9 July 2010
Business Opportunity Support Scheme (‘BOSS’)
Tonga and NZAID agreed that under the New Zealand’s Development Cooperation
Programme with Tonga, supporting private sector development will be a key focus. The
BOSS is one initiative to support private sector development in Tonga.
What is the purpose of BOSS?
This scheme will provide grants to help entrepreneurs and investors conduct feasibility
studies to quantify business and investment opportunities, including opportunities for
joint ventures. This scheme will have a focus on the development of the private sector in
Tonga, by increasing investment in export-related ventures.
What are the objectives?
? To encourage commercial investment in projects or business plans that will
increase earnings from Tongan exports, import substitution and tourism. ? To provide Tongan and New Zealand firms making significant investment
decisions with an informed opportunity to compare the benefits of investing in the
proposed project with other options.
? To identify any impediments to investments or business plans proceeding. ? To support Tonga/New Zealand business linkages.
Who can apply for funds?
? The sector focus will be for feasibility studies in the export-related, import
substitution and tourism sectors. Other sectors will be considered on a case-by-
case basis.
? Recipients must be a registered business or business-related organisation that
has been in operation for at least one year.
? The feasibility grant cannot be applied retrospectively. ? Recipients can only receive one feasibility grant per annum. ? GoT through the National Economic Development Council (NEDC) will make a
judgement call on whether applicants need funding (i.e. whether or not the
applicant has sufficient financial capacity to fund the proposal itself). ? There will be no specific quota for applications from women entrepreneurs.
However, BOSS will be promoted via the Chamber of Commerce, Civil Society
and the Ministry of Women's Affairs. In future, the upstream supply of proposals
from women could be promoted via the proposed Tonga Business Enterprise
Centre.
What will the proposal for an assessment grant need to demonstrate?
? How the potential business/new investment could contribute to the livelihoods of
the wider community. The proposal will need to meet the same criteria as
required for other grants administered by the NEDC. This criteria includes:
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o Level of foreign exchange earnings/import substitution.
o Employment creation & type.
o Direct contribution to economic sector.
o Indirect contribution to the economy.
o Demonstration of management expertise and access to technical
resources.
o Demonstration that demand & supply issues have been addressed
(marketing plans, pre-orders, client base etc.).
o Regional benefits (employment/opportunities in remote islands).
o Attraction of foreign investment.
o Sustainability & growth potential.
? How the feasibility study will assess the commercial viability of the new private
sector investment or business opportunity, and if the study proves that the project
is commercially viable how that project will be funded. ? A plan for the feasibility study and how it will be conducted, including an itemised
budget.
? Each proposal will have been pre-approved by the relevant sector umbrella
organisation.
What funding is available?
? TOP$250,000 will be provided in 2009/10. Funding beyond this point will be
subject to a review of the effectiveness of the scheme ? There is a maximum of TOP30,000 per recipient.
? There is a minimum of TOP10,000 per recipient.
? Recipients will be required to contribute 30% towards the cost of the study.
Contributions will be cash contributions or in-kind contributions and include for
accommodation, food, and vehicles provided by a business to visitors
(prospective investors or consultants) either in Tonga or in NZ. The value of
accommodation and food will be set at the NZAID per diem rates.
What are the eligible costs for the grant?
? Eligible expenses will generally include consultant fees, per diems, travel and
accommodation or other items agreed by the NEDC as essential to complete an
approved feasibility study. Per diems will be provided at the NZAID rate.
How will the grants be approved?
? The NEDC will consider and approve proposals for funding. The NEDC will meet
on a monthly basis.
? The NEDC is supported by a secretariat located in the Chamber of Commerce.
The secretariat will review and assess the proposals using graded criteria, and
then forward proposals that meet the criteria to the NEDC. The secretariat will
also provide the NEDC with a list of proposals that have not been recommended,
together with the reasons for declining the proposals. ? Grant recipients will be required to provide full financial reports and monitoring
reports to the NEDC.
What is the timeframe for BOSS?
? The scheme will conclude in October 2010. It will be reviewed in November 2010
covering the October-October period. If the review finds the scheme successful,
the scheme will look to be extended for a further year.
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NEDC PROSPECTUS
1. Background
The National Economic Development Council (NEDC) is a Government initiative
emanating from Tonga’s first ever National Economic Summit held in April 2007. It was
established by the Prime Minister as a response to the national effort to support the
economic development activities in Tonga.
The Communiqué from this Summit sets the scope for economic growth through:
i) Forging a stronger partnership between government and private sector (creation of
NEDC);
ii) focus on export growth including remittances (corollary is import substitution) and
tourism;
iii) maximise the existing aid funding and add additional government funding to focus
on growing the economy;
iv) develop market opportunities by facilitating trade;
v) enhance the access to capital markets (fully utilise the existing natural and human
resources by improving access to capital) to develop activities to achieve economic
growth; and
vi) develop the labour market to ensure full gainful employment to maximise the
potential for economic growth.
The participating partners agreed to work closer together, with the Government of Tonga
(GoT) acknowledging its role as a facilitator of private sector growth.
2. Objectives
The main objective of the NEDC is to:
“Stimulate economic growth by identifying and recommending to Cabinet policy
initiatives for a private sector led economy”.
3. Tasks
The NEDC was established with the following tasks:
i) set up a sector framework for economic growth (refer Annex 1);
ii) formulate/endorse sector strategies for economic growth;
iii) set up a funding framework to implement the sector strategies (refer Annex 2);
iv) develop funding criteria to determine “best” application of funding to implement the
strategies; and
v) identify the funding sources (including NEDC) and “match” the initiatives identified
in the sectoral strategies
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ANNEX 1: SECTOR FRAMEWORK FOR ECONOMIC GROWTH
1. NEDC Framework
The NEDC should:-
1. represent the economic and business interests of the country as a whole and also of
its component parts;
2. include those GoT Ministries most directly involved in the regulation of industry; 3. build a structure that provides for the formulation of policy, purpose and practice; and 4. motivate, initiate and consolidate activities that aim to stimulate growth in the
economic wealth, environmental sustainability and social stability of the Kingdom.
The Sector Framework of Economic Interests:-
1. an overall umbrella for business groupings; e.g. the Chamber of Commerce and
Industry; and
2. a collection of the principle “umbrella organisations” of the economic sectors to
include;
i. Agriculture,
ii. Fisheries,
iii. Tourism,
iv. Manufacturers,
v. Financial and Service Industries,
vi. Infrastructure, and
vii. The National Export Strategy committee.
The number and nature of sector organizations is to be confirmed but it is envisaged that there will be no more than seven total.
2. Role of Umbrella Organisation
The purpose of the Umbrella Organization is to strengthen private sector representation by ensuring that each sector is represented by one cohesive organization. As such the Umbrella Organisation will work closely with Government Agencies by providing private sector feedback on policy development and implementation in the relevant sector. The role is to assist to stimulate economic growth by identifying and recommending to NEDC policy initiatives for a private sector led economy.
NEDC Representation from each sector is from the respective Umbrella Organisation.
Umbrella Organisations will appoint Executive Officers to liaise with Government and private sector to ensure wide consultation. The Executive Officers will be situated at one location, along with the NEDC Executive officer to ensure close consultation, communication and cost efficiencies.
The appraisal teams for NEDC proposals will be supplied by each Umbrella Organisation. The proposals will be vetted, fine tuned and gain the support of the Umbrella organization before being sent to NEDC for consideration.
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ANNEX 2: NEDC FUNDING CRITERIA
1. Background
The overall tenet of NEDC funding is that projects must demonstrate “a direct positive
economic benefit for the Tongan economy”. Projects must be focused on the generation
of foreign exchange and/or import substitution. Proposals that attract foreign investment
will also be considered.
2. Types of Funding Assistance
The NEDC has considered various options for the approval of funding requests and has
created broad outlines for the type that will be considered. Due consideration has
indicated a need to ensure that the process for applying is simple and efficient and that
access to funds for projects that are deemed to meet the criteria is not impeded.
The following provides a guide to the types of funding available:
A. Grants
There are a few cases where grants will be given. These are most likely to be for
special study tours, specialist training, feasibility studies, research or other projects
aimed at streamlining and improving the target sectors. Grants must be industry-wide
and not focused on individuals and must be directly linked to an economic benefit.
Grants are limited to a maximum of TOP50,000 each.
All applications for grants must be submitted directly to the NEDC via the Secretariat,
care of the Prime Ministers Office (PMO).
B. Industry Development
A number of projects may have an industry wide benefit, and in these cases they will
come under the industry development category. This component is also a form of
grant but where it benefits an entire industry, sector, or the economy as a whole they
will be classified here rather than as a grant. It was considered that these initiatives
could be of “large ticket” by nature that cover a whole sector. The assistance from
the NEDC would aim at building the tourism, agriculture, fisheries,
processing/manufacturing and IT industries. Strengthening of these sectors towards
meeting their potentials will “trickle down” to individual enterprises.
Where feasible, these projects will be run on a not-for-profit basis, to ensure that the
industry sector receives the full benefit of economies of scale in terms of their cost
make up.
Again, applications for such funding must be submitted directly to the NEDC via the
Secretariat, care of the PMO.
C. Private Sector Funding
This project funding type is aimed at kick-starting new ventures. This category is to
assist private sector concerns into ventures which would not normally receive bank
funding or in joint ventures with banks. The fund is something akin to a venture
capital fund but with well defined projects that have the wider industry interests in
mind. Projects that fulfill the criteria may receive full funding from the NEDC, with a
requirement to repay the full amount allocated plus a nominal fee that is used
specifically for the on-going funding of NEDC administration.
This funding group may, at the discretion of the NEDC, be provided in one the
following ways:
1. Full funding of the total project.
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2. Partial funding of the project.
3. Security – The NEDC may provide the funding security required by the banking
sector for the financing of the project.
4. Other – This category is to cover other scenarios for private sector funding that
are not specifically addressed above.
3. NEDC Funding Process
In all cases, regardless of the type of funding being sought, a funding proposal application form (see Annex 3) is to be completed. All proposals along with a completed application form together are to be submitted directly to the NEDC via the Secretariat. If the funding proposal is for private sector funding, then the project proposal must include a detailed business plan including setup cost, cash flows, budgets, marketing plans and other pertinent information.
All proposals should be as comprehensive as possible to ensure that the approval process is not delayed due to lack of key information. All applications for funding should be signed off by the appropriate NEDC sector representative and the Ministry CEO.
Private sector funding proposals, once received by the Secretariat, will be reviewed and graded according to the funding criteria. The Secretariat will also put the proposal through a risk assessment analysis to ensure feasibility and integrity.
All decisions from the Council will be forwarded to the Secretariat who in turn will advise the applicant of the success/failure of the request. For all approved applications, the Secretariat will assist the applicant through the process of securing the approved funds.
4. Criteria
(Applies to Private Sector Funding only)
Requests for Private Sector Funding will be evaluated on a points system. Some of the factors that will be reviewed are as follows:
a. Level of foreign exchange earnings/import substitution.
b. Employment creation & type.
c. Direct contribution to economic sector.
d. Indirect contribution to the economy.
e. Demonstration of management expertise and access to technical resources. f. Demonstration that demand & supply issues have been addressed (marketing
plans, pre-orders, client base etc.). g. Regional benefits (employment/opportunities in remote islands).
h. Attraction of foreign investment.
i. Sustainability & growth potential
For Private Sector Funding, a reporting schedule must be adhered to by the project owner. Required reports will include full financial reports on a quarterly basis (or another schedule to be determined by the NEDC in the case of short-term projects), monthly financial summaries and a monthly report on progress.
The NEDC may at anytime during the project life and at own cost, cause to be conducted an audit of the project. This audit may be financial or targeted specifically at any area of the project. The project owner will not refuse such an audit and will undertake to ensure that all information and assistance is provided.
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ANNEX 3: NEDC FUNDING APPLICATION FORM
NEDC
PROJECT FUNDING APPLICATION FORM
1. Project Name
2. Project Sponsor / Ministry
3. Summary of Project
Brief summary of what the project consists of including what type of funding and
how much is being requested from NEDC.
4. Cost/Benefit Analysis
a. Industry Analysis
What is the impact on local business operations? Is there an opportunity to
involve other local parties?
b. Marketing Analysis
How is the product/service to be taken to the market either locally or overseas?
Who are the major parties involved. (i.e. customers, transport etc.)
c. Employment Strategy
What are the benefits/opportunities for local employment?
d. Economic Value
What is the overall impact on the economy in Tonga?
e. Financial Forecast
What is the financial viability of the project? (At least 3 years forecasts of Profit
& Loss and Cash Flow)
f. Sustainability
What mechanisms are in place to ensure the sustainability of this project? What
are the risks?
g. Monitoring/Reporting
What are the mechanisms for monitoring and reporting?
5. Assistance Required
? Grant
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? Industry development
? Private sector funding
Recommended
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Ministry
Date
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NEDC Umbrella Representative Date
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