CHAPTER - 1

INTRODUCTION
1.1 ASIAN DEVELOPMENT BANK Asian Development Bank (ADB) is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. It was established in 1966. ADB is owned by 63 member countries. Its members are 64, 46 from Asia and the Pacific and 18 from other parts of the globe. The overarching goal of ADB is to reduce poverty. To achieve this, ADB supports activities in its developing member countries to promote propoor economic growth, inclusive social development, and good governance. Asian Development Bank headquarter is in Manila. It has 26 other offices around the world. Asian Development Bank has resident missions in Asia 3 sub regional offices in the Pacific Representative offices in Frankfurt for Europe, Tokyo for Japan, and Washington, DC for North America A special liaison office in Timor-Leste Under its Long-Term Strategic Framework (2001-2015), ADB takes into account in its activities three crosscutting themes: private sector development, regional cooperation, and environmental sustainability. ADB's principal tools are loans, guarantees, and technical assistance, which it mainly provides to governments for specific projects and programs. 1.1.1 Purpose and Functions The purpose of the Bank is to foster economic growth and cooperation in the region of Asia and Far East (hereinafter referred to as the "region") and to contribute to the acceleration of the process of economic development of the developing member countries in the region, collectively 1

and individually. To fulfill its purpose, the Bank shall have the following functions: i. To promote investment in the region of public and private capital for development purposes; ii. To utilize the resources at its disposal for financing development of the developing member countries in the region, giving priority to those regional, sub-regional projects and programmes which will contribute most effectively to the harmonious economic growth of the region as a whole, and having special regard to the needs of the smaller or less developed member countries in the region; iii. To meet requests from members in the region to assist them in the coordination of their development policies and plans with a view to achieving better utilization of their resources, making their economies more complementary, and promoting the orderly expansion of their foreign trade, in particular, intra-regional trade; iv. To provide technical assistance for the preparation, financing and execution of development projects and programmes, including the formulation of specific project proposals; v. To co-operate, in such manner as the Bank may deem appropriate with the United Nations, its organs and subsidiary bodies and with public international organizations and other international institutions, as well as national entities whether public or private, which are concerned with the investment of development funds in the region, and to interest such institutions and entities in new opportunities for investment and assistance; and vi. To undertake such other activities and provide such other services as may advance its purpose. 1.1.2 Considerations for Project Lending

ADB provides project lending assistance based upon the following considerations Economic viability, technical feasibility, and financial soundness Effect on development activity in the country concerned Contribution to the removal of economic bottlenecks Capacity of the borrowing country to service additional external debt Introduction of new technologies to raise productivity Expansion of job opportunities Strengthening of institutions according to criteria of good governance Integration of environmental and social considerations into ADB projects 1.1.3 Membership 1. i. Membership in the Bank shall be open to: Members and associate members of the United Nations Economic Commission for Asia and the Far East; and ii. Other regional countries and non-regional developed countries which are members of the United Nations or of any of its specialized agencies. 2. Countries eligible for membership under paragraph 1 of this Article which do not become members in accordance with Article 64 of this Agreement may be admitted, under such terms and conditions as the Bank may determine, to membership in the Bank upon the affirmative vote of two-thirds of the total number of Governors, representing not less than three-fourths of the total voting power of the members. 3. In the case of associate members of the United Nations Economic Commission for Asia and the Far East which are not responsible for 3

the conduct of their international relations, application for membership in the Bank shall be presented by the member of the Bank responsible for the international relations of the applicant and accompanied by an undertaking by such member that, until the applicant itself assumes such responsibility, the member shall be responsible for all obligations that may be incurred by the applicant by reason of admission to membership in the Bank and enjoyment of the benefits of such membership. Member Countries of Asian Development Bank In 1966, when Asian Development Bank was established, it had 31 members. Over the years its membership has grown to 64, listed in table 1.1, both within and outside the Asian and Pacific region. 1.2 CAPITAL STRUCTURE OF ADD

1.2.1 Authorized Capital According to the Article of ADB The authorized capital stock of the Bank shall be one billion dollars ($1,000,000,000) in terms of United States dollars of the weight and fineness in effect on 31 January 1966. The authorized capital stock shall be divided into one hundred thousand (100,000) shares having a par value of ten thousand dollars ($10,000) each, which shall be available for subscription only by members in accordance with the provisions of Charter of ADB. The original authorized capital stock shall be divided into paid-in shares and callable shares. Shares having an aggregate par value of five hundred million dollars ($500,000,000) shall be paid-in shares, and shares having an aggregate par value of five hundred million dollars ($500,000,000) shall be callable shares. The authorized capital stock of the Bank may be increased by the Board of Governors, at such time and under such terms and conditions as it may deem advisable, by a vote of two-thirds of the

total number of Governors, representing not less than three-fourths of the total voting power of the members. 1.2.2 Subscription of Shares Each member shall subscribe to shares of the capital stock of the Bank. Each subscription to the original authorized capital stock shall be for paid-in shares and callable shares in equal parts. The initial number of shares to be subscribed by countries which become members in accordance with Article 64 of this Agreement shall be that set forth in Annex A hereof. The initial number of shares to be subscribed by countries which are admitted to membership in accordance with paragraph 2 of Article 3 of this Agreement shall be determined by the Board of Governors; provided, however, that no such subscription shall be authorized which would have the effect of reducing the percentage of capital Table 1.1: Member Countries of Asian Development Bank
Subscribed Capital Kmembers Regional Members Afghanistan Armenia I Australia Azerbaijan Bangladesh Bhutan Cambodia China, People's Republic of Cook Islands Fiji Islands Hong Kong, China India Indonesia Japan Kazakhstan Kiribati Korea, Republic of 1966 2005 1966 1999 1973 1982 1966 1986 1976 1970 1969 1966 1966 1966 1994 1974 1966 1,195 10,557 204,740 15,736 36,128 220 1,750 228,000 94 2,406 19,270 224,010 192,700 552,210 28,536 142 178,246 0.034 0.301 5.834 0.448 1.029 0.006 0.050 6.496 0.003 0.069 0.549 6.383 5.490 15.734 0.813 0.004 5.079 14,904 24,266 218,449 29,445 49,837 13,929 15,459 241,709 13,803 16,115 32,979 237,719 206,409 565,91 42,245 13,851 191,955 0.522 0.850 7.654 1.032 1.746 0.488 0.542 8.469 0.484 0.565 1.156 8.329 7.232 11.8.829 1.480 0.485 6.726 0.340 0.553 4.979 0.671 1.136 0.317 0.352 5.510 0.315 0.367 0.752 5.419 4.705 12.900 0.963 0.316 4.375 Year Joined Number of Percent of Number of Shares Total Votes Voting Power Percent of Regional Percent of Total

Kyrgyz Republic Lao PDR Malaysia Maldives Marshall Islands

Micronesia, Federated States of

1994 1966 1966 1978 1990 1990 1991

10,582 492 96,350 142 94 142 532

0.302 0.014 2.745 0.004 0.003 0.004 0.015

24,291 14,201 110,059 13,851 13,803 13,851 14,241

0.851 0.498 3.856 0.485 0.484 0.485 0.499

0.554 0.324 2.509 0.316 0.315 0.316 0.325

Mongolia

Subscribed Capital Members Year Joined Number of Percent Shares of Total 1973 1991 1966 1966 1966 2003 New 1971 1966 1966 1966 1973 1966 1966 1998 1966 2002 1972 2000 1993 1995 1981 1966 19,270 142 5,202 54,340 77,080 114 3,320 84,304 116 12,040 236 20,520 38,540 10,134 48,174 350 142 8,958 50 23,834 236 12,076 2,223,452 0.549 0.004 0.148 1.548 2.196 0.003 0.095 2.402 0.003 0.343 0.007 0.585 1.098 0.289 1.373 0.010 0.004 0.255 0.001 0.679 0.007 0.344 63.351 Number of Votes 32,979 13,851 18,911 68,049 90,789 13,823 17,029 98,013 13,825 25,749 13,945 34,229 52,249 23,843 61,883 14,059 13,851 22,667 13,759 37,543 13,945 25,785 2,854,066

Voting Power Percent of Percent of Regional Total 1.156 0.485 0.663 2.384 3.181 0.484 0.597 3.434 0.484 0.902 0.489 1.199 1.831 0.835 2.168 0.493 0.485 0.794 0.482 1.315 0.489 0.903 100.000 0.752 0.316 0.431 1.551 2.069 0.315 0.388 2.234 0.315 0.587 0.318 0.780 1.191 0.543 1.411 0.320 0.316 0.517 0.314 0.856 0.318 0.588 65.056

Regional Members Myanmar Nauru Nepal New Zealand Pakistan Palau Papua Guinea Samoa Singapore Solomon slands Sri Lanka Taipei, China Tajikistan Thailand Timor-Lestc Tonga Turkmenistan Tuvalu Jzbekistan Vanuatu Viet Nam Total Regional

Philippines

Non Regional Member Countries

Subscribed Capital Members Year Joined Number of Shares Percent of Total Voting Power Number of Votes Percent of Regional Percent of Total

Non-regional Members | Austria | Belgium Canada Denmark Finland France Germany Italy Luxembourg The Netherlands Norway Portugal Spain Sweden Switzerland Turkey United Kingdom United States Total Regional Grand Total Non1966 1966 1966 1966 1966 1970 1966 1966 2003 1966 1966 2002 1986 1966 1967 1991 1966 1966 12,040 12,040 185,086 12,040 12,040 82,356 153,068 63,950 12,040 36,294 12,040 12,040 12,040 12,040 20,650 12,040 72,262 552,210 1,286,276 3,509,728 0.343 0.343 5.274 0.343 0.343 2.347 4.361 1.822 0.343 1.034 0.343 0.343 0.343 0.343 0.588 0.343 2.059 15.734 36.649 100.000 25,749 25,749 198,795 25,749 25,749 96,065 166,777 77,659 25,749 50,003 25,749 25,749 25,749 25,749 34,359 25,749 85,971 565,919 1,533,038 4,387,104 1.680 1.680 12.967 1.680 1.680 6.266 10.879 5.066 1.680 3.262 1.680 1.680 1.680 1.680 2.241 1.680 5.608 36.915 100.000 0.587 0.587 4.531 0.587 0.587 2.190 3.802 1.770 0.587 1.140 0.587 0.587 0.587 0.587 0.783 0.587 1.960 12.900 34.944 100.000

Stock held by regional members below sixty (60) per cent of the total subscribed capital stock.

1.

The Board of Governors shall at intervals of not less than five (5) years review the capital stock of the Bank. In case of an increase in the authorized capital stock, each member shall have a reasonable opportunity to subscribe, under such terms and conditions as the Board of Governors shall determine, to a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscribed bears to the total subscribed capital stock immediately prior to such increase; provided, however, that the foregoing 8

provision shall not apply in respect of any increase or portion of an increase in the authorized capital stock intended solely to give effect to determinations of the Board of Governors under paragraphs 1 and 3 of this Article. No member shall be obligated to subscribe to any part of an increase of capital slock. 2. The Board of Governors may, at the request of a member, increase the subscription of such member on such terms and conditions as the Board may determine; provided, however, that no such increase in the subscription of any member shall be authorized which would have the effect of reducing the percentage of capital stock held by regional members below sixty (60) per cent of the total subscribed capital stock. The Board of Governors shall pay special regard to the request of any regional member having less than six (6) per cent of the subscribed capital stock to increase its proportionate share thereof. 3. Shares of stock initially subscribed by members shall be issued at par. Other shares shall be issued at par unless the Board of Governors by a vote of a majority of the total number of Governors, representing a majority of the total voting power of the members, decides in special circumstances to issue them on other terms. 4. Shares of stock shall not be pledged or encumbered in any manner whatsoever, and they shall not be transferable except to the Bank in accordance with Chapter VII of this Agreement. 5. The liability of the members on shares shall be limited to the unpaid portion of their issue price. 6. No member shall be liable, by reason of its membership, for obligations of the Bank. 1.2.3 Payment of Subscriptions

Payment of the amount initially subscribed by each Signatory to this Agreement(Agreement refers to" Agreement Establishing the Asian Development Bank" )which becomes a member in accordance with Article 64 to the paid-in capital stock of the Bank shall be made in five (5) installments, of twenty (20) per cent each of such amount. i. The first installment shall be paid by each member within thirty (30) days after entry into force of this Agreement, or on or before the date of deposit on its behalf of its instrument of ratification or acceptance in accordance with paragraph 1 of Article 64. ii. The second installment shall become due one (1) year from the entry into force of this Agreement. iii. The remaining three (3) installments shall each become due successively one (1) year from the date on which the preceding installment becomes due. 1. Of each installment for the payment of initial subscriptions to the

original paid-in capital stock: a. b. 2. Fifty (50) per cent shall be paid in gold or convertible currency; and Fifty (50) per cent in the currency of the member. The Bank shall accept from any member promissory notes or other obligations issued by the Government of the member, or by the depository designated by such member, in lieu of the amount to be paid in the currency of the member pursuant to paragraph 2 (b) of this Article, provided such is not required by the Bank for the conduct of its operations. Such notes or obligations shall be nonnegotiable, non-interest-bearing, and payable to the Bank at par value upon demand. Subject to the provisions of paragraph 2(ii) of Article 24, demands upon such notes or obligations payable in convertible currencies shall, over reasonable periods of time, be uniform in percentage on all such notes or obligations. 10

3.

Each payment of a member in its own currency under paragraph 2(b) of this Article shall be in such amount as the Bank, after such consultation with the International Monetary Fund as the Bank may consider necessary and utilizing the par value established with the International Monetary Fund, if any, determines to be equivalent to the full value in terms of dollars of the portion of the subscription being paid. The initial payment shall be in such amount as the member considers appropriate hereunder but shall be subject to such adjustment, to be effected within ninety (90) days of the date on which such payment was due, as the Bank shall determine to be necessary to constitute the full dollar equivalent of such payment.

4.

Payment of the amount subscribed to the callable capital stock of the Bank shall be subject to call only as and when required by the Bank to meet its obligations incurred under sub-paragraphs (ii) and (iv) of Article 11 on borrowings of funds for inclusion in its ordinary capital resources or on guarantees chargeable to such resources.

5.

In the event of the call referred to in paragraph 5 of this Article, payment may be made at the option of the member in gold, convertible currency or in the currency required to discharge the obligations of the Bank for the purpose of which the call is made. Calls on unpaid subscriptions shall be uniform in percentage on all callable shares.

6.

The Bank shall determine the place for any payment under this Article, provided that, until the inaugural meeting of its Board of Governors, the payment of the first installment referred to in paragraph 1 of this Article shall be made to the Secretary-General of the United Nations, as Trustee for the Bank.

1. 3

ORDINARY CAPITAL RESOURCES As used in this Agreement, the term "ordinary capital resources" of

the Bank shall include the following: 11

1.

Authorized capital stock of the Bank, including both paid-in and callable shares, subscribed pursuant to Article 5 of this Agreement, except such part thereof as may be set aside into one or more Special Funds in accordance with paragraph 1 (i) of Article 19 of this Agreement;

2.

Funds raised by borrowings of the Bank by virtue of powers conferred by sub-paragraph (i) of Article 21 of this Agreement, to which the commitment to calls provided for in paragraph 5 of Article 6 of this Agreement is applicable;

3.

Funds received in repayment of loans or guarantees made with the resources indicated in (i) and (iii) of this Article;

4.

Income derived from loans made from the aforementioned funds or from guarantees to which the commitment to calls set forth in paragraph 5 of Article 6 of this Agreement is applicable; and

5.

Any other funds or income received by the Bank which do not form part of its Special Funds resources referred to in Article 20 of this Agreement.

1.4

FINANCIAL MANAGEMENT ADB provides different forms of assistance to governments and

Instruments private enterprises in its developing member countries based on a member's priorities. The main instruments are: 1. 2. 3. 4. 5. Loans Technical assistance Grants Guarantees Equity investments

1.4.1 Loan and Grant Resources 12

ADB's operations are financed by issuing bonds, recycling repayments, and receiving contributions from members. About 70% of the bank's cumulative lending comes from its ordinary capital resources. ADB also provides loans from its Special Funds resources. Among them is the Asian Development Fund, which provides concessional loans to ADB's least developed member countries. ADB also manages several trust funds and channel financing of grants provided by bilateral donors. 1.4.2 Co-financing For every dollar lent by ADB in 2004, an additional 46 cents was mobilized from other official sources and commercial institutions. 1.4.3 Technical Assistance Technical assistance activities-funded through grants, loans, or bothhelp maximize development impact. In 2004, a total of 323 technical assistance activities, amounting to US$197 million, were approved for 1. 2. Preparing and executing projects and programs Supporting advisory and operational activities in areas such as law, economic management, public policy, agriculture and natural resources, energy, finance, education, etc 3. Regional activities 1.5 Organizational Structure and Management of Asian development Bank The Bank have a Board of Governors, a Board of Directors, a President, five Vice-Presidents (i.e. (i) Vice-president of Knowledge Management and Sustainable Development, (ii) Vice-president of Operation 1, (iii) (iv) Vice-president of Operation 2, (v) Vice-president of Finance and Administration) and such other officers and staff. 1.5.1 Board of Governors The Board of Governors is ADB's highest policy-making body and all the powers of the Bank are vested in the Board of Governors. It is 13

composed of one representative from each member. Each member appoints one Governor and one alternate and they serve at the pleasure of the appointing member. The Board of Governors meets annually. At its annual meeting, the Board appoints one of the Governors as Chairman who holds office until the election of the next Chairman and the next annual meeting of the Board. The Board of Governors elects the president of the Bank for a term of (5) five years. According to the Charter of the Bank, all the power of institution are vested in ABD's Board of Governors, which in turn delegate these power to the Board of Directors except for those power reserved for the board of government in the Charter. 1.5.2 Voting Power of Members The total voting power of each member consists of the sum of its basic votes and proportional votes. i. The basic votes of each member consists of such number of votes as results from the equal distribution among all the members of twenty (20) per cent of the aggregate sum of the basic votes and proportional votes of all the members. ii. The number of the proportional votes of each member shall be equal to the number of shares of the capital stock of the Bank held by that member. The basic votes allotted to each member are 13701. Pakistan has 77080 shares of the capital stock of the bank. Thus Pakistan has 90789 votes (total Pakistan voting power is 90789 votes= 77080 shares of capital stock + 13709 basic votes) Japan and USA have the highest number of votes (i.e. 12.900 % of total) each and Tuvalu has the lowest number of votes (0.314% of total votes). 1.5.3 Meetings of Board of Governors

14

1.

The Board meets annually at such date and place as the Board may determine. However, the Board of Directors may change the date and place of the meeting when special circumstances or reasons arise to justify such action.

2.

The Board also hold special meetings when it so decides or when called by the Board of Directors.

3.

The President shall notify all members, by the most rapid possible means, of the date and place of each meeting of the Board. Such notifications must be dispatched at least sixty (60) days prior to the date of an annual meeting and thirty (30) days prior to the date of a special meeting

4.

A majority of the Governors shall constitute a quorum for any meeting of the Board, provided such majority represents not less than two-thirds of the total voting power of the members.

5.

The Board may order the temporary adjournment of any meeting end its resumption at a later date.

6.

The President, Directors and their Alternates may attend any meeting of the Board and participate therein. However, Directors and their Alternates shall not be entitled to vote unless they are entitled to vote as a Governor.

1.5.4 Chairman of Board of Governors 1. At the end of each annual meeting the Board of Governors elect one of its Governors to be the Chairman and two other Governors to be Vice-Chairmen, and they shall serve in their respective positions until the end of the next annual meeting of the Board. In the absence of the chairman, the Vice-Chairman, designated by the Chairman acts in his place. 2. The Chairman, or the Vice-Chairman acting as Chairman, may not vote, but his Alternate Governor may vote in his place. 15

1.5.5 Secretary of Board of Governors The Secretary of the Bank serves as Secretary of the Board of Governors.

16

1.5.6 Language At meetings of the Board the working language shall be English. 1.6 BOARD OF DIRECTORS The Board of Directors is composed of 12 Directors (each with an Alternate), eight of those 12 directors are elected by Governors of regionalmembers and the remaining four are elected by non-regional members. A director shall not be members of the Board of Governors. The Board of Governors elects the Board of Directors every two years. Each director appoints one alternate who has full powers to act for him when he is not present. Directors and alternates shall be nationals of member countries. No two or more Directors may be of the same nationality nor may any two or more alternates be of the same nationality. The Board of Directors performs its duties full-time at the ADB headquarters and holds formal and executive sessions regularly. The Directors supervise ADB's financial statements, approve its administrative budget, and review and approve all policy documents and all loan, equity, and technical assistance operations.
The President chairs the Board of Directors and, under its guidance, conducts the business of ADB.

1.6.1 Powers of Board of Directors The Board of Directors is responsible for the direction of the general operations of the Bank and, shall, in addition to the powers assigned to it expressly by article, exercise all the powers delegated to it by the Board of Governors. 1.6.2 Election of Directors As mention earlier, there are two types of directors I) Those representing regional members; and ii) Those representing non-regional members 1.6.3 Election of Directors by Governors representing regional members:

17

1.

Each Governor representing a regional member shall cast all votes of the member he represents for a single person.

2.

The seven (7) persons receiving the highest number of votes shall be Directors, provided that he received ten percent of the total voting power of regional members. If seven (7) persons are not elected at the first ballot, a second ballot shall be held in which the person who received the lowest number of votes in the preceding ballot shall be ineligible and in which votes shall be cast only by:

a.

Governors who voted in the preceding ballot for a person who is not elected; and

b.

Governors whose votes for a person who is elected are deemed to have raised the votes cast for that person above eleven (11) per cent of the total voting power of regional members.

3.

If, after the second ballot, seven (7) persons are not elected, further

ballots shall be held in conformity with the principles and procedures laid down in this Section, except that after six (6) persons are elected, the seventh may be elected notwithstanding the provisions of paragraph (2) of this Section - by a simple majority of the remaining votes of regional members. All such remaining votes shall be deemed to have counted towards the election of the seventh Director. 1.6.4 Election of Directors by Governors representing non-regional members 1. Each Governor representing a non-regional member shall cast all votes of the member he represents for a single person. 2. The three (3) persons receiving the highest number of votes shall be Directors, except that no person who receives less than twenty-five (25) per cent of the total voting power of non-regional members shall be considered as elected. 3. If three (3) persons are not elected at the first ballot, a second ballot shall be held in which the person who received the lowest number of 18

votes in the preceding ballot shall be ineligible and in which votes shall be cast only by: i. Governors who voted in the preceding ballot for a person who is not elected; and ii. Governors whose votes for a person, who is elected are deemed to have raised the votes cast for that person above twenty-six (26) per cent of the total voting power of non-regional members. 4. In determining whether the votes cast by a Governor shall be deemed to have raised the total number of votes for any person above twentysix (26) per cent, the said twenty-six (26) per cent shall be deemed to include, first, the votes of the Governor casting the highest number of votes for that person, and then, in diminishing order, the votes of each Governor casting the next highest number until twenty-six (26) per cent is attained. 5. Any Governor, part of whose votes must be counted in order to raise the votes cast for any person above twenty-five (25) per cent, shall be considered as casting all his votes for that person even if the total number of votes cast for that person thereby exceeds twenty-six (26) per cent. If, after the second ballot, three (3) persons are not elected, further ballots shall be held in conformity with the principles and procedures laid down in this Section, except that after two (2) persons are elected, a third may be elected - provided that subscriptions from non-regional members shall have reached a minimum total of three hundred forty-five million dollars ($345,000,000) and notwithstanding the provisions of paragraph (2) of this Section - by a simple majority of the remaining votes. 1.6.5 President and Vice-President(s) The president of Bank is the legal representative of bank. He is also the chief of staff of bank. He is elected by the Board of Governors for a term of five years. He shall be a national of a regional member country. He 19

may be re-elected. He shall cease to hold office when the Board of Governors so decides by a vote of two-thirds of the total number of Governors, representing not less than two-thirds of the total voting power of the members. If the office of the President for any reason becomes vacant more than one hundred and eighty (180) days before the end of his term, a successor shall be elected for the unexpired portion of such term by the Board of Governors in accordance with the provisions of Article. If such office for any reason becomes vacant one hundred and eighty (180) days or less before the end of his term, a successor may similarly be elected for the unexpired portion of such term by the Board of Governors. The President is the Chairman of the Board of Directors but have no vote, except a deciding vote in case of an equal division. He can participate in meetings of the Board of Governors. Vice-President (S) The Board of Directors appoints one or more Vice-President(s) on the recommendations of President who hold office for such term, exercise such authority and perform such functions in the administration of the Bank, as may be determined by the Board of Directors. If the president is absent for any reason, the Voice president, or in case there is more than one vice-president, the ranking voice president shall act as president. 1.7 DEPARTMENTS, OFFICES, AND MISSIONS OF ASIAN DEVELOPMENT BANK ADB's field offices include resident and regional missions, a country office, a liaison office, and representative offices. Each support ADB's objective of reducing poverty by strengthening representation in its regional and non-regional members, and by providing broader and more direct access to its constituencies. 1.7.1 Resident Missions The resident missions provide the primary operational interface between ADB and the host DMC. The missions help implement ADB's goal 20

of reducing poverty and related strategic objectives in the DMCs and enhance policy dialogue with the DMCs. They are the recognized intellectual resource and knowledge base on development issues in the DMCs. The resident missions also 1. Create strong partnerships with DMC development stakeholders, including governments, the private sector, and civil society 2. 3. 4. Enhance ADB's responsiveness to local needs and issues Take the lead in aid coordination where possible Promote sub-regional corporation.

Work of Resident Mission The work of the resident missions is grouped into two broad categories: standard and Specific functions Standard functions: Standard functions are those that the resident missions perform as ADB's principal representatives in the field: 1. Promoting relationships with government, civil society, and the private sector 2. 3. 4. 5. Engaging in policy dialogue and support Reporting on country activities Coordinating aid Assisting in external relations and information dissemination

Specific functions The specific functions carried out by the missions relate to delivering and implementing ADD projects. More complex and resource intensive, these functions include 1. 2. Country programming Project and technical assistance processing 21

3. 4.

Portfolio management and project administration Economic and sector work and analyses

1.7.2 Important Departments and Offices Budget, Personnel and Management Systems Department The Budget, Personnel and Management Systems Department (BPMSD) determines, allocates, manages, and administers the Bank's budgetary provisions for financial and human resources. The department also designs and assesses the organization and systems within which these resources are brought together to carry out the broad range of Bank activities. It develops and operates personnel programs. Central Operations Services Office The Central Operations Services Office (COSO) is responsible for central planning, monitoring, and coordinating project processing and administration work programs, and for identifying and resolving procedural and institutional problems being experienced with the Bank's projects. It provides advisory services on procurement of goods and services and use of consultants, it also prepares guidelines, loan administration manuals, project administration instructions, and other operational documents Controller's Department The Controller's Department (CTL) 1. 2. Establishes and maintains the Bank's accounting system and records Prepares reports setting forth the financial position of ordinary capital resources and special funds, including trust funds and the staff retirement fund 3. Calculates and arranges the settlement of maintenance of value obligations of members 4. Authorizes disbursements under loans and technical assistance operations, and provides assistance to other departments in 22

negotiating and administering loans and technical assistance operations 5. Authorizes payments of administrative and other expenses in connection with trust funds and funds of a similar nature 6. Makes payments in respect of salaries, allowances, and benefits under the Staff Retirement Plan Department of External Relations The Department of External Relations (DER) carries out information activities to improve awareness and understanding of ADB's role and operations. It is the focal point for all public information activities and bears overall responsibility for the implementation and consistent application of the Public Communications Policy (PCP). East and Central Asia Department The East and Central Asia Department includes 1. 2. Azerbaijan Resident Mission Central Asia Regional Economic Cooperation Unit (CARECU) Field Office 3. 4. 5. 6. 7. 8. PRC Resident Mission Kazakhstan Resident Mission Kyrgyz Republic Resident Mission Mongolia Resident Mission Tajikistan Resident Mission Uzbekistan Resident Mission

Economics and Research Department ERD delivers four basic products: ideas, instruments, instructions, and informal connections. Ideas: Knowledge Generation and Dissemination 23

Its immersion in countries in the Asian and Pacific region makes ADB a key knowledge bank for the developing countries in the region. ERD publishes the results of empirical research carried out within the Department and other departments in ADB. ERD distributes its publications to over 1,000 libraries and institutions worldwide. ERD also conducts seminars, workshops, and conferences meant to share country experiences, state-of-the-art knowledge, and progress on ongoing projects. Instruments: Knowledge Center Activities Rigorous empirical research rests on timely availability of relevant data. ERD's vision of being a leading research group on key development issues in the region can only be accomplished by a strong core competency to compile, analyze, and share data. Hence, ERD: Generates a statistical database and annual statistical publication that provides economic, financial, and social indicators at the micro and macro level Builds quantitative economic and statistical models to support ADB's economic forecasting and policy analysis Instructions: Operations Support ERD's research products help strengthen ADB's institutional priorities and country operations, particularly ADB's aid effectiveness, even as ADB operations inform ERD's research agenda. ERD translates its research products into operational outcomes through interdepartmental collaboration. Informal Connections: DMC Assistance ERD's applied economic research contributes to augmenting the stock of knowledge on development issues of interest to the DMC development community and policymakers. The department provides policy advice on various development issues. Mekong Department 24

The Mekong Department handles 1. 2. 3. 4. Cambodia Resident Mission Lao PDR Resident Mission Thailand Resident Mission Viet Nam Resident Mission

Office of Administrative Services- OAS OAS provides administrative support and services to help ADB management and staff do their job and enhance the effectiveness of the workplace. It aims to deliver quality products and services at an affordable cost. OAS has two divisions; 1. 2. Facilities and Asset Management (OAFA) Institutional Services (OAIS).

OAFA Manages 1. The planning, operation, and maintenance of ADB facilities, buildings and grounds 2. 3. The library, archives, and records system Food services, commissary services, property control and office equipment OAIS' responsibility includes 1. 2. 3. 4. 5. Procurement of goods and services and contracts administration Printing, shipping, insurance, communications, and transportation Travel and visa Internal and external security and safety Community relations and liaison with the Philippine Government

25

Office of Cofinaiicing Operations The Office of Cofmancing Operations (OCO) acts as ADB's focal point for planning, promoting and arranging cofmancing for ADB projects, and for formulating policies on cofinancing and guarantee operations. It Assists borrowers to obtain cofinancing from; 1. 2. 3. Commercial financial institutions Official funding agencies Export credit agencies

Office of Information Systems and Technology - OIST The Office of Information Systems and Technology (OIST), formerly called the Office of Computer Services, is responsible for planning and managing automated information systems and telecommunications services of the Bank to improve the effectiveness and efficiency of the Bank's operational, financial, and administrative functions. Office of the Auditor General The Office of the Auditor General (OAG) consists of a Financial, Administrative and Information Systems Division (OAGF) and an Integrity Division (OAGI) reporting to the Auditor General. The Auditor General reports directly to the President. The Audit Committee of the Board of Directors reviews OAG's activities. Office of the General Counsel The Office of the General Counsel (OGC) provides advice and assistance to the President, the Board of Governors, the Board of Directors, and various departments and offices of the Bank on legal matters relating to the organization, administration, finance, policies, and operations of the Bank. Office of Regional Economic Integration OREI assist the developing member countries of ADB-both individually and collectively-to harness the full benefits of global financial 26

integration and international capital flows while at the same time minimizing any disruptive effects. Responsibilities 1. Monitor economic policies and financial architecture issues from a regional and subregional perspective and disseminate the results to promote prudential economic management. 2. Strengthen ADB's relations with other international financial institutions, as well as regional and subregional bodies, by providing monitoring inputs to various meetings and discussions. Office of the Secretary The Office of the Secretary (OSEC) provides advice and counsel to the Board of Governors, Board of Directors, and Management. Other major responsibilities include the following: 1. 2. 3. Formal channel of communication between ADB and its members Administers applications for membership in ADB Organizes and oversees the proceedings of the Annual Meeting of the Board of Governors 4. Manages the calendar of meetings of the Board of Directors and organizes the meetings 5. 6. 7. Supports the Committees of the Board of Directors Edits, classifies and circulates Board documents Maintains the official depository for agreements entered into by ADB 8. Administers the terms and conditions of engagement of Management and the Board administers the inspection function

27

Operations Evaluation Department - OED OED was established in 1978 as the Post-evaluation Office, and since then has undergone several changes in functions. The importance of OED increased when it became a department in 2001. 1. On 1 January 2004 OED became an independent Department reporting to ADB's Board of Directors through the Board's Development Effectiveness Committee. OED's functions are: 2. The evaluation of the performance of completed projects, programs, and technical assistance (TA), the ongoing project portfolio, broader thematic issues, and of the effectiveness of ADB's policies, practices, and procedures. 3. The feedback to ongoing operations, including the design of new operations South Asia Department The South Asia Department covers 1. 2. 3. 4. 5. 6. Afghanistan Resident Mission Bangladesh Resident Mission India Resident Mission Nepal Resident Mission Pakistan Resident Mission Sri Lanka Resident Mission

Southeast Asia Department The Southeast Asia Department covers 1. 2. 3. Indonesia Resident Mission Malaysia Resident Mission Philippines Country Office 28

4.

Singapore Resident Mission

Strategy and Policy Department - SPD The objectives of SPD are to provide ADB with a strategic planning perspective and direction, ensure policy and operations coordination, and maintain institutional relations with the international development community, especially on matters relating to resource mobilization. SPD is divided into Two Divisions i. ii. Strategy, Planning, Policy and Interagency Relations Division (SPPI) Management Support Division (SPMS)

Treasury Department - TD The Treasury Department (TD) is responsible for 1. 2. 1.8 Mobilizing funds required for ADB's operations Planning and managing ADB's finances ASIAN DEVELOPMENT BANK'S STAFF ADB staff come from around 50 member countries. Over half are Filipino, but the culture of ADB is international. It has 26 offices around the world. ADB's staff consists of more than 2,000 employees from over 50 countries. Professional Staffs General Profile ADB needs for its operations highly qualified, experienced, dedicated, and motivated staff with a varied mix of operational and technical skills. ADB operates internationally and comprises different nationalities, creating a cross-cultural environment where the elements are nonetheless bound together toward common goals and objectives. Requirement for Applicant Applicants must: 1. Be citizens of ADB member countries

29

2.

Possess very good academic background (those with post-graduate degrees such as MBA, MS, or Ph.D. are given preference)

3.

Have considerable expertise and years of experience in their profession

4.

Have multi-disciplinary background and with experience in an international environment with involvement in developing countries

5. 6.

Have proficiency in both written and spoken English Have the flexibility to work with other nationalities and with different cultural backgrounds

7.

Be willing to travel on mission to member countries, if required With ADB committed to increasing the number of its female professional staff, applications from women are actively encouraged.

Selection of Staff members ADB's Human Resources Division initially evaluates the applications and may refer their CVs to interested departments/offices for further review before a final decision is communicated to the applicant. This is to ensure that all applications are carefully and properly evaluated. The ADB's HR division encourages internal selection. The Human Resources Division ensures that applications from qualified ADB staff are considered for vacancies before considering external candidates. ADB Staff Members from Pakistan As of 31 December 2004, there were 23 professional staff members from Pakistan in ADB (2.69% of the total professional staff), including four senior staff members. 1.9 PAKISTAN AND ASIAN DEVELOPMENT BANK

1.9.1 Pakistan Resident Mission The Pakistan Resident Mission (PRM) located in Islamabad, Pakistan, started its operation in 1989. PRM's primary role is to:

30

1.

Initiate and maintain policy dialogue with the Government of Pakistan on issues relevant to ADB's operations in Pakistan

2.

Prepare the Country Strategy and Program (CSP) for Pakistan and its annual updates, and initiate and monitor the progress of the Poverty Reduction Partnership Agreement with the Government

3.

Plan and prepare ADB's economic and sector work for Pakistan including Country Economic Review (2001), Pakistan Economic Update, Poverty Assessment

4.

Maintain and strengthen working relations with the Government, civil society, private sector and development partners

5. 6. 7.

Strengthen project processing and portfolio management Process and implement a selected number of technical assistance Assist the executing agencies in complying with ADB procedures on procurement and disbursement

8.

Promote external relations and disseminate information about ADB and its operations, including publication of regular PRM Newsletter

9.

Undertake other activities from participating in HQ project processing missions to provide back-up operational support, donor coordination, and subregional cooperation. The Pakistan Resident Mission (PRM) is organized into three operational units;

1. 2. 3.

Country Policy Operations (CPO) Unit, The Results Management & Development Effectiveness Unit And Two supporting operations units-Disbursement Unit and Finance and Administration Unit. Country Policy Operations Unit: The Country Policy Operations Unit is responsible for;

4.

Preparing Country Strategy and Program (CSP) and its annual updates (CSPUs);

31

5.

Carrying

out

programming

tasks

and

conducting

country

programming 6. Taking the lead role in economic and sector work relating to Pakistan including input in the processing and implementation of policy-based operations 7. Providing assistance in the processing of country assistance including loans and Tas 8. 9. Supporting work and initiatives on sub-regional cooperation Supporting donors coordination

Results Management & Development Effectiveness Unit The Results Management & Development Effectiveness Unit is responsible for; 1. Assessing the performances of portfolio of ADB-financed projects in Pakistan; 2. Identifying country-specific and sector-specific portfolio and project performance issues and analyzing underlying reasons; 3. Formulating measures to improve portfolio and project performances with emphasis on increased development effectiveness; 4. Building result-based management capacity for project

implementation in the government; and 5. Carrying-out administration of delegated projects and assisting Headquarters in administering non-delegated projects Governance Unit The Governance Unit is responsible for; 1. Preparing and overseeing ADB's support to Pakistan's governance reforms, including devolution, gender and social development, access to justice, and civil society - state relations.

32

2.

Assisting preparation of technical assistance and loan projects to ensure consistency with ADB policy commitments on governance, civil society participation, gender and social development.

3.

Effectively administering and implementing delegated loan and technical assistance projects.

4.

Networking with partners in civil society, research and policy institutions and government to support improved quality and relevance of ADB's operations to poverty reduction in Pakistan.

Supporting Unit There are two supporting operations units; 1. 2. Disbursement Unit and Finance and Administration Unit.

Disbursement Unit The Disbursement Unit is responsible for; 1. Processing disbursement claims for all Pakistan Loans in accordance with ADB guidelines and local regulations 2. Monitoring Contract Awards and Disbursement achievements and communicating with Project staff, HQ and Federal and Provincial Governments. 3. Training Implementing Agencies' staff on Disbursement Guidelines of ADB for smooth disbursement of funds. 4. Coordinating its activities with Federal and Provincial Ministries of Finance, Implementing Agencies, ADB Controller's office and Result Management and Development Effectivess Unit. 5. Fielding Review Missions to monitor and improve compliance of Disbursement Guidelines of ADB, and take remedial action. 6. Handling all internal/ external queries pertaining to disbursement or lending and borrowing issues. 33

Finance and Admin Unit The Finance and Admin Unit is responsible for; 1. Providing support to the office operations in the fields of financial accounting and management, personnel functions and administration, including security. 2. Handling financial functions of PRM operations, including financial transactions of administrative expenses, business travel, training, capital expenditure, and TA-related expenses. 3. Preparing the annual, midyear and revised budgets and allocations, monitoring and controlling the expenditures and ensuring cost effectiveness and adherence to laid down policies and procedures 4. Advising the Country Director on personnel functions, covering recruitment of staff and various staff actions 5. Monitoring and evaluating overall security situation in country, participating in security meetings at the UN, and based on that plus own assessments, issues 6. Overseeing necessary work involved in physical expansion of PRM Office 7. Providing support to AFRM in a number of areas, including transport, procurement of equipment and supplies. A cumulative of 293 technical assistance (TA) projects has been approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. 1.8.2 Voting power of Pakistan Pakistan is the ninth largest shareholder in ADB among its regional members. Overall, Pakistan is the 13th largest shareholder.

34

Table 1.2 Pakistan's Number of Share and Voting power Number of shares held: 77,080 (2.203% of total shares) of total

Votes: 3.21% of total regional 90,965 (2.08% membership) membership, Overall capital subscription: Paid-in capital subscription: US$1. 19 billion US$83. 55 million

1.9.3 Contributions to Special Funds Resources Pakistan has contributed to the Technical Assistance Special Fund (TASF), which provides grants to borrowing members to help prepare projects and undertake technical or policy studies. Contributions to the TASF (committed): | US$1.60 million

35

CHAPTER 2

ADB ASSISTANCE FOR PAKISTAN

(Literature Survey) Over the years, Asian Development Bank have played a significant role in economic and social transformation in Asia and the Pacific- boosting economic growth, fostering social development, and helping improve the quality of life for millions of people. Asian development bank provide loans, Technical Assistance, and Grants to its member countries. ADB approved 11 loans totaling US$709.2 million for seven projects to Pakistan. ADB has also approved twenty-three technical assistance grants totaling US$28.9 million. Cumulative ADB lending to Pakistan as of 31 December 2004 was US$14.3 billion. Recently ADB has approved $ 1 billion for the reconstruction and rehabilitation of the earth quake affected people. As I started my work on my project titled "The Role of ADB in Pakistan" in December 2005. Accounting period of ADB ends on 31 December. So the data in reports are as of December 2004. a large part of the Asian Development Bank's data is available at its web site and Depository libraries. I used both of the sources. 2.1 ADB LOANS FOR PROJECTS IN PAKISTAN: ADB approved 11 loans totaling US$709.2 million for seven projects in the following sectors. 1. 2. 3. 4. 5. 6. 7. Assistance for sustainable livelihood improvement in Punjab; Multisector rehabilitation in AJK; Public resource management in Balochistan; Technical education and vocational training in Balochistan; Technical education and vocational training in NWFP; Devolved social services in Punjab; and Road development and subregional connectivity in NWFP. 36

The details of the above Project along with their respective loan amount are given in table 2.1 2.2 TECHNICAL ASSISTANCE (TA) ADB has three types of TA activity: 1. Project preparatory technical assistance (PPTA) to prepare a project loan, a program loan, or a sector loan for financing by the ADD and other external sources; 2. Advisory technical assistance (ADTA) to finance, for example, institution building or sector-, policy-, and issues-oriented studies; and 3. Regional technical assistance (RETA) for any of the activities covered in (i) and (ii) involving more than one member country. ADB deems any technical assistance projected funded for under $150,000 a small-scale technical assistance (SSTA). ADB's public communications policy calls for TA reports to be made publicly available no later than upon approval. Table 2.1: amounts
(SMillion)

Details of the Projects Along with their respective

Project Name

ADF

OCR

Total 41.0

1. Sustainable livelihood in Barani Area 41.0 Project(Punjab)

2.

Balochistan Resource Management Program

23.0 75.0

11.0 75.0

133.0 150.0 11.0 16.0

3. Decentralized Social Service (Punjab)

4. Restructuring of Technical Education and 11.0 Vocational System NWFP 5. Restructuring of Technical Education and 16.0 Vocational Balochistan 6. NWFP Road Development Sector and 5.0 Regional Connectivity 296.2

301.2

37

7. Multisector Rehabilitation Project in AJK Total Technical Assistance Reports

57.0 228.0 481.2

57.0 709.2

A technical assistance (TA) report is a recommendation to the Board or President depending on the amount of assistance) to finance a technical assistance project. 2.2.1 Technical Assistance to Pakistan ADB has approved twenty-three technical assistance grants totaling US$28.9 million to Pakistan. These are listed in table 2.2 on the next Page. Table 2.2: ADB's Technical Assistance to Pakistan

S. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Project Name
Balochistan Rural Drought Mitigation Sindh Costal and Development Project Development inland

Division
and SAAE

TA Type
Projects Projects ID PP ID ID ID ID AO ID ID

Amount
600.0 650.0 300.0 550.0 400.0 250.0 450.0 450.0 150.0 950.0 400.0

Community SAAE SAAE SAEN

Water Sector Irrigation Development Renewable Energy Development

Supporting Public Resource Management SAGF Reforms in Balochistan Punjab Resource Reforms(Subprogram 2) Management SAGF

Strengthening Coordination and Alignment PRM of Government Operations to Devaluation Strengthening Procedures to Reduce Delays PRM in Startup of Development Capacity Building of Alternative Energy SAEN Development Boar Implementation of Police Reforms in Punjab PRM National Primary Education Functional SAAE Literacy for Rural Women in Selected Barani Areas of Punjab Sindh Basic Urban Services Balochistan Devolved Social Services Capacity Building Management in Sindh for SASS SASS

Projects Projects Projects

795.0 400.0 400.0

Environment SASS

38

15 16 17 18 19 20 21 22
Total

Coordination of Devolved Social services SASS Programs Mobilization of Grassroots Stakeholders for PRM Pro-Poor Social service Delivery Determents and Drivers of Poverty PRM Reduction and ADB's Contribution in Rural Pakistan Transport Sector Support SATC

ID ID ID

150.0 400.0 400.0

ID ID ID Projects AND

290.0 130.0 20000.0 150.0 240.0

Coordination of Devolved Social services SASS Program (Supplementary) Punjab Devolved Social services Program SASS

SSTA for Facility PPP Initiative in National SATC Highway Department Improving Governance in the Non-Profit PRM Sector of Pakistan

28605.0

Table 2.3: 31

Breakdown of Cumulative ADB lending to Pakistan, as of December 2004

Sector Loan (number) 46 49 25 19 22 1 39 Management, 12 12 8 7 239 Loan Amount (US$ million) 3,062.0 2,977.1 1,878.0 1,604.9 1,344.5 1 1,290.4 987.0 501.1 384.5 229.4 14,258.9 %

Energy Agriculture and Natural Resources Finance Transport and Communications Multisector Industry and Trade Law, Economic and Public Policy Education Water Supply, Sanitation, and Waste Management Health, Nutrition, Social Protection TOTAL and

21.5 20.9 13.2 11.3 9.4 9.0 6.9 3.5 2.7 1.6 100.0

39

2.3

OVERVIEW OF ADB ASSISTANCE As of 31 December 2004, ADB's total loan commitment to the

Pakistan since commencement of its operations in 1968, comprised 239 public sector loans amounting to $14.3 billion, out of which $7.4 billion (51.7 percent) is from the Ordinary Capital Resources (OCR) and $6.9 billion (48.3 percent) is from the Asian Development Fund (ADF). Out of 239 loans, 61 loans covering 51 projects with net loan amount totaling $4.9 billion are ongoing. Of the total loan amount of $4.9 billion, 42 percent is from ADF. As of 31 December 2004, the sectoral composition of ADB's assistance to Pakistan was 21.5 percent for energy sector, 20.9 percent for the agriculture & natural resources, 13.2 percent for finance sector, 11.3 percent for transport and communications, 9.4 percent for multisector, 9.0 percent for industry and trade, 6.9 percent for Law, Economic Management, and Public Policy, 3.5 percent for education, 2.7 percent for water supply, sanitation, and waste management, and 1.6 percent for Health, Nutrition, and social protection(Figure 1). A cumulative of 293 technical assistance (TA) projects has been approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. FIGURE 1 2.3.1 Social Sectors ADB has provided assistance for the Social Action Program for a total of $300 million. In addition, ADB has financed primary education projects with special emphasis on education for girls, improving the service delivery by providing assistance for teacher training projects and contributed to skills development by financing technical and vocational education projects.

40

2.3.2 Energy Sector ADB has provided 46 loans totaling $3062.0 million for Energy Sector Development. It is 21.5% of the total loans. Its assistance has been for improving the technical efficiency of the energy sector as well as for financing critical investments in both the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (WAPDA). As shown in pie chart ADB has provided the most amounts for Energy Sector. 2.3.3 Agriculture Sector ADB has provided program and project assistance with the objectives of reforming the policy framework, ensuring greater role for the private sector and increasing agricultural productivity. ADB has provided 49 loans totaling $2977.1 million for Agriculture Sector. 2.3.4 Irrigation Sector Irrigation plays an important role in agriculture sector. Realizing the fact, ADB has provided assistance for such major irrigation initiatives as Chasma Right Bank Irrigation Project in North West Frontier Province (NWFP) and Punjab [Stage III, approved in 1991], Pat Feeder Canal Project in Balochistan [approved in 1985], and the construction of the Pehur HighLevel Canal in NWFP [approved in 1993]. ADB has also provided assistance for on-farm water management projects, forestry sector projects, and for the National Drainage Program. 2.3.5 Transport Sector Transport is the backbone of economy. Roads network is essential for boosting the economy. ADB has provided assistance for the development of farm to market roads m all the four provinces of Pakistan, as well as for rehabilitation of the provincial road network. ADB has provided 19 loans totaling $1604.9 million for the development of transport and communication sector development. It has also announced $ 1 billion assistance for the earthquake effected areas. The Government of Pakistan 41

will determine how much to allocate for the transport and communication sector. Support has also been provided for strengthening the road sector institutions, such as the communication and works departments and for developing an appropriate regulatory mechanism. 2.3.6 Finance and Industry Sectors ADB has provided lines of foreign exchange credit for the private sector industrial development, and of late for the reform of the trade regime under the ongoing Trade, Export Promotion, and Industry Program Loan. To facilitate private sector access to foreign exchange for exports, the ADB has recently approved the Small and Medium Enterprises Trade Enhancement Facility. ADB has provided 25 loans totaling $ 1878.0 million for the development of finance sector. Under its recently completed Capital Market Development Program Loan, ADB assistance facilitated the reforms of the capital market and strengthening of the regulatory environment. 2.3.7 Education Sector ADB has completed several major projects in education sector. While other are in progress. It has provided 12 loans totaling $501.1 million. It is 3.5% of total loan. 2.3.8 Technical Assistance The grant technical assistance provided by ADB has mainly been for capacity building and institutional development. In addition, it has also supported various in-country and foreign training programs for public and private sector institutions. 2.3.9 Decentralized Service Delivery Study Submissions are invited from individuals working with federal, provincial or district governments in Pakistan, NGOs, academic institutions and donor agencies to contribute to a series of short, published "Issues and Options Notes" that look at emerging concerns and difficulties posed by

42

devolution, with an emphasis on pragmatic, immediate steps that could be taken to promote better service delivery by districts and tehsils. 2.4 ADB'S MAJOR PROJECTS IN PAKISTAN Asian Development Bank has provided assistance for several major projects. Some of these Projects are discussed in detail in the preceding chapters. Here these Projects are listed according to their secrtorial composition. 2.4.1 Agricultural Research Projects 1. 2. 3. 4. 5. Agribusiness Development Project Decentralization Support Program Infrastructure Development Agriculture Sector Program II Forestry Sector Project

2.4.2 Social Sector Projects 1. 2. 3. Capital Market Development Program Punjab Devolved Social Services Program North-West Frontier Province Barani Area Development Project, Phase Balochistan Devolved Social Services Program 4. 5. 6. 7. 8. Earthquake Emergency Assistance Project National Drainage Sector Project Social Action Program (Sector) Project II Sustainable Livelihoods in Barani Areas Project Sindh Rural Development Project

2.4.3 Educational Sector Projects 1. Balochistan Devolved Social Services Program

43

2.

Restructuring of the Technical Education and Vocational Training System Project (Balochistan Province)

3.

Restructuring of the Technical Education and Vocational Training System Project (North-West Frontier Province)

4. 5. 6. 7. 8.

Decentralized Elementary Education Project Science Education Sector Project, Second Girls Primary School Sector Project, Second Technical Education Project Restructuring of the Technical Education and Vocational Training System Project (Balochistan Province)

9.

Restructuring of the Technical Education and Vocational Training System Project (North-West Frontier Province)

3.1.4 Energy Sector Development Projects 1. 2. 3. Energy Sector Restructuring Program Ghazi Barotha Hydropower Project Proposed Loan to Laraib Energy Limited for the New Bong Escape Hydropower Project in the Islamic Republic of Pakistan 4. Infrastructure Development

2.4.5 Finance and Industry Sectors Projects 1. 2. 3. 4. Punjab Resource Management Program Financial (Nonbank) Markets and Governance Program Financial Sector Intermediation Loan Strengthening Regulation, Enforcement and Governance of Financial Markets 5. 6. Small and Medium Enterprise Trade Enhancement Finance Trade, Export Promotion, and Industry Program 44

7. 8. 9.

Microfmance Sector Development Balochistan Resource Management Program Rural Finance Sector Development Program

2.4.6 Governance 1. 2. 3. Earthquake Emergency Assistance Project Balochistan Devolved Social Services Program Strengthening Regulation, Enforcement and Governance of Financial Markets 2.4.7 Health, Nutrition, and Population Sector Projects 1. 2. 3. 4. 5. Balochistan Devolved Social Services Program Reproductive Health Project Women's Health Project Punjab Devolved Social Services Program Sindh Devolved Social Services Program

2.4.8 Irrigation and Drainage 1. 2. 3. 4. 5. 6. Punjab Farmer-Managed Irrigation Project Malakand Rural Development Project Flood Protection Sector Project, Second Dera Ghazi Khan Rural Development Project Bahawalpur Rural Development Project National Drainage Sector Project

2.4.9 Multisector Projects 1. 2. Earthquake Emergency Assistance Project Multisector Rehabilitation and Improvement Project for Azad Jammu and Kashmir 45

3.

Private Sector Development and Finance

4.

Infrastructure Development

2.4.11 Rehabilitation Multisector Rehabilitation and Improvement Project for Azad Jammu and Kashmir 2.4.12 Roads (Operation and Maintenance) Earthquake Emergency Assistance Project North-West Frontier Province Road Development Sector and Subregional Connectivity Project 2.4.13 Roads, Railways and Highways 1. 2. 3. 4. 5. 5. Infrastructure Development Balochistan Road Development Sector Project Punjab Road Development Sector Project Rural Access Roads Project Transport and Communications Infrastructure Development Railways' Infrastructure Development

2.4.14 Sectors / Sectoral Development

1. Microfinance Sector Development

2.4. 1. 2.

URBAN DEVELOPMENT AND HOUSING PROJECTS Southern Punjab Basic Urban Services Project North-West Frontier Province Urban Development Sector Project

Water Resource Management Projects \ 1. Infrastructure Development

2.4.17 Water Supply Projects 1. Punjab Community Water Supply & Sanitation Sector Project 46

2. Balochistan Devolved Social Services Program 3. Korangi Wastewater Management Project 2.4.18 Technical Assistance 1. Punjab Resource Management Program (Subprogram 2)

2.4.19 Others 1. 2. 3. 4. Punjab Resource Management Program (Subprogram 2) Sustainable Livelihoods in Barani Areas Project Access to Justice System Program Ports, Waterways, & Shipping Infrastructure Development Project

47

CHAPTER 3

ANALYSIS OF ADB ASSISTANCE

The theme of this study to be analyze is The role of ADB in Pakistan Development. In order to analyze the required topic of the study, the improvement in quality of life was the criteria. Although, several other factors also contributed in improving the quality of life. But those factors cannot be isolated. For this analytical study three educational sector projects, two agricultural sector projects, three finance and industrial sector projects, one energy sector project, two health sector projects and three social sector projects were selected for all Pakistan to give a comprehensive view of the ADB role. 3.1 ANALYSIS OF ADB ASSISTANCE FOR IMPROVING BASIC EDUCATION

ADB's main human development objective is to reduce poverty by improving the health, living standards, and livelihood of people in its DMCs. This is done by strengthening institutions; building capacity; reforming policy; and providing loans and technical assistance in education, health and nutrition, water supply and sanitation, and urban sectors. No country or region has done well in reducing poverty without first providing widespread basic education and health services. Education helps to empower the poor, to enhance their income-earning potential, and to improve the quality of their lives. Without basic education-without basic skills and knowledge-the poor lack the tools essential for breaking the poverty cycle. People with basic education are more productive and more likely to earn higher incomes. Where attention has been paid to educating women, multiple benefits have been obtained: educated women have lower fertility rates, produce less children and their children have lower infant

48

mortality rates; and educated mothers are more likely to use health services and to send their children to school. Children from poor families are less likely to attend or to complete school and, as adults, these children will be less likely to improve their quality of life or that of their own children. The poor child-who was malnourished as an infant-may have diminished learning ability, may suffer from chronic disease, and therefore may be unable to benefit fully from schooling. A child from a poor family is less likely to receive appropriate stimulation and encouragement at home and may find the transition from home to school more difficult. Early childhood development programs ensure adequate nutrition and health care, help compensate for disadvantaged home environments, and lay the foundation for better performance at school. ADB and education: Work continued in 1999 on preparing an updated education sector policy paper to assess ADB's evolving role in education, with particular attention to education's role in reducing poverty. Of all types of education, primary education is clearly the most important for poverty reduction. But even when this is available and successfully completed by the poor, their transition to higher education and training is limited. Strategies for education and poverty reduction must identify ways to ensure equity of access to education beyond the basic levels. As poor adults are likely to have had no access to education in their childhood or to have dropped out of school early, investing in adult and community education programs (designed to teach basic literacy and numeracy, transfer essential knowledge in health and nutrition, and provide entrepreneurial and incomeenhancement skills) is warranted. Enrollment of the poor in both higher education and skills development programs must be encouraged. However, entry qualifications often require completion of lower levels of education that are often not completed by the poor. Because books and supplies are expensive, the cost of such programs is usually beyond the means of the poor, even when tuition is provided free. The opportunity cost of attending post-basic education training in terms of income foregone is higher for the 49

poor, whose immediate income is needed by the family. ADB-assisted programs in higher education and skills development support programs to enhance equity of access to higher levels of education and training for the poor through the provision of vouchers and scholarships, and develop alternative means of delivering and assessing skills training and higher education. Policy dialogue with governments and capacity building are needed to put in place pro-poor policies and pro-poor resource allocation mechanisms. ADB's Projects for Improving the Education in Pakistan Asian development Bank has provided loans and grants for several projects to Pakistan for the improvement of educational sector, increasing the literacy rate in Pakistan. I have selected the following for analysis. Emphasis is given on the cost and benefits/outputs of the projects. 3.1.1 Analysis of Teacher Training Project Basic Data about the project 1. 2. 3. Loan Number: Project Title: Executing Agency: i. ii. Federal Ministry of Education (MOE); and Provincial education departments (PEDs) of Balochistan, North-West Frontier, Punjab, and Sindh. 4. Amount of Loan: $52.1 million 1210-PAK (SF) Teacher Training

Project Description In spite of impressive economic growth in the previous two decades, Pakistan in the early 1990s had some of the world's lowest social indicators. Out of 160 developing countries, Pakistan ranked 120th and suffered from widespread poverty and low quality of life. Annual population growth rate was 3.1%; infant mortality rate, 107 per 1,000 live births; life expectancy, 55 years; overall illiteracy rate, 69% (85% for women); and primary-school enrolment was very low (less than 50%), particularly for females. In 1992, the Government of Pakistan launched the Social Action Program (199250

1995) to emphasize human resource development, which is essential to promote economic development, reduce poverty, and improve social wellbeing. The program allocates resources for universal primary education to increase the literacy rate to about 80% by the end of the decade. Government of Pakistan also adopted the National Education Policy in the 1990s. This policy reflected issues identified in the 1988 studies that strengthened the rationale for the Teacher Training Project (TTP). In 1990, ADB provided project preparatory technical assistance (TA) to prepare a detailed proposal for the TTP. The TA findings were reviewed by principal stakeholders, policymakers, administrators, and beneficiaries at a national conference in Islamabad in 1992, and recommendations incorporated to improve the project design. Objectives of Teacher Training Program The objectives of TTP included the following: 1. an expanded teacher training system to solve the teacher shortage, which at appraisal was estimated to reach 525,800 by 2000 (234,600 for primary schools; 96,100 for middle schools; and 195,100 for secondary schools); 2. improved quality of teacher training programs, which at appraisal were dominated by the 9-month primary teacher training certificate(PTC) training course and the 12- month certificate of teaching(CT) course, and which, after over 25 years, had become obsolete; and 3. improve planning, management, and efficiency of teacher training institution(TTIs), which were under multiple chains of command and responsibilities at the federal and provincial levels.

51

Anticipated Benefits Anticipated benefits upon project completion included the following: i. training for over 160,000 teachers, of whom at least 60% would be women; staff development through overseas fellowship and incountry training for about 5,000 Ministry of Education (MOE) and provincial education department (FED) senior staff and officials involved in teacher training; ii. iii. improvement of 59 TTIs; and establishment of six new TTIs to a. b. increase training capacity, quality, and research; increase access to teacher training in disadvantaged rural areas, especially for women; c. improve the quality of methodologies and teaching

environment in TTIs; d. Strengthen planning and management.

Project Cost and Financing The total project cost at appraisal was estimated at $71.3 million. Table 3.1: Project Cost
($ Million) Cost Foreign Exchange cost Local Currency Cost Total Appraisal Estimate 13.5 57.8 71.3 Actual 7.3 19.4 26.7

ADB provided a loan of$52.1 million and Government of Pakistan committed $19.2 million for local currency costs. The loan, approved on 15 December 1992 and declared effective on 14 October 1993, was to cover the entire foreign exchange costs of $13.5 million, and part ($38.6 million equivalent) of the total local currency costs. The actual project cost was $26.7 million, including $21.4 million financed by an ADB loan and $5.3 52

million by Government of Pakistan. After five loan cancellations amounting to $29.7 million, the loan account was finally closed on 18 July 2002. No major changes were made to the project scope during implementation, including the midterm review, although changes to the project schedule were required due to long delays. Table 3.2 Financing plan of the Projects
Cost Implementation Costs ADB-Financed Borrower-Financed Sub total IDC Cost ADB-Financed Borrower-Financed Total Appraisal Estimate Foreign Local Total 11.9 0.0 11.9 1.6 0.0 1.6 38.6 19.2 57.8 0.0 0.0 0.0 50.5 19.2 69.7 1.6 0.0 1.6 Actual Local 14.1 5.3 19.4 0.0 0.0 0.0

Foreign 6.3 0.0 6.3 1.0 0.0 1.0

Total 20.4 5.3 25.7 1.0 0.0 1.0

Project Schedule The loan was approved on 15 December 1992, and signed on 29 March 1993. The original date of loan effectiveness was 27 June 1993, but the loan became effective on 14 October 1993, as more time was needed to comply with the conditions precedent to loan effectiveness. TTP was expected to be implemented over 5.5 years, with physical completion by 30 June 1998, and loan closing by 31 December 1998. However, significant delays were caused mainly by: i. late site selection of PITEs in Punjab, Sindh, and NWFP, which, in turn, set back procurement of equipment, furniture, recruitment of staff, and operation and maintenance; and ii. late decisions by FCU on fellowships abroad, curriculum and instructional material development, consultancy services, and procurement of electronic media equipment.

53

TTP was extended twice for a total of 24 months at the request of GOP, initially to complete the physical infrastructure, in-service and training abroad, and other institution-strengthening activities, and subsequently to try and complete the capacity-building activities for the PITEs and the instructional material development. Ultimately, the civil works, in-service training, and other capacity-building activities were generally completed, but not installation of the electronic media equipment and related operational training and printing of the remaining textbooks for Dipl. Ed. A comparison of scheduled and actual project implementation is given in Table 3.3. Table 3.3: Project Schedule
Item Civil Works Balochistan Engineering Designs Date of Award Completion of Work North West Frontier Engineering Designs Date of Award Completion of Work Punjab Engineering Designs Date of Award Completion of Work Sindh Engineering Designs Date of Award Completion of Work Equipment and Supplies First Procurement Last Procurement Appraisal Estimate Actual

Oct 1993 Jun 1995

May 1995 Sep 1995 Dec 2000 Jun 1996 Feb 1996 Sep 1999

Oct 1993 Junl995

Oct 1993 Jun 1995 Oct 1993 Jun 1995 Mar 1993 Dec 1995

Mar 1996 Jul 2000 Jun 1994 Jun 2000 Sep 1994 Mar 2000

Consulting Services Start of services Completion of services Staff Development Local Fellowship First Training Last training Overseas Fellowship

Mar 1993 Dec 1997

Sep 1995 Dec 1999

Mar 1993 Dec 1997

Apr 1995 Dec 1999

54

First Award Return of Last Fellow Project Implementation Unit Beginning of Start-Up Completion

Mar 1993 Dec 1995 Jun 1993 Dec 1997

Jun 1998 Dec 1998 Oct 1993 Dec 2000

Performance of Consultants, Contractors, and Suppliers:

The consultants started late due to delays in their engagement; some were terminated early due to unsatisfactory performance. Overall, the output of consultants was generally not satisfactory. This was due to errors in their selection, difficulties in reconciling work schedules, failure to clearly understand expected outputs and schedules, weak monitoring and supervision by the consulting firms and FCU and PIUs, inappropriate expenditures, and the lack of attention by ADB review missions1 to closely monitor the consultants' outputs. In general, the consultants failed to establish a participatory and cohesive work environment in FCU, TPTE, PITEs, and PIUs, and generate a sense of project ownership among domestic experts, project entities, managers and staff, and beneficiaries. The consultants' outputs were inadequate and incomplete. The performance of civil works contractors and suppliers of equipment, vehicles, library books, and instructional materials was generally satisfactory. A recent policy decision by Government of Pakistan to adopt only ADB's procurement guidelines will make procurement less cumbersome and time consuming in future. Performance of the Asian Development Bank ADB generally handled approval, disbursement, and related project procedures efficiently and on time. Fourteen review missions were conducted from 1995 to 2001. Although adequate staff time was provided for review missions, field supervision of project activities to help FCU and PIUs solve their problems, given the complexity of the umbrella-type design of the project, could have been more effective. During project implementation, the review missions could also have recommended further training of FCU and PIU staff in ADB's procurement and disbursement 55

procedures to expedite completion of project components, and advised EAs to have funds reimbursed under advance action and retroactive financing. ADB's performance was considered partly satisfactory. Efficacy in Achievement of Purpose In general, TTP accomplished its overall objectives of capacity expansion and increased access to training, as well as intermediate and long-term goals of pre-service quality through the Dipl. Ed. course. Consistent with the targets, the physical infrastructure was practically all completed and more classrooms were constructed than planned. However, specific objectives such as the provision and installation of electronic media equipment and laboratory equipment, vehicles, furniture, curriculum and instructional material development, in-service training, and TEMIS and BME were partly accomplished. In other words, TTP is assessed as partly efficacious. Environmental, Socio-cultural, and Other Impacts TTP did not have any adverse environmental or socio-cultural impacts. In terms of institutional capacity strengthening, including the development of management capacity in the new institutions, the Project had a significant beneficial impact by increasing the number of academic institutions and access thereto and improving teacher training facilities and methods. However, due to the weak performance of FCU, the delay to fully install and train staff in TEMIS that weakened the monitoring and evaluation systems; and the failure to complete the in-country and overseas training program as designed, institutional development is partly satisfactory. Overall Assessment Overall, TTP is rated partly successful. TTP accomplished: i. ii. its targets for physical infrastructure, although delayed; an early positive enrolment trend in favor of women from rural areas into the Project Institutions;

56

iii.

the basis for long-term quality improvement of primary and secondary teacher training through the introduction on a pilot basis of the Dipl. Ed. Programs: and

iv.

a major impact by benefiting about 138,800 teachers through inservice and overseas training programs, including about 3,200 senior staff from MOE and PEDs involved in teacher training programs. The latter training program achievements were below appraisal targets.

Moreover, TTP suffered from long delays in completing the civil works components and weak project management and supervision by FCU which led to delays in the completion of training and underutilization of loan funds for capacity building, consultants and procurement of furniture, vehicles, and equipment. 3.1.2 Analysis of Second Girls Primary School Project Basic Data about project 1. Project Number: 27180 2. Loan Number: 1454(SF) 3. Country: Pakistan 4. Loan Number: 1454-PAK(SF) 5. Project Title: Second Girls Primary School Sector Project 6. Executing Agency: i. Ministry of Education (federal) ii. Department of Education (Balochistan) iii. Department of Education (NWFP) iv. Department of Education (Punjab) v. Department of Education (Sindh) 7. Amount of Loan: Project Description Pakistan has one of the highest rates of illiteracy in the region because of limited access to education and lack of basic education facilities. Females, especially in rural areas, are particularly disadvantaged, as the adult literacy rate is considerably lower in rural areas than in urban areas, and illiteracy is significantly higher among females than among males. The Asian 57 SDR31,178,000

Development Bank (ADD), through the Primary Education (Girls) Sector Project 1, supported the Government of Pakistan's (the Government's) longterm plan to increase girls' participation in primary education by setting up community model schools (CMSs) for girls in union councils. In the final phases of that project, ADB responded to the Government's request for further assistance by approving a project preparatory technical assistance (PPTA) to build on experience and achievement under the earlier project, and prepare a detailed proposal for the Second Girls Primary School Sector Project (the Project) in close consultation and coordination with the Government, other aid agencies, and expected beneficiaries. Purpose of the Project The Project was aimed at providing accessible and good-quality primary education to increase the participation and retention rates of girls in rural areas. The Project supported the government's long-term plan to expand primary education for girls by establishing CMSs where they could receive good-quality instruction and master the basic literacy skills needed for further education and productive life. Output of the Projects The Project outputs, as expected at appraisal, consisted of the following: 1. Improved access to good-quality primary education through CMSs in 1,000 union councils that have been converted from multigrade schools or built on new sites in communities without schools for girls; staff deployment programs for local teachers, to ensure that the CMSs are adequately staffed with teachers and to reduce teacher absenteeism and transfers; and quality improvement interventions in interactive radio instruction (IRI) and instructional materials (IM) such as annotated teacher guides closely tied to student textbooks, and assessment of student achievement and enrollment in CMSs. 2. Strengthened institutional capacity for monitoring and supervision, including provincial education offices capable of conducting benefit 58

monitoring and evaluation (BME) of student achievement and community participation in CMSs; a network of learning coordinators (LCs) assigned to teacher resource rooms (TRRs) in CMSs; school management committees (SMCs); and CMS headmistresses (HMs), LCs, and staff participating in an outreach program for nearby schools. One thousand CMSs (the location of the CMS are shown in the map in the next page) would be established to allow up to 200,000 girls to enroll by the third year of full CMS operations, when grade 2 students would have progressed to grade 5. The CMSs were to be staffed with about 5,000 trained female teachers, with a new teacher being assigned for each additional 40 students. IRI programs would be introduced in the CMSs to support the Government's efforts to introduce English and to strengthen mathematics at the primary level, and activity-based lesson plans would help keep the students interested in learning. >><><><Map<><><><> Project Cost The total cost of the Project at appraisal was estimated at $ 78.8 million equivalent comprising $ 10.1 million in foreign exchange cost of $ 68.7 million equivalent in local currency cost. ADB approved a loan of $45.0 million from its Special Fund to finance $7.6 million (76%) of the foreign exchange cost and $37.3 million (54%) in local currency cost. The ADB loan represented 57 % of the total project cost. The Organization of Petroleum Exporting Countries Fund for International Development (OPEC Fund) was to finance $16.0 million ($1.7 million of the foreign exchange cost and $14.4 million of the local currency cost). The remaining $17.8 million, comprising $0.8 million in foreign exchange cost and $17.0 million in local currency cost, was to be shouldered by the Government through budgetary allocations. The actual project cost was $60.6 million $41.6 million in foreign exchange cost 15 and $19.0 million equivalent in local currency cost. ADB 59

financed $37.1 million, OPEC Fund $11.3 million, and the Government $12.2 million equivalent. Local currency costs financed by ADB included primarily civil works, furniture, IM, and staff development activities. The actual costs as shown in the following Table 3.4 were lower than the appraisal estimate. Here we do not discuss its reasons. Table 3.4: Project Appraisal Estimate and Actual Cost ($ million)
Cost Foreign Exchange cost Local Currency Cost Total Appraisal Estimate 10.1 68.7 78.8 Actual 41.6 19.0 60.6

Breakdown by Project components The amounts allocated to each component of the Project are shown in the table below. Table 3.5: Breakdown by Project component
Component Base Cost Civil Work Furniture, Equipment, Vehicles, and Materials Staff Development Consulting Services Community Participation CMS staff Salaries Salaries, Incentives, and O&B Total Base Cost Taxes and Duties Service Charges Imprest Account Total Appraisal Estimate Actual

39.3 13.8 2.9 2.2 2.2 16.5 1.9 77.2 0.0 1.6 0.0 78.8

36.4 4.1 0.8 2.8 0.0 9.7 1.5 55.3 0. 0.8 4.5 60.6

60

Project Schedule: The Project was originally scheduled (as is shown in the schedule below) to begin in the fourth quarter of 1996 and be completed after 5 years, with the loan closing on 31 May 2002. The loan was approved on 15 August 1996 and took effect on 19 January 1998. The loan closing had to be extended by 2 years and 10 months, to 31 March 2005, to allow the civil works and other contracts to be completed. Overall, the implementation of civil works was slow because of weak management and supervision by the government construction departments concerned. Table 3.6: Second Girls Primary School Sector Project's schedule
Item A B C Appraisal Estimate Actual July 1997 December 1998 April 1998 31 March 2005 April 1998 March 1999 January 2000 March 2005 July 2000 March 2005 January 2001 December 2002 J January 2001 March 2005 January 2001 March 2005 Not Implemented Not Implemented

Implementation plan Developed Start July 1997 Completion December 1998 Civil Works Start July 1998 Completion December 2001 Equipment and Furnishing 1. PIU/Quality Improvement Centers Start April 1998 Completion September 1998 2. Teacher Resource Rooms/CMSs Start January 1998 Completion June 2000 Instructional Materials 1. Community Model Schools Start April 1999 Completion June 2002 2. IRI English Dissemination Start January 1999 Completion December 2002 3. IRI Mathematics-Dissemination Start October 1999 Completion December 2002 4. Packets Dissemination Start October 1999 Completion December 2002 5. Assessment tests- Preparation and Administration Start Completion July 1997 Appointment of Staff September 1998

61

The major delay in implementation was primarily due to the delay in the effectiveness of the ADB loan caused by a condition requiring the OPEC Fund loan agreement to be executed and delivered by the parties. Performance of the Borrower and the Executing Agency The overall performance of the Borrower and the EAs was satisfactory. The Government's budgetary allocation was adequate, and it released counterpart funds on time. Despite initial start-up delays, the Project achieved its appraisal targets within the extended period of the loan approved by ADB. Performance of the Asian Development Bank ADB closely supervised and monitored the Project, and guided the EAs in procurement. ADB approved contract awards on time and clarified implementation issues raised by the EAs. In addition to regular review missions, regular follow-up meetings were held with the project directors. As required, joint review meetings with the project directors were also held to discuss and resolve common implementation issues. The project directors keenly appreciated this initiative taken by ADB. The Government appreciated as well ADB's approval of a loan extension of 2 years and 10 months, to allow for the implementation delays and the need to complete the large number of civil works contracts. Throughout the implementation period, ADB maintained a cordial relationship with the EAs, and its review missions supported the quick resolution of outstanding constraints on project implementation. Efficacy in Achievement of Purpose In general, the Project accomplished its overall objectives of increased access and enhanced institutional capacity. Consistent with the targets, the physical infrastructure was practically completed and functioning with students and staff, classrooms and TRRs were being used, and most of the SMCs were in place, although not all were equally active. The PCR mission visited over 100 schools; nearly all were functioning, with average student 62

enrollment near designed capacity. The Project made improvements in the collection and analysis of data on student enrollment, dropout, and repetition rates; however, this initiative could not be completed because the consulting firm did not field the required consultants. The following key appraisal targets were met: 1. 75 new schools were built and 979 existing schools were upgraded. Nearly all these school projects were completed and are functioning. 2. Furniture was procured for all 1,054 CMSs. Most of the furnishings are in place and are being used. 3. Equipment and library books were procured, and IM were developed under the Project. 4. Management and planning capacity at the central level and in the provinces was strengthened. At the school level, SMCs were established. Environmental, Socio-cultural, and Other impacts of the Project The Project has had significant beneficial environmental, socio-cultural, and other effects. Most of the project facilities were built on existing sites, and the new sites were also suitable locations, which did not suffer any environmental degradation from the civil works. Moreover, increased access for girls to primary education has the potential of opening up skills (raining opportunities and a chance to lead a productive life. The Project has also contributed to women's development and social development. By educating women, they will able to their home affairs better as well as contribute to economic development positively. In terms of institutional capacity strengthening, the Project has had a significant beneficial impact by increasing the number of academic institutions and access to them and by improving training facilities and methods. Table 3.7: Summary of Major Activity Achievements 63

Major Activity Civil works for up gradation of multi grade schools to CMSs Civil works for construction of new CMSs Provision of furniture/Instructional materials Enrollment capacity

Appraisal Provision 866 Schools 96 CMS 962 CMS 200,000 Students 962 CMS

Actual 979 Schools 75CMS 1,054 CMS 210,800 Students

Remarks

of SMCs

749 CMS

SMCs in remaining CMS could not be established because of weak coordination between FCU and PIUs

Teacher Staff deployed Establishment of TRRs

4,049 Teachers 177 TRRs

4,722 Teachers 165 TRRS Balochistan decided to use 22 existing training halls and community outposts as TRRs Government decided to use existing set ups in Balochistan and NWFP Punjab trained 12,448 personsmonths of additional staff Development

Establishment of QIC Staff Development (Teachers, HMs, and LCs) Consultant services (Local) Introduction of IRI English

4 QIC 4,578 personmonths 942 personmonths Grade 3-5

2 QIC 16,584 persons months 1,046 person months Introduced in NWFP

Consultant could not develop appropriate training Program

Development of IRI mathematics

Grades 1 2

Grades 1 2

CMS =community model school, FCU= federal coordination unit, HM = headmistress, IRI = inter radio instruction, LC= learning coordinator, PIU = Project implementation unit, QIC = quality improvement cell, SMC = school Management committee, TRR = Teacher resource room.

3.1.3 Analysis of Middle School Project Basic Data

1. 2. Loan Number: Project Title: 1278-PAK(SF) Middle School Project

64

3.

Executing Agencies: i. ii. iii. Ministry of Education, Federal Department of Education, Balochistan Department of Education, North-West Frontier Province (NWFP) iv. Department of Education, Sindh $78 million estimated

4.

Amount of Loan:

Loan data 1. Appraisal i. ii. 2. i. ii. iii. 3. 4. 5. Date of Board Approval Date of Loan Agreement Date of Loan effectiveness i. ii. iii. 6. i. ii. iii. 7. In Loan agreement Actual Number of Extensions In Agreement Actual Number of Extensions 15 August 1 31 December 1999 31 March 2004 1 1994 12 October 1994 25 December 1993 17 May 1994 Date Started Date Completed Date Started Date Completed 12 September 1993 25 September 1993 9 November 1993 10 November 1993

Loan Negotiations

Closing Date

Terms of Loan i. ii. iii. Interest Rate Maturity (Number of years) Grace Period (Number of years) 1% 35 10

Project Description 65

In 1992 the Government of Pakistan requested Asian Development Bank (ADB) assistance to analyze issues, strategies, and options relating to expanding and improving middle-school education, and to prepare a project proposal to address issues identified. The Government confirmed its priority for the project to the 1993 Country Programming Mission and requested that ADB assistance be limited to the provinces of Balochistan, North-West Frontier Province (NWFP), and Sindh. The Punjab was excluded because the World Bank was undertaking a similar project in Punjab. Objectives of the Project The rationale for the proposed intervention was that the Government was improving access, quality, and supervision in primary schools with external assistance, including from ADB. The Middle School Project took note of two realities: the need to create additional seats for the increased number of students projected to complete primary school; and the importance of elementary education with a special focus on girls' education. The Project thus aimed to: i. improve access to and participation in middle schooling in rural and urban slum areas, especially for girls; ii. improve the quality of education, and increase student learning and achievement; iii. strengthen the capacity to plan, implement, and maintain the school system. To achieve these objectives the Project was to: i. increase the supply of middle-school places, especially for rural girls; ii. encourage demand from rural girls by offering stipends to attend grades 6-8, and assist rural female matriculates to qualify as middleschool teachers;

66

iii. iv.

support the private sector's entry into the middle- school market; reform the middle school curriculum and textbooks, and then retrain teachers and head teachers;

v. vi.

produce pilot achievement tests in core subjects; carry out studies on the provincial management of school systems so as to introduce efficiency gains;

vii.

improve the capacity to plan, monitor, and evaluate the school system;

viii.

establish systems for maintenance of school plant.

Relevance of Design and Formulation Human resource development was a critical element of the Government's 1992 National Education Policy and of its Eighth Five-Year Plan (FY1993/94-FY1997/98), as economic progress depended on an educated and skilled workforce. Eight years of elementary education was seen as essential for preparation for productive work and for further education and training. Girls' education was seen as important for ensuring the improved participation of women in economic activities and reducing the population growth rate and mortality. Among the objectives and policy statements of the National Education Policy, three related to middle schooling: i. In due course, primary education would give way to elementary education comprising grades 1-8; ii. iii. quality of education would receive high priority; and education for rural areas would be recognized as critical to bridging the gap between urban and rural populations in terms of access to quality education and improving socioeconomic mobility. Further recognition of the importance of social sector development was the 1992 launch of the Government's Social Action Programme, designed to 67

improve human development by improving basic social services. Initially the program's coverage of education was limited to primary education; in mid-1998 the scope was enhanced to cover elementary education. The Project was thus in line with the Government's development objectives and ADB's medium-term strategy. Project design accorded with Government priorities and was within the framework of the project preparatory technical assistance, which was comprehensive in scope. Federal and provincial representatives participated in project processing. ><<>><Map><><>< Project Costs The total project cost at appraisal was estimated at $100.5 million equivalent comprising $ 38.5 million in foreign exchange cost and $ 62 million equivalent in local currency cost. ADBs loan of $78 million contributed 78% of the total project cost, covering 100% of the foreign exchange cost and 64% or $ 39.5 million of the local currency cost. The governments share was $22.5 million equivalent all in local currency. The total actual project cost was $40.7 million, comprising $ 14.7 million in foreign exchange cost and $26 million equivalent in local currency cost. The following Table 3.7 shows actual project costs.

68

Table 3.8: Project Costs of MSP ($'000)

Item Foreign Exchange A. Implementation Cost 1. Civil Works 9,456.0 2. Furniture, Equipment and Vehicles 308.0 3. Instructional Material 5.0 4. Staff Development 908.0 5. Consulting services 1,571.0 6. Rural Girls Stipend Program 94.0 7. Incremental Recurrent Costs 0.0 8. Taxes and Duties 0.0 Sub-total (A) 12,742.0 B. Imprest Advances and Service Charges 1. Imprest Advances 785.0 2. Service Charges 1,615.0 Sub-total (B) 2,400.0 Total 14,742.0 Local Currency 13,371.0 2,534.0 268.0 2,804.0 1,654.0 2,953.0 1,953.0 497.0 26,026.0 0.0 0.0 0.0 6,026.0 Total Cost 22,827.0 2,841.0 273.0 3,046.0 3,046.0 3,046.0 1,946.0 497.0 38,367.0 785.0 1,615.0 2,400.0 40,767.0

Project Schedule Implementation was to span 5 years and 3 months, from the last quarter of 1994 until the last quarter of 1999. Instead, it spanned 9 years and 5 months and encompassed four extensions respectively for 2 years, 1 year, 9 months, and 6 months, starting from 1 January 2000 to 31 March 2004. The main reasons included initial delays of 10 months in loan effectiveness followed by implementation delays. These affected civil works; international training; in-country training in Sindh, initially held up by delayed approval of the revised PC-I and then by a protracted process of preparation; procurements; approval and notification of the revised curriculum and textbooks, and their introduction in schools; and the appointment of staff to upgraded schools.

69

Table 3.9: Projects Schedule of MSP

Item Short list Consultants Complete Engineering Designs Civil works Contract Date of Award Completion of Work Equipment and Supplies: First Procurement Last Procurement Completion of Equipment Installation Staff Development Start international training Completion-In-Country Training Start International Training Completion International Training Stipend Program Start Stipend Program Completion Stipend Program Appraisal Estimate July 1994 December 1996 July 1994 December 1998 April 1994 December 1996 December 1998 Actual October 1998 March 2002 April 1995 Sep 2003 April 1994 December 2001 June 2003

December 1998 April 1994 December 1998 April 1994 June 1999

December 2003 January 2001 June 2001 April 1995 Dec 2000

Project output The Project's components covered (i) access and participation, (ii) quality improvement, and (iii) institutional strengthening. A description of the subcomponents is as follow. Access and participation 1. Capacity Expansion

The appraisal target was (i) to upgrade 900 primary schools covering grades 1-5 to middle schools covering grades 6-8, of which 746 (83%) were to be in rural areas (both girls and boys) and 576 were to be for girls (64%); and (ii) to provide science demonstration equipment, books, reference and instructional materials, low-cost duplicating machines, and computers to each school. Upgrading was to include an average of three classrooms; a science room; and basic supporting amenities comprising a head teacher's room, veranda, toilet, hand pump, and boundary wall. 70

At project completion, 609 primary schools had been upgraded. The project implementation units (PIUs) put the number at 559 (91%), but this is doubtful as many schools were observed to be in urban or peri-urban areas. One site out of 140 in Balochistan and 9 sites of 300 in NWFP were dropped due to site disputes, and Sindh's target of 460 schools was reduced in 1999 at the request of the Government of Sindh (COS) to the 179 schools on which work had started. Against the project requirement of 64% girls' schools, Balochistan achieved 68%, NWFP 57%, and Sindh 40%. 2. Rural Girls' Stipend Program

Under the two stipend programs, (i) cash allowances were to be provided to 50,430 girls from rural poor families to help them attend middle school; and (ii) 2,500 rural female matriculates were to be assisted to complete courses in government colleges for elementary teachers (GCETs) and potentially become teachers in rural areas. This was to mitigate the serious shortage of female teachers in Balochistan and NWFP. The district education officers (DEOs) were to implement the rural girls' program, and the GCETs the rural teachers' program to assist women accessing GCET courses. In total 41,962 girls were provided with cash allowances, and 1,422 rural female matriculates received assistance for GCET attendance. All provinces faced difficulties meeting the income criterion, and all beneficiaries were not necessarily from the rural areas. 3. Private Sector Participation

The Project was to support a study to involve the private sector and to develop an action plan to implement its recommendations. The study was to (i) focus on a potentially greater role for non-government organizations, local communities, education foundations, other philanthropic and humanitarian institutions, and profit-oriented organizations; and (ii) devise a mechanism for private foundations to provide loans and grants to them to increase the number of private schools in the more rural areas enrolling children from less affluent households. The consultants' report was 71

disseminated in March 1999 to the provincial governments, none of which took any substantive action. However each province has an education foundation that provides matching loans/grants to encourage private sector participation. While not directly attributable to the Project, and apart from support by the foundations, several low-cost private schools have been established, even in rural areas. Private schooling has now become important for the country,. Enrolment in private primary schools is now in the order of 42 percent of total enrolment (2004). During 2004, at the middle school level, the private sector had a share of 37 percent of total enrolment. At the secondary and higher secondary level in the same year, the private sector share was 30 percent and 64 percent respectively of the total enrolment. Quality improvement 1. Curriculum Reform and Textbook Development The curricular content of middle schools was to be reviewed and restructured, including curriculum reform to align the middle-school curriculum with the ongoing primary and secondary school reforms; development of more relevant and attractive text materials ii line with the revised curriculum; development and reproduction of prototype handbooks for head teachers, teacher handbooks and textbooks; and the purchase o library reference books for middle schools in the three provinces. The curriculum was revised by the international consultants and approved in March 1998; textbook revision was completed in March 1999; and teacher and head-teacher handbooks developed in April 2000 during an extension of the consultant Government approval and notification of the revised textbooks and handbooks tool until 15 June 2002, a delay of 3 years, adversely affecting staff training in the revise curriculum. 2. Teacher and Head-Teacher Training

In-service training was to be imparted to some 5,500 untrained teachers to improve subject competency, 15,500 middle-school teachers in the revised 72

curriculum, am 4,000 middle-school head teachers in school management and supervision. Th provincial curriculum and extension centers were to conduct the training coordination with the GCETs. In fact, training in all provinces was undertaken by the PIUs, although the provincial curriculum and extension centers and GCETs often provided the venues. 3. Achievement Testing

Systematic strengthening of the national educational quality monitoring and evaluation process was to be undertaken through staff training and consulting services to develop national achievement testing services, and data collection and analysis t monitor the quality of schooling, focusing on grades 6 and 8. Classroom-base continuous achievement testing was to be pilot tested in sample middle schools in each province. 4. Academic Supervision

The provincial bureaus of curriculum and extension were to be helped to improvw school supervision through systematic reviews of school supervision processes from provincial to the school level. The reviews were to identify critical weaknesses in system and suggest solutions. A management and supervisory training unit was to set up within the existing provincial curriculum and extension centers to help develop supervisory training, and utility transport provided to facilitate district supervision, especially for female officers working with girls' schools. Institutional strengthening 1. Management Development

A school management organization study was to be conducted and an action plan developed to improve the efficiency of the provincial departments of education and their various administrative tiers relating to school education. The study was to focus on the management structure of primary, middle, and secondary schools, and include policy and related strategy development, staffing adequacy, and training needs. The consultants completed the study by the end of 2000 and developed a 73

manual. Master trainers were trained in Islamabad and workshops also held there for provincial participants. The education departments took no further identifiable action. 2. Planning, Monitoring, and Evaluation

The planning capabilities of provincial and district offices were to be strengthened through data collection, analysis, and feedback, and the introduction of school location planning. Geographic information system equipment was to be acquired for Sindh and assistance provided to institutionalize the recently developed national education management information system. Procurement of the geographic information system equipment was delayed due to the Sindh PIU's reservations about undertaking the procurement. It asked FCU to procure the equipment on its behalf, but the request could not be accommodated due to difficulties relating to financing shares. Meanwhile another agency provided substantial assistance for the geographic information system and the Project's contribution was curtailed to cover the outstanding components, mostly office equipment. 3. Developing School Maintenance Systems

A system and an action plan were to be developed for planning and executing maintenance programs with annual resource requirements. The existing provisions and staff working on school maintenance were to be comprehensively reviewed and recommendations made as needed on resource requirements, staff, and training needs. The possibility of involving communities in school maintenance was to be considered, together with government recurrent budgetary provisions. The international consultants developed a system and manual for school maintenance, but little action was taken by the provincial governments to institute a proper school maintenance plan, as evidenced by the state of disrepair of many project schools. Performance of the Asian Development Bank 74

ADB's performance overall was satisfactory. After delegation of the Project to PRM, ADB's performance was increasingly governed by a focus on the Project's development objectives, bearing in mind the institutional, financial, and procedural constraints of the respective governments; and by concerns for governance, transparency, and sustainability. Procedures applied by the PIUs were often inconsistent with ADB procedures and this led to delays in ADB approvalor non-approvalof procurements. These factors resulted in Sindh not exercising an option to re-tender the procurement of equipment for the MST unit, and Balochistan re-tendering of books not being approved. Monitoring by ADB was adequate although more missions could have been fielded. This was largely attributable to stuffing constraints and resulting work pressures at PRM, which precluded more frequent missions critical issues were raised during high-level quarterly provincial project review meetings. Efficiency in Achievement of Outputs and Purpose The Project is rated as inefficient in terms of efficiency of process. Implementation delays affected project start-up, civil works, in-country and international training, procurement, and staffing of the PIUs as well as of upgraded schools. Loan extensions spanned a cumulative period of 4 years and 3 months, and even then some activities were not adequately complete. Environmental, Socio-cultural, and Other Impacts The Project had no significant environmental impacts. On a socio-cultural level, the rural girls' stipend program had a positive impact in assisting a number of girls to complete middle schooling even in remote areas. Government of Sindh adopted the stipend program and is providing it to all girls in middle schools. Many project schools, especially for rural girls, have opened up unprecedented opportunities for communities, which are likely to effect a nonreversible change in attitudes to female schooling.

75

Overall Assessment The Project is rated partly successful. The Project suffered implementation delays and financial mismanagement comprising an embezzlement of $1.03 million and ineligible
<><><<<><

use of imprested account funds. Government commitment to achieve the Project's development objectives remains elusive as project schools arc partially functional and enrollment less than intended. The potential for quality improvements has yet to be realized, and the impact of teacher training is difficult to assess as teachers trained were mostly from nonproject schools due to delays in recruitment of teachers for upgraded schools. Of the three provinces, Sindh's performance was the weakest. The leadership shown by it in curtailing the civil works' program, regrettably, has not extended to its approach for the 179 upgraded schools. It will require the same leadership, and indeed, on the part of all provincial and district governments, to ensure that investments made are optimized. Under the 2001 devolved system, the focus will shift to district governments, the quality of each district government determining the quality of results. 3.2 ADB Assistance for the Improvement of Health and Social Sector

Asian Development Bank and Health Sector ADB's updated health sector policy, adopted in February 1999, reemphasizes primary health care, including reproductive health, family planning, and selected nutrition interventions, as the best strategy to provide universal access to essential health services. ADB's overall objective in the health sub-sector is to assist DMC governments in ensuring that their citizens have broad access to basic preventive, promotive, and curative services. ADB focuses on 1. improving the health status of the poor, women, infants, children, and indigenous peoples; 76

2. 3.

promoting health sector reforms; enhancing the efficiency of health sub-sector investments through institutional strengthening and capacity building;

4. 5.

achieving tangible, measurable results; and testing innovative approaches and supporting effective and affordable new technologies.

The Asian financial crisis highlighted the need for governments to actively pursue health sub-sector reform and implement effective and cost-efficient strategies. Reforms in health sub-sector financing aim to mobilize more resources for health and to make better use of available resources, particularly government subsidies. ADB projects support reforms that further decentralize health service delivery, encourage partnerships with the private sector to improve efficiency and coverage, and focus on protecting vulnerable groups, especially the poor, women, children, and indigenous peoples. ADB has financed several health projects and has provided and is providing Technical Assistance for Pakistan. Time's Limit does not allow me to discuss all of them. So I confined myself to the following two. 3.2.1 Analysis of Third Health Project Background This project is the Asian Development Bank's (ADB's) third in a series of seven lending operations in the health sector over the last 20 years. It was the first major externally funded intervention in this sector for Balochistan and the North-West Frontier Province (NWFP).ADB's first loan to the health sector was for the province of Punjab, and the second was for the province of Sindh. The Project was supportive of the sector policy and operational objectives to Government's accelerate the

development of a more effective health care delivery system in the two provinces addressing access to health care facilities particularly in rural areas and the quality of health services and improving planning in the sector nationwide. 77

The Project was designed to support the Government's health investment programs as contained in the Sixth Five-Year Plan (FY1984-FY1988) and the Seventh Five-Year Plan (FY1989-FY1993). At the time, the level of morbidity and mortality was high, with young children and women of reproductive age being the most vulnerable groups. The Government's overall goal was to improve the health status of the population by making available health services to the maximum number of people. Physical targets included the establishment of a basic health unit (BHU) or a rural health center (RHC) in every union council 11 of the country. It was during the implementation of the Project that the Government, assisted by aid agencies, formulated a comprehensive Social Action Program (SAP), which covered, among others, primary health care. The basic approach of SAP was to significantly increase the level of public funding for priority sectors. ADB supported SAP jointly with a number of aid agencies including the World Bank through the Social Action Program (Sector) Project (SAPP I). SAPP I and the Project complemented each other, and their implementation overlapped in 1994-1995. Formulation A TA was provided during September 1986-January 1987 to prepare the Project. Loan fact-finding was conducted in April 1987 in close consultation with the Government and aid agencies active in the sector. The Project was appraised in June-July 1987, jointly with the former Overseas Development Administration of the United Kingdom, which cofmanced equipment, consulting services, and fellowships for the establishment of medical equipment maintenance and repair workshops, provincial planning units, and MOH planning cell. Purpose and Outputs The Project aimed to improve health care delivery in Balochistan and NWFP, while addressing the need for improved planning at the national level, i.e. MOH. It focused on (i) physical infrastructure improvement, (ii) 78

health personnel development, (iii) maintenance and repair of medical equipment, and (iv) planning and management of health services at the provincial departments of health (DOHs) and MOH. Cost, Financing, and Executing Arrangements The total project cost at appraisal was estimated at $37.2 million equivalent, with a foreign exchange component of $13.1 million and a local currency component of $24.1 million equivalent. ADB made a loan of $30.4 million from its Special Funds resources to cover 82 percent of the total project cost. The Department for International Development (DFID) of the United Kingdom provided a grant of $3.7 million and the Government agreed to finance $3.1 million equivalent of local currency costs. The executing agencies (EAs) were MOH, and the DOHs in Balochistan and NWFP. Project coordinating committees were established in Balochistan headed by the additional chief secretary and in NWFP by the secretary of health. Cost and Scheduling The actual project cost at completion amounted to $26.7 million or 72 percent of appraisal estimate. The Government financed $2.7 million equivalent of the local currency cost (10 percent of the total), while ADB contributed $21.0 million (79 percent), and DFID $3.0 million (11 percent). The net amount disbursed from the ADB loan was distributed as follows: $11.1 million for NWFP, $9.3 million for Balochistan, and $0.6 million for MOH. Reasons for the low loan utilization (69 percent of the approved loan amount) were the depreciation of the Pakistan rupee versus the dollar and the appreciation of special drawing rights against the dollar. Another reason was that most expenditures were much lower than the appraisal estimates. The unutilized amount of $13.1 million was cancelled. The ADB loan became effective in January 1989, about eight months later than envisaged, due to delays in (i) completing the co-financing arrangements with DFID, (ii) approval of the Project by the Executive Committee of the National Economic Council, and (iii) establishment of the 79

PIUs and project coordinating committees. After two extensions, the loan was closed in August 1996. The Project was physically completed in December 1995, 2.5 years behind the original schedule. The implementation delay was attributed to (i) lack of adequate project management experience of the EAs; (ii) unfamiliarity of the PIU staff with ADB procedures on recruitment of consultants and procurement; and (iii) delays in civil works due to slow approval process, delays in acquisition of land for the construction of new facilities particularly in tribal areas, and the effect of unusually cold weather during some winter months. Table 3.10:Appraisal versus Actual Project Costs ($ Million)
Category Part A Civil works Equipment, Vehicles, Materials, and Supplies Incremental Operating Costs Subtotal Part B Civil Works Equipment, Vehicles, Materials, and Supplies Incremental Operating Costs Subtotal Part C Equipment, Vehicles, Materials, and Supplies Service Charge During Construction Prior Technical Assistance Unallocated Total Appraisal Estimate FE LC TC 2.61 1.14 0.07 3.82 5.34 1.14 0.07 6.55 0.35 1.00 0.09 1.31 13.12 7.13 0.62 0.07 7.82 9.19 0.55 0.09 9.83 0.27 0.00 0.00 8.14 24.06 9.74 1.76 0.14 11.64 14.53 1.69 0.16 16.38 0.62 1.00 0.09 7.45 37.18 Appraisal Estimate FE LC TC 1.96 1.14 0.00 3.10 2.19 2.78 0.00 4.97 1.01 0.48 0.04 0.00 9.50 6.12 0.93 1.13 8.18 7.20 0.56 1.18 8.94 0.03 0.00 0.00 0.00 17.15 8.08 2.07 1.13 11.28 9.39 3.34 1.18 13.91 1.04 0.48 0.04 0.00 25.75 Appraisal Estimate FE LC TC (25) 0 (100) (19) (59) 144 (100) (24) 189 (52) (56) (100) (27) (14) 50 1,514 5 (22) 2 1,211 (9) 89 0 0 (100) (29) (17) 18 707 (3) (35) 98 638 (15) 63 (52) (56) (100) (28)

FE =Foreign Exchange, LC = Local Currency, TC = Total Cost.

Completion and Self-Evaluation According to PCR, the implementation of the Project was generally in accordance with the arrangements agreed at appraisal. There were initial delays in establishing the appropriate project implementation units (PIUs) and implementation took 2.5 years longer than anticipated. Based on a review of the PCR, it seems that the consultants' performance under the 80

Project was generally satisfactory, having successfully established the planning cell at MOH and the planning units in the provincial health departments. The training provided to various staff under the DFID grant seems to have contributed to the functioning of the medical equipment maintenance and repair workshops, nursing and public health schools, and planning cell and units. The PCR rated the Project as partly successful. Loan covenants were generally complied with. Partial compliance was noted on covenants relating to project benefit monitoring and evaluation (BME).The PCR estimated that the new and upgraded facilities under the Project allowed for increased access to primary health care services by around 7.5 million people living in the rural areas of Balochistan and NWFP. At the time of the PCR, many of the facilities were just being equipped, staffed, and operationalized. Operations It is recognized that the Project has long been completed, that other interventions affecting the same areas have come into play, and that the Project's benefits and impacts cannot be isolated from these. Thus, the evaluation has been conducted in the context of the overall effort provided in the health sector both of the federal and provincial governments and that of the aid agencies with emphasis on lessons for the future. The contribution of the all effort is reflected in the trends in health indicators in the two provinces. In this respect, the evaluation has looked beyond the physical achievements of the Project that had already been discussed in the PCR, and adopted a more forward-looking approach that assesses outcomes in the light of their overall significance to the health sector in the country. Achievement of Outputs The Project has enhanced the accessibility, equity, delivery, and quality of primary health care services in rural communities, especially for women and children. It has improved health care delivery at the union council level. Better quality medical staff and improved programs and facilities have 81

increased the number of clients in health centers. The enhanced quality of education and increased security has improved morale among teachers, staff, and students. Education and training of nurses and LHVs are now firmly established and an adequate supply of graduates has been achieved. Repair and servicing of medical equipment have been given a start. The institutional capacity of the provincial DOHs has been strengthened. The Project has laid a foundation for efforts on which other initiatives can build upon in the future. Some health facilities, especially in Balochistan, are underutilized due mainly to 1. non-posting of medical officers (particularly women medical officers (WMOs), and in some places high levels of absenteeism; 2. 3. lack of security; and lack medicines and medical supplies.

Still, there are many examples of RHCs and BHUs that are providing health care services well beyond their rated capacity. The contributions of the Project complemented those of other aid agencies, as well as efforts of the provincial and federal governments. The budgetary and human resources constraints, as well as Constraints in the distribution of supplies, are attributable to ineffective and inefficient management at the local level. The district health officer and the medical officer-in-charge play a key role in providing effective management to RHCs and BHUs. Procurement and Construction The physical infrastructure component was largely attained. Civil works accounted for about two thirds of the total project cost. They were on the critical path of project implementation and determined the timing of other activities such as equipment procurement, staff development and training, staff recruitment, and consulting services. All civil works contracts were awarded on the basis of local competitive bidding and were supervised by 82

the communications and works departments. Procedures for inviting and accepting bids, pre-qualification of contractors, and other requirements such as performance and security bonds, were unwieldy and complicated. The inefficiencies at the start-up of the Project were mainly due to the unfamiliarity of the PIU staff with ADB's procurement procedures, as well as the unfamiliarity of ADB staff with government procedures not unexpected as this was the first ADB-supported project in the health sector in the two provinces. Delays in the provision of government counterpart funds also contributed to implementation delays. Nonetheless, the physical facilities were implemented as envisaged and the quality of construction was generally satisfactory. While there were delays in the civil works, they did not impact adversely on the outcome of the Project. The pace of work gained momentum in the second half of project implementation. The procurement of small packages of equipment and furniture for the RHCs, BHUs, and nursing and public health schools that was carried out through local competitive bidding, international shopping, or direct purchase, was carried out satisfactorily, albeit with a front-end delay of seven months. The procedures prescribed during appraisal were appropriate and the overall quality of the medical equipment, teaching aids and materials, vehicles, and furniture was satisfactory. The procurement of equipment and vehicles, for the medical equipment repair and maintenance workshops under the DFID grant, was only partially completed due to delay in staff recruitment and training, and thus resulted in delay in operationalization as well. While construction of the workshops in Loralai and Sibi in Balochistan was completed satisfactorily, staff could not be recruited in time because of the protracted approval procedures of the Government. Thus, DFID did not provide equipment for these workshops. Nor was any equipment provided to the three BHUs in the Federally Administered Tribal Area (FATA) due to security problems. These BHUs remain inoperative to date.

83

Achievement of Project Purpose Operational Performance It is difficult to isolate the benefits and impact of the Project from those of other ADB financed projects in the sector, and from interventions of other aid agencies and the efforts of the federal and provincial governments. Such complementary projects have contributed to the overall objective of improving the quality of health service delivery. The benefits have been reinforced by the gains under the ADB-assisted Health Care Development Project. While attempting to assess the Project's effectiveness in achieving its objectives, the following discussions, therefore, need to be viewed in the context of the overall efforts of aid agencies working in the sector during the period under review. Furthermore, the operational performance and impact of investments in the sector have been subject to adverse weather conditions in the two provinces, such as unusually severe winters and droughts, as well as the adverse effects of the perennial refugee problems in the districts bordering Afghanistan. Lessons learned from the Project have influenced the design and scope of ADB's subsequent health and population interventions in Pakistan. The Project aimed to improve the coverage and quality of health care services for the rural population of Balochistan and NWFP, but no baseline and process indicators to measure the achievement were specified at the time of appraisal. Nevertheless, viewed in the context of infrastructure development for the rural population, the contributed toward the expansion of MCH services, and diagnostic and dental care facilities, established medical equipment maintenance/repair systems, increased training opportunities for nurses and LHVs, and enhanced planning capacity at the federal and provincial levels. DOH Balochistan and DOH NWFP both acknowledge that the Project represented a significant landmark in health sector development. Physical Infrastructure Improvement for Health Care Delivery 1. Improving the Quality of Services at Referral Facilities 84

The Project has contributed to the improvement of the quality of health care services. The improved RHCs, upgraded civil dispensaries and small rural health facilities, and new BHUs are more effective and serve more clients. The survey shows that the majority of patients live within five kilometers of these facilities. Due to this proximity, more than half of the beneficiaries visit the RHCs on foot. Others use various means of transport. Travel time for the majority of the people is not more than 20 minutes. There were 378 union councils in NWFP and 164 in Balochistan, which had either an RHC or a BHU in 1987. The Project provided improvements to 103 existing RHCs (against the target of 107), upgraded to the RHC level 4 civil dispensaries in Balochistan (as targeted) and 11 small rural health facilities in NWFP (against the target of 14), and constructed 3 new BHUs in NWFP (the 3 in FATA could not be operationalized). In total, 22 percent of the then existing 542 health facilities were upgraded under the Project. Overall, the Project provided the right kind of facilities. Their number continued to grow in the subsequent years. Table 3.11:Number of Health Facilities in 1999
Province NWFP Balochistan Total RHC 79 47 126 BHU 914 454 1,368 Total Union Councils (with BHU/RHC) 993 501 1,494 Dispensaries 531 648 1,179

Source: Ministry of Health. National Feedback Report (1999) Government of Pakistan.

2.

Indoor Facilities

All 118 RHCs improved under the Project have separate male and female wards with the majority of them (65 percent) in satisfactory to good condition. However, a number of facilities require minor repairs. The wards are generally underutilized. Hospital admissions tend to be low because of the non-availability of medical staff and the lack of medicines and medical supplies. Only a third of the RHCs surveyed reported indoor patient admissions. The frequency of obstetric/gynecology-related admissions was even lower. 85

Kitchens have been provided in more than half of the facilities. However, they are not being used as families usually bring food for the patients. Furniture has been kept in good condition in most of the facilities. Generators are available in most facilities and have been kept in good condition. Air compressors are available in about half the facilities. Only 13 percent of facilities have an infant incubator. 3. Operating Theater

Operating theaters were the major additions under the Project in almost all the RHCs. The activities, however, are generally limited to minor surgeries, and very few facilities perform any major operations, e.g., caesarean section. 4. Dental Services

The establishment of dental clinics at the RHCs has been a longstanding requirement in rural areas. The services rendered are much appreciated by the majority of the patients. However, only 65 percent of health facilities have dental surgeons. 5. Basic Utilities

While electricity is available in most health facilities, water and telephone are available in only about half the facilities. Toilets are available in all the facilities, although their general condition and level of cleanliness greatly vary. Drainage facilities are available in around 90 percent of the RHCs and staff houses. Gas is not available in most of the facilities, rendering many facilities in the colder areas unlivable during the winter months. 6. Residential Facilities for Medical Staff

Out of the 120 housing units targeted in the Project, 109 were built, and 78 of these were provided with furniture. The provision of staff housing for medical officers and other medical staff in the rural health facilities has greatly contributed to the willingness of these staff to be assigned to remote places, and improved the retention of medical personnel. All the residences 86

are occupied and properly maintained. Availability of doctors has increased with 80 percent of facility patients surveyed expressing their satisfaction in this regard. Health Services Provision 1. Maternal and Child Health A facility survey, 29 which was conducted in 1999 to compare the situation in 1993 (with the Project close to completion) with that of 1998 (after the Project was completed), showed an increase in MCH service utilization. The survey also showed an increase of 120 percent in antenatal clients in Balochistan during the same period. The number of female health workers increased by 164 percent, from 243 in 1993 to 641 in 1998, in Balochistan alone. Family planning services, initially provided only by the population welfare centers, are now provided also at the RHCs. Family planning clients in Balochistan increased by 126 percent in 1998 compared with 1993. Currently, 75 percent of primary health care facilities in NWFP are providing contraceptives to their clients. RHCs are the main source of family planning services to the rural population. The contraceptive prevalence rate among the rural population increased from 9 percent in 1990 to 23 percent in 1999 in NWFP, and from 2 to 10 percent during the same period in Balochistan. 2. Immunization Coverage

The addition of immunization rooms in the upgraded RHCs under the Project contributed toward the increased immunization coverage in both provinces. The expanded program on immunization has a strong presence in the majority of the facilities as vaccinators are available in 87 percent of the RHCs. Refrigerators for storing drugs are available in 83 percent of the facilities. Of these, 95 percent are in good/satisfactory condition. The survey conducted in 199031 reported that the proportion of fully immunized children in the age group 12-23 months was only 18 percent in Balochistan. 87

The overall coverage reported in 1997 was 59 percent, and for the rural population 57 percent. 3. Medical Staff

Medical officers, being the core staff of an RHC, are available in almost all the RHCs (96 percent). However, some specialists, e.g., surgeons and particularly WMOs, are in short supply, especially in remote areas. Forty percent of RHCs do not have a posted WMO. Constraints related to cultural and traditional practices, security problems, and lack of basic amenities are the main reasons why WMOs prefer urban center rather than rural health facility postings. Regular attendance of doctors has also been a problem in certain places. LHVs are available in 87 percent of the health facilities and are playing an important role in prenatal care. The supply of medical staff, such as vaccinators, laboratory technicians, and drug/medicine dispensers, is adequate, whereas there is a lack of x-ray technicians. Health Impact 1. Improved Diagnosis Basic apparatus/equipment used in the medical officer's examination room includes an examination table, blood pressure apparatus, stethoscope, eye/ear/nose/throat box, laryngoscope, and instruments table. These are available in all the facilities and in good/satisfactory condition in more than 90 percent of the facilities surveyed. The addition of laboratory and x-ray rooms in the RHCs greatly enhanced the diagnostic capabilities of these facilities. They are reported to be in good condition. X-ray machines, provided under the Project, are generally in good condition, and in places where there is an x-ray technician, heavily utilized. 2. Health Indicators

Due to the complex nature of health and disease, the impacts of health interventions ate difficult to assess. Each health intervention has a supplementary effect on others. A number of health indicators need to be

88

used to measure health impacts. Health impacts can generally be assessed from 1. 2. 3. 4. vital health and demographic indicators, morbidity and mortality indicators, service provision indicators, and perceptions of beneficiaries.

The available vital health and demographic indicators show a progressive improvement in the general health status of the people in the two provinces over the years. Despite the lack of some indicators for certain years (especially for FATA), most indicators improved between 1990 and 1999. Beneficiary Perceptions 1. Community Satisfaction with RHCs Sixty seven percent of respondents to a survey question on whether they were satisfied with the outpatient diagnostic/treatment replied in the affirmative. Eighty percent were satisfied with the availability of the doctors at the center but only 41 percent were satisfied with the availability of WMOs. The majorities were satisfied with the availability of female health workers and labor room staff at the RHCs. Availability of medicines is an area of concern. The majority of the respondents expressed dissatisfaction with the emergency service and emergency medicines. Seventy-five percent were dissatisfied with surgical operations, and 83 percent with postoperative care.

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2.

Health Personnel Development

At the start of the Project in 1988, there was a serious shortage of female nurses and LIIVs. Expansion of prcscrvice training of female medical staff was achieved through the upgrading of nursing and public health schools (for LIIVs). This initiative has considerably contributed to health personnel development in the two provinces. The number of female paramedical staff has since registered an increase. Strengthening of the Post-Graduate College of Nursing at Hayat Abad and the Basic School of Nursing at Lady Reading Hospital in Peshawar in NWFP also contributed to increased availability of nurses and better quality of training. Balochistan and NWFP have all played an important role in enhancing the quality of nurse training. The access to on-the-job training in nearby hospitals and MCH centers has been greatly enhanced by vehicles supplied under the Project. The graduates of the nursing schools are available for posting in government urban and rural health facilities in their respective provinces, as they are under service bond to work for the Government upon completion of their course. However, due to scarcity of sanctioned posts, there is at least a year of waiting time before fresh graduates can join the government service. Some find temporary employment with private clinics. The annual number of nursing graduates in NWFP is around 120, and in Balochistan around 60. In addition, around 70 LHVs a year complete their two-year course in the two provinces. 3. Maintenance and Repair of Medical Equipment

There is a substantial amount of medical equipment in health facilities in both provinces. To ensure adequate maintenance and repair of such equipment, seven workshops were established under the Project. Two other workshops, in

90

Loralai and Sibi, have no repair equipment yet, despite an assurance from DOH Balochistan during the PCR review to supply it. While the output of central workshops in Quetta and Peshawar is high, the utilization of divisional level workshops remains low. In places where workshops operate, substantial savings in equipment repair have been realized. 4. Planning and Management of Health Services

The Project contributed greatly to establishing the planning capacity at the provincial department level in Balochistan and NWFP. While the operations and performance of the planning units in DOH Balochistan and DOH NWFP are very satisfactory, those of the MOH planning cell need further support. The lack of focus in MOH is attributable to the overlapping functions in planning and management of the Health Division of the Planning Commission, the Basic Health Services Unit of MOH, the National Institute of Health, and the Health Services Academy. At the provincial level, conscious efforts toward collection and use of information are apparent and the staffs posted in the planning units are responsible for development planning and budget preparation. Compared with them, the planning cell established at MOH Islamabad is still lacking in human resources capacity and expertise. Nevertheless, the planning cell and units have played an important role in the preparation of the annual operational plans and the annual development and recurrent budgets for MOH and the two provincial departments a clear indication that the Project has contributed to institutional capacity building in all three organizations. Of the targeted 27 nursing teaching staff for overseas fellowships, 21 nurses were trained in post basic nursing in various fields. More than the targeted 60 nursing trainees attended local training workshops organized by consultants engaged under the DFID grant. Seven MOH and DOH staff were trained overseas for two years in health planning and management. Most of the staff trained under the Project are still employed in different 91

capacities within the DOHs. The planning units in the provinces are thus staffed by trained professionals. Achievement of Other Development Impacts 1. Socioeconomic Impact It is difficult to assess in quantitative terms the socioeconomic impacts accruing from investments in health sector projects. The nature of the project components and benefits does not allow such an assessment. It can be concluded, however, that the improved health status of the people has increased economic productivity and contributed to the reduction in poverty. The Project has helped remove gender, rural-urban, and inter district disparities in the delivery and quality of health care services. Improvements in health uplift the level of performance and productivity of individuals, thereby increasing their income-generating capacity. Improved accessibility and availability of services, coupled with increased utilization, have had a positive impact on the health status of the people. Increased immunization coverage has helped in reducing the incidence of childhood diseases. 2. Environmental Impact

The environmental impact of the Project has been positive. As designed, the Project did not have any adverse environmental effects. In fact, the management and disposal of medical waste, proper housekeeping, and control of infection emphasized by medical staff, health managers, and administrators, have contributed to an improvement in environmental sanitation. In the communities, information, education, and communication concerning cleanliness, hygiene, and nutrition have increased people's awareness of health and disease, resulting in the reduced incidence of communicable diseases such as diarrhea, tuberculosis, and respiratory tract infections. However, the inadequate treatment of sewage in the provinces remains a problem.

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3.

Impact on Institutions and Policy

One of the most important contributions of the Project to the health and population sector in Balochistan and NWFP was the improvement of the planning capacity at the provincial department level through the establishment of the planning units. The strengthening of educational institutions for nurses and LHVs has been another major contribution to institutional capacity building. The filling of vacant posts and linking the MOH planning cell with the provincial units will enable closer collaboration, especially in view of the ongoing devolution process. A study of the rationalization of the distribution of health centers (and doctors), taking into account the demand for health services, population density, and urbanization, is being conducted by the planning unit in NWFP, and its recommendations are to be implemented in the province and FATA. While not as effective as the DOH planning units, the MOH planning cell needs to intensify linkages with the Planning and Development Division of the Ministry of Planning and Development, and with the HMIS, The beneficial effects of institutional development could be adversely affected in the long term, mainly because of the non-availability of sanctioned posts and shortages of trained medical personnel, as well as financial constraints. Project institutions would have developed further if MOH and the DOHs had better coordination and cooperation with the Ministry of Population Welfare and the provincial departments of population welfare. Overall Project Rating Considering that it was ADB's first lending operation in primary health care in the two provinces, the Project has performed satisfactorily. Its benefits are now fully apparent compared with the time of the PCR review when many of the facilities were just being quipped, staffed, and operationalized. Consequently, the Project is successful.

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3.2.2 Analysis of Institutional Development of the Ministry of Population Welfare Introduction In November 1992, the Government of Pakistan requested the Asian Development Bank (ADB) to finance part of the foreign assistance requirement of its Population Welfare program (PWP). The Project was based on this request, and approved on 2 December 1993. The Project was to support PWP in reducing the population growth rate from 3.1% to 2.6% per year by the end of the Eighth Five-Year Plan (1993 to 1998) through an in creased contraceptive prevalence rate (CPR) and a reduced total fertility rate. Specifically, the project aimed to: i. Increase accessibility and coverage of family planning services in rural and underserved areas; ii. Improve the quality, supply, and distribution of doctors and paramedical staff in clinical training of village government staff; iii. Increase awareness of the benefits of and demand planning services; and iv. Strengthen planning, management capacity, and research activities for population welfare services. Component of the Project The Project comprised four main components: i. ii. iii. iv. service delivery; human resource development (HRD) and training; information, education, and communication (IEC); and Planning, management, and research. Attached to the Project was a technical assistance (TA) grant for institutional development at the Ministry of Population Welfare (MOPW). 94 for family family planning services, and the family planning workers (VFPWs) and

Objectives of the Program Pakistan formulated its Population Welfare Program (PWP) with the overall objective of reducing the population growth rate from 3.1%among the highest in South Asia to 2.6% per year by the end of the Eighth Five -Year Plan (1993 to 1998). This target was set based on the high population growth rate and the understanding that rapid population growth strains public expenditure for social services, depletes natural resources, and undermines economic growth. The long-term goal of PWP is reducing poverty. Present Situation In 1992, not more than 25% of the population had access to family planning services. The coverage in rural areas, where 70% of the population lives, was only around 5%, while coverage in urban areas was 54%. The Government aimed to increase coverage in both rural and urban areas. For this purpose, the Government planned to recruit, train, and deploy the village family planning workers (VFPWs). Required financing for PWP was estimated at $364 million, with foreign assistance estimated at $257 million. The Project has been highly relevant and consistent with the Government's policy to limit population growth by reducing fertility, enhancing access to reproductive health facilities, and improving coverage of services across Pakistan, especially in underserved and rural areas. Cost, Financing, and Executing Arrangements Cost: The total project cost amounted to $30.6 million, compared with $39.0 million estimated at appraisal. The following table shows appraised and actual project costs. Table 3.12 Appraisal and Actual Cost ($ million)
Item Civil Work Foreign 1.089 Appraisal Local 5.090 Total 6.179 Foreign 1.105 PCR Local 1.871 Total 2.976

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Equipment, furniture, and Vehicles Medicines Consulting Services Training, Salaries, Staff, development and Research Study Project Implementation Incremental Recurrent Cost Service Charge Total

2.490 2.250 0.282 3.000 0.336 2.000 0.5S8 12.035

2.300 0.711 0.146 11.690 1.528 5.500

4.790 2.961 0.428 14.690 1.864 7.500 0.588 39.000

2.930 1.305 4.559 0.058 2.992 0.474 13.423

2.656 0.396 6.223 0.205 5.855

5.586 1.701 10.782 0.263 8.647 0.474 30.629

26.965

17.206

Financing ADD financed $23.07 million of the total project cost. Substantial loan savings were realized from civil works and incremental recurrent costs, as well as the entire provision for consulting services. Reallocations were made to cover additional requirements for equipment and staff training. The balance of $1.49 million was cancelled at loan closing on 8 June 2000. The Executing Agency for the Project was MOPW. Each PWD had responsibility for implementing the components at the provincial level, including coordination with the department of health and the planning and development department. A project implementation unit (PIU), headed by a project director, was established in each province for day-to-day management, coordination, administration, and implementation. At the national level, an interministerial coordinating committee provided guidance and policy direction, while provincial-level project steering committees provided guidance and resolved interdepartmental problems. Completion and Self-Evaluation The Project was completed in December 1999, compared with the expected completion date at appraisal of March 1999. Total project cost amounted to $30.6 million, compared with $39.0 million estimated at appraisal. ADB financed $23.07 million of the Project. The balance of $1.49 million was cancelled on 8 June 2000. The expected closing date was 31 December 1999, but actual closing was completed on 8 June 2000. 96

The project completion report (PCR), rated the Project successful. The PCR cited the Project's realization of its development objectives by contributing to PWP's achievement in reducing population growth from 3.1% to 2.6% per year. The IEC campaign raised awareness of and demand for family planning services, while VFPWs effectively improved access to these services. The Project made a positive contribution to empowering women by recruiting and training village women as VFPWs. This has enhanced their status in the community, and demonstrated the advantage of educating girls. Achievement of other Development Impacts 1. Socioeconomic Impact The Project focused on the poor, particularly rural women, who were experiencing health risks related to frequent and closely-spaced pregnancies. High unmet need for contraception existed because of poor access to services; low awareness of services; and poverty, which impeded to access these services. The Project recruited and trained 11,570 VFPWs, who were deployed by MOPW, each serving an average of 200 rural households, and 46 RHSCs that provided support to referral cases from rural and urban areas. Thus, the Project developed skills and provided jobs for rural women. A majority of workers are poor, and work as VFPWs to supplement their household incomes. A survey conducted in this regard find that women were satisfied with their decisions to become VFPWs. This is a strong indication of social change in a society where family planning messages conveyed by male family planning workers were rebuked in the 1970s and 1980s. VFPWs made house calls and were able to provide services within their cultural norms and won respect without violating traditional customs. The major impact has, therefore, been their role in making family planning accessible to the needy. Project support contributed in reducing poverty by reducing

97

unwanted pregnancies and births and providing employment to 11,570 VFPWs. 2. Environmental Impact

The Project did not pose environmental problems as the construction and renovation of RHSCs was well-planned and executed, involving mainly small-scale physical infrastructure subprojects. The Project had a positive impact to the environment, as it had also included IEC on health, sanitation, and environmental protection. 3. Impact on Institutions and Policy

Before 1993, MOPW had no experience in evolving and establishing grassroots programs such as the VFPW scheme, for which the Project provided critical development and implementation inputs. With project support, MOPW has successfully implemented the scheme, which has had a significant impact on the population program. Overall Assessment
1. Relevance

The Project's goal, purpose, and outputs were highly relevant and consistent with the Government's development policy to reduce population growth by reducing fertility levels, enhancing access to facilities, and increasing coverage of services across Pakistan, especially in underserved and rural areas. 2. Efficacy

The Project aimed to help the Government reduce population growth from 3.1% in 1993 to 2.6% by 1998, and reduce the TFR to 5.4 from 5.97 births over the same period by increasing the CPR to 24%. Demographic surveys reveal that these targets were surpassed. The performance of PWP was remarkable during 1 990s, but more specifically during the project life from 1993 to 1999, a period that witnessed a rapid rise in contraceptive prevalence, awareness regarding 98

contraceptives and family planning, coverage of family planning facilities, and access to services. Beneficiaries and workers also highly initiatives. 3. Efficiency

As the Project supported PWP in its aim to reduce population growth from 3.1% to 2.6% per year by the end of the Eighth Five-Year Plan in FY1998, its achievements and impacts cannot be separated from those of the PWP. Components used for the cost-effectiveness analysis were all related to the family planning/reproductive health program, which were also the focus of the Project through RHSCs, VFPWs, IEC campaign, and training and research components. The survey also showed that VFPWs considered the project inputs highly efficient. The Government, under its Poverty Reduction Strategy Paper, allocates much higher investment targets for the population sector. For the current Five-Year Plan (2003-08) Rs20.978 billion is recommended under PC-I for the sector. The allocation for the first year (2003-04) was Rs3.19 billion, 45% more than the previous year's allocation. Allocations for 2004-08 gradually increase. Table 3.13:Achievement of Project Targets
Category A. Training Courses 1. Training of Village Family Planning Workers 12,000 11,570 96.4 Planned Actual %Achieved

2. Training of Paramedics 3. Training of Doctors B. Training Centers (Constructive and Renovation) C. Reproductive Health service Centers (Construction &Expansion)

12,320 2,845 191 51

10,609 3,583 184 46

86.1 125.9 96.3 90.2

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Overall Project Rating Based on the overall assessment of the relevance, efficacy, efficiency, sustainability, and impact on socioeconomic, institutional and policy developments, the Project is rated successful. 3.3 Analysis of Emergency Assistance for Drought Impact Mitigation and Recovery Component Project Loan Number: Project Title: 1413-PAK (SF)-02 Drought Impact Mitigation and Recovery Component

Basic Data about Project 1. 2. 3. 4.

Executing Agencies:Ministry of Finance, Planning and Development Division Amount of Loan: SDR 79.443 million

Basic Data about Loan 1.

2.

Appraisal
Fact-finding

Emergency Assistance Project, no appraisal 21 May 2001 31 May 200 1 No loan negotiations. Amendments to Loan Agreement for Loan 1413-PAK (SF) by the Borrower on 4 September 2001. 16 August 200 1 4 September 200 1

i. ii. 3.

Date Started Date Completed

Loan Negotiations: i.
ii.

Date Started: Date Completed:

4 5. 6.

Date of Board Approval Date of Loan Agreement Date of Loan effectiveness i. ii.

In Loan agreement 4 September 2001 Actual In Agreement Actual Number of Extensions 4 September 2001 31 August 2004 30 September 2005 2

7.

Closing Date i. ii. iii.

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8.

Terms of Loan i. ii. ii. Interest Rate Maturity (Number of years) 1% 35

Grace Period (Number of years) 1 0

Introduction During the late 1990s, severe drought conditions threatened livelihoods and increased poverty levels across Pakistan, especially in rural areas. The drought, which continued over 3 years, aggravated the country's already highly stressed water situation. The dought was worst in rain-fed regions of Baluchistan and Sindh provinces and occurred during a severe economic crisis when the Government was also facing demands to finance a variety of development needs. In addition, rural employment was reported to moving to non-farm activities, thereby reducing already difficult agriculture production and increasing migration of affected populations to neighboring regions. Emergency measures were needed to improve conditions for the poor and provide support for poverty reduction and employment generation. In May 2001, the Government initiated a multifaceted approach to address the immediate and medium-term effects of the drought, including a public works program (Khushal Pakistan Programme) to create temporary employment, and promote social protection and the recovery process. The Asian Development Bank (ADB) Fact-Finding Mission, fielded in May 2001, assessed requirements to mitigate drought impacts. To support Government efforts, ADB developed the Drought Impact Mitigation and Recovery Component (DIMRC) to; i. Improve water resources and water supply sub-projects to support efficient water use, and water conservation and harvesting; ii. Improve accessibility by providing rural roads to rural communities to enhance rural employment;

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iii.

Support a range of services in agriculture, livestock, forestry, and rangelands to help and protect livelihood opportunities for the poor;

iv.

Enhance health care and other services with a locus on providing nutrition supplementation and maternal health care services for the rural poor in drought-affected areas.

The DIMRC design and formulation were relevant to the Government's efforts to mitigate the adverse effects of drought duly aggravated by the economic crisis and severe resource crunch of the late 1990s. The DIMRC was designed as a quick response to an emergency situation. Rural areas were the primary focus. Project Costs The estimated project cost at appraisal was $125.0 million. The loan did not make provision for allocations to sectors and subproject activities, or for price and physical contingencies. ADB provided a loan of $100.0 million equivalent from savings from 12 ongoing projects. 13 Project beneficiaries were to contribute $9.0 million (7.2% of total cost), and Government $16.0 million (12.8 %) as part of incremental costs, duties, and transfers. The Government contribution reflected its substantial and extensive nationwide involvement. By end September 2005, the actual cost stood at $141.155 million 113% of the original Estimates. Table 3. 14:
Cost Foreign Exchange cost Local Currency Cost Total

Project Cost ($ million)

Appraisal Estimate Not Specified Not Specified Actual 43.85 97.30 141.16

The major reason for this escalation is due to the beneficiary contribution. Communities contributed in several ways: land for dams, tube wells, drinking water sub-projects, health centers/dispensaries and veterinary

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centers; earth and stones as input to various structures and roads; water for construction; and care and storage of material brought in by contractors, etc. The Government allocated the DIMRC funds to four provinces, without specifying funds for specific sectors. Provinces and districts could select subprojects and develop a portfolio based on local priorities. In Sindh, 64% of sub-projects focused on rural roads and ulili/ed 76% of the allocated funds. In Punjab, 17% of sub-projects were in irrigation and water management for 32% of the funds; road and drinking water sub-projects utilized 25% of the funds. In NWFP, 55% of all sub-projects were for drinking water and utilized 45% of the funds, and 39% were for irrigation, using 48% of the funds. In Baluchistan, 65% of sub-projects were for irrigation and utilized 69% of funds. Project Outputs Project appraisal did not elaborate specific targets to be achieved by the completion date. Rather, it provided a broad scope of work and activities to support achievement of broader objectives of employment generation and income supplementation to the poor. The President of Pakistan approved the provincial distribution of funds based on drought severity and poverty incidence. Sindh and Baluchistan were each allocated 30%, Punjab 25%, and NWFP 15%. Provinces adopted varied measures to arrive at district allocations. Given the DIMRC's flexibility, all provinces planned outputs according to approved sub-projects, keeping in view the identified project areas. The scope of approved activities widened tremendously to address emerging local needs, making the project complex and comprehensive. Project Schedule The DIMRC, approved on 16 August 2001 and declared effective on 4 September 2001, was to be implemented over 3 years ending on 31 August 2004. Actual implementation started in late 2002.The Government agreed to adopt a time-bound implementation plan for the first 3 months to include preparation of provincial plans (in year 1) for fund allocation, establishment 103

of federal, provincial, and district coordination committees, and recruitment of federal and provincial consultants. Due to the Project's emergency nature, no firm time frame or schedule was designed. Rather, the time frame was left open to enable governments to take swift actions to involve all concerned and implement subprojects. ADB missions during 2003 and 2004 provided necessary support in evolving firm milestones and timelines to ensure smooth implementation and timely project completion. The loan closing was extended thrice first to 31 December 2004, then to 30 June 2005, and finally to 30 September 2005 primarily to accommodate delays by Baluchistan and NWFP in finalizing project portfolios. The delays were also aggravated by unprecedented heavy rains and snow in mountainous districts during December 2004 to February 2005. Efficiency in Achievement of Outputs and Purpose The DIMRC is rated efficient. A total of 1,902 sub-projects were undertaken. Punjab, Sindh, and NWFP were able to complete and make a large majority of their sub-projects operational well before project completion, while Baluchistan completed more than 85% of its targeted sub-projects by 30 September 2005. Most sub-projects were implemented using private sector contractors. The process of open competition, selection of firms based on bids and technical competence, and timely completion of sub-projects with quality outputs are major areas of project efficiency. Where district coordination officers supervised the DIMRC, work was completed on time with local department staff providing the necessary technical supervision. The overall time between sub-project identification and launching of work could have been shortened if the DDACCs had been given approval authority for sub-projects costing less than $50,000. Almost all sub-projects benefited local residents. The sub-projects under implementation including tubewells, when completed by end September

104

2005, are expected to provide tremendous benefits to the poor living in drought area. Keen interest by provincial coordinators and district coordination officers helped resolve many audit observations by September 2005. Environmental, Socio-cultural, and Other Impacts The DIMRC had no adverse environmental, sociocultural, or other impacts. Most of the structures and facilities are constructed on existing locations, or in agreement with communities on contributed land. No sub-project degraded the environment. No house or dwelling was removed or damaged. The DIMRC introduced sub-projects and structures to upgrade the environment through land conservation, improvement of water access, reduction in water-borne diseases, and adequate disposal of wastewater. Reduction of the dust level has improved the environmental health, especially of school-aged children. Increased access to health services for people and livestock will improve survival and quality of life. Other socio-cultural impacts include tremendous reduction in female time used for water collection, availability of private transport to reach health facilities, timeliness of teacher presence in schools because of the road network, improvement in personal hygiene due to greater water availability within communities, promotion of investment in land and farm capital by progressive farmers, significant opportunities for fisheries, and roadside tree plantation to protect rural roads. Irrigation sector projects in NWFP and Baluchistan addressed the emergency situation and provided direct opportunities to reduce poverty through employment and income generation for farmers and unskilled laborers. Of civil society, vulnerable populations may not have fully benefited from project sub-projects. The economic benefits of the project are given in the table on at next page. 105

Overall Assessment The DIMRC is rated successful; it achieved its objectives and completed a significant proportion of planned tasks and civil work structures. The quality of work is satisfactory. The DIMRC had a national scope prepared to address drought-related emergency conditions, but was not developed with a project framework. Implementation arrangements were quickly designed and put in place. The DIMRC generated many jobs for local skilled and unskilled laborers, and provided employment when poverty and unemployment were increasing. Table 3.15:Employment and income Generation from Project (By sector)
Sectors Type of Job No. of Job Created per km 10-15 5-6 6-7(20+in Sindh) 3-4(5+ in Sindh) 1-2 7-8 2-3 6-7 25-35 10-15 4-6 4-5 Monthly Wages/Earning (Rs) 3,000-4,000 5,000-10,000 4,000+ 7,000+ 3,000-4,000 3,500 Plus 5,000 Plus 3500 on Average 6,000 on Average 4,000 on Average 9,000 on Average 4,000 on Average 9,000 on Average Duration of Earning

Road

Unskilled Skilled Unskilled Skilled

5-6 months 5-6 months 3 months 3 months For Sub project life time 3 months 3 months 1 months 1 months 7-8 months

Drinking Water Construction

Operation Irrigation(Water courses) Construction Tubewells Water Conservation(Delay action or check dams) Health and Veterinary Centers - Civil works

Operator/ Guard Unskilled Skilled Unskilled Skilled Unskilled Skilled Unskilled Skilled

3.4

Analysis of Second Barani Area Development Project Key Dates

Expected Appraisal Loan Negotiations Board Approval Loan Agreement Loan Effectiveness Actual 22 Jun-11 Jul 1989 13-16 Nov 1989 20 Feb 1990 19 Mar 1990 4 Feb 1993

17 Jun 1990

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Project Completion Loan Closing Months (effectiveness to completion)

31 Dec 1997 30 Jun 1998 90

31 Dec 1998 24 Dec 1998 97

Background The Green Revolution that began in the 1960s brought significant increases in crop yields to Pakistan. However, adoption of the new technology was largely confined to areas with access to irrigation. As the income gap between irrigated and barani (rain-fed) areas rose, more attention was given to balanced regional development and special assistance for rain-fed areas. In March 1986, the National Commission on Agriculture proposed the allocation of public funds to promote development in rain-fed areas, which was seen to have high potential for increasing crop yields, contributing to overall agricultural growth, and mitigating increasing regional disparity. At the time of project appraisal, the Asian Development Bank's (ADB's) operational strategy in Pakistan supported balanced regional development, with its assistance to agriculture focusing on increasing productivity, farm production, and rural employment. Formulation The Project was a follow-up of the first Barani Agricultural Development Project (BADP), which was financed by the International Fund for Agricultural Development (IFAD) and implemented from 1981 to 1990 under ADB administration. The Project was formulated in accordance with a Master Plan for Barani Agricultural Development (the Master Plan), which was developed during 1986-1988 under a technical assistance (TA) financed by the United Nations Development Programme (UNDP) under ADB administration. Purpose and Outputs The purposes of project include: i. Increase farm household production, employment, and income, particularly among smallholders, the landless, and women; 107

ii. iii.

Reduce the growing migration of population to urban areas; and Alleviate constraints on agriculture in the project areas.

Components of the Projects The Project comprised five components: Part 1 - Watershed Improvement, including: i. ii. iii. soil and water conservation, rangeland and forestry development, and water harvesting;

Part 2 - Crop and Livestock Development, including: i. Crop husbandry, which covered a. b. c. d. ii. Basic agricultural research, Adaptive agricultural research, Agricultural extension, and Women's agricultural extension program; and

Animal husbandry, which covered a. b. c. livestock production extension, bank animal health, and livestock nutrition research;

Part 3 - Rural Infrastructure, including i. ii. upgrading of farm-to-market roads, and village water supply systems;

Part 4 - Rural Credit; and Part 5 - Institutional strengthening, which included: i. ii. iii. improvement of capacities of government staff, training for beneficiaries and project staff, and support for the project coordination unit (PCU).

The Project covered four sub-districts in Punjab Province (see Map); two sub-districts had been partially covered by the BADP and the other two were new sub-district 108

<><><><><>Map<><><><> The selection of Districts The selection of the project areas considered (i) the desire to represent the low, medium, and high rainfall regions in the rain-fed areas for pilot testing, and (ii) the large number of landless poor in these subdistricts. Cost, Financing, and Executing Arrangements At appraisal, the project cost was estimated at $59.9 million, financed by an ADB loan of SDR19.024 million ($25.0 million equivalent) from ADB's Special Fund resources. The rest was to be financed by an IF AD loan of $19.4 million, a UNDP grant of $0.7 million, and counterpart funds from the Government ($10.8 million equivalent), Agricultural Development Bank of Pakistan (ADBP) ($0.8 million equivalent), and farmer beneficiaries ($3.2 million equivalent). The UNDP grant was to finance training and consulting services as well as an ADB TA associated with the Project. Table 3.16: Comparison of Appraisal and Actual Project Costs ($ million) <><>><<> The Project involved two executing agencies. ADBP was responsible for executing the credit component while the Government of Punjab was responsible for all other components. Completion and Self-Evaluation The Project was completed in December 1998. A project completion report (PCR) prepared by ADB's Pakistan Resident Mission was circulated to the Board in August 2000. The PCR rated the Project partly successful. Achievement of Outputs Many of the project's targets were revised significantly during project implementation.

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This flexibility allowed the reallocation of funds to better uses when more information became available. Against the final revision, most of the important targets were met. For some small items, such as culverts, small water gates, and drop siphons, the targets were exceeded by a large margin. For a few items, such as hand pumps, drip irrigation systems, and portable irrigation systems, the targets were not met. Cost and Scheduling At $51.3 million, there was a project cost under run of 14%, leading to cancellation of the ADB loan by SDR 2.8 million ($3.7 million equivalent). Cost deviations of individual components varied, with significant underand overruns The large cost deviations were associated with the substantial changes in project targets as well as depreciation of the local currency against the dollar between project approval in 1990 and project completion in 1998. The Project suffered serious delays in its first 4 years of implementation. Initially, loan effectiveness was delayed by about 6 months due to the longer than anticipated compliance with conditions for effectiveness, such as project approval by IF AD and UNDP, and the Government's approval of their project documents (Planning Commission Form 1 [PC-1]). There were many other reasons, too.

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Achievement of Project Purpose 1. Watershed Improvement This sub-component aimed to provide a structural basis to enhance infiltration of rainfall and moisture storage within the soil profile through the construction of earthen bunds, water outlets, gully plugging, terracing, and land leveling as well as construction of minidams and ponds. Most of the revised physical targets were completed, and generally construction was of a good standard. 2. Socioeconomic Impact

The Project's most significant impact was apparent on farmlands that received access to irrigation after project interventions. Crop yields were doubled, cropping patterns shifted from wheat to high-value crops, and farm income substantially increased. Access to irrigation significantly reduced the risk of crop failure due to erratic rainfall. The OEM noted, however, that benefits of the small-scale irrigation facilities in the project areas are highly localized, mostly confined to adjacent fields,25 which, in most cases, belong to one household. 3. Environmental Impact

The Project generated a positive impact on the environment with negligible negative influence. First, most of the irrigation structures such as minidams and ponds were relatively small as were land reclamation interventions such as gully plugs and land leveling. Increased use of wells and lift pumps may have lowered the water table in some locations, but the significance is difficult to assess after several years of continued low rainfall. Second, improved cultivation has an impact on augmenting water retention and intensifying vegetative cover. Finally, potable water supply has reduced incidences of waterbome diseases.

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4.

Impact on Institutions and Policy

The Project's achievements in ameliorating constraints to rain-fed agriculture by developing small-scale irrigation facilities have encouraged the Government to continue public investment in rain-fed areas. After the Project, the Government implemented the Barani Village Development Project financed by IF AD, and is currently preparing another intervention to be financed by ADB. The Project has not only provided rich experience and lessons learned for the design and implementation of follow-up projects, but also trained a large number of government officials and field staff who continue to work on such projects. Overall Project Rating The overall project rating is partly successful. The Project has met most of its revised physical targets; its impact on increasing farm production was marked on farmlands benefiting from irrigation facilities. The primary benefits of the irrigation investment, however, flowed to a small number of large landholders. The Project had intended to target smallholders and landless poor. In the absence of implementation measures, however, it bypassed the majority of its intended target groups. Assessment of ADB and Borrower Performance ADB designed the Project based on the Government's initiatives and longterm strategy for rain-fed area development. ADB also mobilized cofinancing from other donors. However, ADB should have given more attention to developing measures to ensure appropriate distribution of benefits. ADB's supervision of implementation could have been more effective in the initial years. Less frequent turnover of supervisory staff could have ensured the effectiveness of project supervision. Overall, ADB's performance is rated partly satisfactory.

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The Government demonstrated strong ownership and commitment to rainfed area development, and fulfilled the loan covenants with few exceptions. In particular, the entire amount of counterpart funds was made available at project commencement, thus avoiding implementation delays due to slow releases of counterpart funds. ABAD and other line agencies implemented the Project largely as designed. Although there were serious delays in the initial 4 years, implementation accelerated in later years and was completed with only 1 year of delay. Overall, the performance of the Government is rated satisfactory. 3.5 Analysis of Malakaiid Rural Development

Description The Project will comprise; i. Village development services, including agricultural support services, community-managed infrastructure development, and development of community-based health services targeted specifically to women; ii. iii. Rural financial services; Improvement and expansion of the road network in the Project area, and introduction of a toll management and roads maintenance system for annual maintenance of the road network; and iv. Implementation support and capacity building services, to reduce rural poverty in Malakand Division in North West Frontier Province (NWFP) in Pakistan. Location Malakand Division in North West Frontier Province (NWFP). Executing Agencies i. ii. Planning, Environment and Development Department, NWFP

Basic Data about Cost and Financing: 113

The Loan was approved by the Board of Directors on 18 March 1999. The Project is Estimated to be completed by June 2006. Table 3.17:Cost and Financing Plan (in US$ million)
Source Bank Co-financing Borrower Beneficiaries Others Project/Program Cost Foreign Loan 15.40 0.00 0.00 0.00 0.00 15.40 OCR Loan Amount 0.00 Local Cost 25.60 0.00 12.10 8.80 1.00 47.50 ADF 41.00 Total 41.00 0.00 12.10 8.80 1.00 62.90 Total 41.00

Rationale The Project area has largely been neglected in the development of infrastructure, and in the generation of employment and income earning opportunities. It is estimated that 72 percent of the population in the Project area is below the poverty line of $150 per capita. Human development status is also low due to lack of education and health care services. The previous development projects implemented in Malakand and Government service delivery have reached only a small proportion of the rural population, especially in the remote mountainous areas. Beneficiary consultations in the area indicate that the rural poor request a better road network, irrigation improvement, improved access to agricultural inputs, agricultural extension advice and credit, access to improved livestock breeds and veterinary services, better health care and education, and potable water supply. The Project is designed to meet these beneficiary needs, and policy dialogue conducted with the Government of NWFP focused on institutional innovations to create a rural support organization to sustain institutional support to the village organizations beyond the Project implementation period.

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Objectives and Scope The Project aims to reduce rural poverty in Malakand by enhancing household incomes and living standards, particularly for the smallholder and tenant farmers, and the landless, who constitute the rural poor in the Project area. Women's human resource development and improvement of their income earning potential arc specifically aimed at. At the same time, by assisting to create a semi permanent structure to support village-level development and by providing capacity- building assistance and training support, the Project will contribute to institutional reforms for devolution of powers to the local level. The Project comprises village development services, rural financing services, road development, and implementation support and capacity-building services. Environment Impact and Mitigation The impact of the project is overall positive as per appraisal. The Project incorporates environmental awareness raising and training for implementing agencies, and safeguard measures. Social Aspects and Remedies Institutional reforms to be undertaken will contribute to empowerment of local residents and women. Benefits and Beneficiaries The Project will directly benefit approximately 80,000 rural households in 1,000 settlements (villages) in the Project area (close to 50 percent of the rural population). Two thirds of the beneficiaries are expected to be from households below the poverty line. The social mobilization process and annual Benefits Monitoring and Evaluation surveys are the targeting mechanisms. The beneficiaries will include all direct users of the Project area transport network; and the region's consumers and producers, who will benefit from lower costs and improved markets as a result of the transport network improvement; farmers and farm families, who will benefit from irrigation, agriculture, and livestock activities; village families, who will 115

benefit from irrigation, agriculture, and livestock activities; village households, who will benefit from rural electrification, drinking water and sanitation improvements, financial services, and strengthened village institutions; and the Project area female population who will benefit particularly from improved health services, access to credit, and improved agricultural and livestock extension services as well as membership in women's organizations and subsequent empowerment as decision makers. Beneficiary Participation in Formulation Three thousand potential beneficiaries in 68 villages of the Project area were consulted through a formal survey, rapid appraisals were conducted, and a series of village dialogues were carried out (separately for women and for men). Beneficiary Participation in Implementation Beneficiaries will take part in decision making on design, construction, operation and maintenance, and overall management of the village development schemes. Procurement All procurement under the Project will be carried out in accordance with the Bank's Guidelines for Procurement. Civil works under the Project are small and scattered over a wide area. The civil works for rural access roads will be carried out by prequalified contractors through local competitive bidding in accordance with procedures acceptable to the Bank. International competitive bidding (ICB) procedures will be followed for the rehabilitation and improvement of the provincial highways. Civil works for communitymanaged rural infrastructure, including irrigation schemes; jeepable tracks, drinking water and sanitation schemes, and micro hydropower schemes will be carried out by village organizations, which will procure materials directly from local suppliers according to procedures acceptable to the Bank. Procurement of vehicles and office equipment for Project

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Administration Unit and Rural Support Program will be undertaken through international shopping procedures and direct purchase, as appropriate 3.6 Analysis of ADB Assistance for Energy Sector Development

As shown in the pie chart, ADB has provided large amount of fund to the energy sector. Its assistance has been for improving the technical efficiency of the energy sector as well as for financing critical investments in both the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (WAPDA). Out of total $14.3 billion lending, ADB has provided 21.5% to the energy Sector. Major Energy Sector Development Projects 1. 2. 3. 4. Energy Sector Restructuring Program Ghazi Barotha Hydropower Project Proposed Loan to Laraib Energy Limited for the New Bong Escape Hydropower Project in the Islamic Republic of Pakistan Infrastructure Development

I have selected Ghazi Barotha Hydropower Project for analysis. 3.6.1 Analysis of Ghazi Barotha Hydropower Project Description The Ghazi Barotha Hydropower Project was set up in the public sector by the Water and Power Development Authority of Pakistan (WAPDA). The Project was to divert water from the Indus River at Ghazi (Map 1), which is 7 kilometers (km) downstream from Tarbela dam, to a 52 km power channel. The channel was to then transport the water to Barotha, where a capacity of 1,450 megawatt (MW), consisting of five units of 290 MW each, was to be installed to generate 6,600 gigawatt-hours (GWh) of power annually. The Project was a run-of-the-river project, with far less environmental and social impact than is often associated with large dams and reservoirs. The Project comprised three main components: 1. A barrage at Ghazi (Map 2), which is 7 km downstream from Tarbela dam;

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2. 3.

A 52 km channel from Ghazi to Barotha (Map 3); and A power complex at Barotha, with a 1,450 MW generating capacity (Map).

Approximately 340 km of transmission lines were also to be installed by the Project. The main objectives of the Project were to meet the demand for electric power in Pakistan by generating hydropower in an environmentally sustainable and socially acceptable manner with minimal environmental and resettlement impacts. The power generated by the Project was also to help moderate the impact of higher costs of thermal generation in the private sector. As energy was in short supply in Pakistan, a cost-effective approach to improving efficiency in transportation, conversion, and consumption of energy needed to be addressed. Technical assistance (TA) was therefore associated with the loan to formulate the Power Efficiency Project, to improve demand-side management and reduce power losses. An Asian Development Bank (ADB) loan of $300 million, from ordinary capital resources, was approved on 16 January 1996. Co-financing of $947 million was also provided, comprising $350 million from the World Bank, $350 million from the Japan Bank for International Cooperation (JBIC), $147 million from Kreditanstalt fur Wiederaufbau, $60 million from the European Investment Bank, and $40 million from the Islamic Development Bank (IDB). <><><>Map <><>>< Evaluation of Design and Implementation 1. Relevance of Design and Formulation Pakistan was suffering from a severe shortage of generating facilities in year-round power generating capability. As a result, power supply restrictions (load shedding) had been resorted to since 1982. To overcome this, additional generating capacity of 7,000 MW was required by 2001. Although significant private sector thermal generating capacity, up to 5,792 MW, was hoped to be installed during 1995-2000, new hydropower 118

capacity was also required. The Project was identified to support the Government's least-cost development program of expansion of electricity generation, enhancement of reliability of power supply, and improvement of power system control, thereby alleviating the acute power shortage situation in the country through the provision of urgently needed power generating plant additions. ADB's association with the Project started with the November 1994 development partner meeting in Paris, at which stage WAPDA had already commenced advance procurement action. In June 1994, pre-qualified bidders for the civil works packages were identified, and bid documents were issued in August 1994. Subsequently, the Government and the World Bank requested ADB to participate in the ongoing procurement. ADB recognized that the Project had been well prepared and agreed to support the Government's efforts for early implementation of the Project. <><><>><Maps <><><>><>< Project Outputs Due to the size and complexity of the Project and the various sources of financing, the Project was divided into various packages comprising civil works for the barrage, power channel, and power complex (C-01, C-02, and C-03, respectively). A series of mechanical and electrical (M&E) works, in association with the civil works, were also undertaken. C-01. The Barrage: The barrage across the Indus River, located near Ghazi, downstream from Tarbela, consists of several major components: gated head regulator, skimming platform, undersluices, open flume standard bays, dividing island, right and left guide banks, fuse plug embankment, separation dyke, cunette, road bridge over the barrage, control building, workshops, offices, and M&E installations. A taking over certificate (TOC) for works essential for impounding was issued on 16 June 2003, and the 119

TOC for works not essential for impounding was issued in November 2003 (effective from 22 August 2003). Impounding of the barrage pond commenced in February 2003, and the maximum level was reached on 20 May 2003. C-02. The Power Channel: The power channel is 52 km long and lined with reinforced concrete. The capacity is 1,600 cubic meters per second. Seventy-nine structures of different categories are on the channel, including bridges, super-passages, culverts, inlets, and escapes. The TOC for works essential for impounding was issued on 9 August 2003 (effective from 30 July 2003). Impounding of the power channel commenced on 9 April 2003. C-03. The Power Complex: The power complex is located near the confluence of the Indus and Haro rivers, at Barotha. It consists of several components: powerhouse, with five 290 MW capacity generating units, having a total generating capacity of 1,450 MW; tail regulator; forebay; intake structure; penstocks (five); headponds (two); sill structures (two) and low-level outlets (two); spillway; tailrace channel; switchyard; and other associated installations. Most of the work, including the powerhouse and installation and testing of turbines, generators, and M&E equipment, has been completed. Several minor items at the power complex, however, have yet to be completed. Impounding of the forebay and south head pond was started in April 2003, simultaneously with the impounding of the channel. The tailrace channel was flooded on 18 April 2003, and its downstream cofferdam was removed. The Mechanical and Electrical Work The M&E works covered the manufacture, supply, and installation of turbines, generators, and transformers, as well as associated powerhouse and switchyard equipment and gate equipment and cables and accessories. Transmission facilities, to connect the powerhouse to WAPDA's 500 kV grid (involving two 500 kV transmission lines of 100 km between Barotha and Rewat, financed by IDE, and about 150 km of lines that loop in and out 120

of the existing 500 kV lines between Tarbela and Gatti, financed by ADB) were also included. The 500 kV Barotha-Rewat transmission lines (lot 1), the supply of towers, conductor, insulators and hardware, and accessories had been substantially completed and were expected to be in full operation by 31 March 2005. The 500 kV Tarbela-Gatti transmission lines (lot 2) were completed in February 2003 and commissioned and fully operational on 6 June 2003. The Project's components did not change, except for the transmission facilities required for the reliable evacuation of power. Load flow studies carried out by WAPDA identified the need for additional lines and/or substations. These were for (i) a 500 kV transmission link between Rewat and Lahore, along with extensions of the (existing) Rewat and Lahore substations; (ii) a new 500 kV substation at Gakhar; and (iii) a 220 kV transmission line linking the powerhouse at Barotha to Nowshehra. As envisaged at appraisal, all the components have now been installed and commissioned, and all five generating units are in commercial operation. Project Costs At Appraisal, the project cost was estimated to be $2.20 billion, of which $1.39 billion (63%) was estimated to be the foreign exchange cost, and the total local currency cost was $0.81 billion (37%). ADB's loan at appraisal was $300 million, comprising $280 million (93%) in foreign exchange cost and $20 million (7%) in local currency cost, to be financed from the ordinary capital resources. Total co-financing sources amounted to $947 million, of which $884 million was estimated to be the foreign exchange cost and $63 million was estimated to be the local currency cost. The remaining foreign exchange cost of $230 million and local currency cost of $723 million were to be met by WAPDA. The Project's actual completion cost, estimated by the PCR Mission, was $1.93 billion, with a foreign exchange cost of $1.21 billion (63%) and a 121

local currency cost of $0.72 billion (37%). ADD financed $254.5 million, of which $235.9 million (93%) was foreign exchange cost and $18.6 million (7%) was local currency cost. Cofinancing accounted for $803.4 million, of which $764.8 million (95%) was foreign exchange cost and $38.6 million (5%) was local currency cost. The Project's actual completion cost was $273.4 million less than that envisaged at appraisal, which represented an overall 12% reduction in the cost estimated at appraisal. Actual local costs were approximately 11% lower and foreign costs were approximately 13% lower than at appraisal. The Project benefited from lower-than-cxpected bid prices, in particular for the power complex and M&E equipment packages. Although local costs decreased in dollar terms, land prices increased significantly. At appraisal the total cost of land acquisition was estimated at $37 million. Actual costs amounted to approximately $115 million, a 300% increase from appraisal estimates. In terms of foreign costs, two of the civil works contracts (C-01 and C-02) cost more than envisaged at appraisal, because contractors filed numerous variation orders and claims, due to implementation delays. The actual cost of contract C-03, however, was approximately 27% below that estimated at appraisal. The M&E contract's actual costs were also below appraisal estimates, by approximately 58%, due to lower bid prices. The detailed costs for each project component compared to appraisal estimates are shown in (table 01) on the next page.

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Project Schedule The actual and appraisal implementation schedules of major project activities are compared in (Table 02). At appraisal, the Project was envisaged to be implemented within 6 years, with construction commencing in early 1996 and project commissioning taking place in mid-2001. ADB's Board approved the loan on 16 January 1996. The date of the Loan Agreement and the Project Agreement was 11 March 1996. The loan became effective on 20 June 1996 and was extended once from the original closing date of 30 June 2002 to 31 December 2003, due to implementation delays. Project implementation was delayed by 3 years, due to 1. Late handover of land for the power channel and the power complex, which caused resettlement delays; 2. Various contract delays for the main components, mainly due to WAPDA's financial shortfall in counterpart funding; 3. Some difficulties arising from labor unions and various contractors not having been paid for several months; and 4. Necessary repatriation of foreign consultants from the site, owing to the events of 11 September 2001 in the United States. The start of works on the barrage and power tunnel contracts was delayed to September 1996, due to delays taking place in the release of the contractor's equipment from customs and in the acquisition of land, the latter being due to disputed land valuation prices and the lack of counterpart funds. The permeability of the riverbed material was found to be much higher than expected, and this led to delays in the construction of the under sluices and standard bays. As a result, the barrage and auxiliary works had only reached a physical progress of 53%, against the planned 77%, by September 1999. The original duration of the contract was 51 months, with a completion date 123

of 10 March 2000. A request for an extension of time was made by the contractor on several occasions. The contractor cited several reasons for the delay. Due to the events of 11 September 2001, the civil works contractor undertaking contracts C-01 and C-02 stopped work on the site on 25 September 2001. A supplementary agreement with the contractor was made on 14 April 2002, extending the completion date to 31 July 2003, which enabled resumption of the work on both contracts. As a result of the demobilization of the contractor, the construction work was delayed by about 12 months. Due to this, the Borrower, through the Ministry of Finance, requested on 28 May 2002 that ADB extend the loan closing date by 17 months, from30 June 2002 to 31 December 2003. ADB approved the extension on 12 August 2002. Contract C-03 had an original duration of 64 months, with an expected completion date of 16 June 2002. The first EOT request was made on 8 February 1999, due to the late turnover of land. Other requests for EOT culminated in Supplementary Agreement No.2-2002 on 9 February 2001, extending the completion date to 15 July 2003. Table 3.18 Appraisal and Actual Costs(Smillion)
Description A FE Land 1. Land Acquisition 0 2. Relocation and Settlement 0.2 Subtotal A 0.2 Preparatory Work 1. Colonies and access Road 0 2. Grid Station for 0.7 construction Subtotal B 0.7 Main Civil works C1 Barrage and ancillary 120.0 Works C2 power Channel and 206.8 ancillary Works C3 Power Complex ancillary 264.9 Works Appraisal LC TC 37.0 51.6 88.6 27.7 1.6 29.3 52.0 88.5 113.7 37.0 51.8 88.8 27.7 2.3 30.0 172.0 295.1 378.6 FE 0 0 0 0 0 0 189.2 362.7 203.2 Actual LC TC 114.9 29.9 144.8 28.5 1.1 29.6 79.7 3.0 72.1 114.9 29.9 144.8 28.5 1.1 29.6 268.9 365.7 275.3

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D.

C3 Penstock Subtotal (c) Mechanical and Electrical Works ME-01 Turbines and auxiliaries ME-02 Generators and auxiliaries ME-03 Transformers and reactors(inc SCAD A revised ME-04 Cranes ME-05 High voltage switchgcar, control, and protection ME-06Medium voltage and low voltage switchgear ME-07 Elevators ME-08 Diesel generating standby sets ME-09 Gate Equipment ME-010 Generator isolated phase bus ME- 11 Switchyard steel structure and powerhouse masts ME- 12 Cables and accessories ME- 13 Miscellaneous Power plant auxilliarics ME-14Control, instrument, supervisory control and data acquisition, and telecommunication ME- 15 Transmission Subtotal (D) Engineering, Administration 1. Project management consultancy 2. Other consultancy services 3. WAPDA, s engineering and administration 4. Studies, field investigations and others

591.5

254.2

845.7

12.4 767.4

2.1 157.0

14.5 924.3

78.5 96.0 23.9 8.0 42.7 2.1 0.6 0.6 28.6 2.2 0.7 2.3 6.6 14.3

12.8 15.6 4.9 1.2 10.6 2.6 0 0.6 10.1 0.3 1.8 0.2 1.2 0.8

91.3 111.6 28.8 9.2 53.3 4.7 0.6 1.2 38.7 2.5 2.5 2.5 7.8 15.1

37.0 36.1 25.8 8.6 19.0 0 0 0 14.0 0 0 0 0 7.2

3.1 1.3 2.0 0.3 0 0 0 0 0 0 0 0 0.2

40.1 37.3 27.8 8.6 19.3 0 0 0 14.0 0 0 0 0 7.2

51.8 358.9

13.0 75.7

64.8 434.8

30.1 177.8

6.6 13.4

36.7 191.2

24.0 3.0 21.8 0.9

34.0 1.5 21.8 1.5

58.0 2.4 0 2.4

16.5 0 57.0 0

52.8 0 57.0 3.9

96.2 0

3.9

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Subtotal (E) Duties Base Cost Physical contingencies Base cost + physical Contingencies Price contingencies Interest during construction (including financial charges) Total Project Cost

27.9 0 979.2 116.1 1,095.3 96.7 202.0 1,394.0

58.6 31.1 537.7 53.5 591.2 39.8 175.0 806.0

86.7 31.1 1,516.9 169.6 1686.5 136.5 377.0 2,200.0

16.5 0 961.7 150.0 1,111.7 95.9 1,207.6

113.7 34.6 493.0 20.0 513.0 206.0 719.0

130.2 34.6 1,454. 7 170.0 1,624. 7 301.9 1,926. 6

Implementation Arrangements Apart from the delays in project implementation, the implementing arrangements were as envisaged at appraisal, with WAPDA as the EA. As required under the Loan Agreement, WAPDA, with the Water Wing bearing the responsibility for implementing the Project, established a Ghazi Barotha project office for the Project's day-to-day implementation. WAPDA also reestablished the panel of experts, to review all technical and safety aspects of the Project. 11 Overall project coordination was carried out by a WADA team based in the WAPDA colony at Hattian, located near the center of the project area, and no formal mechanism existed for coordination among financers. The environmental aspects of project implementation were monitored by WAPDA's Environmental Cell. An independent environmental and resettlement review panel also monitored the Project's environmental aspects. Related Technical Assistance ADB included a TA grant in the Project. ADB commenced with the engagement of consulting services and made a final selection in October 1997, in anticipation of the signing of the TA agreement. ADB informed the Ministry of Water and Power and the Economic Affairs Department of this on 15 October 1997 and requested advice regarding the TA. As the Technical Assistance agreement was not signed, the TA lapsed automatically. 18 ADB informed the Economic Affairs Department on 27

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August 1998 that it intended to cancel the TA and requested a reply. No reply was received, and the TA was cancelled on 24 June 1999. Performance of Consultants, Contractors, and Suppliers 1. Consultants The EA reported that the performance of the consultants was satisfactory and that the consultants performed their tasks professionally and in accordance with the terms of reference. 2. Contractors

In executing the different civil works contracts, the performance of the various contractors was satisfactory. However, several disputes occurred regarding contractors' claims, and these are still being resolved according to the contract procedure. After the 11 September 2001 incident in the United States, the contractors working on the barrage (C-01) and power channel (C-02) stopped work. As a result of WAPDA's efforts, culminating in the signing of Supplementary Agreement No. 1-2002 between WAPDA and the contractors on 14 April 2002 and the extension of the completion date to 31 July 2003 for these civil works, the contractors restarted work in April 2002. Performance of the Borrower and the Executing Agency 1. The Borrower The performance of the Borrower overall was rated satisfactory. During project preparation, the Borrower made every effort to expedite the project preparation process, as this was a high priority project for the Government. The feasibility and design study had a major emphasis on minimizing the Project's adverse environmental and social impacts, even when this involved higher costs. The Borrower's processing and approval of the feasibility study was relatively fast, and the Project was ready for development partner appraisal within 36 months. The Borrower's performance during the preparation phase was rated highly satisfactory.

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However, during the Project's implementation phase, the Borrower's performance was not so good. The Borrower could have taken steps to insulate the EA from the increases in generation costs when the EA's financial position deteriorated following the induction of independent power producers under the 1994 policy. However, the Borrower did not allow the EA to increase its tariffs and it did not provide other resources to the EA to enable it to cover costs. During the Project's implementation phase, the Borrower's performance was rated as unsatisfactory. Taking into account the Borrower's performance during the Project's preparation and the Borrower's performance during project implementation, an overall rating of partly satisfactory has been given. 2. Water and Power Development Authority

The performance of the EA is rated partly satisfactory. Although the EA achieved project objectives, delays in project implementation, caused by; i. ii. The availability of counterpart funds and Delays in land acquisition and compensation, affected the Project's efficiency and effectiveness. The EA was also not able to consistently meet its financial covenants of (i) keeping overall accounts receivable from exceeding the equivalent of 3 months of energy sales, (ii) maintaining a 40% sell-financing ratio, and (iii) maintaining a debt service coverage ratio of at least 1.5 times the estimated debt service requirements. This affects the sustainability of the Project and has resulted in the EA's performance being rated partly satisfactory. Performance of the Asian Development Bank The Borrower and the EA appreciated the assistance and cooperation extended to them by ADB and considered the performance of ADB to be fully satisfactory. Project formulation was relatively quick, taking 6 months from fact-finding to Board approval in January 1996. ADB undertook 1 inception mission and 10 review missions, 23 monitored progress closely, 128

and provided valuable assistance in resolving conflicts with some contractors. These missions included visits to the Project's site and the EA's headquarters in Lahore, where coordination meetings were held to discuss and solve problems. The number of review missions, however, could have been greater, due to the fact that the implementation period spanned approximately 9 years. ADB had a total of seven project officers during the loan handling project implementation. ADB also reorganized its organization during project implementation, which did not contribute to a smooth handover of the Project from one officer to another. The role performed by ADB's missions in providing advice regarding technical issues and preparation and evaluation of bid documents, as well as matters of loan administration, was recognized by the EAs. Overall, ADB's performance was rated partly satisfactory. Evaluation of Performance 1. Relevance The Project's rationale to ease the acute power supply shortage situation in the country and reduce load shedding through the provision of an urgently needed power generating plant was sound. The Project was in line with ADB's operational strategy at the time of appraisal. It supported the Government's least-cost development program to expand electricity generation, enhance the reliability of the power supply, and alleviate the acute power shortage. The Project is rated highly relevant. 2. Efficacy in Achievement of Purpose

Except for delays, project implementation followed the arrangements envisaged at appraisal. The Project is considered successful in achieving its objective of meeting the demand for electric power in Pakistan at the least cost and in an environmentally sustainable and socially acceptable manner. Although the Project faced significant delays in implementation, which resulted in a postponement of project benefits, and WAPDA's weak

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financial sustainability, the additional electric power provided by the Project is substantial. The Project was rated as efficacious. 3. Efficiency in Achievement of Outputs and Purpose

The Project was considered efficient in achieving its outputs and purpose. In estimating the financial internal rate of return (FIRR) and economic internal rate of return (EIRR) for this project completion report, the Project was evaluated using a similar methodology to that used at appraisal. The FIRR was estimated at 14.2%, which is above the weighted average cost of capital of 6.5%. The FIRR at appraisal was estimated at 13.0%. The recalculated EIRR was 31.4%, compared to 17.9% at appraisal. The EIRR is greater than the opportunity cost of capital of 12.0% and thus enables the Project to be rated efficient. Environmental, Sociocultural, and Other Impacts The Project was specially designed to minimize environmental and social impacts. Throughout the Project's studies, emphasis was placed on the early identification of environmental and resettlement impacts. The adopted alignment of the power channel caused minimal resettlement, as it avoided all villages by shifting the power channel to higher ground away from the river. The Project also resettled project affected persons in the project area near their homes on new spoil bank land provided by the Project along the power channel. Frequent interaction with local people during the project planning stage kept the project team attuned to public concerns. The PCR Mission visited the project area and observed no adverse environmental impacts of significance. Environmental mitigation measures included (i) releasing a minimum of 28 cubic meters per second of water from the barrage at all times, so as to not have any impact on downstream ecosystems and riverine conditions; (ii) implementing downstream of the barrage a program of regular water quality monitoring, as well as monitoring of local flora and fauna; (iii) providing an underdrainage system under the channel, to minimize seepage losses and 130

adverse impacts on focal groundwater levels; and (iv) implementing .safety measures for the power channel, including chain-link fences near populated areas; cattle grids, to prevent livestock from wandering onto the service roads and/or accidentally falling into the channel; hand rails, floating booms, and grab rails along points of public access; and public education programs, to inform residents of potential safety risks, etc. In addition, the Project included the construction of 46 bridges 2nd crossings over the channel. An integrated regional development program, Ghazi-Barotha Taraqiati Idara (GBTI), promoted participatory development of the affected communities for land compensation, rehabilitation, and resettlement works. GBTI was paid Rs99.38 million from the agreed integrated regional development program funds of PRsl76 million to prepare a development program for the affected communities. GBTI began 150 productive physical infrastructure schemes with the participation of community organizations benefiting more than 40,000 households. Overall Assessment The Project is considered successful, based on a review of its relevance, efficacy, efficiency, and sustainability, and impact on institutional development. Lessons Learned The Project was successful in many aspects, except for significant delays with various causes. An important lesson from the Project concerns that of the availability of counterpart funding. At appraisal, WAPDA was to finance approximately 43% of the total project cost. However, due to the declining performance of WAPDA and the impossibility of increasing tariffs, the level of funds available declined. The foreign development partners increased their disbursements in June 1997, to assist in covering WAPDA's shortage of funds. This continued until June 1999. Due to WAPDA's not being able to generate its share of the finances, 131

project implementation suffered. In the future, the availability of counterpart funds needs to be guaranteed more fully, and ADB assistance to the power sector in the country should take this into account. A key lesson of the Project relates to environmental and social impacts. The environmental aspects arc mainly positive, in that they obviate the need for a comparably sized (thermal) generation plant and thereby reduce the damaging atmospheric impacts of such plants. However, as demonstrated in the Project, reducing the potential social impacts to manageable levels is also possible, through rigorous evaluation of alternatives and public consultation and awareness building. In this context, the selection of the final power channel alignment (and the conscious decision to avoid existing villages and settlements, even at somewhat higher costs) and locations of the barrage and powerhouse deserve to be highlighted. These decisions substantially reduced the scale of the resettlement and relocation under the Project without adversely affecting its economic and financial viability. ADB should have been more involved with the environmental and resettlement aspects. Although the World Bank was responsible for the environmental and resettlement aspects of the Project, ADB could have taken a more active role, as was noted in discussions with a World Bank mission. 3.7 ADB Assistance for Finance and Industry Sectors Development ADB has provided lines of foreign exchange credit for the private sector industrial development, and of late for the reform of the trade regime under the ongoing Trade, Export Promotion, and Industry Program Loan. To facilitate private sector access to foreign exchange for exports, the ADB has recently approved the Small and Medium Enterprises Trade Enhancement Facility. Under its recently completed Capital Market Development Program Loan, ADB assistance facilitated the reforms of the capital market and 132

strengthening of the regulatory environment. In the remaining chapter Capital Market Development and Capacity Enhancement of the Securities Market and Political Risk Guarantee are discussed. 3.7.1 Capital Market Development and Capacity Enhancement of the Securities Market Background In the early 1990s, the economy of Pakistan grew modestly but was characterized by balance of payment and fiscal imbalances that undermined economic stability. From 1993 to 1996, the Government made several attempts under International Monetary Fund (IMF) programs to address the macroeconomic imbalances and deep-rooted structural problems. However, slippages in policy implementation as well as policy reversals muted the Supply response, bringing the economy to the verge of a banking crisis in 1996. The economic instability and institutional constraints of the capital market induced vulnerability in the Karachi Stock Exchange (KSE) Index, which fell from around 2660 in March 1994 to 1332 on 10 September 1996. In February 1997, the Pakistan Muslim League, headed by former Prime Minister Nawaz Sharif, won the election and established government. With a strong electoral mandate, the new government quickly prepared a comprehensive stabilization and structural adjustment program, including banking and capital market reforms. In line with its country operational strategy for Pakistan of 1995, the Asian Development Bank (ADB) was to support the capital market reform. This support was premised on IMF and World Bank support for banking sector reform. The report and recommendation of the President (RRP) gave the following rationale for the Capital Market Development Program (CMDP): The development of the securities market will facilitate the efficient allocation of resources in the economy and help broaden and deepen the

133

financial sector, while providing alternative sources of funding to industry, which has traditionally relied on Government directed credit. Formulation In early 1997, the Government requested ADB to process the CMDP. Diagnostic studies for the CMDP relied on the findings of an economic and sector work mission from December 1996 to January 1997, supplemented by outputs of a preceding technical assistance (TA) grant. Following extensive policy dialogue with relevant Government agencies and broad consultation with market participants, a reconnaissance mission in February-March 1997 determined the CMDP objective and components. A fact-finding mission in April 1997 reached broad consensus with the Government on the policy matrix, which included more than 40 actions to be taken before the release of the first ranche. Substantial progress was made on the prior actions. An appraisal mission was therefore fielded in July 1997 to fine-tune the policy matrix and discuss the scope of a TA loan to complement the CMDP. An ADB mission visited Washington, DC, in August 1997 to coordinate with the IMF and the World Bank on policy support operations in Pakistan. The loan negotiation for the CMDP was held in September 1997. Purpose and Outputs The purpose of the CMDP, as stated in the RRP, was to accelerate the mobilization of long-term resources and improve the efficiency of its allocation through a diversified and competitive capital market, which encourages broad-based participation of issuers and investors. The CMDP had seven components: a. Creating an enabling policy' environment to enhance competition and a level playing field, b. Strengthening securities market governance, institutions, regulation, and supervision; 134

c.

Improving and modernizing the market infrastructure and promoting its integration;

d. e. f. g.

Developing the corporate debt market; Reforming the mutual fund industry; Developing the leasing industry; Promoting contractual savings through reforms of the insurance sector and pension and provident funds.

The CMDP comprised a total of 58 policy actions 30 actions already taken before Board approval, and 28 actions to be taken by the time the second tranche was released (11 were conditions for the release). TA Loan 1577-PAK (SF) for Capacity Enhancement of the Securities Market was to support the (i) institutional strengthening of the Securities Exchange Commission of Pakistan (SECP), (ii) strengthening of the selfregulatory mechanism for key market participants, (iii) establishment of the National Clearing and Settlement System (NCSS), and (iv) establishment of an over-the-counter (OTC) market to develop the secondary bond market. Cost, Financing, and Executing Arrangements On 6 November 1997, ADB approved a loan of $250 million from its ordinary capital resources for the CMDP. Counterpart funds generated from this program loan were to be used by the Government to finance the adjustment costs of around $514 million associated with the CMDP and high-priority development projects. The CMDP was to be implemented over a period of 3 years from the date of loan effectiveness. The loan was to be disbursed in two equal tranches of $125 million each, the first to be available upon loan effectiveness and the second after 2 years, as indicated in the policy matrix and the main text of the RRP. However, the program summary in the RRP indicated that the second tranche could be released within the 3-year program period. The Loan Agreement stipulated that the proceeds of the Loan are expected to 135

be utilized by 31 December 1999 while indicating the loan closing date to be 31 December 2000. Executing Arrangements The Ministry of Finance (MOF) was the Executing Agency for the program loan. It was to coordinate and monitor the overall implementation of the CMDP, and administer the utilization of the loan proceeds. MOF was to be supported by (i) SECP in overseeing and coordinating the implementation of the reforms in the stock exchanges, leasing industry, and mutual funds; and (ii) the Ministry of Commerce (MOC) in overseeing the implementation of the insurance industry reforms. The Loan Agreement stated that the CMDP objective is to develop the Borrower's capital market by enhancing investor confidence and promoting a diversified, competitive and market-based capital market through, among other things, appropriate regulatory and institutional reform. TA Loan 1577-PAK(SF) for $5 million was approved in conjunction with the CMDP. SECP was the Executing Agency for the TA loan. The Central Depository Company of Pakistan (CDC) was to provide support in implementing the NCSS component, while a separate legal entity, with the support of the stock exchanges and lead financial institutions, was to be set up for the establishment of an OTC market. To complement the CMDP, ADB also approved the following stand-alone TAs in June-September 1997: i. TA 2812-PAK: Interest Rate Management of National Saving Scheme, ii. iii. iv. TA 2825-PAK: Capital Market and Insurance Law Reform, TA 2865-PAK: Restructuring of Public Sector Mutual Funds, TA 2866-PAK: Reform of Insurance Industry, and (v) TA2867PAK: Reform of Pension and Provident Funds.

136

Completion and Self-Evaluation The CMDP loan took effect on 5 January 1998.The first tranche of $125 million was disbursed on 6 January 1998. The second tranche of the same amount was disbursed on 22 June 2000, 6 months later than originally scheduled. To allow monitoring of the progress of unaccomplished program measures, the loan closing date of Loan 1576-PAK was extended twice to 31 October 2001, 10 months later than initially planned. TA Loan 1577-PAK(SF) closed on 30 July 2002, after four extensions and 19 months later than initially planned. The program completion report (PCR) on both the CMDP and the TA loan was circulated to the Board in November 2002. The PCR rated the CMDP successful on the basis of the following: i. The Program was highly relevant to the country and maintained its relevance during implementation; ii. The Program achieved definite results in key reform areas, e.g., modernization of the stock market infrastructure, establishment of SECP, and improved efficiency and enhanced accountability of the stock market; iii. iv. CMDP outputs and outcomes were likely to be sustained. The PCR confirmed full compliance with 51 policy requirements, substantial compliance with 2 requirements, and partial compliance with 3 requirements, while considering 2 other requirements 14 inappropriate, in accordance with the opinion expressed by the consultant under TA Loan 1577-PAK(SF) The PCR recommended independently evaluating the CMDP within 3 years. The PCR adequately assessed the CMDP outputs and outcomes. However, it did not discuss compliance with the conditions for the second tranche at the time of its actual release 15 and the appropriateness of ADB's disbursement decision. Moreover, the PCR did not include enough 137

information to allow an evaluation of TA Loan 1577-PAK(SF) and, hence, did not give an overall rating. The PCR's findings on the TA loan can be summarized as follows: a. Two components, i.e., institutional strengthening of SECP and establishment of the NCSS, complemented CMDP; b. Program measures related to two other components, i.e.

strengthening of the self-regulatory framework and establishment of an OTC market for the secondary bond market, were premature; c. Another component added in January 2000 to support the restructuring of mutual funds run by state-owned companies complemented CMDP. Operations Evaluation An Operations Evaluation Mission (OEM) was undertaken from 25 April to 10 May 2005. The OEM met with representatives of the following: MOF, MOC, State Bank of Pakistan (SBP), SECP, Privatization Commission, Central Directorate of National Savings (CDNS), KSE, Lahore Stock Exchange (LSE), Islamabad Stock Exchange (ISE), CDC, National Clearing Company of Pakistan (NCC), Leasing Association of Pakistan (LAP), and other agencies concerned and market participants. This program performance evaluation report (PPER) incorporates OEM findings, survey results, observations of ADB staff concerned, and a review of reports and documents related to the CMDP. The draft PPER was circulated to the Government and within ADB. Comments received were considered in finalizing the PPER. In my opinion, project is successful. The Capital Market has grown steadily and in 2005 it touch the new height. The Details of stock Exchange performance are given in a subsequent section. Achievement of Program Measures

138

The OEM confirmed full compliance with 26 out of 30 policy conditions that were to be met before the release of the first tranche. Of the remaining four conditions, one had been partly complied with, one had not been complied with, white other two conditions could not be verified. The policy condition deemed partly complied with concerned the privatization of mutual funds run by the state-owned National Investment Trust Limited (NIT). The OEM confirmed full compliance with 20 out of 28 conditions for the second tranche. Of the remaining eight conditions, one had been complied with after major modification, five had been partly complied with, and two had not been complied with. The policy conditions that were deemed partly complied with concerned (i) development of an OTC debt market, (ii) strengthening of the regulatory framework, and monitoring and inspection of mutual funds, (iii) privatization of NIT's mutual funds, (iv) reinforcement of lessors' right of repossession, and (v) reconstitution of the Insurance Claim Settlement Board. The conditions deemed not complied with concerned (i) setting of minimum criteria for SRO status for the stock exchanges, and (ii) granting of SRO status to MUFAP and LAP. Achievement of Program Purpose Table 1 gives the performance indicators for the CMDP and other relevant data identified in the RRP. The OEM's assessment of the indicators is as follows: i. The primary share market has shown signs of recovery since FY2004, ii. Transactions in the secondary share market have significantly increased since FY2003, iii. Market capitalization started to increase from FY2003 reflecting a rapid increase in the index price,

139

iv.

Market infrastructure has been upgraded largely to the standards recommended by the Group of Thirty Consultative Group on International Economic and Monetary Affairs, Inc. (G30) of the International Securities Services Association,

v.

The GDP share of investment in leasing assets remained within a range of 0.8-1.1% from FY1994 to FY2004,

vi.

The total size of mutual funds has increased since FY2003, and (vii) Total premiums collected by general and life insurance companies have progressively increased since FY1994.

These performance indicators suggest largely satisfactory progress in achieving the CMDP purpose. The ensuing paragraphs further elaborate this finding. Table 3.17:Key Statistical Data
Item Unit FY 19994-96 37-59 3,208-1 1,044 6.5-22.9 17.6-259 FY1997-2002 0-8 0-1,116 FY-2003 FY-2004 2 311 10 10,466 387.1 26.0

A. Performance Indicators Of CMDP 1 Number/size of Equity IPOs Number/size (Rs. Million) 2 3 4 5 6 7 8 Average Daily trading volume Market capitalization(at end of period) Compliance with G30 Recommendations Total investment in Lease finance Total Mutual Fund assets Total Premium collected by general insurance companies Total Premium collected by life insurance companies Million Shares % of CD I

33.9-192.7 8.2-20.3

214.4 15.7

%of GDP % of Total bank deposits Rs. Billion PRs. Million

0.81-0.96

0.8-1.09 1.47-3.333

8 of 9 Conditions complied with 0.74 0.81 2.90 19.6 10.0 4.32 22.0 11.8

6.7-91 4.5-6.5

9.4-15.3 5.9-7.5

1.

Stock market transactions have significantly increased since CMDP implementation. However, strong demand for equity securities has not been matched by a supply of fresh issues. Equity subscriptions 140

were four times the size of equity IPOs from FY2002 to FY2004. The immediate reason for this demand-supply gap in the stock market was a substantial reduction in interest rates, leading to a secondary stock market rally during this period. The CMDP achievements, together with favorable macroeconomic and external conditions, also contributed to this rally. 2. Though market capitalization has grown significantly in recent years, the Government's shareholding still represents about 50% of the market capitalizations3 of KSE-100. Moreover, the Government remains the largest raiser of funding through the primary equity market, comprising more than 60% of IPO value during FY2002FY2004, and there were also secondary offerings and direct sale of shares of listed companies by the Government. IPO issuance by the private sector has been relatively small; market participants have given the following reasons for this: Very low interest rates and easier credit conditions,

encouraging companies to make greater use of bank loans for their financing needs; and Stricter corporate governance and reporting The phase out of the fiscal incentive of a lower tax rate

for listed companies with the unification of corporate tax rates;

requirements for listed companies. 3. The Pakistan stock market experienced a major bullish run in early 2005. The KSE-100 index, which surged by 65% from January 2005 to a peak of 10,303 on 15 March 2005, fell by about 35% to 6,725 on 13 April 2005(figure 2). To investigate this incident, SECP has immediately formed a task force, which submitted the report to SECP in June 2005. But we have no concern with that this time. 141

Figure - <>><<><>
Source: Karachi Stock Exchange Website.

3.7.2 Analysis of Political Risk Guarantee Introduction: The Asian Development Bank has agreed to provide a US$ 150 Million Political Risk Guarantee facility (PRG Facility) for Pakistan. Under the Facility, ADB shall guarantee payment to participating international banks confirming certain eligible Letters of Credit (L/Cs) issued by registered Pakistani Banks - if the issuing bank fails to pay under the L/C and this failure to pay is the result of the occurrence of certain political events which have been pre-agreed between ADB and the Government of Pakistan (GOP). Standard Chartered Bank Standard Chartered Bank has been appointed as ADB's facility agent to manage the operational aspects of this facility out of its Dubai office on behalf of ADB. Objective of the PRG Facility ADB approved in December 2000 the SME Trade Enhancement Finance (SMETEF) Project for Pakistan, which is designed to help improve Pakistan's trade finance system in a number of key areas. ADB's Assistance Components: ADB's assistance consists of a number of integrated components, including: 1. Establishment of a new $150 million dollar-based financing facility, the Foreign Currency Export Facility (FCEF) 2. Equity investment in the Pakistan Export Finance Guarantee Agency (PEFGA) 3. Provision of the $150 million PRG Facility for international banks confirming eligible L/Cs issued by Pakistani banks

142

Offshore suppliers that sell much needed imports to Pakistan may at times encounter difficulties in obtaining confirmation of L/Cs issued by Pakistani Banks, or have done so in the past at a high cost. This may result in Pakistani exporters paying more for inputs used for export production than their international competitors. The objective of the PRG Facility is to ensure continued and improved access to finance for imports that are directly or indirectly used for export production. By effectively transferring to ADB certain non-bank country risks such as currency convertibility and transfer blockage, which are of particular concern to some international banks, the PRG Facility seeks to reduce financing cost, increase tenor and keep Pakistan country limits for international banks confirming eligible import L/Cs. The Facility will be available for a period of six years from [effective date] but may be cancelled after the end of the third year if it is determined that it is no longer required. Companies/Individuals that can use the PRG Facility Companies/Individuals in Pakistan who wish to import raw materials for direct or indirect export production can use the PRG Facility. For eligible imports, applicants can indicate their desire for cover under the PRG Facility by submitting an Applicant Certificate to their issuing bank in Pakistan at the time of opening an L/C or subsequently on account of an amendment.

143

LC Issuing Banks in Pakistan All banks in Pakistan (including branches of international banks) may issue L/Cs eligible for confirmation under the PRO Facility, provided mat they: 1. Meet the minimum paid-up capital requirement and other SBP prudential regulations; 2. Have a correspondent banking relationship with the intended confirming bank that is willing to take the commercial and other risks of L/C issuing bank not covered by the guarantee associated with the confirmation of the L/C; 3. Are willing and able to issue the L/C and take all risks associated with the payment of any amounts owed by the Pakistani importer (Applicant) to it. International Confirming Banks Any reputable international bank may obtain a guarantee under the Facility, provided that it: 1. Has entered into a Master Risk Participation Agreement (MRPA) with ADB and its Agent, Standard Chartered Bank in Dubai, and 2. Has a correspondent banking relationship with the intended issuing bank and is willing to take the commercial and other risks of L/C issuing bank not covered by the guarantee associated with the confirmation of the L/C. Eligible Letters of Credit 1. Criteria for an eligible L/C An eligible L/C under the Facility would meet the following criteria: i. Have a term (i.e., validity plus usance, if any) of up to 360 days, The term of the L/C may exceed 360 days and may extend upto 3 years, on a case to case basis, provided the term of the L/C shall in no case exceed the remaining period of the ADB Facility. 144

ii. iii.

Be subject to UCP 500 and irrevocable. Be not less than US $ 5,000/= or equivalent and not more than US$ l,000,000/= or equivalent. The maximum amount of L/C may exceed US$ 1,000,000/ after consulting with the facility agent.

iv.

Be issued in respect of goods, services, spare parts or capital equipment that originate from an ADB Member Country.

v.

Be issued by a registered Pakistani bank that meets the minimum paid-up capital requirement and other SBP Prudential Regulations.

vi.

Should have the following clause in the L/C or amendment: Intended for ADB PRG/Country of Origin of Goods_____ .

2.

Certification by the Applicant

Furthermore, eligible L/Cs must meet the following criteria which will be certified by the Applicant to the intended Issuing Bank in an Applicant Certificate. 1. Is issued in respect of goods that support export production meeting by any of the following criteria, prevailing on the date of such Applicant Certificate: 2. Are imported by or at the request of an exporter registered by the Pakistan Export Promotion Bureau; or 3. Qualify to be financed under the Foreign Currency Export Facility, or are linked to other components under the Government's Trade Export Promotion and Industry Program supported by ADB, including schemes such as the Duty and Tax Revision for Exports rules, Common Bonded Warehouse rules or the Pakistan Export Finance Guarantee Agency; or 4. Are in line with State Bank of Pakistan (SBP) eligibility guidelines (the SBP Eligibility Guidelines), if any, as issued or as amended

145

from time to time by SBP and advised by SBP by circular or other means accessible to the Applicant and the Issuing Bank; and 5. Is not used for the importation of any of the following, prevailing on the date of such Applicant Certificate: 6. Arms, ammunition and other military materials; radioactive and associated materials, nuclear reactors, and components thereof, fuel elements (cartridges) non-irradiated for nuclear reactors; 7. Goods, services, spare parts or capital equipment that originate from countries other than ADB Member Countries; or 8. Luxury goods, consumer goods or other imports which are on SBP's negative list (the SBP Negative List), if any, as issued or as amended from time to time by SBP and advised by SBP by circular or other means accessible to the Applicant and the Issuing Bank. Applicant Certificate i. To ensure that the Facility supports export production, Applicant will need to certify to the Issuing Bank that the L/C is issued in respect of goods which will eventually support the export production. Each time an Applicant applies with an issuing bank for (i) An L/C intended to be covered under the Facility, or ii. An amendment to an L/C already issued under the Facility and the amendment involves a change in goods, nature of good and/or country of origin, or iii. An amendment to an L/C issued outside the Facility and through this amendment, the Applicant intends the L/C to be covered under the Facility, (in this case, the application for Amendment should request for the inclusion of the clause Intended for ADD PRG/Country of Origin of Goods _____ in the L/C), then the Applicant must submit as an attachment with such LC application.

146

This self-declaration shall be conclusive evidence that the goods to be imported originate from an ADB member country and meet the eligibility criteria. 3.7 ADB Assistance for Agriculture Sector Development

Agriculture accounts for nearly 23 percent of Pakistan's national income (GDP) and employs 42 percent of its workforce. Agriculture also supplies raw material to Pakistan's Industries, notably textile industry, the largest industrial sub-sector of the economy. Most importantly, 67.5 percent of country's population living in rural areas are directly or indirectly dependent on agriculture for their livelihood. Given its importance to national economy, the Government attaches high priority to raising agricultural productivity with a view to promoting faster agricultural growth and hence, raising farmers income. Pakistan's agriculture has been suffering, off and on, from severe shortage of irrigation water in recent years. Overview of ADB Assistance ADB has provided program and project assistance with the objectives of reforming the policy framework, ensuring greater role for the private sector and increasing agricultural productivity. Out of total $14.3 billion lending, 20.9% is for the agriculture sector development. Agricultural Research Projects 1. 2. 3. 4. 5. 6. Agribusiness Development Project Decentralization Support Program Infrastructure Development Agriculture Sector Program II Forestry Sector Project Livestock Development project

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Irrigation and Drainage projects 1. 2. 3. 4. 5. 6. 7. Punjab Farmer-Managed Irrigation Project Malakand Rural Development Project Flood Protection Sector Project, Second Dera Ghazi Khan Rural Development Project Bahawalpur Rural Development Project National Drainage Sector Project Pehur High-Level Canal Project

I have selected the Pehur High-Level Canal Project and Livestock Development project for the discussion. Although the livestock is not directly related to Agriculture but it is widely recognized as the main source of cash income for the landless and small farmers. There is an important interrelationship between livestock and farms engaged in cropping, apart from the value of livestock as a food source and for storage of household wealth. Livestock also provide both manure and draught power for farming. 3.7.1 Pehur High-Level Canal Project Basic Data Project: Project Number: Loan Number: Pehur High-Level Canal Project PAK19242 1294-PAK

Executing Agency: Water and Power Development Authority Department of Irrigation, NWFP Amount of Loan: $ 127,600,000 Introduction The Pehur High-Level Canal (PHLC) Project is located in the North-West Frontier Province (NWFP). The province covers 10 million ha and has a total population of 17.5 million, of which 83% live in rural areas and are predominantly dependent on agriculture. Current agriculture production levels in NWFP cannot meet the basic food needs of its population. An estimated 1.7 million ha per year are cultivated in NWFP but only 0.9 million ha are irrigated. The project area is located at the far reaches of the 148

Upper Swat Canal (USC) system, and suffers from inadequate water supply, water logging, and salinity. Purpose of the Projects The main aim of the Project is to realize the full agricultural potential of about 40,300 ha in the project area by (i) alleviating shortage of irrigation supplies to about 35,800 ha at the far reaches of the USC; (ii) reclaiming about 6,000 ha of waterlogged land within the USC command area; and (iii) providing irrigation development for about 4,500 ha of mainly rain-fed land outside USC command in Topi Priority Area (TPA). The Project also intended to increase agricultural production in the adjacent Swabi Salinity Control and Reclamation Program (SCARP) Project, (SSP) area by supplementing its water resources and allowing additional irrigation development of about 4,000 ha of mainly rain-fed land. Components of the Projects To achieve the above mentioned objectives, the project was divided into four components: 1. 2. Irrigation and drainage improvement and development; Measures for accelerating agriculture development, capitalizing on improved irrigation and drainage conditions (Agriculture Development Component); 3. 4. Land resource conservation study; and Environment and benefit monitoring and evaluation (BME) program.

Project Cost and Loan The project loan, was approved on 22 December 1993, and became effective on 2 November 1994. Implementation was expected to take place over 9 years and the original loan closing date was 31 December 2002.

149

Table 3.20:Project Cost ($ million)

Cost Foreign Exchange Local Currency Cost Total Appraisal Estimate 52.20 110.80 163.00 Actual 47.33 90.81 138.14

The Water and Power Development Authority (WAPDA) the main Executing Agency (EA) of the Project was supported by the government of NWFP's Department of Irrigation (DOI) and Department of Agriculture (DOA) through its Directorate of On-Farm Water Management (DOFWM) and Department of Agriculture Extension (DAE), in implementing the Project. Table 3.21:Financing Plan ($ million)
Cost Implementation Cost Borrower Financed ADB financed Total IDC Cost Borrower Financed ADB financed Other External Financed Total 0.00 4.81 0.00 4.808 0.00 4.69 0.00 4.693 35.40 127.60 163.00 31.35 106.14 138.14 Appraisal Estimate Actual

150

Cost Breakdown by Project Component Table 3.22:Cost Breakdown by Project Component ($ million)
Component A. Irrigation and Drainage B. Agriculture Development C. Land Resource Conservation D. Environmental and Benefit Monitoring and Evaluation Total Base Cost Physical Contingencies Price Escalation D. Service Charge during Construction Total Cost 4.81 163.00 4.70 138.14 1.38 117.47 15.03 25.70 0.41 129.68 0.90 2.86 Appraisal Estimate 107.42 8.55 0.12 Actual 124.30 4.97

Project Schedule: Table 3.23:Project Schedule

Item Date of Contract with Engineering Consultants Completion of Engineering Designs Civil works Contract Date of Award Completion of Work Equipment and Supplies Dates First Procurement (PCSS05) Last Procurement (PCSS0069) Completion of Equipment Installation Start of Operations Completion of Tests and Commissioning Beginning of Start-up Appraisal Estimate Jan 1994 Dec 1995 Jun 1995 Sep 2001 Jan 1995 Sep 1996 Actual

Dec 1994 Jun 1996 Nov 1995 Jun 2005 Jan 1995 May 2005

Jun 1999 Jul 1999

Nov 2003 Nov 2002

><<><><>Map><><<><>

151

Project feasibility The Project was technically and economically viable within the original implementation schedule. The design of individual components was satisfactory, except for the subsurface drainage component. Implementation arrangements were partly satisfactory, as they had to be adjusted to consider the capacity of the EAs, and efficient and economical use of consultants, as desired by the borrower. Design work on PI1LC started in 1970 but the Project's technical assistance (Executing Arrangements) consultants based their design appraisal on the updated project proposal prepared by WAPDA in 1991. The project cost estimates at design stage were satisfactory. Consultations with farming communities were not comprehensive and efforts were not well coordinated between different project stakeholders, leading to more intensive consultation before project commissioning. However, during remodeling and construction of watercourses (WCs), dialogue with beneficiaries was quite extensive which resulted in ownership of the completed WCs by the communities. Changes to the appraised design and scope of components were introduced during the detailed design stage and, in some cases, during implementation. Lessons learned from subsurface drainage in other projects were not fully incorporated in the project design, despite the hydro-geological conditions of the area which required subsurface drainage. Project Outputs The project output envisaged at appraisal to increase irrigation supplies by about 100% in the cultivable command area of 35,800 ha in the far reaches of the USC has been fully achieved. This includes 7,600 ha where canals were only improved and not remodeled to avoid the risk of water-logging with increased supplies. The Project also provided irrigation development in about 4,310 ha of mainly rain-fed land in TPA (against the appraisal target of 4,500 ha) and allowed additional irrigation development in about 5,212 152

ha of mainly rain-fed land in the SSP (Ballar) area (higher than the 4,000 ha appraisal target). About 8,000 ha of waterlogged land within the USC command area was reclaimed (against 6,000 ha envisaged at appraisal) by providing surface drainage under the Project and subsurface drainage under SPP. ADB Contribution in Project Costs ADB provided a loan of $127.60 million to finance about 78% of the total estimated project cost ($163.00 million), comprising all the foreign exchange cost ($52.20 million) and 68% ($75.41 million equivalent) of the local currency cost. The Project is expected to disburse $106.89 million from ADB's contribution, financing 77.3% of the total project cost ($138.13 million), comprising $47.33 million of the foreign exchange cost and 5.5% ($59.46 million equivalent) of the local currency cost. ADB's contribution is 15.7% less than the appraisal estimate, mainly because a large amount of unallocated funds ($40 million) was allocated at the design stage to meet conditions encountered during tunneling. ADC provided major cost saving (54%) as work carried out through WUAs was completed at 60% of the estimated cost. Performance of the Asian Development Bank My project concerned with the role of ADB in Pakistan. So, I confined myself only to the Performance of the Asian Development Bank in the Pehur High-Level Canal Project. I do not discuss the performance of Executing Agency and other agencies that were engaged in the Project. ADB's performance was satisfactory. It played an effective role in project implementation. Regular and special missions reviewed implementation process and provided the required technical review and guidance to the Eas. ADB's responsiveness was enhanced after delegating the project to the PRM. PRM conducted regular training of Executing Arrangements staff in procurement

153

and disbursement, which had a positive impact on the performance of the Executing Arrangements. ADB staff was actively involved in resolution of disputes between contractors and the Executing Arrangements, and settlement of payment and audit issues between consultants and the Executing Arrangements. ADB played a key role in resolving disputes between WAPDA and DOI on system performance and handover of project components. Achievement of Outputs and Purposes The Project was efficacious in achieving its immediate development objectives and puipose. The quantifiable benefits of the Project include the incremental increase in crop production after 1998, when the Project began. Environmental, Socio-cultural, and Other Impacts At appraisal, no major negative environmental impacts were envisaged. The Project improved drainage drainage, and land reduced erosion by and providing watershed surface/subsurface management. The project has substantial positive social impacts. As envisaged at appraisal, no major shift in farm sizes, farm operations, or tenancy arrangements were noted in the USC command area. About 98.5% of farmers in the project area have a landholding of less than 5 ha, where 90.1% of these small farmers are subsistence farmers with less than 2.5 ha slightly above 80% subsistence farmers reported at appraisal. About 52.6% of farms are tenant-operated (compared with 55% reported at appraisal), 38.8% are owner-operated (against 30% at appraisal), and the remaining 8.6% are owner-cum-tenant operated (compared with 15% at appraisal). This shows that owners are moving to non-farm employment because of further reduction in farm size. The tenancy arrangements in the USC command area without drainage have remained the same. In the drainage area, owners have increased their share from 25% - 33% of the produce to 50%, depending on the level of improvement brought about by the Project. 154 development,

The incomes of both tenants and owners have increased due to increased production. Similar revision in tenancy arrangements has been noted in the new areas of TPA and Ballar, where irrigation has been provided. The income and social condition of both tenants and owners have improved in terms of spending on health and education, reduction in conflict and access to services, improvement in agricultural practices, improved water availability and drainage conditions. The Project is currently benefiting more than 60,000 farm families, in line with appraisal estimates. With increased cropping intensities, higher crop yields, and high income-generating cropping patterns, income at full development for owner-operators is estimated to range from Rs59,408 to PRs78,503 in TPA, Ballar, and Pehur drainage area (against the appraisal estimate of Rs37,619). Tenant-operators' farm income will range from Rs27,935 to PRs42,585 against the appraisal estimate of PRs25,212 in the same areas. 3.7.2 Livestock Development Project Background In 1985, the Government of Pakistan asked the Asian Development Bank (ADB) to support the accelerated and sustainable development of its livestock sub-sector by financing several initiatives to improve livestock productivity. ADB approved an advisory technical assistance 1 for $188,000 on 13 October 1986. The Livestock Sector Study (LSS) comprised two phases: 1. 2. A review of the livestock sector (March-June 1987), and The identification of priority investments in the sector (SeptemberNovember 1989). After the first phase of LSS, in October 1987, the Government requested ADB for a small-scale project preparatory technical assistance to prepare the Livestock Development Project, which would build on the previously financed LSS in preparation for a potential loan. 155

Rationale The livestock sub-sector provides one of the main sources of protein and energy for Pakistan's rural poor, and is widely recognized as the main source of cash income for the landless and small farmers. There is an important interrelationship between livestock and farms engaged in cropping, apart from the value of livestock as a food source and for storage of household wealth. Livestock also provide both manure and draught power for farming, and animal dung is used extensively as a heat source in domestic cooking. Demand is growing for milk, dairy products, and other livestock products in the urban centers, which now have better access to the more perishable livestock products through improved road networks. But inadequate cold chain delivery systems limit opportunities for greater urban use of livestock products. Only 25% of the milk produced is marketed; the rest is consumed in the immediate location of production. Limited Iced sources during the summer severely restrict opportunities to supply peak market demands. Furthermore, livestock productivity is constrained by weak services for extension, animal health, and livestock breeding. Purpose of the Project The objective of the Project was to increase livestock production by improving livestock productivity in selected areas of Pakistan. The project aimed to support the Government's efforts in livestock sector development by 1. Establishing a policy and institutional framework to encourage private investment in the sub-sector, 2. Increasing livestock production and improving use of meat and other byproducts, 3. Accelerating development of the sub-sector to increase rural employment and income. Output of the Projects 156

The Project had six outputs: 1. Strengthening the planning, monitoring, and coordination

capabilities of the Federal Livestock Division and the provincial livestock departments in Balochistan, NWFP, Punjab, and Sindh; 2. Development of extension services in livestock production by establishing some 17 livestock production extension services (as shown in the map on the following page). 3. Breed improvement through improved artificial breeding services and increased semen production from proven and selected sires of preferred local breeds of buffalo and cattle; 4. Rationalization and improvement of animal health services by strengthening field services for disease control, providing drugs and vaccines, and gradually privatizing veterinary services; 5. Slaughterhouse improvement by relocating or expanding selected slaughterhouses; and 6. Capacity building through training at a livestock extension training center (LETC) to be established, overseas training, and consultancies. Formulation Consultants were hired in late 1987 to prepare a draft design. ADB modified the draft design during subsequent processing. A pre-appraisal mission was fielded in June-July. >><<><>Map<><>><<>

157

1988, followed by an appraisal mission 10-25 April 1989. The Project was consistent with the overall thrust of the LSS. The final design and feasibility study were discussed during those missions with the Government and the provincial governments of Balochistan, North-West Frontier Province (NWFP), Punjab, and Sindh. The loan to finance the Project was approved on 28 September 1989 and closed on 6 January 1999, about 1.5 years later than expected at appraisal. Cost and Executing Arrangements The project cost was originally estimated at $55 million ($18.2 million for foreign and $36.8 million for local costs). After the cancellation of part of the slaughterhouse component, the much lower than expected number of village livestock extension committees (VLECs) actually established, and the depreciation of the Pakistan rupee vis-a-vis the dollar during implementation, the actual cost was $30.6 million, comprising $9.2 million for foreign and $21.4 million for local costs. With the downsizing of project scope, $23.8 million of the loan was canceled. Table 3.24:Projects Costs ($ million)
Item FC A Livestock Supporting services 1. Planning, Monitoring, and Coordination 2. Production Extension 3. Breed Improvement 4. Animal Health Subtotal Slaughterhouse Improvement Training, Fellowship, and Consulting Services 1. Local and international Training 2. Consulting Services Subtotal Base Cost Physical Contingencies Price Escalation Contingencies Service Charges During Construction 0.36 3.61 1.97 1.07 6.99 1.33 Appraisal LC 1.67 11.53 4.77 1.50 19.47 3.04 Total 2.01 15.14 6.74 2.57 26.46 4.38 FC 0.38 1.93 1.78 0.35 4.44 0.17 Actual LC 1.10 13.60 4.02 1.02 19.73 1.21 Total 1.47 15.53 5.80 1.37 24.17 1.37

B C

2.26 2.74 4.99 13.31 1.33 2.12 1.39

0.19 1.04 1.23 23.75 2.38 10.72 0.00 36.85

2.44 3.78 6.22 37.06 3.71 12.84 1.39 55.00

1.43 2.53 3.96 8.56 0.00 0.00 0.66 9.23

0.09 0.33 0.42 21.36 0.00 0.00 0.00 21.36

1.52 2.66 4.38 29.93 0.00 0.00 0.66 30.59

D E F

Total Cost 18.16 FC = Foreign Exchange Cost, LC= Local Currency.

158

Actual ADB loan disbursements were $23.9 million. Government and beneficiary contributions were $5.5 and $1.3 million respectively, in local currency. The Executing Agency (EA) at the national level was the Ministry of Food, Agriculture and Livestock (MINFAL). At the provincial level, EAs were the livestock and dairy development departments (LDDDs) at Quetta, Peshawar, and Lahore, and the Livestock and Fisheries Department in Hyderabad. Project Benefits 1. Milk Production: Dairy Based on surveys at project completion, incremental milk production was estimated at 11%. This figure represents the cumulative benefit from improved animal health services, production extension, animal breeding initiatives, and the extensive training that the project provided for farmers and support institutions. Incremental milk production is, therefore, estimated to be about 12% higher than in the without project scenario. The increase of 4.9 million liters is less than 16% of the 31 million liters of incremental production considered achievable at appraisal. 2. Meat Production: Sheep and Goats

Incremental benefits for sheep farmers were derived from increased lambing, higher Live weight gains of young animals, meat from culled animals, and wool produced from breeding stock retained by farmers. The PCR attributed a 20% improvement in lambing rate to these benefits. The PCR also attributed 50% of the increased feed costs to the higher lambing rate. The other increased feed costs were attributed to production of ewe meat and wool (which were not assessed in the benefits). The same approach was used in this reevaluation over the 1,400 sheep-raising households that benefited from the Project. Benefits were introduced progressively over 4 years.

159

Achievement of other Development impact The impact of the Livestock Development Project was less than anticipated in terms of increased livestock productivity. The reasons include (i) an ambitious and top down approach; (ii) lack of focus and ownership;(iii) lack of the participatory approach;(iv) an inadequate balance among livestock health, livestock production, and extension activities; (v) failure to construct and/or privatize slaughterhouses, etc. These factors also constrained realization of anticipated socioeconomic and environmental impacts, and desired policy and institutional changes. Despite the constraints that inhibited realization of desired quantitative and non-quantitative impacts, the Project brought some positive changes, suggesting the possibility of high payoffs for future investments in the subsector. Positive Change Positive changes include: i. A trend for farmers to adopt preventive and curative recommendations due to extended drought; ii. A realization of the judicious balance among investments in livestock health, livestock production, and extension; iii. The increased role, over time, of the private sector in delivering health services, animal feed production, and marketing; iv. Increased demand for live animals and livestock products (beef and mutton) in Afghanistan, Iran, and the Gulf countries; v. Increased capability of the provincial livestock and dairy development departments (LDDDs) as a result of project training; and vi. a realization of the importance of the livestock sub-sector and its linkage with poverty reduction objectives, especially for landless households and female-headed rural households.

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CHAPTER 4

FINDINGS
1. In ADB's view, poverty is a deprivation of essential assets and opportunities to which every human is entitled. Everyone should have access to basic education and primary health services. 2. Poverty in South Asia is due primarily to 3. 4. 5. low income low human development prevailing inequality social exclusion gender bias basic education health care nutrition water and sanitation income employment and wages empowerment pro-poor economic growth social development good governance

Poverty is better measured in terms of

ADB's poverty reduction strategy is anchored on

The total voting power of each member consists of the sum of its basic votes and proportional votes.

6. Japan and USA have the highest number of votes (i.e. 12.900 % of total) each and Tuvalu has the lowest number of votes (0.314% of total votes) (Table 1.1). 7. Preliminary findings of ADB's Poverty Analysis in Pakistan show extreme pockets of poverty in rural Sindh and southern Punjab, 161

whereas the whole province of Balochistan is poor by all indicators of poverty and development. Today, about 32 percent of the population live below the poverty line. 8. The Asian Development Bank is a long-standing development partner of Pakistan, having provided a total of 14.3 billion in development assistance from 1968 to 2004. 9. ADB have provided a total of $ 15.8 billion to Pakistan in assistance from 1968 to 2005.. The projected assistance for the period 20062008 amounts to $3.6 billion. This is nearly a 50% increase in annual lending to Pakistan compared to past four years. A large portion of this assistance is earmarked for infrastructure development in the areas of water, power, transport, and urban development. In addition, ADB is planning assistance in a number of innovative areas, including support for the Karachi mega-city project, a rural modernization project to enhance livelihood opportunities. 10. The major development sectors in which ADB has invested include energy, agriculture and rural development, finance and trade, transport and communications, social sector and governance. (Figure 1). 11. Pakistan has seen rapid economic progress in the last five years, which is a result of the pursuit of sound and pragmatic reform policies, ADB have been a strong supporter of the Government. 12. PRM has initiated a series to provide regular updates on the state of the national economy. It presents an analysis of economic trends in Pakistan and also presents an outlook of the economy for the future. 13. Pakistan is the ninth largest shareholder in ADB among its regional members. Overall, Pakistan is the 13th largest shareholder. (Table 1.1)

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14.

Pakistan has contributed to the Technical Assistance Special Fund (TASF) $1.60 million. (Table 1.2)

15.

ADB is Pakistan's longstanding development partner and its assistance is instrumental in assisting Pakistan meet its development challenges.

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CHAPTER 5

CONLUSION AND RECOMMENDATIONS

5.1 CONCLUSION

Over the years, Asian Development Bank has played a significant role m economic and social transformation id Asia acid (be Pacific- boasting economic growth, fostering social development, and helping improve the quality of life for millions of people. Asian development bank provide loans, Technical Assistance, and Grants to its member countries. ADB approved 11 loans totaling US$709.2 million for seven projects to Pakistan. ADB has also approved twenty-three technical assistance grants totaling US$28.9 million. A cumulative of 293 technical assistance (TA) projects has been approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. In December 2005 ADB approved assistance totaling US$1.333 billion for Pakistan, including $300 million in grants and loans for reconstruction of areas worst hit by the October earthquake; up to $770 million for a new financing product and a $3 million loan to promote highway development; $60 million in loans to clean up the urban environment for 1 .4 million people in Rawalpindi, Punjab; and a $200 million loan for the second phase of a resource management program in Punjab. Pakistan is one of the founder members of ADB. It is a long-standing partner of Pakistan, having provided a total $ 1.5 billion were to Pakistan in assistance from 1968 to 2005 of this amount, $1.5 billion were provided in 2005 (It must fee remember that in preceding chapters I have mentioned $14.3 billion assistance, the reason is that, my topic is the role of ADB in Pakistan development and most of the assistance provided in 2005 are not put into Operation). The projected assistance for the period 2006-2008 amounts to $3.7 billion. The major Development sectors in which ADB has 164

invested include energy, agriculture and rural, finance and trade, transport and communications, social sector and governance. The sectoral composition of ADB's assistance to Pakistan was 21.5 percent for energy sector, 20.9 percent for the agriculture & natural resources, 13.2 percent for finance sector, 1 1.3 percent for transport and communications, 9.4 percent for multisector, 9.0 percent for industry and trade, 6.9 percent for Law, Economic Management, and Public Policy, 3.5 percent for education, 2.7 percent for water supply, sanitation, and waste management, and 1 .6 percent for Health, Nutrition, and social protection. In addition to this assistance portfolio, the Pakistan Resident Mission is actively engaged in Economic and Sector Work to develop an understanding of Important Economic policy and sector topics, particularly with regard to poverty and governance issues. 5.2 RECOMMENDATIONS

Contingent upon the findings of the study, the following recommendations arc made that may help achieve its objectives more effectively. i. ADB project lending may be base upon the economic viability, technical feasibility, and needs of the DMCs. ii. The country unable to service additional external debts may be considered more eligible for loans, grants, and assistance to enable it to overcome its weak financial position. iii. The number of basic votes may be increase up to 50% to decrease the influence of iv. The number of listed Universities may be increase to allow a large number of students for internship. v. Jobs in ADB may be given on Quota bases to make ADB a true multilateral institution. vi. To increase the literacy rate in DMCs, more funds, at least 8.50% of total lending, may be allocated to educational sector projects. 165

vii.

Employment may be given on equality basis to decrease gender discrimination.

viii.

Steps may be taken to make the Asia, borderless Asia, where every Asian is free to travel to, stay, have a job and can invest in, each corner of the continent.

ix.

Steps may be taken to make the Asia free of poverty, diseases, social and economic injustices, and ignorance.

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BIBLIOGRAPHY
1. 2. 3. 4. 5. 6. Asian Development Bank Website M. All Shah Pakistan Economic Survey 2003-2004 Government of Pakistan OEM Estimates of Livestock Ministry of Health, National Feedback Report( 1999) Pakistan economic update (July 2004 - March 2005) Ministry of Finance website

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