Project Title

APEC SME Business Ethics for the Construction-Engineering Sector: Building A Strong Future for SMEs 

Project Year

2017   

Project Number

SME 05 2017 

Project Session

Session 1   

Project Type

Standard 

Project Status

Project in Implementation   
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Project No.

SME 05 2017 

Project Title

APEC SME Business Ethics for the Construction-Engineering Sector: Building A Strong Future for SMEs 

Project Status

Project in Implementation 

Publication (if any)

 

Fund Account

General Project Account 

Sub-fund

None 

Project Year

2017 

Project Session

Session 1 

APEC Funding

59,540 

Co-funding Amount

141,050 

Total Project Value

200,590 

Sponsoring Forum

Small and Medium Enterprises Working Group (SMEWG) 

Topics

Small and Medium Enterprises 

Committee

SOM Steering Committee on Economic and Technical Cooperation (SCE) 

Other Fora Involved

 

Other Non-APEC Stakeholders Involved

 

Proposing Economy(ies)

United States 

Co-Sponsoring Economies

Australia; Canada; Hong Kong, China; Indonesia; Japan; Korea; Malaysia; Mexico; Papua New Guinea; Peru; Philippines; Singapore; Chinese Taipei; Thailand; Viet Nam 

Expected Start Date

01/08/2017 

Expected Completion Date

31/12/2018 

Project Proponent Name 1

Lynn A Costa 

Job Title 1

Senior Policy Advisor to the Deputy Assistant Secretary, Office of Asia 

Organization 1

US Department of Commerce 

Postal Address 1

14th and Constitution, Washington, DC 20230, USA 

Telephone 1

1-202 4825428 

Fax 1

Not Applicable 

Email 1

Lynn Costa@trade.gov 

Project Proponent Name 2

Not Applicable 

Job Title 2

Not Applicable 

Organization 2

Not Applicable 

Postal Address 2

Not Applicable 

Telephone 2

Not Applicable 

Fax 2

Not Applicable 

Email 2

Not Applicable 

Declaration

Lynn Costa 

Project Summary

The project will fund a two-day ethics compliance workshop in Hanoi, Viet Nam in August 2018. At this workshop, a newly formed Construction-Engineering Implementation Team, comprised of experienced engineers and construction compliance experts from APEC economies, will formulate a set of recommendations to increase SME participation in infrastructure projects across the APEC region. The Implementation Team will: 1) identify relevant APEC Working Groups to expand expertise and the knowledge base on issues such as customs, procurement and human resource management , 2) review and select high-standard training models to educate future generations of civil service professionals, 3) define a common set of APEC-wide Principles and Guidelines for an Anti-Corruption Certification program with potential incentive mechanisms for SMEs, and improve government processes - such as greater automation of regulatory practices to enhance efficiency, transparency and opportunities for small construction & engineering firms  who are the primary bidders, major suppliers and sub-contractors on large and small-scale projects across the APEC region.

Relevance

Per the Asian Development Bank, Asia alone will require USD 8 trillion in infrastructure investment through 2020 to meet the region’s infrastructure needs. World Bank states that the return on investment is potentially significant for economies throughout the Pacific Rim—a ten percent increase in infrastructure provision boosts long-term growth by one per cent. SMEs as the major sub-contractors and suppliers in the construction-engineering sector can gain a significant share of this work; if they are treated fairly and equitably across APEC economies in the project bidding and execution phases. To date, the work in the construction-engineering sector has focused on establishing the Hanoi Principles for the Construction-Engineering Sector and the implementation of these principles across APEC economies. The new Implementation Team will now analyse and assess methods to improve efficiency for SMEs and reduce opportunities for corruption throughout the project lifecycle, focusing on key areas where SMEs have substantial challenges (procurement, licenses, customs, and project management). The Implementation Team provides the SMEs from the Construction-Engineering sector with a voice in the APEC process and will strengthen cross-fora collaboration among APEC working groups on infrastructure development. The team will also assemble high-quality training program models, review for quality and then present to the SMEWG that can be used to enhance civil servant’s expertise on the development and execution of infrastructure projects.

This project falls under Rank 1 as established by SOM Officials in Lima, Peru under several categories: 1) MSME modernization and integration in global value chains, 2) trade and investment liberalization, including infrastructure development, 3) the Boracay Action Agenda where business ethics is listed as a key priority, and 4) in the Iloilo Initiative where the work in the construction-engineering sector was strongly supported. The new work will also focus on good regulatory practices and how technology can improve the customs, tendering and bidding processes for opportunity, operability and fairness for SMEs. The project also meets Rank 1 under Human Capital Development, as this project envisions training for civil servants on project engineering, project management, and estimating, as well as procurement systems. This work was also recognized by SME Ministers in the following:

2014 APEC Small and Medium Enterprises Ministerial Declaration
Nanjing, China, 5 September 2014

Facilitating Ethical Business Environments for SMEs

20. We reiterated the importance of strengthening ethical business practices in key sectors for APEC SMEs and their partners in the supply chain. Ethical business practices facilitate environments that free SMEs from the high costs of corruption, permit sustainable economic growth, and support SMEs access to global markets. We congratulate the Business Ethics for APEC SMEs Initiative for concluding its fifth year, supporting the successful development of 18 new codes of ethics across 9 APEC economies where they previously did not exist and extending the APEC Principles to nearly 14,000 companies, of which over 8,000 are SMEs.21. We welcomed the APEC Business Ethics for SMEs Forum to build stakeholder capacity to implement the APEC Principles and to facilitate multi-stakeholder collaboration. We endorsed the “Nanjing Declaration to Promote Ethical Business Environments in the Medical Device and Biopharmaceutical Sectors (2014-2020)” and extended our support to the achievement of its goals, including the call on APEC member economies to double the number of codes of ethics between 2012 and 2015, working toward further implementation of the APEC Principles by 2020. We expressed our support for the Manila Declaration to advance implementation of APEC Principles for the Construction and Engineering Sector and we encouraged SMEs to utilize the new APEC Business Ethics Web Portal to enhance their ethics compliance knowledge and capacity building skills.

22. We extended our appreciation to the Philippines for hosting the 2nd APEC Business Ethics for SMEs Forum in 2015 and encouraged the convening of this Forum on an annual basis.

Strengthening Dialogue with the Business Sector

27. We recognized the wide inclusion of private sectors in SMEWG activities, in particular in the multi-year project on Improving Natural Disaster Resilience of APEC SMEs to Facilitate Trade and Investment, and the multi-year project on Business Ethics Capacity Building for SMEs in Medical Devices, Bio-Pharmaceutical and Construction Sectors.

Link: http://apec.org/Meeting-Papers/Sectoral-Ministerial-Meetings/Small-and-Medium-Enterprise/2014_sme.aspx

Objectives

The key objectives are the following: 

·  The first objective, supported by APEC SME Ministers, is to establish an Implementation Team with the proper expertise to work collaboratively on a set of recommendations to increase SME participation in infrastructure in the APEC region. Ministers approved four categories of focus: training models for public sector professionals, technology applications to increase transparency and opportunities for SMEs, a certification process for SMEs to verify ethics compliance, and cross-fora collaboration to address specific areas where corruption impacted the internationalization of small and medium-sized companies. Working with the SME delegates and construction-engineering professionals engaged in this project since 2011, the Project Overseer will establish the new Implementation Team. The newly created Implementation Team will be comprised of experts in their field from the public and private sectors. Team members from the public sector will have an understanding of infrastructure -- civil or industrial -- and the engineering and construction industry. Ideal participants are senior government ministry or quasi-governmental officials that manage infrastructure development (for example, prepares RFPs/ITBs, manages the bidding and procurement process, and oversees the execution phase).  This may include participants from ministries with responsibility for public works, roads, seaports, airports, power facilities, industrial infrastructure, and/or housing construction. Furthermore, ideal participants may come from government ministries with responsibility for anti-corruption programs that also have familiarity with engineering and construction industry issues. Participants should be able to speak authoritatively on these subjects on behalf of their government. Ideal participants from the private sector would be senior managers or higher from an SME construction company, a senior official from construction or engineering association with SME members, or an international company that sub-contracts portions of a large-scale project with small and medium-sized firms. The participant should be able to speak authoritatively on behalf of domestic construction and engineering firms.

·  Once assembled the Implementation Team will be divided into three expert working groups to address the main goals of this project which are:

o  Training Models: Identify successful training models for civil service professionals to increase transparency, accountability and integrity by governments in the bid and execution phases of an infrastructure project. Governments are the major regulators of infrastructure services as well as the primary consumers of infrastructure services;

o  Technology:  Increase the use of technology, e.g. e-customs and e-procurement to increase transparency and reduce bribery and risk for SMEs;

o  Certification: Establish an APEC-wide integrity certification system that correlates with certification incentives for SMEs. NOTE: The certification process requires an external financial audit which has an affiliated cost. The project aims to identify incentives for SMEs to help offset the auditing costs. TRACE International, Ethic Intelligence, World Bank, and the World Economic Forum’s “Partnering Again Corruption Initiative (PACI) would be consulted in the next phase of this project in 2019 as they have experience establishing certification programs. An APEC certification system will be advanced in 2019 upon approval by the SMEWG/SME Ministers.

Cross-fora collaboration: As a group, the Implementation Team will establish a list of relevant APEC working groups that correlate with SME constraints to widen the base of knowledge on specific issues. The Project Overseer will reach out to the APEC working group to establish linkages and possible work product. APEC working groups could include: CTI (Sub-Committee on Customs Procedures) and Procurement, ACTWG, HRDWG, SMEWG, Transportation, Mining, and Energy. When APEC working groups are identified, the relevant working group expert will be invited to attend meetings held in phase 2.

Alignment

This project supports calls by APEC Leaders, APEC Ministers, APEC SME Ministers and APEC Ministers Responsible for Trade in 2016 to (A) strengthen SME cooperation in the promotion of ethical practices that empower their ability to operate in the international marketplace and (B) to advance implementation of the Nanjing Declaration and create ethical environments that support innovation and sustainable growth for SMEs. Visit http://mcprinciples.apec.org to view these recommendations. The APEC Business Advisory Council (ABAC) has also called for the continued strengthening of ethical practices by convening the APEC Business Ethics for SMEs Forum on an annual basis to 2020 and through capacity building workshops that increase the internationalization of SMEs in the construction-engineering sector. This projects furthers ABAC’s recommendations. 

The project is directly aligned with the SME Working Group Strategic Plan, which has the vision of promoting competitive, sustainable growth of SMEs and a mission of “enabling policy, business, and regulatory environment for SMEs and MEs” and “strengthening the participation and access to global markets for SMEs and MEs.” Unethical business practices serve as a detrimental barrier to achieving this vision for SMEs. This projects advances the recommendations cited in the 2014 Manila Declaration for the Construction-Engineering Sector, acknowledged by SME Ministers.

TILF/ASF Justification

Not Applicable.

Beneficiaries and Outputs

Outputs: The project (phase one) will be a workshop where the Implementation Team meets as an entire group to discuss individual expert working group’s research and recommendations. The Implementation Team will discuss the expert working group’s decisions as a full team, and make final determinations through discussion and consensus on the specific recommendations that should go forward for SMEWG and SME Ministerial approval.

The Project Overseer with provide a comprehensive written report to the SMEWG and a PowerPoint presentation that will include an overview of the training models for public sector professionals, the recommendations for technology applications that would reduce risk and costs for SME’s in this sector, status of the working group’s research on certification programs and the types of incentives that could be utilized to offset certification costs, and a compendium of SME constraints and the corresponding APEC working group needed for expertise and maximum impact.

The Project Overseer will also present an action plan (next steps) to implement the recommendations. 

Outcomes: The overarching goal of this work is to change a culture of corruption in the APEC region so that SMEs are not disproportionately impacted by improper requests for financial inducements. The primary goals of the project will help facilitate cross-border integration of SMEs into large-scale infrastructure projects or position them to serve as the lead contractor in domestic and foreign smaller-scale projects. 

In the medium-term, the newly formed Implementation Team will identify key areas where corruption is problematic for SMEs and tie these problems to expertise that resides in specific APEC working groups. This type of cross-fora collaboration is essential to addressing the specific problems SMEs are having that make sub-contracting outside of their own economies too expensive and risky. As an example, bribe requests at customs (e.g. to get their inputs or supplies out of customs) is a frequent problem for SMEs. The sub-Committee on Customs can advise the Implementation Team on what is currently in place to assist SMEs with custom’s problems. Onerous costs for licenses and permits also dissuade SMEs from engaging in cross-border projects. Often the SME is asked to pay “additional fees” in order to receive a license or permit in a timely manner. The public-sector training models will also help remove these problems, by teaching the public sector that the theft of unauthorized fees from SMEs is undermining the reputation of public sector agencies and workers, as well as undermining public trust in government institutions. Infusing integrity into public sector institutions that provide public goods (bridges, roads, hospitals, housing complexes, dams, energy facilities) assures the public that infrastructure is build based on high-standards and in alignment with international safety standards. It also undermines the ability of APEC economies to attract investment in infrastructure development that is gained through public-private partnerships.

Beneficiaries: The direct beneficiaries of this project are:

1)  Small and medium-sized companies who are significantly impacted by the cost of corruption and are risk averse in terms of expanding their operations within the APEC region due to their limited operating capital and fear of being pressured to pay bribes for licenses, to retrieve goods from customs, or to gain contracts. 

2) Multinational companies/international contractors benefit because they are responsible under law in many APEC economies for the sub-contractors and suppliers they contract with in large-scale projects under the third-party provisions of domestic laws and international agreements. 

3) Governments will benefit from the public-sector training, which will educate civil servants on the benefits and cost-savings to governments when infrastructure projects are built on integrity, transparency and accountability. Government ministries and agencies responsible for infrastructure development and financing will also benefit because civil servant training raises the reputation of public workers, which in turn raises public trust in terms of safety and how public money is spent on public goods. 

4) SMEs will benefit from the cross-fora collaboration with relevant APEC working groups because working group expertise can inform the Implementation Team on what processes are in place to resolve specific problems and advise on what actions could be taken specifically to help SME companies. 

5) Women entrepreneurs will benefit from e-procurement/online tendering where an application process should be gender neutral, based on the qualifications of the company and the quality of the bid submitted.

Dissemination

As noted, a list of recommendations will be submitted to SME Ministers for consideration. Based on Ministers’ approval, online training modules will be disseminated (free of charge) to APEC economies via the APEC SME Business Ethics Website (www.mcprinciples.org) and to the SMEWG delegates for domestic websites.

The Project Overseer, in conjunction with the Implementation Team, will work with APEC working groups to integrate knowledge and best practices into this initiative with a view towards identifying practical solutions for SMEs. The Implementation Team will also examine if and how benefits can accrue to SMEs that undergo a certification process. A list of potential benefits (actions) that can be taken by APEC economies to strengthen the marketable position of SMEs will be presented to SME Ministers. NOTE: Certification benefits have been established in non-APEC economies that off-set the costs associated with the certification process – such as lower bank rates for certified SMEs and a “green light” through customs.

Gender

We will proactively seek balanced representation by men and women in the project’s agenda, among target  attendees, and in those leveraging the project’s outputs within each member economy. This includes taking an equitable approach to the selection of speakers and participants during the recruitment process. This approach has enabled APEC’s 14 previous business ethics programs thus far to achieve near gender balance, including the construction and engineering sector where participants included women-owned construction-engineering companies, women engineers, ethics compliance leads within construction companies, senior officials from APEC economies that led their teams at the capacity building workshops, and ministers and vice ministers at the APEC forum responsible for infrastructure programs within APEC economies. We are confident there will be robust participation by both genders in the event, particularly those leading industry and government organizations of great importance to SMEs. Women play a particularly important role in the success of APEC SME companies. They also benefit from the project’s efforts to strengthen ethical business practices within and between APEC member economies. 

As economies have recovered from the recent recession, the construction industry, as well as the oil and gas industry, has seen significant comebacks. The growth has created double-digit demand for workers. A CNN article cites a Bureau of Labor statistic estimating that 46% of new jobs in the oil industry went to women in 2013. The growth has created double-digit demand for workers. According to the same report, women make up 9.3% of those employed in construction and 13.1% of those employed in mining, quarrying and oil and gas extraction industries. The growth trend is expected to continue. Clearly there is room for growth in women-owned and operated businesses in the construction sector, which includes the energy and mining sectors. 

It is also important to note that women are vital contributors to the project team as well as the extensive network of ethics champions supporting this effort. Women from all 21 APEC member economies have actively participated in the APEC SME business ethics work to-date and will continue to do so under this project. Many of the most active project contributors are also women; from mentors/leaders from industry working with SMEs in Australia, Canada, Chile, China, Hong Kong, Indonesia, Korea, Malaysia, Mexico, New Zealand, Peru, Philippines, Thailand, United States and Vietnam to government leaders supporting SMEs in all 21 APEC economies. It should be noted that the Project Overseer is a woman, as is the lead industry compliance expert who is a senior vice president for ethics compliance (regulatory and financial) at a Fortune 500 company.

Work Plan

Objectives/Outputs

Timing

Implementation Plan

Member Economies Involved

Beneficiaries Involved

Others Involved

Assemble Implementation Team

August -  September 2017

Email and Conference Calls

All APEC Economies

N/A

World Bank and ADB, OECD, PACI, Transparency international and ASEAN Constructors Association

Organize Implementation Team into Working Groups

October – December 2017

Email and Calls

All interested APEC Economies

N/A

World Bank and ADB, OECD and ASEAN Constructors Association

Organize meeting with ASEAN Constructors

May-June 2018

Overseer will travel to meeting venue

All active APEC economies

N/A

International Federation of Asian & Western Pacific Contractors Associations (IFAWPCA) 
Executive Committee Meeting

Secure venue and Draft Meeting

Agenda

June 2018

Overseer will handle

US and Vietnam

N/A

N/A

Secure attendees

July 2018

Overseer and US SME delegate

All APEC

Economies

SMEs, Industry, & government representatives

N/A

Hold workshop

August 2018

Overseer and US SME delegate

All interested APEC economies

All relevant stakeholders within APEC budget allowance

N/A

Prepare recommendations for SME Ministers

August 2018

Presentation to SME Ministers

All APEC economies

N/A

N/A

Risks

No risks are anticipated as this is not a large forum, but rather a meeting of public-private experts in the engineering and construction sector. The anticipated attendance at the workshop (members of the Implementation Team) is anticipated at 50 persons. Past workshops have seen 50-70 participants. Many of the previous experts from construction-engineering firms, construction and engineering associations and government agencies have signaled their intent to participate, particularly from travel-eligible economies.

Monitoring and Evaluation

The project will achieve its objective by gaining approval by the SMEWG/SME Ministers to move the Implementation team recommendations to the execution phase. The Project Overseer will then work directly with the SME delegates and relevant APEC working groups to ensure outcomes are “the right size” and the right policy prescription for SMEs. The Project Overseer will report directly to the SME Working group to keep them apprised of progress as well as through the monitoring report required by APEC.

Linkages

ABAC is fully supportive of the APEC Business Ethics Initiative and participated in the 2016 Construction-Engineering workshop in Peru. ADB and World Bank will be consulted as they both have a focus on SMEs, ethics, and have training expertise and knowledge that can add value to this project. The relevant APEC working groups will be contacted once the Implementation team identifies which working groups are the most salient to construction-engineering and solving challenges for SMEs through their work streams. 

APEC is the best source of funds for this project because it provides travel funding for the eleven eligible economies which ensures equity across all levels of development within APEC member economies. APEC is also recognized as a global leader in establishing sound policies and practices that facilitate trade and investment across the APEC region -- with a specialized and sustained focus on small and medium-sized enterprises.

Sustainability

The early ethics workshops for the construction-engineering sector focused on establishing principles, codes of ethics, and capacity building. These workshops primarily focused on ethical compliance by the private sector. 

·  This project shifts the training focus to the public sector - the decision-makers on procurement and those responsible for government oversite of a construction project.

·  The project also includes an examination of SME challenges at the border (customs) and what can be done by custom’s authorities to eliminate bribe requests which have a huge financial impact on small and medium-sized firms.

· The focus on auditing and certification would make an SME completing a certification process more attractive as a trusted partner on a project and ensures that neither the firm or the international contractor will have legal problems stemming from corrupt activity related to their project. Domestic agencies engaged in public procurement could list all the companies that have gone through the auditing and certification process on their websites as a “Trusted Project Partner”. This serves as an incentive for SME certification and demonstrates a pro-active stance by governments to ensure that public goods are being undertaken in a safe and ethical manner. 

·  It is also noteworthy that an SME that goes through an auditing and certification process is taking pro-active steps for sustainable company development. 

The next steps of the project is turning the recommendations into concrete actionable implementation plans. This would be done in collaboration with relevant APEC working groups, outside organizations that focus on auditing and certification programs, and the SMEWG. The Project Overseer will track the process. The Project Overseer would assume the lead role to ensure that the approved recommendations are carried out in a timely manner. The U.S. ethics team (led by the Project Overseer) would monitor progress and report back to the SMEWG.

Project Overseers

The Project Overseer is Ms. Lynn Costa, Senior Advisor to the Deputy Assistant Secretary of Commerce of at the U.S. Department of Commerce. She has served as the leader of the Business Ethics for APEC SMEs Initiative since 2010 and is widely regarded as the principal focal point in APEC’s work to strengthen ethical business practices. She has led the preparation and execution of 14 programs across the region and has engaged with thousands of attendees and other external stakeholders. She is expert in the subject matter of this project and will serve as the main point of contact. Ms. Costa oversees numerous projects that help build open and transparent business climates around the world to facilitate the movement of goods and services between economies. She served as the lead negotiator in the Doha Non-Agricultural Market Access (NAMA) sectoral negotiations in Geneva, Switzerland from 2002-2008 and serves as the senior development specialist for Commerce.  Ms. Costa has extensive experience in delivering large-scale trade development programs around the world for the Center for International Private Enterprise (CIPE), an affiliate of the U.S. Chamber of Commerce. As CIPE’s Program Officer for Training her work focused on commercial privatization, business association advocacy, corporate governance, economic journalism, women’s’ leadership, corruption, democratic governance and the informal sector/property rights in developing economies. Lynn has also served as the Senior Government Relations Officer for Princeton Technologies, Inc. where she was instrumental in negotiating large private contracts with foreign and domestic firms. Ms. Costa has a Bachelor’s Degree in Political Science from George Mason University and a Masters in International Commerce and Policy from George Mason’s School of Public Policy in Fairfax, Virginia.

Cost Efficiency

Not Applicable.

Drawdown Timetable

Not Applicable.

Direct Labour

Not Applicable.

Waivers

1) A waiver is requested for business class travel for experts, government or non-government, if the expert required is critical to reaching an optimal outcome or if medically advisable. Business class travel for experts would only be approved on a case-by-case basis by the Program Director during the project’s implementation. This approval will only be issued if the experts travel exceeds 12 hours (airport to airport), there are sufficient funds in the budget, and/or (as appropriate) medical certification is provided by experts claiming it is medically advisable.

2) A waiver is requested for advance payment of travel funds to participants from travel-eligible economies and to expert attendees.

Are there any supporting document attached?

No 
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Project No.

Project Title

Project Status

Publication (if any)

Fund Account

Sub-fund

Project Year

Project Session

APEC Funding

Co-funding Amount

Total Project Value

Sponsoring Forum

Topics

Committee

Other Fora Involved

Other Non-APEC Stakeholders Involved

Proposing Economy(ies)

Co-Sponsoring Economies

Expected Start Date

Expected Completion Date

Project Proponent Name 1

Job Title 1

Organization 1

Postal Address 1

Telephone 1

Fax 1

Email 1

Project Proponent Name 2

Job Title 2

Organization 2

Postal Address 2

Telephone 2

Fax 2

Email 2

Declaration

Project Summary

Relevance

Objectives

Alignment

TILF/ASF Justification

Beneficiaries and Outputs

Dissemination

Gender

Work Plan

Risks

Monitoring and Evaluation

Linkages

Sustainability

Project Overseers

Cost Efficiency

Drawdown Timetable

Direct Labour

Waivers

Are there any supporting document attached?

hdFldAdmin

Project Number

Previous Fora

Secretariat Comments

Reprogramming Notes

Consolidated QAF

Endorsement By Fora

PD Sign Off

Batch

Forum Priority

Committee Ranking Category

Committee Priority

PDM Priority

Priority Within Funding Category

Monitoring Report Received

Completion Report Received

PMU Field 1

PMU Field 2

PMU Field 3

On Behalf Of

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