Switch Language:

Home

MDGF-2096: Support for new decentralization initiatives and production stimulation in Cuba.

PLEASE NOTE THIS CONCEPT NOTE IS THE ORIGINAL SUBMISSION TO THE FUND. IN MANY CASES INDICATIVE BUDGET AMOUNTS APPROVED BY THE STEERING COMMITTEE ARE CONSIDERABLY LOWER THAN THAT REQUESTED AND INDICATED HERE-IN. FINAL BUDGET AMOUNTS WILL ONLY BE AVAILABLE AFTER APPROVAL OF THE FINALIZED DETAILED JOINT PROGRAMME DOCUMENT.
Fri, 2008/12/12 - 5:30pm — liudmila.curbel...
Fri, 2008/12/12 - 5:30pm
Fri, 2008/12/12 - 5:30pm
liudmila.curbelo@undp.org
English  (current), Spanish 

ID: MDGF-2096

Development and the private sector
Round 1
(26/04/2007 - 31/12/2009)
Cuba
$8,246,795
36 Months
Support for new decentralization initiatives and production stimulation in Cuba.

Attached Documents:

Top

A. Applicant Information

Latin America and the Caribbean
  • Lower Middle Income Country
  • High HDI, according to UNDP's 2006 Human Development Report
  • Susan McDADE
  • susan.mcdade@undp.org
  • Liudmila Curbelo
  • liudmila.curbelo@undp.org
  • Roberto Galvez
  • UNDP - United Nations Development Programme
  • Representante Residente Adjunto
  • roberto.galvez@undp.org
  • Liudmila Curbelo
  • UNDP - United Nations Development Programme
  • Oficial de coordinacion
  • liudmila.curbelo@undp.org
  • UNDP - United Nations Development Programme ($5,876,440)
  • UNESCO - United Nations Educational and Scientific Organization ($770,300)
  • FAO - Food and Agriculture Organization of the United Nations ($1,600,055)
Top

B. Concept Note

In support of Cuba’s new initiatives aimed at decentralization and stimulating national production, this programme aims to incorporate the private sector within municipal priorities as a catalyst for local development by: 1. increasing and diversifying private sector production, 2. strengthening the technical services and management capabilities of municipal government necessary to promote public-private cooperation and 3. improving the local population’s access to goods and services. The beneficiaries will be individual producers, cooperatives and the general population of five of the country’s municipalities. The programme will lend support to the local Municipal Development Initiative promoted by the national authorities. National efforts towards achieving the Millennium Development Goals will be strengthened at both the local and national level, especially MDGs 1, 3 and 7. The programme is a product of the approved UNDAF 2008-2012, in the area of cooperation on local human development. The UNDP is the proposed lead agency.

For the purposes of this document, the term ‘private sector’ refers to individual producers and cooperative methods of production and service provision. Cuba’s economy is predominantly state-run, with 82.9% of the employed population working in this sector. It is governed by a National Economic Management and Planning System which operates in a centralized fashion to determine priorities and the assignment of distributing state resources, in accordance with the country’s strategic lines of development. The national authorities recognize the need for a form of local sustainable development that is compatible with the national strategic development plan. Municipal governments have been given the responsibility of implementing their own local development strategy, which will require a major decentralization of state functions in order to increase the strength of the municipal governments, to strengthen their institutions and to exploit their economic potential. There are municipalities which underutilize their social infrastructure, organizational capacity and local resources and they will need to be mobilized if they are to succeed in boosting their economies on this scale. The country operates a dual currency system with the Cuban peso (CUP non-convertible) and the Cuban convertible peso (CUC - hard currency) circulating side by side. Consequently, this puts limitations on access to factors of production such as inputs and capital that are only available using Cuba’s freely convertible currency (CUC) on which non-state producers, both individual and cooperative, must rely. During the 1990s some openings were provided for the private sector, which included individual producers, in both the mixed farming and service industries, as well as cooperatives. Over the last two years new public policies have evolved to encourage the role of the private sector through changes in productive roles, monetary incentives and the granting of free right of use of important means of production such as land through user rights. The programme will lend direct support to capacity building for private sector production and the governments capacity to guide these policies. The majority of the country’s municipalities are predominantly involved in mixed farming (75% of the total). In these municipalities the private sector is relevant to farming and livestock activities: 64% of agricultural land is in private sector hands, a percentage that increases to 76.7% if we consider the area that is actually cultivated. These figures will continue to rise due to the policy instituted in 2008 of handing over uncultivated land to individual producers. In these municipalities the private sector has the potential to become an important actor in the regional economy and a key element in achieving Millennium Development Goal (MDG) 1 at the municipal level. Although each municipality dedicated to mixed farming has its own specific characteristics, the great majority of them share very similar problems: i) depressed economic activity, caused by the closure of the sugar cane agroindustrial complexes and the general decapitalization of the farming sector; ii) problems of reskilling the workforce, essentially due to the disparity between the type of technical and professional training given to young people and the needs and requirements of the municipality; iii) an ageing population, adverse migratory patterns and a decrease in population in absolute terms; and iv) a yet to be defined municipal development strategy. Despite the fact that the national authorities recognize the importance of the private sector to these predominantly farming based municipalities, there is relatively little experience within the framework of recent local development policies when it comes to exploiting and facilitating the new productive opportunities generated by the private sector, so as to integrate them in a comprehensive and sustainable fashion within the local development strategy. The proposed joint programme will be developed across five pilot municipalities. In the west: La Palma municipality in Pinar del Río province and Martí municipality in Matanzas province; in the centre: Yaguajay municipality in Sancti Spíritus province; and in the east: El Salvador municipality in Guantánamo province and Río Cauto municipality in Granma province. These municipalities have undergone a process of industrial restructuring after the closure of the sugar cane agroindustrial complexes that represented the key economic activity within the community. This has had a direct impact on the population in terms of a change in employment culture, the loss of productive jobs and the dismantling of the area’s principal chains of production. A process of restructuring and transformation was undertaken not only at the economic level, but also in socio-cultural and environmental terms. These municipalities have a combined total population of 209,677 inhabitants, of which 48.5% are women and 51% live in rural areas. They are also characterized by the decreasing size of their population in absolute terms. Although all five municipalities are dedicated to mixed farming and forestry, each of them has their own specific differences when it comes to their productive activities: in Martí cattle-raising predominates; in Río Cauto cattle-raising and rice production; in Yaguajay mixed crop production; and in La Palma and El Salvador the main activity is forestry. The direct beneficiaries of this joint programme will essentially be individual male and female farmers, cooperative producers and craft workers from the five municipalities in which the pilot project is to be implemented. The entire municipal population will benefit thanks to the positive relationship between the private sector and local development, the former being conceived as a function of the latter and resulting in a greater level of human development in the municipality. National authorities are currently developing a set of new policies, initiatives and actions for tackling the root causes of the problem that is the focus of this joint programme. It is worth highlighting here the Municipal Local Development Initiative (IMDL) is currently being developed by the Ministry for Economy and Planning (MEP) as a pilot project in three of the country’s municipalities (also included within the five being considered under this joint programme proposal). The aim of the IMDL is to support the municipalities in drawing up and implementing their own development strategy, through the management of economic projects based on the exploitation of local resources, capable of being self-financed by generating profit for the municipalities and thus benifiting the region. Since these municipalities are mainly dedicated to mixed farming with important private sector participation, this initiative aims to facilitate the economic activities of the private sector as a contribution to each municipality’s own development strategy. The initiative has the support of the Local Human Development Programme (PDHL) of the United Nations Development Programme (UNDP). Since 2007 an important restructuring process has been carried out on the national farming and livestock policy, under the leadership of the Ministry of Agriculture (MINAG). Amongst the actions involved in this process are the following: 1. An increased productive role for the non-state sector and a change in role for a majority of state productive enterprises which now supply services; 2. The handing over of uncultivated land to individual producers, including new producers without previous experience in farming and livestock production, as well as to cooperatives; 3. Production incentives through financial mechanisms, especially the increase in farmgate prices paid directly to producers, both in national currency as well as in convertible pesos to increase purchasing power; and 4. Decentralization of the organizational and decision-making structures of MINAG through the setting up of municipal delegations. This process is being supported by the Food and Agriculture Organization of the United Nations (FAO) and UNDP's PDHL. One of the four lines of action of UNDP’s PDHL focuses on local economic development. Positive results have been obtained under this line of action in the coordination of local value added chains, enterprise development, and training in business and cooperative management. This was made possible through the development of mechanisms such as the Revolving Fund for Local Economic Development Initiatives (FRIDEL), a hard currency credit instrument and the only one currently operating through international cooperation. The joint programme proposed under this thematic window will be framed in accordance with the IMDL logic of leveraging the private sector to support the strategic vision for strengthening municipal economic management capacities. From among the initiatives developed as part of the revision of the country’s farming and livestock policy, the ones that will be enabled or exploited are essentially those working towards a stronger productive role for the private sector at the local level. A contribution will also be made towards the follow-up of measures in regards to employment, as contained in the National Action Plan for Follow-up to the Beijing Conference. This programme is innovative because, in what is fundamentally a centrally planned state economy, with access to productive resources determined by the availability of its convertible currency (CUC) and with limited access to foreign exchange credit for non-state producers, it will: i. Offer pilot credit mechanisms designed to facilitate access to financial resources for the private sector; ii. Encourage private sector enterprise management; iii. Support the role of the private sector as a transformation catalyst for the region; iv. Broaden the management and decision-making capacities of municipal governments regarding local economic resources, by working jointly with the private sector to draw up their own development strategy; and v. Demonstrate financially the commercial viability of local economic development. The joint programme will contribute towards reinforcing the efforts of national authorities in achieving MDG 1: The eradication of extreme poverty and hunger; MDG 3: The promotion of gender equality and the empowerment of women; and MDG 7: Ensuring environmental sustainability. The joint programme is a product of the UN Development Assistance Framework (UNDAF), 2008-2012. This programme framework considers the Millennium Development Goals and the gender dimension to be issues that cut across all areas of cooperation. One of these five areas of cooperation is Local Human Development, which is in line with the national priority of enhancing the population’s quality of life through the reinforcement and ownership of local development processes, with an emphasis on areas of least human development. As a response to this priority, outcome 1 of the UNDAF pursues the following objective: By 2012, the UNDAF anticipates that in the area of local human development it will have contributed to enhancing local capacities and performance in terms of increased human development in selected municipalities. In particular, the programme would make a direct contribution to two national outcomes in this area of cooperation: 1.2. Increased local capacities in economic management on the part of municipal governments, as well as production and service enterprises; and 1.5. Support for national strategies contributing to local development.

The problem addressed by this joint programme requires a multi-sectoral and inter-agency response. The mutually supportive development interventions that have been drawn up are the result of a joint analysis of the problem and a joint proposal for its resolution. The programme’s objective is to contribute to the development of the production and management capacities of the private sector, as well as the management and technical service capacities of municipal government in terms of the non-state sector in five pilot municipalities across the country, thereby exploiting the opportunities generated by new local development policies towards raising the quality of life of the population. In view of these factors, the anticipated outcomes are: 1. Enhanced and diversified production of private sector goods and services in a sustainable way in the chosen municipalities, motivated by the need to provide improved access to productive resources and increase productivity through greater value-added. In order to achieve this, the installed productive capacity will be increased by improving access to inputs, equipment and technologies. Wider access to financial resources will be provided to ensure the economic sustainability of the activities. Individual and cooperative producers will be given training and instruction to increase their efficiency and productivity. Climate risk management will also be incorporated into the (mixed farming) production process. 2. Developed technical services that are provided by municipal government and their management capacity enhanced in terms of incorporating the private sector into the integrated development of the municipality, as a more efficient and effective development process based on the participation of the private sector as a partner in development. Support will be given to the preparation of the municipality’s development strategy to include the participation of the private sector. Technical services will be developed to support private sector development. Technical training will be closely linked to the municipality’s priorities and its main economic activities, as well as to the identification of gender-based requirements. 3. Increased access to goods and services for the municipal population, in order to achieve a wider availability and range of these goods and services. This will enable an increase in family income and the local supply of products and services to the population. It will also contribute to improving the people’s standard of living and thus help to reduce internal migration. The joint programme will strengthen the private sector’s capacities within the municipalities in terms of: economically sustainable production and management; environmentally sustainable risk management; and participation in the regional development strategy. Additionally, there will be a strengthening of municipal government capacities in the provision of services to the private sector to support development, as well as assistance in producing the development strategy.

The preparation of this joint programme is the collective result of work carried out by a technical team made up of officials from the Ministry for Economy and Planning (MEP), Ministry of Agriculture (MINAG), Ministry for Light industry (MINIL), Institute of Physical Planning (IPF), Ministry of Foreign Investment and Economic Cooperation (MINVEC); and three agencies of the United Nations System in Cuba: FAO, UNDP and UNESCO. The present Concept Note and its Results Framework have been coordinated and prepared by taking into account the wide experience of UNDP in support of the Municipal Local Development Initiative; that of FAO and UNDP in the new mixed farming policy; and UNESCO’s local development work with crafts people and artists, together with the participating national institutions. The technical team has presented reports periodically to the authorities of the above institutions and to the national UN country team. The programme will be implemented through an inter-agency and inter-sectoral mechanism with broad participation of the national institutions involved. The lead agency for providing coordination on behalf of the United Nations System will be the UNDP, acting in support of the Resident Coordinator. In order to achieve the three outcomes proposed, the joint programme activities will be as follows: 1. Outcome 1 relating to increased production from the private sector: improved access to inputs, equipment, technologies and processing; improved access to sustainable hard currecny financing, through strengthened financial incentive mechanisms in aid of production, including access to credit; training for workers and managers in production techniques and technologies as well as business management, including cooperative management; and given the scourge of frequent hurricanes, the incorporation into the production process of risk management techniques to ensure the sustainability of increased production, by adapting the production technologies employed and, in the case of agriculture, adopting more resistant and tolerant crops. 2. Outcome 2 relating to the integration of the private sector into municipal development: training for the public and private sectors in preparing and developing an endogenous municipal strategy; development of a municipal diagnostic analysis; training for the public sector in the technical services necessary for increasing private sector production and also developing its material capacities; implementation of a system to facilitate coordination between the public and private sectors; and increased technical training for young people in each municipality in harmony with the municipality’s economic requirements, together with new job opportunities created by the private sector. 3. Outcome 3 relating to the municipal population’s access to goods and services: - On the demand side, in order to increase earnings: the creation and diversification of employment, with concrete actions directed towards access to jobs for women including management positions; and a developing role for individual and cooperative producers as catalysts in the municipal economy; - On the supply side, in order to increase the supply of goods and services: stronger, improved and better coordinated supply chain, distribution and sales. This joint programme, through the lessons learned from the Municipal Local Development Initiative (IMDL), makes use of the existing capacities of private sector producers in these municipalities, as well as the capacities of municipal institutions and municipal government in particular. It will have the support of the national directorate of MEP which is in charge of the IMDL, the national directorate of MINAG which covers the cooperative and private sector, the national directorate of MINIL in charge of local industry, and the national directorate of IPF which oversees regional development. The three participating agencies are currently developing actions under expected UNDAF outcome 1, on which this joint programme is based. The above agencies have the support of the bilateral cooperation from Canada and Spain and the decentralized cooperation from Spain, Italy and Canada, which can be considered as co-financing for the programme. The established areas of intervention fall within the priorities of the 8th Mixed Commission for Development Cooperation agreed between Cuba and Spain in September 2007. The sustainability of the results of this programme is guaranteed. In previous studies carried out for the implementation of the IMDL, the structure of production in two municipalities was analysed in relation to the level of consumption stemming from the country’s importing of goods. As a result, it was discovered that a minimum of 3 million dollars worth of imports could potentially be substituted each year in each municipality by goods produced locally. The MEP considers this pilot experiment a valuable opportunity for giving the municipalities their own capacity for decision-making, while conserving the country’s resources. The initial investment proposed in the joint programme for each municipality over three years is actually less than the potential year-on-year savings gained from the substitution of imports. One of the values of this programme is its replication potential due to: 1. the existence within the country of 127 municipalities (75%) with similar circumstances to the five already chosen; and 2. the economic stimulus that the potential savings would bring to the country through the substitution of imports. The principal risks confronting the joint programme are: i. the occurrence of natural disasters that might compromise the municipal production of goods and services; and ii. the limited access to inputs, products, technologies and markets brought about by the economic, commercial and financial blockade imposed on Cuba by the United States.

The monitoring and evaluation activities of the joint programme will be aligned with the monitoring and evaluation plan of the UNDAF, especially with the follow-up and evaluation framework of the Local Human Development area of cooperation. The national system for statistics, with offices in each of the municipalities throughout the country together with their specialized human resources, will contribute a large part of the technical information required for the evaluation. Impact and process indicators will be established for monitoring and evaluating the joint programme from the standpoint of direct outcomes and outputs. These indicators will be obtained from both quantitative and qualitative data. The monitoring process will be implemented throughout the programme and two evaluations will be carried out, one at the mid-point and one at the end of the programme. Several of these indicators are also reflected in the UNDAF. The main indicators for results in terms of outcomes will be: 1. Outcome 1: (i) Volume of production in the private sector; (ii). Number of cooperatives and/or private producers gaining access to financial resources (disaggregated by gender in the case of individual producers); (iii). Number of private producers trained in production and management techniques (disaggregated by gender); (iv). Number of cooperatives and/or private producers incorporating risk management into their production activities (disaggregated by gender in the case of individual producers). 2. Outcome 2: (i) Number of municipalities having their own development strategy that incorporates the private sector; (ii) Number of cooperatives and/or private producers benefiting from technical services offered by the municipal government (disaggregated by gender in the case of individual producers); and (iii) Number of young people with technical training employed in private sector economic activities given priority in the municipal development strategy (disaggregated by gender). 3. Outcome 3: (i) Percentage of the population (disaggregated by gender) employed within the municipality, as compared with the percentage registered in the baseline year; (ii) Volume of earnings of cooperatives and individual producers; and (iii). Volume of trade in the municipality resulting from the productive activities of cooperatives and individual producers. The above indicators will be complemented by additional indicators essentially relating to processes that will be established in the monitoring and evaluation framework of the joint programme.

The United Nations system in Cuba is made up of seven resident agencies and a further seven that have programmes and activities in the country. This joint programme is being developed under the UNDAF local human development area of cooperation. As a strategy for achieving within this area a process of dialogue, planning, implementation, monitoring and evaluation, an Inter-Agency Working Group on Local Human Development (GIDHL) has been set up. This inter-agency group has been working together for over a year and has provided analytical results which have contributed towards the identification of joint programming opportunities and helped in the design of the programme. The United Nations System in Cuba has wide experience carrying out local coordinated projects as a result of its inter-agency collaboration within the context of the Local Human Development Programme (PDHL) and the implementation of projects under the Telefood initiative administered by FAO. As lead agency providing support for the coordination of this joint programme, the UNDP will report back to the inter-agency group, the UN Country Team and the Resident Coordinator, in order to provide a general overview of the process on behalf of the UN system. The main national institutions associated with the programme, under the coordination of the Ministry of Foreign Investment and Economic Cooperation (MINVEC), will be directly linked to the Ministry for Economy and Planning (MEP), the Ministry of Agriculture (MINAG) and municipal governments. It is also anticipated that the Ministry for Light Industry (MINIL), the Ministry of Culture (MINCULT), the Ministry of Education (MINED), and universities / university sub-campuses in the municipalities will lend their participation. The participating UN agencies are: FAO, UNDP and UNESCO. The costs incurred by each of the agencies over the last two years amount to: FAO (500,000 USD in 2007 and 1,500,000 USD in 2008); UNDP (11,060,000 USD in 2007 and 17,000,000 USD in 2008) and UNESCO (1,214,308 USD in 2007 and 815,716 USD in 2008). The National Steering Committee, which will provide the general strategic guidelines, is comprised of a representative of the Cuban Government, the Resident Coordinator of the UN system in Cuba, the heads of the UN system agencies, and a representative of AECID (Spanish Agency for International Development Cooperation). The Coordination Committee, made up of members of the Inter-Agency Working Group for Local Human Development and representatives from the national participating institutions, will be responsible for coordinating the implementation, monitoring and evaluation of the programme, based on the joint results framework. UNDP as lead agency will provide programme oversight for the group. Financial administration of the programme will be the responsibility of UNDP, as is the case with all programmes under this Fund. Once approved, a Memorandum of Understanding will be signed between UNDP, as Administrative Agent, and the UN system participating agencies, and this will secure the release of funds from the central trust fund office.

Top

C. MDG-Related Indicators

  • Goal 1: Eradicate extreme poverty and hunger
  • Goal 3: Promote gender equality and empower women
  • Goal 7: Ensure environmental sustainability
  • 1. Proportion of population below $1 (PPP) per day
  • 2. Poverty gap ratio [incidence x depth of poverty]
  • 3. Share of poorest quintile in national consumption
  • 11. Share of women in wage employment in the non-agricultural sector
  • 29. Proportion of population using solid fuels
Top

D. Formulation Advance

No
Top

E. Resident Coordinator's Undertakings

  • The Concept Note has been reviewed by the national government and the UN Country Team.
  • If approved by the MDG-F Steering Committee, the UN Participating Organizations undertake to submit a draft Joint Programme Document within eight weeks of notification.
  • All UN Participating Organizations have or will sign the global Memorandum of Understanding with the Multi-Donor Trust Fund Office.