Syria Syrian Recovery Trust Fund million DKK Jacob Faber/Kasper Thams Olsen. Michael Lund Jeppesen

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1 MENA 104.Arabiske Lande.6-X. Syria Syrian Recovery Trust Fund Kreditanstalt für Wiederaufbau (KfW) 25.0 million DKK 2013 None Strategic Framework - Danish Arab Partnership Programme, ; Danish policy for engagement in fragile states Jacob Faber/Kasper Thams Olsen Michael Lund Jeppesen After more than two years of conflict, there is an imminent and mounting need for not only humanitarian assistance, but also recovery and development assistance in Syria. Moreover, there is a critical need to strengthen the moderate parts of the opposition, not least the Syrian Opposition Coalition (SOC), which Denmark recognizes as the legitimate representative of the Syrian people. To further this objective, establishing a multi-donor trust fund is deemed a suitable instrument. The overall objective of the Syrian Recovery Trust Fund (SRTF) is to serve as an effective mechanism to meet the priority needs of the Syrian people in a transparent and accountable manner. To ensure a demand-driven and relevant support, SOC will be centrally located in the governance structures of the Trust Fund and as such play a central role in the allocation of the funds. The Danish contribution to the SRTF will be DKK 25 million and allocated through the Danish Arab Partnership Programme. 1

2 The overall objective of the Syrian Recovery Trust Fund (SRTF) is to serve as an effective mechanism to meet the priority needs of the Syrian people in a transparent and accountable manner. After more than two years of conflict, there is an imminent and mounting need for not only humanitarian assistance, but also recovery and development assistance in Syria. This is not least the case in the areas controlled by the opposition forces, where government structures have disintegrated after the fall of the regime and large parts of the population lack basic services. Efforts are being made locally to set up local governance structures and to deliver basic services to the people, but the task is daunting and can only realistically be undertaken with international support that provides for reliable channels through which aid can be directed. At the same time, there is a critical need to strengthen the moderate parts of the opposition, not least the National Coalition of Syrian Revolution and Opposition Forces (SOC), which Denmark recognizes as the legitimate representative of the Syrian people. SOC legitimacy and public support can only derive from effective presence on the ground; through the ability to deliver services and by taking responsibility for local governance. However, the SOC lacks both capacity and financial resources to undertake this task, and the coalition is currently losing ground to extremist groups. For the benefit of improving SOC legitimacy and ability to deliver on the ground, international support should be channelled through an instrument that is seen as being directed by the SOC. In recognition of this, a multi-donor trust fund approach is deemed a suitable vehicle to deliver the assistance in an effective way and in close partnership with the SOC. The fund is also intended to pool donor contributions and direct them towards activities considered necessary by the SOC. The SOC will be centrally located in the governance structures of the fund and as such play a central role in selecting and prioritising projects. The SRTF will provide a cost-effective way of channelling the support to the Syrian people in a coordinated way that only requires limited administrative resources. The SRTF will be funded through the Danish Arab Partnership Programme (DAPP). There is an on-going effort to reduce the number of partners and to make the DAPP more focused. Although supporting the SRTF entails taking a new partner on-board, it will make it possible to support a broad range of projects and activities through one intervention. Based on an assessment of the performance and effectiveness of the SRTF, further contribution could be considered. 2

3 The major obstacle for enhancing non-humanitarian assistance inside Syria remains the implementing modalities, most notably access and security issues; lack of capable and accountable implementing partners; and the difficulty of monitoring projects and ensuring the sustainability of interventions. Another challenge is the absence of a national development strategy. Given the situation, it would however not make sense to align with national plans, which would be owned by the regime. The SRTF instead provides a possibility of aligning support to the opposition held areas in coordination with the SOC. The multi-donor trust fund approach will also serve as an effective way of coordinating and harmonizing donor support. To ensure local ownership and to facilitate demand-driven and relevant support, the SOC has through full representation in the supervisory and managing bodies of the SRTF been put in the driver s seat in terms of prioritising and selecting projects. Also, the SOC s office for development and humanitarian aid, the so-called Assistance Coordination Unit (ACU), is intended to be the main source of project proposals and needs assessments. Context The conflict has now moved into its third year, and the toll on the Syrian population is huge. The UN estimates that more than 70,000 people, mostly civilians, have lost their lives. Many more have been severely injured. According to UNHCR, the number of people who had to flee the country has surpassed 1.5 million, and more than 20 per cent of the Syrian population over 4 million have abandoned their homes and are now internally displaced. Conservative estimates indicate that 6.8 million people are in need of aid. The conflict is leaving lasting scars on the country. Large parts of Damascus, Aleppo and a number of other cities have been severely damaged. OCHA reports that by March 2013 half of all hospitals in the country are either inoperative or only partially operational. In conflict affected areas the availability of water has dramatically decreased compared to pre-crisis levels; pumping stations and other water infrastructure installations have been severely damaged. Food supplies have diminished, and livelihoods are threatened by the destruction of factories in the cities as well as damages to the irrigation systems and access roads in the rural areas. Areas controlled by the opposition, often cut-off by the government in Damascus, are especially vulnerable. In November 2012, Syrian opposition factions agreed to set up a new and more inclusive 60- member leadership council, creating the National Coalition of Syrian Revolutionary and Opposition Forces (SOC). In December 2012, the SOC was recognized as the legitimate representative of the Syrian people by Denmark and a number of other countries in the Group of Friends of the Syrian People. To coordinate the humanitarian aid and development assistance, the SOC has set up the ACU. This Unit coordinates the delivery of 3

4 humanitarian and non-humanitarian assistance to the opposition held areas and will also start to implement its own programmes. In terms of SRTF, the ACU s primary role is to provide needs assessments and projects proposals. The SOC strives to establish a presence on the ground in the opposition controlled areas, but governance structures remain inadequate and large parts of the population live without access to basic services. For good reasons the SOC lacks planning and implementing capacity and not least financial resources. Thus, efforts are urgently needed to consolidate and expand delivery channels to ensure the provision of essential public services, to build trust in the nascent non-sectarian, civil institutions and to prepare a major repair and reconstruction of public and social infrastructure in the opposition held areas. Purpose of the support In socioeconomic terms, the SRTF pursues two objectives: 1) To serve as an efficient mechanism to meet the priority needs of the Syrian people in a transparent and accountable manner, and (2) to pool donor contributions and direct them towards activities considered necessary by the SOC and the donor community to effectively address basic services of the Syrian people in the opposition held areas. Over time the Trust Fund can furthermore contribute to rebuilding the country in the aftermath of the ongoing conflict. Geographically, the SRTF will target the population inside Syria. The Fund operates with three windows of support : 1. Delivery of basic services: Securing the provision of essential services to the Syrian population, such as water and energy supply, basic health care and the restoration of food production facilities. 2. Financial support to local implementing partners: Delivering capacity development activities to rebuild public institutions and to ensure the sustainability of operations. 3. Rehabilitation of social and economic infrastructure: Rebuilding the infrastructure such as roads, schools, clinics, water, sewage and waste disposal. During the start-up phase, only the first window will opened. The other windows will be opened subsequently, when the Steering Board considers it to be an appropriate time. Fund design and management The SRTF has been designed in line with the core principles of Paris Declaration on aid effectiveness, i.e. ownership, alignment, transparency and mutual accountability, as well as harmonization and effectiveness. The Fund prioritises a demand-driven approach to assure the delivery of goods and services actually required by targeted beneficiaries. To further this objective, needs-assessment analyses will be conducted in order to make it possible to take informed decisions on funding priorities. The fund will be managed by three main governing bodies: the Steering Board, the Management Committee and the Management Unit. The Steering Board is composed of 4

5 representatives from the SOC/ACU (chair), donors and the trustee (KfW see below). The board should provide policy guidance and oversee the overall implementation of the activities. The Management Committee will be responsible for operational guidance and for reviewing and approving project proposals. The Management Unit will be responsible for the day-to-day management, providing support to projects, and monitoring and reporting on progress. The SOC will be represented in all three governing bodies (as a Chairman in the Steering Board) to ensure local ownership and that the development projects are supporting the priorities and needs of the population. Selection and implementation of projects The projects will be implemented by range of different entities on the ground. Eligible implementing partners include local councils, municipalities and other local basic service providers in the areas controlled by the opposition; Syrian civil society organizations; and international NGOs with field presence and of course the ACU. In time, UN agencies, programmes and funds are also envisaged to be able to get access to funds. The selection of projects will be subject to the following criteria: projects shall be based on the needs of the affected population as documented by the ACU; they must be nondiscriminatory in terms of regional, ethnic and religious groups; they must be technical, financial and organisational feasible; and the implementing partner must demonstrate availability of sufficiently qualified staff for the implementation and operation of the project(s). Synergies with other Danish-supported activities The SRTF is highly synergetic with other Danish-supported activities for Syria. Denmark has been actively engaged in strengthening the SOC both politically and through development activities. Denmark supports the capacity development of the ACU through support for a regional office in Jordan. Denmark has also funded a civil society training centre, which will be run in coordination with the ACU. While the ACU projects will strive to ensure that the SOC is capacitated to deliver directly, the ACU is also still a relatively weak structure, which cannot channel funds to the delivery of basic services on a large scale. The SRTF aims at assisting the SOC in delivering such large-scale assistance by giving them access to funds that will enable them to undertake concrete activities on a larger scale. The programme adheres to the Danish policy for engagement in fragile states. The activities aim at enhancing local ownership, aligning with local priorities and promoting inclusive political processes to facilitate state-society dialogue through institutions of political governance. 5

6 The total Danish contribution to the SRTF is DKK 25 million. The SRTF will be funded through Danish Arab Partnership Programme. In term of financial management, the funds will be channelled through the German development bank Kreditanstalt für Wiederaufbau (KfW), which will serve as trustee (see annex 1). KfW is currently active in 32 fragile countries and has a long-lasting experience in financing of trust funds and similar instruments in conflict and post-conflict environments such as Afghanistan, the Democratic Republic of Congo, Liberia and Libya. Other donors committed so far are the United Arab Emirates and Germany. Both have committed EUR 10 million, but are expected to increase their funding in the future. Other donors, including USA and Norway, have also expressed interest. The total funding volume of the SRTF is expected to reach at least EUR 100 million in the initial phase, but the Fund has been designed to facilitate an even larger funding base without major modifications. The SRTF is projected to begin its operations on the ground by mid The life-span of the Fund will depend on the development of the ongoing conflict in Syria. The fragility of the situation in Syria entails a high risk-profile for all development activities. The SRTF will face a number of risks, including security, programmatic and fiduciary risks. Also, the support involves reputational risks for donors. The highly volatile security situation reduces the ability of the implementing partners to deliver projects and makes it difficult to reach many parts of the country. Should the security situation deteriorate even further, the accessibility might decrease. The security situation also endangers the sustainability of the programme activities. Programmatic risks include first and foremost low capacity of implementing partners and limited ability to monitor progress. The high programmatic risks in turn increases the fiduciary risks and the likelihood that money end up in the wrong hands and unintentionally support extremist groups. Finally, the potential misuse of funds entails considerable reputational risks for donors. To mitigate the abovementioned risks, a number of risk mitigation measures have been established. The most important approach in this fluid, dynamic context is to remain flexible and to continuously be able to adjust the support quickly in the light of the developments on the ground. With respect to the security situation, the SRTF has been designed on the assumption that, in spite of an environment of violent conflict and the constant threat of air strikes, it will be possible to plan, execute and monitor sizable measures in the areas controlled by the SOC. In case a worsening security situation on the ground renders this assumption inadequate, additional instruments of remote management (e.g. third party monitors ) may be considered. To mitigate the risk of working with the wrong people, considerable emphasis has been put in the design of the Fund to build robust governance structures to assure that partner selection is well-informed and based on transparent criteria, 6

7 including peace and conflict assessment in the areas concerned. Working with international NGOs with established field presence in the conflict areas may further reduce the overall fiduciary risk, as will measures to reduce local cash exposure. Careful attention will be paid to local ownership and to continuous monitoring and review of activities to make sure that they deliver. 7

8 Kreditanstalt für Wiederaufbau (KfW) is a German government-owned development bank based in. KfW has a long-standing experience in development aid through the KfW Entwicklungsbank (KfW Development Bank). KfW Development Bank provides financing to governments, public enterprises and commercial banks engaged in microfinance and Small and Medium sized Enterprise (SME) promotion in developing countries. KfW also works in health, education, agriculture, forestry, solid waste management. KfW is one of the main partners of GIZ. KfW is currently active in 32 fragile countries and has an established experience in financing of trust funds and similar instruments in conflict and post-conflict environments such as Afghanistan, the Democratic Republic of Congo, Liberia and Libya. More info: 8

9 Modern Syria is home to a fast-growing population of some 23 million people of diverse ethnic and religious background with an average per-capita income of USD 2,750 in Life expectancy at birth had reached 76 years, full primary school enrollment had been achieved and 86% of rural population had access to improved water sources. The main revenue sources were oil and agriculture; the oil sector provided approximately 20% of the government s revenues and around 35% of its export receipts in However, this is now considerably reduced due to international sanctions against the Syrian oil sector. Agriculture contributed around 20% to GDP and employment in Recent figures are had to establish due to the conflict. Established as a Parliamentary Republic after independence in 1946, the country has been under authoritarian rule of the Assad family, since of the coup d etat that brought Hafez Assad to the Presidency in Following the death of Hafez Assad in 2000, the country underwent a brief period of relaxation under his son and successor Bashar Assad, optimistically known as the Damascus Spring. Hundreds of political prisoners were released, but real political freedoms and a shake-up of the state-dominated economy never materialized. The regime s forceful crack-down on a popular protest in Dera a in March 2011 sparked a self-perpetuating cycle of protests met by increasingly violent government repression. The unrest quickly spread throughout Syria, and the demands of the demonstrators escalated from a call for meaningful political reforms to an end to the regime headed by President Assad. The uprising has evolved into an armed conflict with fierce fighting spreading to Aleppo and Damascus and beyond. Since the beginning of the conflict in Syria, the world has witnessed a decline in human security, with over 70,000 deaths and more than 1.5 million refugees. Conservative estimates indicate 6.8 million people in need of aid, more than four million internally displaced (IDPs), and the United Nations High Commissioner for Refugees (UNHCR) foresees the possibility of 3.5 million refugees by the end of this year. The situation of human rights in Syria has deteriorated dramatically. In its February 2013 report, the UN independent international Commission of Inquiry on Syria concluded that Government forces and affiliated militia had committed crimes against humanity, war crimes and gross violations of international human rights and humanitarian law. Evidence was also given that anti-government, extremist armed groups had committed war crimes and other serious abuses, although not reaching the intensity and scale of those committed by Syrian authorities. The consequences of the increasingly unpredictable and destabilising Syrian conflict are felt beyond Syrian borders. Lebanon and Jordan are now faced with unprecedented situation which threatens their internal stability. Also Turkey and Iraq face potential political problems directly related to the ethnic, religious and political affiliation of refugees As Syria has entered its third year of crisis, a drawn-out conflict is predicted, with neither side seems able to assert military superiority in the short run. 9

10 Log frame has not yet been developed. 10

11 SRTF Concept Note, April 26, 2013 Framework Agreement in relation to the Syria Recovery Trust Fund 11

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