BEST Phase II NOFO 72043825RFA00001 app hw.pdf

Issue Date: Nov. 22, 2024 Deadline for Questions: Dec. 13, 2024, 13:00 Manila Local Time Closing Date: Feb. 12, 2025 Closing Time: 13:00 Manila Local Time

Subject: Notice of Funding Opportunity Number (NOFO): 72043825RFA00001

Program Title: Business Excellence for Sustainability and Transparency (BEST) Phase II Activity

Federal Assistance Listing Number: 98.001

To Prospective Applicants:

The United States Agency for International Development (USAID) is seeking applications for a cooperative agreement from qualified entities to implement the Business Excellence for Sustainability and Transparency (BEST) Phase II Activity. Eligibility for this award is not restricted.

USAID intends to make an award to the applicant(s) who best meets the objectives of this funding opportunity based on the merit review criteria described in this NOFO, subject to a risk assessment. Eligible parties interested in submitting an application are encouraged to read this NOFO thoroughly to understand the type of program sought, application submission requirements, and selection process.

To be eligible for award, the applicant must provide all information as required in this NOFO and meet eligibility standards in Section B of this NOFO. This funding opportunity is posted on www.grants.gov and may be amended. It is the responsibility of the applicant to regularly check the website to ensure they have the latest information pertaining to this NOFO and to ensure that it has been downloaded from the internet in its entirety. USAID bears no responsibility for data errors resulting from transmission or conversion process. If you have difficulty registering on www.grants.gov or accessing the NOFO, please contact the Grants.gov Support Center at 1- 800-518-4726 or via email at support@grants.gov for technical assistance or if you need assistive technology and are unable to access any material on this site.

Unless an exception in 2 CFR 25.110 applies, applicants must comply with 2 CFR 25 requirements to obtain a Unique Entity Identifier (UEI) and register in the System for Award Management (SAM.gov), as applicable. See Section E, Submission Requirements and Deadlines, for more information. The registration process may take many weeks to complete. Therefore, applicants are encouraged to begin registration early.

Please send any questions to the point(s) of contact identified in Section A. The deadline for questions is shown above. Responses to questions received prior to the deadline will be http://www.grants.gov/ http://www.grants.gov/ mailto:support@grants.gov furnished to all potential applicants through an amendment to this notice posted to www.grants.gov.

Issuance of this NOFO does not constitute an award commitment on the part of the Government nor does it commit the Government to pay for any costs incurred in preparation or submission of comments or suggestions or an application. Applications are submitted at the risk of the applicant. All preparation and submission costs are at the applicant’s expense.

Thank you for your interest in USAID programs.

Sincerely, Howard Weston Agreement Officer

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity http://www.grants.gov/

TABLE OF CONTENTS

Section A – Basic Information

Section B – Eligibility

Section C – Program Description

Section D – Application Content and Format

Section E – Submission Requirements and Deadlines

Section F – Application Review Information

Section G – Award Notices

Section H – Post-Award Requirements and Administration

Section I – Other Information

Annex 1 - Application Cover Page

Annex 2 - Standard Provisions

Annex 3 - Mission Analyses of Operating Environment

Annex 4 - Abbreviations and Acronyms 49

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity

SECTION A: BASIC INFORMATION

1. Executive Summary

The USAID Business Excellence for Sustainability and Transparency (BEST) Phase II Activity will further advance key elements of the original activity and incorporate new elements to improve long-term sustainability of the small and medium-sized enterprise (SME) sector.

BEST Phase II will work more closely with Mongolian government entities and civil society organizations (CSOs), providing training and capacity building so they can more effectively advise SMEs. In addition, BEST Phase II will include a component to work with SMEs directly to improve their energy efficiency and environmental sustainability to improve their overall competitiveness. Similar to BEST, the goal of BEST Phase II is to build the capacity of SMEs so they can more powerfully serve as an engine for Mongolia’s economic growth and diversification. Best Phase II will

1. Improve capacity of Mongolian institutions;

2. Improve corporate governance of SMEs; and

3. Improve energy efficiency and environmental sustainability of SMEs.

2. Estimate of Funds Available and Number of Awards Contemplated

USAID intends to award one Cooperative Agreement pursuant to this NOFO but reserves the right to issue an award other than a Cooperative Agreement or issue more than one award or no award or cancel the solicitation or re-solicit the action.

Subject to funding availability and at the discretion of the Agency, USAID intends to provide not more than $10 million in total USAID funding over a five-year period.

3. Start Date and Period of Performance for Federal Awards

The anticipated period of performance is five (5) years. The estimated start date will be on or about May 1, 2025.

4. Agency Point of Contact

Name Howard Weston Maria Guadalupe David Title Agreement Officer Agreement Specialist Email manila-roaa-rfa@usaid.gov manila-roaa-rfa@usaid.gov Mail Address Regional Office of Acquisition and

Assistance (ROAA) 1201 Roxas Boulevard, Ermita Manila, Philippines 1000

Regional Office of Acquisition and Assistance (ROAA) 1201 Roxas Boulevard, Ermita Manila, Philippines 1000

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity mailto:manila-roaa-rfa@usaid.gov

5. Acquisition and Assistance Ombudsman

The A&A Ombudsman helps ensure equitable treatment of all parties who participate in USAID’s acquisition and assistance process. The A&A Ombudsman serves as a resource for all organizations who are doing or wish to do business with USAID. Please visit this page for additional information: https://www.usaid.gov/work-usaid/acquisition-assistance-ombudsman.

The A&A Ombudsman may be contacted via: Ombudsman@usaid.gov

6. Authorized Geographic Code

The geographic code for the procurement of commodities and services under this program is 937. Except as may be specifically approved in advance by the Agreement Officer (AO), all commodities and services that will be reimbursed by USAID under this award must be from the authorized geographic code specified in this NOFO and must meet the source and nationality requirements set forth in 22 CFR 228.

7. Selection of Instrument

Stakeholder consultations were carried out with government agencies, the donor community, commercial banks, non-bank financial institutions, and beneficiaries from the original BEST activity to craft BEST Phase II, ensuring that the program design is grounded in evidence.

The principal purpose of the relationship between the recipient and USAID is to transfer funds to accomplish a public purpose: helping build the capacity of host country government agencies, CSOs, and SMEs through initiatives that align with the objectives noted above (and these organizations would be the direct beneficiaries). The recipient will perform the activity for its own purpose, according to its organizational mission, programs or activities, and not acquire property or services for the direct use or benefit of USAID. The recipient will implement the activity not as an agent of the U.S. government; rather, the U.S.

government will support but not directly control the activity. The objectives of this activity are best met by having an independent entity as the implementer, and not to do so as agents of the U.S. government. Based on these factors, an assistance award was recommended for this activity. Given that some level of substantial involvement will be advantageous to achieve the objectives of the award, the AO approved a cooperative agreement for the activity.

[End Of Section A]

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.usaid.gov/work-usaid/acquisition-assistance-ombudsman https://www.usaid.gov/work-usaid/acquisition-assistance-ombudsman https://www.usaid.gov/work-usaid/acquisition-assistance-ombudsman

SECTION B: ELIGIBILITY

1. Eligible Applicants

Eligibility for this NOFO is not restricted. For-profit entities may submit an application, but profit is not allowable under this NOFO.

Faith-based organizations are eligible to apply for federal financial assistance on the same basis as any other organization and are subject to the protections and requirements of Federal law.

Additionally, USAID welcomes applications from organizations that have not previously received financial assistance from USAID.

Interested and eligible applicants may submit no more than one application under this NOFO. However, entities may be listed in more than one application as a potential subrecipient.

Each applicant must be found to be a responsible entity before receiving an award in accordance with ADS 303.3.9.

2. Cost Sharing

Cost Sharing is not required for this activity.

[End Of Section B]

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SECTION C: PROGRAM DESCRIPTION

This funding opportunity is authorized under the Foreign Assistance Act (FAA) of 1961, as amended. The resulting award will be subject to 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and USAID’s supplement, 2 CFR 700, as well as the additional requirements found in Section H.

USAID will have substantial involvement with any award made as a result of this NOFO. For more information on substantial involvement, please refer to USAID’s ADS 303.3.11 Cooperative Agreements and Substantial Involvement (10/01/2024).

TITLE OF ACTIVITY: Business Excellence for Sustainability and Transparency (BEST) Phase II

I. BACKGROUND

Despite recent progress, Mongolia’s economy still struggles with a lack of diversification. It remains highly dependent on the mining sector and animal husbandry (together accounting for nearly 40 percent of gross domestic product (GDP)), making it extremely vulnerable to fluctuations in global commodity prices and changing climate conditions. In addition, Mongolia is also dependent on the People’s Republic of China (PRC) as a mineral export market, transit country, and primary supplier of a range of imported goods. One of USAID’s core objectives in Mongolia is to diversify the economy so it is less dependent on mineral exports and the PRC, and the agency’s primary focus (along with other development partners) in recent years has been on building the capacity of small and medium-sized enterprises (SMEs) to become greater contributors to the economy.

Mongolia also struggles with governance issues (particularly lack of transparency and accountability, as well as corruption) in addition to an inefficient energy sector that relies on coal-fired power generation and energy imports from the PRC and Russia. Addressing these shortcomings through BEST Phase II also represents key aspects of USAID’s strategy in Mongolia, as it relates to promoting clean energy and encouraging democratic governance.

Supporting Mongolia’s transition to clean energy decreases harmful emissions from coal power and also guards against influence from these authoritarian, energy-supplying neighbors and economic “over-reliance” that threatens to degrade Mongolia’s sovereignty. Mongolia’s democracy is strong but young, and promoting homegrown economic diversification and energy independence are important measures to mitigate the risk of democratic backsliding.

While SMEs make up 90 percent of registered Mongolian businesses and employ over two-thirds of the overall workforce, they only contribute approximately 10 percent to GDP.

According to the Asian Development Bank (ADB), SMEs account for only 25 percent of total outstanding bank loans, and while roughly half of SMEs are able to access some form of financing, it is often much less than requested, and frequently under unfavorable terms. Access to lending is impaired by a lack of recognized collateral, high interest rates, and the banks’ own

NOFO 72043825RFA00001

Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.usaid.gov/sites/default/files/2024-10/303_100824.pdf https://www.usaid.gov/sites/default/files/2024-10/303_100824.pdf liquidity constraints. In addition, low financial literacy, weak corporate governance, and difficulties formulating viable business plans are also significant constraints for SMEs. Women-owned SMEs face even greater challenges, as banks generally perceive lending to women as more risky than men due to traditional gender biases and because women more often lack assets that can be provided as collateral.

II. PROGRAM GOAL AND PURPOSE

To address these limitations, since late 2019 USAID/Mongolia has supported an SME development activity (Business Excellence for Sustainability and Transparency (BEST)) focused on building capacity among both SMEs and the institutions that serve them. Through training and tailored consulting services, BEST helps to increase access to finance, improve corporate governance, and build institutional capacity. It advises SMEs on a wide variety of topics including financial management and accounting practices, loan literacy and business planning, and also provides assistance with preparing loan applications. BEST also provides training to government agencies at both the national and provincial levels to enhance transparency and develop policies to promote SME development.

BEST is widely regarded as a successful activity for building SME capacity, unlocking financing, and creating new jobs. With over four years of data accumulated, it has exceeded targets for most indicators in each reporting year, some by a significant margin. BEST has already helped to facilitate over $80 million in loan financing, creating over 4,000 new jobs. The activity has a wide reach, operating not only in Ulaanbaatar but also 12 rural provinces. This wide reach and record of success has led it to become one of the most, if not the most, popular donor programs in the country. It has overwhelming support from the Government of Mongolia, as well as commercial banks and other financial institutions, which have strongly advocated for its continuation.

This new activity, “BEST Phase II,1” is intended to not only keep certain elements of the original activity but also adjust in areas that are anticipated to improve long-term sustainability of the SME sector. Specifically, BEST Phase II will work more closely with Mongolian government entities and civil society organizations (CSOs), providing training and capacity building to them so that they can ultimately become more adept at advising SMEs. In addition, BEST Phase II will include a component to work with SMEs to improve their energy efficiency and environmental sustainability (and therefore improve their overall competitiveness).

II. PROGRAM FOCUS / APPROACH AND RESULTS FRAMEWORK

While the goal of BEST Phase II will remain essentially the same as the original BEST activity, i.e., growing and diversifying the economy through SME development, it will take a slightly different approach in that it will work more directly with government institutions and CSOs. The aim of increasing capacity within these institutions is to make SME development more locally led, and

1 Given BEST’s strong name and brand recognition, USAID/Mongolia proposes to continue using this name.

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thereby more sustainable. In addition, given USAID/Mongolia’s strategic focus on helping Mongolia become more energy independent, BEST Phase II will also work directly with SMEs to improve energy efficiency and environmental sustainability, which would address this goal and help SMEs become more competitive.

Theory of Change

The development hypothesis/theory of change asserts that:

IF Mongolian government institutions and civil society organizations have greater capacity to support SMEs in obtaining financing, improving corporate governance, and becoming more operationally efficient (including energy efficient) and resilient, THEN SMEs will have enhanced capabilities, so they can become a larger part of the economy and strengthen Mongolia’s economic sovereignty.

As noted, SMEs make up 90 percent of registered Mongolian businesses and employ over two-thirds of the overall workforce. However, despite the progress made under the original BEST activity and the work of other donors in the sector, they continue to face barriers in accessing finance, and many do not have the expertise or resources to implement energy efficiency and environmental sustainability measures to improve their competitiveness. While government and civil society support to SMEs is growing, there is still limited capacity to advise SMEs on the various considerations for obtaining financing, implementing best practices on corporate governance, and becoming more operationally efficient and competitive. Given the importance of the SME sector to Mongolia’s economy, building domestic capacity to advise SMEs in these areas will help to build a more robust and sustainable SME sector and promote greater economic diversification.

Results Framework

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The activity will comprise the following objectives:

1) Improving capacity of Mongolian institutions,

2) Improving corporate governance among SMEs, and

3) Improving operational efficiency through energy efficiency and environmental sustainability measures.

Objective 1: Improving Capacity of Mongolian Institutions

Government institutions and civil society organizations have limited capacity to support SME needs. The main national level government agency that provides support to SMEs, the SME Development Agency, is relatively small (approximately 35 staff in Ulaanbaatar, and no dedicated staff in its provincial offices). Certain provincial governments (14 out of a total of 21) currently operate “business incubator centers” that serve SMEs, although they vary widely in terms of the level of services offered (some just provide office space and support services, while others provide general training and even some specialized consulting services). The Ministry of Economy and Development, while involved in SME policy matters, does not provide training or support services. Therefore, there is an opportunity to build capacity among government institutions (particularly staff at business incubator centers) so that they can ultimately provide the types of services BEST currently provides. Building greater capacity among these institutions would also promote sustainability by increasing government effectiveness to address SME needs beyond the timeframe of this USAID activity.

Similarly, CSOs involved in SME causes are rare and understaffed. Industry associations generally cater to larger companies, although there are some that have SME members. There is also a growing industry of private business consultants focusing on SMEs. Interestingly, one of the unexpected successes of the current BEST activity is the formation of informal “mentoring” clubs among beneficiaries. Building capacity among CSOs such as these should also promote sustainability by further developing the business advisory space.

BEST Phase II will provide training to staff from these organizations across a range of relevant topics, including business planning/operations, accounting practices, financial literacy, and assistance navigating the loan application and repayment processes, in addition to any other topics that the applicant deems appropriate. This could include both structured as well as “on-the-job” training involving SMEs seeking government support, and embedded advisors at the SME Development Agency and business incubator centers.

This component would also include training to government and CSO representatives on measures to reduce corruption. Corruption remains a significant problem in Mongolia, evidenced by its rank of 122 (out of 180 countries) on Transparency International’s Corruption Perceptions Index (its score and ranking have remained essentially flat over the past several years). In addition, corruption has affected the SME Development Agency, with a scandal emerging in 2018 involving loans to politically connected individuals. In this area, training will

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be provided on effective oversight of the lending program and other best practices to reduce corruption within government entities dealing with SME matters.

This component will replace the direct training/advisory services to SMEs that BEST currently provides, with the ultimate objective of developing a cadre of government and civil society/NGO representatives that have the capabilities to assist SMEs directly. BEST Phase II could also work with provincial government agencies that do not have business incubator centers to develop these operations. During initial stakeholder consultations with government and business incubator staff, representatives expressed a willingness to work with USAID in this area. Due to funding limitations, this objective may only include assistance to government officials and civil society/NGO representatives (i.e., no direct training/consulting to SMEs, as the current BEST activity provides - see Section VIII for further discussion on funding types and the effects on activity interventions).

At the conclusion of the activity, it is expected that the following intermediate results would be achieved under this objective: (1) capacity of government and civil society representatives to advise SMEs would be improved, and (2) corruption among government and SMEs would be reduced.

Illustrative Activities

● Training to government institutions and CSOs on areas to support SME development, including (but not limited to):

○ Business planning and operations

○ Accounting practices

○ Compliance with government regulations

○ Anti-corruption

○ Loan application processes and post-loan maintenance

○ Standards conformance

○ Navigating customs procedures (for SMEs targeting export markets)

○ Building/enhancing online presence

○ Developing market linkages (more effective relationships among producers, distributors and retail)

● Training to CSOs/NGOs in the aforementioned areas

● Development of a training and/or continuing education curriculum

● Development and enhancement of government and civil society operations to support SMEs

(business incubator centers and industry associations)

● Embedded advisors at government institutions and CSOs/NGOs

● Coordinate with local banks, non-bank financial institutions, and international donors with

SME support programs (including U.S. Development Finance Corporation (DFC) to identify promising opportunities

Illustrative Indicators

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Standard

● DR.2.1.3: Number of policies and plans enhanced to improve service delivery governance and regulation

● DR.2.2.4-2: Number of government officials receiving USG-supported anti-corruption training

● DR.2.2.4-5: Number of people affiliated with non-governmental organizations receiving USG-supported anti-corruption training

● DR.4.2-2: Number of civil society organizations (CSOs) receiving USG assistance engaged in advocacy interventions

● EG.5-2: Full-time equivalent employment of firms receiving USG assistance

● EG.5.2-1: Number of firms receiving USG-funded technical assistance for improving business performance

● EG.3.2-26: Value of annual sales of producers and firms receiving USG assistance

Custom

● Value of financing accessed by SMEs as a result of USG assistance

● Number of loans received by SMEs as a result of USG assistance

● Number of SME loan applications finalized with USG assistance

● Number of initiatives successfully implemented to strengthen SME financing mechanisms with

USG assistance

● Number of NGOs strengthened to promote policy dialogue, advocate for change and exercise oversight of public institutions

● Percent of USG-assisted organizations with improved performance

● Number of organizations pursuing their own performance improvement priorities with USG capacity strengthening support.

Note: Interventions and indicators are neither restrictive nor comprehensive and are for illustration purposes only.

Objective 2: Improving Corporate Governance among SMEs

Despite notable progress under the current BEST activity, there are still a significant number of SMEs that have not implemented an appropriate system of corporate governance, and therefore many lack the formalized standard practices for combating corruption2, complying with government regulations, and ingraining ethical business conduct. BEST Phase II will continue this critical work from the first activity by providing training and tailored advisory services in this area. In addition to working directly with SMEs, this component will also involve government and civil society representatives in order to build their capacity to serve as advisors in this area following the conclusion of the activity. Under this objective, assistance will go toward not only government and civil society representatives but also the SMEs themselves.

At the conclusion of the activity, it is expected that the following intermediate results would be achieved under this objective: (1) corporate governance among SMEs would be improved, and

(2) compliance with government regulations and corporate best practices among SMEs would be increased.

2 Numerous programs (funded by USAID as well as other donors) have focused on anti-corruption measures within the government, but a relatively limited amount have targeted the “supply” side of corruption, i.e., the private sector. As part of this objective, the implementing partner will develop and implement training programs to address this.

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Illustrative Activities

● Training to government institutions and SMEs on various aspects of corporate governance, including (but not limited to):

○ Overall principles (responsibility, accountability, transparency, fairness)

○ Leadership structures/shareholders

○ Compensation

○ Financial controls, auditing and disclosure

○ Risk management

○ Anti-corruption

● Development of a training and/or continuing education curriculum

● Mobilize the private sector and CSOs in policy dialogues or advocacy for reforms to improve the business environment for SMEs

Illustrative Indicators

Standard

● DR.2.1.3: Number of policies and plans enhanced to improve service delivery governance and regulation

● DR.2.2.4-2: Number of government officials receiving USG-supported anti-corruption training

● DR.2.2.4-5: Number of people affiliated with non-governmental organizations receiving USG-supported anti-corruption training

● DR.4.2-2: Number of civil society organizations (CSOs) receiving USG assistance engaged in advocacy interventions Custom

● Number of SMEs adopted good corporate governance practices as a result of USG assistance

● Number of SMEs trained in corporate governance

● Number of SMEs in compliance with government regulations as a result of USG assistance

Note: Interventions and indicators are neither restrictive nor comprehensive and are for illustration purposes only.

Objective 3: Improving Operational Efficiency through Energy Efficiency and Environmental Sustainability Measures

Most Mongolian SMEs fail to adopt energy efficiency and environmental sustainability measures due to limited knowledge and access to finance. BEST Phase II will assist SMEs in overcoming these barriers, adopt environmentally sustainable business practices, strengthen their resilience to climate change and environmental shocks, and identify potential business opportunities focusing on “green” sectors/value chains and the circular economy. BEST Phase II will work directly with SMEs in this area, through workshops and tailored advisory services, on accessing finance to implement energy efficiency and environmental sustainability measures. In addition, this component will feature a subaward program for SMEs lacking capital to invest in new equipment and energy efficiency solutions.

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At the conclusion of the activity, it is expected that the following intermediate results would be achieved under this objective: (1) ability of SMEs to implement energy efficiency and environmental sustainability measures would be increased, and (2) SMEs’ resilience to climate change and environmental shocks would be strengthened.

Illustrative Activities

● Training on energy efficiency and environmental sustainability measures

● Development of training and/or continuing education curriculum

● Advisory services on green financing opportunities

● Subaward program targeted toward purchases of energy efficient equipment, building energy efficiency solutions, etc.

● Coordinate with local banks, non-bank financial institutions, and international donors with clean energy/green financing programs to identify potential financing

Illustrative Indicators

Standard

● EG.12-1: Number of people trained in clean energy supported by USG assistance

● EG.12-4: Amount of investment mobilized (in USD) for clean energy as supported by USG assistance

● EG.12-6: Greenhouse gas (GHG) emissions, estimated in metric tons of CO2e, reduced, sequestered, or avoided through clean energy as supported by USG assistance Custom

● Value of financing accessed by SMEs as a result of USG assistance (toward energy efficiency/environmental sustainability measures)

● Number of loans received by SMEs as a result of USG assistance (toward energy efficiency/environmental sustainability measures)

● Number of SME loan applications finalized with USG assistance (toward energy efficiency/environmental sustainability measures)

● Number of startups, SMEs or relevant local stakeholders receiving subawards (toward energy efficiency/environmental sustainability measures)

Note: Interventions and indicators are neither restrictive nor comprehensive and are for illustration purposes only.

In addition to these objectives, USAID will work with the awardee during implementation to explore options for BEST Phase II to provide training and advisory services (such as financial management, accounting, loan literacy, and general business planning) directly to SMEs under a fee-for-service model, where SMEs would pay the BEST II Implementing Partner a fee based on a sliding scale. Payments for these services would be used to offset USAID's contribution to the activity. Applicants should not address this potential objective in their applications.

USAID anticipates finalizing the Results Framework through co-creation with an Apparently Successful Applicant (ASA), during which time the ASA will be encouraged to build upon this framework and propose revisions or innovations to its applications.

III. GEOGRAPHIC FOCUS AND TARGET POPULATIONS

As noted, one of the strengths of the current BEST activity is its wide geographic coverage – including its main office in Ulaanbaatar as well as branches in 12 of the country’s 21 provinces.

As funding constraints are likely to limit the ability to maintain this footprint, it is proposed that the applicant look into the establishment of regional “hubs” in strategically located provincial capitals (potential locations include Erdenet, Choibalsan, Uliastai, and Sainshand). The criteria for selecting regional hubs should be based on the concentration of SMEs and access to other provinces, and the applicant will be encouraged to propose (with justification) regional hubs from which to operate. Initial research on the aforementioned potential regional hubs is presented below3:

Erdenet, Orkhon Province (North): Erdenet is Mongolia’s second largest city (population ~100,000) and a hub for the northern provinces. It was founded in the 1974 around a major copper deposit, and the mine is still the region’s main economic driver. Other industries include textiles, food production, and timber processing. The original BEST activity has maintained an office in Erdenet since 2019. The local business incubator center, the Erdenet Science and Technology Park, currently provides assistance to approximately 20 SMEs in various industries.

Erdenet is located approximately 180 kilometers from Mongolia’s third largest city (Darkhan) and could also coordinate with the other northern provinces of Selenge, Bulgan, Arkhangai, and Khuvsgul.

Choibalsan, Dornod Province (East): Choibalsan is Mongolia’s fourth largest city (population ~45,000) and a hub for the eastern region. It has long been a trading route and continues to maintain strong economic linkages to Russia and the PRC. Major industries include coal mining, wool/cashmere processing and meat production. The original BEST activity has maintained an office in Choibalsan since 2019. The local business incubator center, the SME Support Center, currently provides assistance to approximately 15 SMEs in various industries. In addition to serving Dornod Province, a hub in Choibalsan could also coordinate with the eastern provinces of Khentii and Sukhbaatar.

Uliastai, Zavkhan Province (West): While Uliastai is not a major city (population ~15,000), it is strategically located to serve Mongolia’s far western provinces (Govi-Altai, Khovd, Bayan-Ulgii and Uvs) in addition to Zavkhan. The original BEST activity has maintained an office in Uliastai since 2019. The Zavkhan Provincial Government is working to establish a local business incubator center, and it is anticipated to open by the end of 2024.

3 Note: The establishment of regional hubs (in these cities or elsewhere) is not required, and applicants will be encouraged to develop their own strategies for engaging with rural government offices, CSOs, and SMEs. The original BEST activity maintained regional hubs in Erdenet, Choibalsan, Sainshand and Khovd in addition to its provincial offices.

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Sainshand, Dornogovi Province (South): While Sainshand is also relatively small (population ~25,000), it is situated along Mongolia’s main railway line and strategically located to serve the other southern provinces of Dundgovi and Umnugovi. The original BEST activity has maintained an office in Sainshand since 2019. While there is currently no local business incubator center, this hub could coordinate with centers in both Mandalgovi and Dalanzadgad.

In addition to regional hubs, the applicant may explore the potential to leverage existing provincial and/or local government facilities to support the activity outside of these locations (during the activity planning process, some local governments and banking institutions raised the potential for cooperation of this nature).

Beneficiaries would include government agencies, CSOs, and SMEs. The activity will provide training to employees primarily at government agencies dealing with SME issues, including the SME Development Agency, the Ministry of Food, Agriculture, and Light Industry (MOFALI), and business incubator centers (a list of current centers is provided below). Training would also be provided to CSOs (NGOs and industry associations). Finally, BEST Phase II will provide training and advisory services directly to SMEs, but only under objectives 2 and 3. SMEs owned by women and marginalized groups will be prioritized.

Business Incubator Centers

Province (City) Arkhangai (Tsetserleg)

Bayankhongor (Bayankhongor)

Bulgan (Bulgan)

Darkhan-Uul (Darkhan)

Dornod (Choibalsan)

Dundgovi (Mandalgovi)

Govi-Altai (Altai)

Khovd (Khovd)

Khuvsgul (Moron)

Khentii (Chinggis)

Orkhon (Erdenet)

Uvurkhangai (Arvaikheer)

Umnugovi (Dalanzadgad)

Zavkhan (Uliastai)

V. PROGRAMMATIC AND STRATEGIC LINKAGES

U.S. Government Policies and Frameworks

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● Indo-Pacific Strategy of the United States4: The Indo-Pacific Strategy states the United States’ commitment to “an Indo-Pacific that is free and open, connected, prosperous, secure, and resilient.” To realize this future, the Strategy outlines five objectives to:

advance a free and open Indo-Pacific, build connections within and beyond the region, drive Indo-Pacific prosperity, bolster Indo-Pacific security, and build regional resilience to 21st century transnational threats. In the Strategy, the United States commits to work with partners to foster sustainable and inclusive economic growth, strengthen democratic institutions and good governance, and improve resilience to climate threats, among other areas.

● USAID Economic Growth Policy5: USAID’s Economic Growth Policy elevates the importance of economic growth as central to reducing poverty and dependency.

Inclusive, sustained, resilient, private sector-led economic growth delivers the increased incomes and domestic resources that make developing countries self-reliant and fosters demand for more transparent and accountable governance.

● USAID Democracy, Human Rights and Governance (DRG) Strategy6: USAID’s DRG Strategy aims to support the establishment and consolidation of inclusive and accountable democracies to advance freedom, dignity, and development. To achieve this goal, the Strategy sets four strategic objectives: (1) Promote participatory, representative, and inclusive political processes and government institutions; (2) Foster greater accountability of institutions and leaders to citizens and to the law; (3) Protect and promote universally recognized human rights; and (4) Improve development outcomes through the integration of DRG principles and practices across USAID’s development portfolio.

● USAID Climate Strategy (2022-2030)7: USAID’s Climate Strategy takes an unprecedented whole-of-Agency approach organized around two main strategic objectives. First, there is Targeted Direct Action, which will target climate change mitigation and adaptation efforts to the highest priority communities and locations—those with the most urgent needs or most immediate opportunities—to maximize impact. Second, there is Systems Change, which will take a systems approach to these larger transformations—such as transforming food systems to be more resilient, less wasteful and less environmentally destructive, or transitioning economic systems to be less carbon-intensive—in ways that are comprehensive, equitable, and locally led.

https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf https://www.usaid.gov/sites/default/files/2022-05/EG_Policy_Final_1.12.2021.pdf

6 https://www.usaid.gov/democracy/democracy-human-rights-and-governance-strategy https://www.usaid.gov/sites/default/files/documents/USAID-Climate-Strategy-2022-2030.pdf

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf https://www.usaid.gov/sites/default/files/2022-05/EG_Policy_Final_1.12.2021.pdf https://2017-2020.usaid.gov/democracy-human-rights-and-governance-strategy https://www.usaid.gov/policy/climate-strategy https://www.whitehouse.gov/wp-content/uploads/2022/02/U.S.-Indo-Pacific-Strategy.pdf https://www.usaid.gov/sites/default/files/2022-05/EG_Policy_Final_1.12.2021.pdf https://2017-2020.usaid.gov/democracy-human-rights-and-governance-strategy https://www.usaid.gov/policy/climate-strategy

● USAID Local Capacity Strengthening Policy8: The Agency's localization efforts aim to put local actors in the lead, strengthen local systems, and be responsive to local communities. Under this commitment, USAID will strengthen local capacities, shift power to local actors, and ensure that diverse local voices are integrated throughout all aspects of development works. The shift also entails channeling a larger portion of assistance directly to credible local partners while ensuring accountability for the appropriate use of funds and achievement of development and humanitarian results.

The Local Capacity Strengthening Policy advances the strategic and intentional investment in the process of partnering with local actors—individuals, organizations, and networks—to jointly improve the performance of a local system to produce locally valued and sustainable development outcomes.

● USAID Diversity, Equity, and Inclusion Strategic Plan (2021-2024)9: USAID’s DEI Strategic Plan sets forth the framework towards creating and sustaining a diverse and inclusive workplace, ensuring accessibility across all workforce, promoting equitable access to opportunities, and strengthening accountability in all development pathways.

USAID promotes the rights and inclusion of marginalized and underrepresented populations in the development process, including but not limited to indigenous and tribal peoples, the LGBTIQ+ community, women and girls, youth, and persons with disabilities.

● USAID 2023 Gender Equity and Women’s Empowerment Policy10: The GEWE Policy provides the vision for USAID’s work to advance gender equality and women’s empowerment. The updated operational and programmatic framework enables USAID to more effectively advance gender equality and women’s empowerment across all programming and to meet the Administrator’s goal to double USAID’s gender work.

USAID affirms that gender equality and women’s and girls’ empowerment are fundamental for the realization of human rights and key to effective and sustainable development outcomes.

● USAID Private Sector Engagement Policy11: USAID sees private sector engagement as fundamental to ending the need for foreign assistance. This policy is a call to action for USAID and its partners to embrace market-based approaches as a more-sustainable way to support communities in achieving development and humanitarian outcomes at scale.

This is based on the premise that private enterprise is one of the most powerful forces for lifting lives, strengthening communities, and accelerating countries to self-reliance.

Mongolia Strategic Framework (SF) https://www.usaid.gov/policy/local-capacity-strengthening https://www.usaid.gov/about-us/diversity-equity-inclusion https://www.usaid.gov/gender-equality-and-womens-empowerment https://www.usaid.gov/sites/default/files/2022-05/usaid_psepolicy_final.pdf

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.usaid.gov/sites/default/files/2022-10/LCS-Policy-2022-10-17.pdf https://drive.google.com/file/d/1KgSNTgq-7c4vuiBW-izCelO-50-i9mQQ/view?usp=sharing https://www.usaid.gov/gender-equality-and-womens-empowerment https://www.usaid.gov/sites/default/files/2022-05/usaid_psepolicy_final.pdf https://www.usaid.gov/policy/local-capacity-strengthening https://drive.google.com/file/d/1KgSNTgq-7c4vuiBW-izCelO-50-i9mQQ/view?usp=sharing https://www.usaid.gov/gender-equality-and-womens-empowerment https://www.usaid.gov/sites/default/files/2022-05/usaid_psepolicy_final.pdf

The Mongolia Strategic Framework 2023-2028 goal is for Mongolia to become a self-reliant, well-governed, and prosperous Indo-Pacific partner. This goal statement supports the broader Indo-Pacific Vision including promoting economic prosperity, strengthening governance, and enhancing security. Under the SF, USAID is advancing citizen-responsive governance that adheres to a rules-based order for a more “well-governed” Mongolia; creating open and transparent markets to unlock private enterprise-led growth to foster a “prosperous” Mongolia;

and building a network of partners from the government, civil society, and private sector capable of addressing threats to Mongolia’s independence and sovereignty. The ultimate goal is to empower Mongolia to become less reliant on its neighbors for its economic and democratic progress.

Mongolia Vision 2050 Long-Term Development Policy

USAID aligns its strategies and development pathways with host country government priorities and plans. The Mongolia Vision 2050 Long-Term Development Policy outlines a broad set of goals spanning education, health, general economic and rural development, democratic governance, and environmental and cultural preservation. The government’s long-term vision is to be among leading middle-income countries, have a multi-sector stable economy and a society dominated by middle and upper-middle income classes, which would preserve ecological balance, and have stable and democratic governance. Underpinning these goals are the development objectives for a diverse and sustainable economy; inclusive social development, environment; and governance.

VI. COORDINATION WITH OTHER USAID-FUNDED ACTIVITIES

Three ongoing USAID activities would complement BEST Phase II: Mongolia Energy Governance (MEG), Enhancing Production and Market Access for Vegetables (EPMAV), and Media and Civil Society Strengthening (MACSS).

● MEG is helping to develop and implement more favorable laws and regulations to encourage more private sector investment and promote greater adoption of modern energy technologies. One of its key goals is to boost energy efficiency and demand side management measures, which complements BEST Phase II’s objective of enabling SMEs to access financing to become more energy efficient and environmentally sustainable.

BEST Phase II could facilitate interactions between SMEs and energy efficiency experts on ways to incorporate energy-saving technologies and best practices within their operations.

● EPMAV is working with SMEs across various parts of the agricultural value chain, including greenhouse operators and those involved in storage and distribution. It has been coordinating with the current BEST activity on working with SMEs involved in greenhouse vegetable production to improve productivity and could continue this cooperation with BEST Phase II.

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.usaid.gov/sites/default/files/2023-04/2023%20Mongolia%20Strategic%20Framework.pdf https://cabinet.gov.mn/wp-content/uploads/2050_VISION_LONG-TERM-DEVELOPMENT-POLICY.pdf

● MACSS is assisting in building capacity of CSOs across a range of issues including combating corruption and increasing government transparency. One of the objectives of MACSS is to increase civil society capacity in rural areas, and under BEST Phase II it could work with industry associations and business groups that have a similar focus outside of Ulaanbaatar.

In addition to these USAID activities, several other bilateral and multilateral donors have ongoing programs to support SME development, and therefore applicants are encouraged to develop strategies to coordinate and limit duplication with them.

VII. MONITORING, EVALUATION, and COLLABORATION, LEARNING and ADAPTING (CLA)

Performance Monitoring

This activity will utilize a combination of Democracy and Governance (DG), Economic Growth (EG), and Clean Energy (CE) funding types; therefore, the Implementing Partner (IP) will be required to collect data for and report on all relevant foreign assistance standard indicators in these areas in their Monitoring, Evaluation and Learning (MEL) Plan. The IP will also be responsible for monitoring participation and success in the activity by women, men, and ethnically or geographically vulnerable individuals and communities. USAID/Mongolia will work with the IP to finalize a MEL plan to measure the activity’s development impacts.

In addition to standard indicators, IPs will be highly encouraged to incorporate custom indicators into their MEL plan to adequately track progress and outcomes of interventions, with reference to and in support of standard indicators. USAID is interested in innovative, cross-sectoral custom indicators to track integrated outcomes across the various objectives during the period of performance. The IP will monitor these outcome indicators, and their related disaggregates, to measure achievement of these objectives.

Collaboration, Learning, and Adapting (CLA)

Development work presents many opportunities to collaborate and engage with a broad set of stakeholders, to learn from both evidence and experience and to adapt iteratively to unexpected results or changes in context. This is why USAID places “Collaborating, Learning and Adapting” at the center of its Program Cycle, both as a connector between, and an integrated part of the components.

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Business Excellence for Sustainability and Transparency (BEST) Phase II Activity https://www.state.gov/foreign-assistance-resource-library/#managing

Collaborating Collaboration enables cross-sector integration, convergence, and effective interventions to maximize development resources and enhance development results. The Recipient shall collaborate with USAID-supported activities in common regions of operation and engage with stakeholders (defined collaboratively with USAID AOR) to deliver integrated services to target populations.

Learning Learning is intentional, systematic and resourced. Sources for learning include data from monitoring, portfolio reviews, findings of research, evaluations, analyses conducted by USAID or third parties, knowledge gained from experience, stocktaking exercises, and other sources.

Those documents produced by USAID will be shared with the Recipient by the AOR for consideration in the learning phase of CLA.

These sources shall be used to develop and implement plans, manage adaptively, and contribute to the USAID/Mongolia knowledge base to improve development outcomes. A collaborating, learning, and adapting focus helps to ensure that programming is coordinated, grounded in evidence, and adjusted as necessary to remain relevant and effective throughout implementation.

Knowledge generated by learning shall be applied throughout programming to implementation approaches, processes, and stakeholder engagement.