During 2004, the Bank administered 55 trust funds for technical cooperation activities. This number includes the Regional Fund for Agricultural Technology (FONTAGRO); the Indigenous Peoples’ Fund; trust funds for microenterprise development; independent funds established by Austria, Canada, Japan, Korea, Spain, the United States and Venezuela; the Global Environmental Facility; and 37 funds under the Program for Development of Technical Cooperation among Member Countries of the Bank (TC/Funds Program).
The trust funds have been established by donors to provide support to IDB borrowing member countries through consulting services and training and, in some cases, cofinancing for Bank loans and microenterprise development projects. Among the funds in administration, the TC/Funds Program is currently the largest pool of resources. Since 1991, 48 funds have been established under the TC/Funds umbrella, with total contributions of $228.6 million. The program also encompasses five agreements for the provision of in-kind services.
In 2004, the nonborrowing member countries of the Bank contributed $45.6 million to trust funds. Funds have been established by Austria, Belgium, Canada, Denmark, the European Union, Finland, France, Israel, Italy, Japan, Korea, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States.
During the year, the United Kingdom, through its Department for International Development (DFID), established two new arrangements with the Bank in support of poverty reduction: the DFID-IDB Enlace Trust Fund, which focuses on social inclusion in Central America, and the Cooperation Framework Arrangement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Inter-American Development Bank, which stipulates the financial instruments to be used by DFID to fund IDB projects.
In addition, the Bank and the Global Environment Facility (GEF) signed a Memorandum of Understanding outlining the procedures for access to GEF’s Full-sized and Medium-sized Projects and Block A and Block C grants under its Project Preparation and Development Facility, along with a Financial Procedures Agreement with the World Bank as GEF trustor.
In conjunction with the agreement reached with the government of the Republic of Korea concerning the conditions for its admission as a new member country of the Bank, it is expected that Korea will participate actively in trust funds, particularly in the areas of technology and poverty reduction.
Trust funds have become the second largest source of financing for the Bank’s nonreimbursable technical cooperation projects after the FSO. In 2004, of the total $56.7 million approved under the nonreimbursable technical cooperation program, $24.8 million was financed with trust fund resources to finance 188 technical cooperation operations. In addition to this amount, the trust funds financed eight operations in support of the Bank for $8 million.
Since its establishment in 1988, the Japan Special Fund (JSF) has become a major source of untied resources for the Bank’s technical cooperation activities. One of the oldest and largest technical cooperation funds administered by the Bank, the JSF approved six projects in 2004 totaling $2.1 million, of which 61 percent targeted the social sectors. New contributions from Japan to the JSF in 2004 totaled approximately $2.6 million, raising the aggregate contribution to approximately $208.2 million.
In 2001, the government of Japan created the Poverty Reduction Program (JPO), setting aside $30 million from the JSF. The JPO uses innovative methods to provide direct assistance to poor and vulnerable groups, encouraging the participation of civil society organizations such as NGOs and community groups to enhance IDB loans.
A third initiative, the Japan Program, was created in 1999 with funds mainly from the government of Japan to facilitate the transfer of knowledge and the exchange of best practices between Latin America and Asia. In 2004, the Japan Program approved 12 technical cooperation projects for a total of $1.6 million.
Still another window, the Japanese Trust Fund for Consultancy Services (JCF), was created in 1995. In 2004, the Bank approved six JCF projects for $3 million. JCF funding is tied, requiring that at least 50 percent of project resources be used for Japanese consultants or consulting firms. Any sectors in which Japanese expertise is needed, such as infrastructure and the environment, are eligible for financing. In 2004, Japan contributed approximately $2.1 million to the JCF, bringing cumulative contributions to approximately $30 million (see Box 13).