WORLD TRADE
ORGANIZATIONWT/IFSC/W/7/Add.1
1 May 2002
(02-2483)
Integrated Framework Steering Committee
FINANCIAL REPORT ON THE INTEGRATED FRAMEWORK
TRUST FUND (IFTF)
Report by the United Nations Development Programme (UNDP):
March 2001-February 2002
Addendum
A OVERVIEW
1. The Integrated Framework Trust Fund (IFTF), hereafter also referred to as “the Trust
Fund (TF)” or “the Fund”, was established under the financial regulations and rules of the UNDP for
the receipt and administration of funds and for mobilizing additional resources needed to enhance the
programme activities of the Integrated Framework for Trade-Related Technical Assistance to LeastDeveloped Countries (IF).  The IF aims at mainstreaming trade within national development strategies
by promoting trade policies supportive of the poverty reduction objectives of these countries,
accelerating the integration of LDCs into the multilateral trading system and the global economy and
at developing national capacities.
2. Since its creation in February 2001, the IFTF has served as a central point for the deposit of
contributions to the IF.  Contributions have been pledged by both bilateral and multilateral donors
towards two finance windows operating simultaneou sly: Window I, a general fund, for un-earmarked
contributions for diagnostic studies and mainstreaming, or Window II for contributions allocated to
specific and clearly identifiable programmes for capacity building.
(a) Utilization of the Trust Fund (TF)
3. In implementing pilot scheme, the Steering Committee (SC) has endorsed the
recommendation made by the Inter-Agency Working Group (IAWG) concerning the designation ofone or several Executing Agencies for the implementation of each activity financed under the TF.
During the review period, the SC made decisions on funding projects that meet the objectives of the
IF.  Details of such projects, including the respective project budgets, were set out in the relevant
project documents.
4. In accordance with decisions and directives of the UNDP Executive Board, the TF charges for
support services provided by the Executing Agency, plus any costs incurred for administering the
fund.  As agreed, the aforementioned costs have not exceeded thirteen percent (13 per cent) limit.  On
average, the total administration services fees for the IF pilot scheme was about 9-10 per cent of total
project expenditures.
(b) Administration of the IFTF
5. The IFTF has been administered by the UNDP in accordance with the applicable UNDP
regulations. Project management and expenditures are all governed by the regulations, rules and
directives of the UNDP and, where applicable, the regulations, rules and directives of a designated
executing agency.WT/IFSC/W/7/Add.1
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6. In managing the fund, UNDP has observed th e rule that the aggregate of the amounts
budgeted for the projects together with any estimated payments in respect of support services shall not
exceed the total resources available to the Fund.
7. Audited financial report for expenditures incurred in 2001 will be presented to donors during
the course of this year.  UNDP is working with all the tasked Executing Agencies on this matter.
8. The administration of the TF has proceeded according to plan. Considerable delays have been
encountered in the remittance of pledges, for various reasons.  Delay in remittance of pledges has
potential to harm the smooth implementation of IF project activities. The cooperating agencies that
are executing IF projects have established flexible and accommodative arrangements with the Fund
Manager to facilitate quick implementation of project activities once project documents have been
signed.
B REVIEW PERIOD FINANCIAL STATUS
9. This Financial Report covers the period March 2001 to February 2002, and captures financial
information on contributions to Window I (mains treaming) and Window II (capacity building), and
project approvals done by the SC during the same period.  In addition, the Financial Report reports on
progress by donors in remitting pledges to the IF, as well as the major problems encountered.
10. The definition of resource transfer or remittance referred in this Financial Report is the
confirmation of the deposit of resources into the TF Bank Account.  The Report also makes note of
time gap between the SC approval of project idea and signature of the resultant project document by
Fund Manager.  For purposes of disbursing project funds, the signature of the project document serves
as the official expenditure authorization to executing agencies.
11. For purposes of transferring pledged funds, different donors have applied different
mechanisms for the transfer of resources to the TF.  Some donors have opted to employ the
Memorandums of Agreement (MoUs) with UNDP, while others use a simple letter of transfer. There
are also other donors who continue to apply th eir own respective disbursement procedures, with
conditionalities, the most common being the termin ation date, which imply for the TF Manager the
establishment of a sub-Trust Fund. The addition of conditionalities has tended to complicate theadministration of the Fund, e.g. the need for separate reporting requirements for established sub-Trust
Funds.
12. The IFTF had received total pledges amounting to US$9.2 million, almost a 50 per cent
increase from the level in October 2001.  This amount has been pledged by total of 16 bilateral and
multilateral donors, as indicated in Table 1 (Pledges to IF). Since establishment last year, 11 of the
16 participating donors had transferred all or part of the resource pledged to the TF.  IF donors are
honoring pledges made to the IFTF by transferring or remitting resources to the TF Bank Account.
13. Of the $4.0 million
1 remitted to date, a total of $3.2 million (or 80 per cent of total
remittances) came in 2001.  A total of 9 donors (Canada, Denmark, Finland, Ireland, Netherlands,
Norway, Sweden, Switzerland and UK) contributed to the 2001 remittances, as indicated in Table 2.
Donors have already made commitments to remit an additional $5.0 million and $987,680
during 2002 and 2003 respectively (see Table 2 – Schedule of remittances).
14. As of 28 February 2002, Belgium and the World Bank had transferred their first tranche of
contributions to the TF. For the World Bank, the second similar tranche is expected in during the
course of this year, while the Belgium contri bution will come in 2003.  Two donors (UNDP and
                                                     
1 Year 2001 - $3,236,382.58, and 2002 - $827,320 (from Belgium & World Bank).WT/IFSC/W/7/Add.1
Page 3
World Bank) have already committed themselves to make further contributions amounting to
US$600,000 in year 2003.
15. Indicative transfers for year 2002 comprise of contributions for window I of $3.3 million
(Switzerland, UK, USA, EU, UNDP and World Bank ), and window II of $2.1 million (from Belgium,
Italy & Japan).  Belgium and Italy contributions had been earmarked with no specific country focus.
16. Fund Manager is finalizing paper work that will see the transfer of pledges from the USA,
EU and UK (second contribution to IF).  These remittances are not captured in the cash-flow schedule
for the reporting period.
C ANALYSIS OF RESOURCE UTILIZATION
17. Resources allocated for the period under review have enabled work to start on the three (3)
pilot studies in Cambodia (August 2001), Mauritania and Madagascar (approved July 2001), at a cost
of US$300,000 each.
18. The SC approved five projects from the old IF programme for funding under the IFTF. The
projects, with a total budget of $1.5 million (or $300,000 each), are for Bangladesh, The Gambia,
Haiti, Uganda, and Tanzania.  Projects documents for these countries have now been signed for
implementation, and ITC, the Executing Agency, has commenced work in these countries.
19. Drawing on the lessons from the first group of pilot countries, a decision has been made to
extend the IF to a second group of recommended LDCs2 on the basis of the agreed criteria.3  UNDP
and World Bank have prepared a regional project document to extend the IF to four LDCs (Lesotho,
Malawi, Senegal and Yemen) at a budget of $1.2 m illion.  The fifth country, Mali is still being
reviewed in collaboration with USAID that has shown interest to support the country.  The total
approved regional project budget for the five will be $1.5 million.
20. The IAWG will soon review the capacity building project for Cambodia to be funded from
Japan’s contribution to the Window II at a cost of $500,000.  Approval is likely to be in March 2002.
21. As of end of February 2002, the cumulative approvals (for windows I & II) amount to
$3.9 million4, while the actual cumulative remittances were $4.0 million, leaving a small surplus
balance of $0.1 million in the IFTF Bank Account (see Table 3 – Cash Flow Schedule balancewithout Cambodia project).
22. The cash flow analysis indicates that the IFTF balance available is not adequate to meet the
requirements of achieving target of eleven LDCs by year-end.  UNDP is following up with donors
who have made pledges in order to expedite the transfer of resources to the TF.
23. The pilot scheme reveals that about 85 per cent of diagnostic study costs are made up of
expenditures in respect of international experts’ fees and mission costs.  The costs of national
activities, including the use of national experts is relatively small (see Table below).
                                                     
2 Burundi, Djibouti, Eritrea, Ethiopia, Guinea, Le sotho, Malawi, Mali, Nepal, Senegal and Yemen.
3 The agreed criteria are contai ned in WTO document WT/IFSC/W/9.
4 Pilot (3 countries), Old IF (5 co untries) and Next Round (5 countries)WT/IFSC/W/7/Add.1
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IF Pilot Scheme Distribution of Costs
Item Expenditure ($) % of Total
International Experts fees 480,001 65%
Mission Costs 146,300 20%
National Experts fees 21,400 3%
Workshop & Printing 21,600 3%
Admin. Fees 66,930 9%
Total 736,231 100%
Source: World Bank, Interim project delivery reports for year 2001, IF Pilot Scheme
(Cambodia, Madagascar & Mauritania), January 2002 .
D MATTERS ARISING
(a) Donor Conditionality
24. Despite the spirit of the IF compelling donors to avoid imposition of conditionalities and the
earmarking of resources made available to the IFTF, a number of donors have continued to apply this
approach, creating considerable difficulties for overall TF administration.  In the cases of introductionof donor conditionalities in a MoU, UNDP is compelle d to establish and manage a separate sub-Trust
Fund for such contribution, with separate reporting requirements. This situation creates problems for
matching and pooling donor contributions, outside the common fund, to mobilize resources for
approved project budgets.
25. The inclusion of termination or expiry dates for IF contributions constitute a major problem
for TF administration.  The conditionality creates a problem for fund management when project
activities are delayed or rescheduled to due to political or social instability in a beneficiary country.
In such situation, the IFTF needs flexibility to rollover-unspent balances with minimum restrictions
from contributing donors.
(b) Earmarking of contributions to Window II
26. Contributions to Window II are becoming in creasing essential especially as countries
complete their diagnostic studies and have developed priority matrixes for TA.  Urgent and rapid
action is required to build on the momentum generated by diagnostic studies.  However, earmarking
towards specific countries is discouraged as it increases complexity and disrupts the sound allocation
process of Fund resources between countries and projects.
27. Because of the importance of the follow-up capacity building activities to the beneficiary
countries, monitoring of these activities through the TF becomes an important and useful activity.  In
this regard, the IAWG encourages donor contributio ns for Window II through the TF.  The IAWG has
been flexible on earmarking for window II contribution.
(c) Treatment of Unspent IF Country Allocations
28. Experience from the pilot countries indicates that some countries are unlikely to fully utilize
the amount ($300,000) allocated for diagnostic studies. Guidance of the SC on this matter is required.WT/IFSC/W/7/Add.1
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TABLE 1 - PLEDGES TO IF TRUST FUND
(As of 28 February 2002)
Donor Amount Pledged
Belgium* 30,000,000 BF ( approx. $715,000)
Canada Canadian $1,000,000 (approx. US$ 650,000)
Denmark US$ 300,000
Finland 1 million Finnish Markka (approx. US$ 150,000)
France Amount to be announced
Ireland US$ 300,000
Italy* Euros 900,000  (approx. $850,000)
Japan* US$ 500,000
Netherlands US$ 300,000
Norway US$ 500,000
Sweden 3 million Swedish Kronor (approx. US$ 300,000)
Switzerland US$ 500,000
United Kingdom** US$ 500,000
GBP 1,000,000 (approx. $1,439,000)
United States US$ 200,000
European Commission Euro 200,000 (approx. US$ 180,000)
UNDP US$ 300,000 (US$ 100,000 per year)
World Bank US$ 1,500,000 (US$ 500,000 per year)
TOTAL US$ 9,184,000
* = Earmarked for Window II for capacity building
** = Amount pledges in 2001
*** = Pledge made at Doha
TABLE 2 - SCHEDULE OF REMITTANCES
Donors Actual Remittan ces Expected remittances
2001 2002 2003
Belgium $327,320.00 $387,680.00
Canada $660,264.17
Denmark $286,168.00
Finland $154,497.41
France
Ireland $299,950.00
Italy $850,000.00*
Japan $500,000.00*
Netherlands $300,000.00
Norway $511,945.00
Sweden $323,558.00
Switzerland $200,000.00 $300,000.00*
United Kingdom $500,000.00 $1,439,000.00*
United States $200,000.00*
European Commission $180,000.00*
UNDP $200,000.00* $100,000.00
World Bank 500,000.00
$5000,000.00 $500,000.00
TOTAL $3,236,382.58 $4,996,320.00 $987,680.00
*   Announced but not yet remitted to the IFTF AccountWT/IFSC/W/7/Add.1
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TABLE 3 – SCHEDULED OF EXPECTED CASH FLOW
2001 2002
Beginning Balance 0 2,336,382.58
Remittances
Actual Remittances
Pilot Countries$3,236,382.58 $827,3200 ***
Cambodia $300,000.00
Madagascar $300,000.00
Mauritania $300,000.00
Sub-total
Old IF Countries * ($900,000.00)
Bangladesh $300,000.00
Gambia $300,000.00
Haiti $300,000.00
Tanzania $300,000.00
Uganda $300,000.00
Sub-total
Window II Approval
Cambodia (under review)
The Next Round  **
(Initial Group)($1,500,000.00)
($500,000.00)#
Malawi $300,000.00
Lesotho $300,000.00
Senegal $300,000.00
Mali**** $300,000.00
Sub-Total ($1,500,000.00)
Total Expenditures ($900,000.00) ($3,500,000.00)
End Balance (with Window II approval) -$336.297.42
End Balance (less Window II approval) $2,336,382.58 $163,702.58
* Project documents for the five old IF countries have been signed first week of January 2002.
Total amounts to $1.5 million.
** Project document sent to the WB for signature amounts to $1,500,000, which correspond to
six countries.  As additional remittance will be made, revisions will be prepared.
Target for 2002 is to cover eleven countries (remainder not included in cash flow).
*** Remittances from World Bank ($500,000) and Belgium ($327,320)
**** Project still under SC & IAWG consideration
# Project to be considered for approval early March 2002.
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