CORE ELIGIBILITY AND SELECTION CRITERIA FOR SUBPROJECT FEASIBILITY STUDIES AND PILOT PROJECT ACTIVITIES

Presented below are core eligibility and selection criteria for (I) initial project screening by the TASMU and (ii) subsequent selection of subproject feasibility studies and pilot projects by TASMU and their approval by the screening committee. These may be refined or added to by TASMU with the approval of the Technical Screening Committee (TSC) during the course of the implementation of the Technical Assistance (TA) Loan.

A. Eligibility and Selection Criteria for Subproject Feasibility Studies

TASMU does not recommend any subproject proposal, which has been subject to an initial screening and RRA, to the TSC for its approval to conduct a Sub-Project Feasibility study (SFS), unless the proposal meets the following core eligibility and selection criteria:

• TASMU must identify a nucleus enterprise (NE) with sufficiently strong financial, technical, and managerial capacities to carry out the subproject. The NE may be a company or registered commercial entity or a non-government organization (NGO) or similar non-profit charitable organization, and may be based in Papua New Guinea (PNG) or abroad. Should such a NE not exist at the time of recommending the particular subproject proposal to the TSC, TASMU must identify the party or parties proposing to form the NE, such party or parties to have all the financial, technical, and managerial capacities that TASMU deems necessary to establish and operate the NE.
• The estimated total amount of the planned investment that is the subject of the SFS, including investments relating thereto (NE, smallholder and public sector infrastructure), must be at least $1 million equivalent.
• The proposal to conduct a SFS must refer to a NE system wherein a NE will provide marketing outlets and other technical and financial support to smallholder agricultural production. This may include different typologies: (i) a NE system comprising a commercial estate (e.g., plantation) and related smallholders/out-growers, (ii) a NE system comprising a NE owned and operated by an NGO or other similar non-profit charitable organization, or (iii) a NE system comprising a NE owned and operated by a group of smallholders. Investment proposals relating to stand-alone NEs (e.g., a processing plant or a plantation without out-growers) may also be considered when there are strong and identifiable potential benefits in terms of employment and poverty reduction for the surrounding population.
• TASMU must have reasonable cause to believe that, as a result of the preliminary RRA completed by TASMU, the investment proposal is prima facie economically and financially viable and that any NE, associated smallholder enterprise, and/or supporting infrastructure financed as a result of the SFS can be operated and maintained in a sustainable manner.

Whenever requesting approval of the screening committee to have a SFS carried out, TASMU must ensure that the SFS provides for the following:

• the preparation of a business plan, comprising a financing plan including operation and maintenance estimates, potential/expected sources of capital and recurrent funds, and all other cost and revenue estimates required for a commercially viable private sector investment;
• a study or studies on identifiable social and economic benefits for the smallholders/out-growers and the surrounding population;
• a study or studies on the environmental impacts of the subproject if these have not already been previously and satisfactorily addressed in accordance with the Asian Development Bank's (ADB) environmental guidelines; and
• a study or studies on social impacts, land use, land tenure and possible resettlement issues if these have not already been satisfactorily addressed in accordance with ADB's social guidelines.

Whenever the TSC gives its approval for a SFS to be carried out, TASMU, before engaging consultants to commence work it, must enter into a Memorandum of Agreement (MoA) with the proponent/s. In that MoA, the proponent/s must agree that if the SFS leads to investment financing for a NE by ADB or any other funding source, as soon as the financing arrangements become effective, that portion of the amount of the TA provided by the Borrower out of the proceeds of the Loan that exceeds the equivalent of $100,000 will be reimbursed to the Borrower.

B. Eligibility and Selection Criteria for Pilot Project Activities

TASMU does not recommend any Pilot Project to the screening committee for funding unless it meets the following core eligibility and selection criteria:

• The party or parties offering to implement the Pilot Project must be incorporated as a company or registered commercial entity, or be an NGO or similar non-profit charitable organization, based either in PNG or abroad, such party or parties to have been assessed by TASMU as having sufficiently strong financial, technical, and managerial capacities.
• The Pilot Project must involve a known and tested technology.
• The Pilot Project must have readily identifiable social and economic benefits for the rural population surrounding the proponent's pilot venture. In this regard, endorsement of the proposed pilot activity by a suitable representation of the local community should be sought by the proponent before submission of the proposal to TASMU.
• The Pilot Project must not entail any activity that could prove damaging to the environment. Clearance to this effect is sought during the preliminary RRA by TASMU.
• The Pilot Project must not entail any activity that could have negative social impacts. Clearance to this effect should be obtained during the preliminary rapid appraisal by TASMU.
• The party or parties that will implement the Pilot Project must be able to provide to TASMU satisfactory evidence of commitment to contribute, in cash or in kind, at least 33 percent of the total cost of the Pilot Project, and must have signed a commitment to provide the agreed inputs on a timely basis.
• The Pilot Project, including the 33 percent contribution of the proponent/s, will not cost more than $200,000 equivalent, making the maximum investment out of the proceeds of the Loan not greater than $132,000 equivalent.

After approval of the micro-investment plan for a Pilot Project has been given by the TSC, TASMU will not authorize the release of any proceeds from the loan account in respect of the pilot project until such time as a MoA has been entered into between TASMU on behalf of the Borrower and the NE or subproject proponent/s. Such MoA, which is in form and content satisfactory to ADB, will include, but not necessarily be limited to, provisions relating to (i) the overall investment and activities program of the pilot project, (ii) the manner in which financial accounts will be submitted and auditing requirements met, (iii) the quarterly reporting requirements, (iv) the organization for Pilot Project implementation/responsibilities, (v) detailed cost estimates, and (vi) the project work plan.