Business Opportunity Support Scheme (BOSS - NZAID New Zealands

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Business Opportunity Support Scheme (BOSS - NZAID New Zealands ...

    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


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:


    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


    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


    ? Each proposal will have been pre-approved by the relevant sector umbrella


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.



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


    ii) focus on export growth including remittances (corollary is import substitution) and


    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



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


    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.



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.


    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.





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


    ? Industry development

    ? Private sector funding






    NEDC Umbrella Representative Date


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