Documt of The World Bank. FOR OFmFCIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Documt of The World Bank FOR OFmFCIAL USE ONLY REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE Report No. P-4025-PAK INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PrOPOSED LOAN IN AN AMOUNT OF US$100 MILLION EQUIVALENT TO THE ISLAMIC REPUBLIC OF PAKISTAN FIFTH FOR THE TELECOMMUNICATIONS PROJECT June 19, 1986 This document has a restricted distribution and may be used by recipients only in the performance of their otficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS Currency Unit = Pakistan (Rs) US$1.00 = Rs 16.8 Rs 1.0 = US$0.06 FISCAL YEAR July I - June 30 ABBREVIATIONS ADB - Asian Development Bank CTI - Carrier Telephone Industries DEL - Direct Exchange Line ECNEC - Executive Committee of the National Economic Council COP - Government of Pakistan ITU - International Telecommunications Union KfW - Kreditanstalt fur Wiederaufbau (Federal Republic of Germany (FRG)) OECF - Overseas Economic Cooperation Fund (Japan) PC-1 - Planning Commission Proforma No. 1 TIP - Telephone Industries of Pakistan T&T - Telegraph and Telephone Department

3 FOR OMCIAL USE ONLY PAKISTAN FIFTH TELECOMMUNICATIONS PROJECT LOAN AND PROJECT SUMMARY Borrower: Amount: Terms: Project Description: Islamic Republic of Pakistan US$100 million equivalent Twenty years, including five years of grace, at the standard variable interest rate. The project would encompass the entire FY8J-90 investment program for Pakistan's Telegraph and Telephone (T&T) Department. It would expand local, long-distance, and international telephone and telex networks, while increasing the management, organizational, and implementation capacity of T&T. This growth would be reinforced with a program of rehabilitation, replacement, and improved operations and maintenance. In strengthening the telecommunications system, the project would address one of the chief bottlenecks to future economic and social development. While business and government subscribers would benefit most from the improvement in long distance, nationwide dialling, international and telex facilities, the provision of new subsidiary routes, rural exchanges, and public call offices would benefit currently unserviced rural areas. Since the technology to be employed has been well tested elsewhere, the major risk is one of inadequate implementation capacity on the part of T&T. To reduce this risk, the project would focus on the institutional aspects of expansion and modernization. This emphasis would be ensured by regular review with the Bank of progress in meeting a series of physical and managerial targets and service quality indicators. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World BDnk authoriation.

4 Estimated Cost: [ (US$ millions) Item Foreiatn Local Ij Total Local Telephone Network Long Distance Network Transission International Network Telex, Telegraph and Data Netorks Rural Network Replacements Miscellaneous Technical Assistance and Training Total Base Cost Physical Contingencies Price Contingencies Total Proiect Cost Financins Plan: (US$ millions) Foreija Local Total [BRD Loan Asian Development Bank Japan (OECF) UNDP Federal Republic of Germany (WfI) - Mixed Credits Other Export Credits GOP/T&T Total L Including US$161.3 million in customs duties.

5 -iii- Estimated (US$ mil-lions) Disbursements: IDA FY FY86 FY87 FY88 FY89 FY90 Annual Cumulative Rate of Return: 22X. Appraisal Report: No PAK, dated June 17, 1986 Map: IBRD

6 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE ISLAMIC REPUBLIC CF PAKISTAN FOR A FIFTH TELECOMKUNICATIONS PROJECT 1. I submit the following report and recommendation on a proposed loan to the Islamic Republic of Pakistan for the equivalent of US$100 million to help finance a Fifth Telecommunications Project. The loan would have a term of 20 years, including five years of grace, at the standard variable interest rate. PART I - THE ECONOMY 1/ 2. The most recent economic report, "Pakistan: Economic and Social Development Prospects" (No PAK, dated February 18, 1986), was distributed to the Executive Directors on March 3, Economic growth rebounded strongly in FY85 after the slowdown in the previous year. Assisted by a strong recovery in the agricultural sector, real GDP increased by 8.4%, compared to 3.5% in FY84. Value added in agriculture grew by 9.9% and in manufacturing by 8.6Z. Both fixed investment and private investment rose by about 12Z. Improved availability of agricultural commodities helped to reduce the rate of inflation to 7.5Z from 8.4Z in FY84. On the other hand, the budget deteriorated markedly, national savings decreased, and the balance of payments came under pressure. Government current revenues fell short of the budgeted amount while expenditures substantially exceeded the budgeted amounts. As a result, government borrowing from the domestic banking system increased from 1.9% of GDP in FY84 to 3.9Z of GDP. Reflecting largely the sharp drop in public savings, national savings fell from 12.8Z to 11.2Z of GNP. Although the immediate growth prospects are good, budgetary and balance of payments developments will need to be carefully watched. 4. The balance of payments deteriorated in FY85. The current account deficit stood at US$1.6 billion, compared to US$1 billion in FY84. Lower exports and remittances were the main contributing factors. Exports declined by 7.3% as the country's major exports, cotton and rice, suffered the effects of lower prices and lower volumes, respectively. Furthermore, remittances declined for the second successive year, falling by 10.6% in FY85. According to recent projections, net migration is expected to decline and thus remit- 1/ Parts I and II are substantially the same as Parts I and II of the President's Report P-4302-PAK (Kot Addu Combined Cycle Power Project) dated M&v 5, 1986.

7 -2- tances will be lower over the medium term. As a result of the higher current deficit and low net capital flows, the reserve drawdown reached US$960 million. Gross official gold and foreign exchange reserves were US$1.2 billion at the end of FY85, which was equivalent to 2 months of imports of goods and services. 5. The process of gradually eliminating interest rates from the economy, initiated in 1980, was completed in July All transactions are now based on new financing modes consistent with Islamic principles. Existing interest-based commitments have been honored ard transactions with foreign governments and financial institutions are not affected. It is too early to determine with any certainty the potential costs of Islamization. Undoubtedly, the operation of the new system will initially involve some costs, but whether long-run efficiency will be affected will depend on how the system is applied. To date, the Government has proceeded cautiously, and new financing modes have been applied flexibly and developments monitored closely. 6. The strong recovery in GDP growth in FY85 meant that the overall growth ratio achieved in the first two years of the Sixth PLan was consistent with the improved performance achieved during the Fifth Plan period (FY79-83). Growth in national output (6.5Z), agriculture (4.2%), manufacturing (10.4%), exports (112), and private investment (6.7%), though below Sixth Plan targets, was well above the rates achieved during FY70-78 and very respectable compared with the growth rates of other developing countries. Growth during this period--coupled with increased remittances--benefited large segments of the population. Performance improved despite a number of adverse factors: (a) a world recession; (b) a 30% decline in the external terms of trade after 1979; and (c) the Afghanistan crisis with its attendant expenditures for increased defense and refugee assistance. 7. Fiscal performance and the balance of payments improved significantly during the Fifth Plan. The overall budget deficit and Government bank borrowing, which in FY79 stood at 8.8% and 4.3% of GDP respectively, fell to 6.4% and 1.7% by FY83. As the levels of Government borrowing from banks dropped and overall credit expansion was restrained, the growth of the money supply slowed down and inflationary pressures lessened; inflation dropped from 8% to 5% by the end of the Plan period. The improved fiscal performance was largely the result of expenditure restraint rather than better revenue performance. Real expansion in current expenditures on economic and social services barely kept pace with population growth, and development expenuitures declined relative to GDP. Government revenues remained constant at 16% of GDP, and public savings, having risen in the first half of the Plan period from 1% to 3.8% of GNP, dropped to 1.6% by FY83. Assisted by remittances, but also strong export growth, the current account deficit fell from 5% of GNP to 2% by the end of the Plan Period. Gross reserves increased from 3.5 to 4.5 months of imports of goods and services.

8 -3-8. In addition to improving economic management through fiscal and monetary policies, the Government took measures to improve performance in the commodity-producing sectors. In agriculture, all major crops reached record output Levels, with wheat and sugar achieving self-sufficiency. Subsidies on pesticides were virtually eliminated, while fertilizer prices were raised to reduce the subsidy burden. Crop procurement prices were adjusted to bring them closer to world prices. Provincial allocations for operations and maintenance in irrigation were increased, along with water charges. Encouraged by improved policies and incentives, private manufacturing investment grew by 10.9% per annum. Areas open to the private sector were widened, most agricultural processing units were denationalized, and sanctioning limits increased. A flexible exchange rate policy adopted in 1982 was instrumental in stimulating manufactured exports, while import liberalization increased the availability of raw materials and capital goods. In energy, measures were taken to accelerate the development of domestic resources, rationalize prices, and improve policy formulation and energy planning capabilities. 9. The developments in Pakistan's economy since FY78 represent welcome steps toward the solution of problems that are essentially structural and long-term in nature. Nevertheless, further wide-ranging measures must be introduced to address structural issues. Pakistan's long-term growth prospects depend on the resolution of two such issues: (a) the need to increase the level and efficiency of public investment; and (b) the need to encourage export expansion and efficient import substitution. If Pakistan is to sustain high economic growth, it must make major infrastructure investments, upgrade existing facilities, and strengthen its neglected social base. The last has fared badly as a result of resource constraints, as is reflected in Pakistan's social indicators, which lag seriously behind those of other developing countries at comparable levels of development. It will not be possible to increase public investment and recurrent allocations without a major domestic resource mobilization effort. Although Pakistan should give priority to reforming indirect taxation through a broad-based sales tax, it should also rely more on user charges, should curtail subsidies, and increase self-financing by public enterprises. Given the continuing constrained outlook for official assistance and the likelihood of lower remittance flows, sustained improvements in both export expansion and efficient import substitution will be necessary to support high growth with sustainable external capital requirements. If trade performance is to be improved, structural adjustment must be continued and strengthened in the key sectors of agriculture, industry, and energy. Both agriculture and industry have considerable potential for increased exports and some degree of efficient import substitution. In energy, the accelerated development of Pakistan's under-exploited resources can contribute considerably to the reduction of energy imports. 10. In agriculture, high growth has been largely the result of increased acreage; yet average yields remain low by world standards and by those of progressive farmers within Pakistan. Before agricultural productivity and

9 -4- diversification can be increased, institutional support must be strengthened, appropriate pricing policies must be put in place, and the core investment program identified and implemented. More effective institutional support should be sought through improvements in the quality and quantity of services to farmers. In particular, strengthening the seed program requires more efficient seed multiplication and dissemination, increased efficiency in public sector plants, and a greater role for the private sector. The delivery of agricultural credit also needs to be improved to ensure that it actually reaches small farmers and tenants, whose credit needs are greatest. Furthermore, marketing costs need to be reduced and research and extension services strengthened. Agricultural pricing policies should create appropriate incentives to farmers, while minimizing subsidies. Multicrop approaches to pricing should complement the single-crop, cost-of-production approach currently used. Finally, a core investment program in agriculture and water is needed to reduce the possibility of distortions in investment priorities. Low cost programs that yield quick returns should be emphasized along with critical infrastructure investments that raise farm productivity. Greater emphasis on the complementarity of investment programs, especially between agriculture and water, would ensure that priority is accorded to programs that increase agricultural productivity rather than merely augment the supply of physical infrastructure. 11. Despite fairly rapid industrial growth accompanied at times by rapid expansion of manufactured exports in recent years, there are a number of issues the Government must address if this performance is to be sustained. High levels of protection have led to high cost, low quality domestic production both by raising input prices and by reducing the demand for new technology to raise productivity and improve product quality. If Pakistan is to increase and diversify its manufactured export base and encourage efficient import substitution, industrial incentives must be rationalized to reduce both the level and dispersion of effective protection rates. The objective here is to increase the efficiency of the industrial sector by exposing protected producers to greater foreign competition and to reduce the antiexport bias inherent in the present incentives. In addition, the Government should reform the regulations affecting investment sanctioning and cost-plus pricing in order to improve competition among domestic firms. It should limit sanctioning to a few cases of strategic importance, leaving most investment decisions to the private sector, which is better able to assess investment opportunities. Cost-plus pricing arrangements with a number of key private and public manufacturing enterprises, which provide insufficient incentives to minimize costs or allocate capital efficiently, should be replaced by market-oriented approaches, which better reflect supply/demand conditions and provide adequate incentives for reinvestment and operational efficiency. 12. Issues that needed to be and are being addressed in the energy sector pertain to three broad areas: (a) investment and development; (b) pricing; (c) institutional strengthening. In the power subsector, the Government has formulated a least-cost development plan for the period and has

10 -5- outlined a core investment program of Rs 30 billion consisting of high priority projects to be implemented during FY86 to FY88. Given the likelihood of domestic resource constraints and persistent power shortages, the Government is also undertaking a number of measures including tariff increases to ensure that a large portion of this investment program would be financed from the Water and Power Development Authority's self-generated resources. The gas producer pricing formula for new discoveries has been adjusted to provide adequate incentives to attract private sector exploration. Because consumer gas prices were kept artificially low to encourage the substitution of gas for imported oil, relative prices became distorted and the use of gas uneconomic. Since 1982, the Government policy has been to progressively increase consumer prices of gas in order to reach two-thirds of fuel oil parity by 1988; the FY86 budget increased the average gas price by over 50Z. Assisted by domestic price increases and lower international prices for fuel oil, the Government's target has been realized. The Government should continue the policy of gradually adjusting gas prices with a view to reaching full parity as early as possible. Electricity tariffs, which are currently below the long-run marginal cost, should be adjusted to reflect this cost, not only to ensure the efficient use of electricity and encourage energy conservation, but also to mobilize the substantial additional funds required by the power investment program. Finally, the Covernment should consider increasing the autonomy of public enterprises in the energy sector to improve their efficiency and should continue to strengthen energy planning and policy coordination. 13. The Sixth Five-Year Plan (FY83-88) articulates a pragmatic strategy for Pakistan's continued rapid development that includes an expanded role for the private sector, increased public development expenditures, and increased allocations for energy, agriculture, irrigation, and the social sectors. Although the size and composition of the Plan are appropriate, development expenditures during the first two years of the Plan have been 8.5X lower than the amounts projected because of insufficient domestic resources. Although this would not appear overly large, the way in which sectoral shortfalls have been distributed contradicts Plan priorities. Education, energy, health, and agriculture have received considerably lower allocations than called for in the Plan. Furthermore, without a predefined core investment program, there is a tendency to distribute shortfalls evenly over a large number of projects within a sector; thus too many projects have been initiated, and projects that should receive priority are underfunded. To address this issue, the Government has re-introduced a Three-Year Priority Investment Program (FY86-88). The Government has emphasized that the adoption of a rolling medium-term program does not mean that plan strategies and priorities are being revised, or that shortfalls are considered inevitable. The program will merely identify sectoral core investment programs to be given priority in annual plans. If priority investments, especially in key areas, could be protected, the public investment program would become more effective and its priorities would be sharpened.

11 The improved performance and policy framework of the Fifth Plan, which the Government intends to continue during the Sixth Plan, have improved Pakistan's creditworthiness for a blend of Bank and IDA borrowing and commercial borrowing. At the end of 1984, Pakistan's external public debt (excluding the undisbursed pipeline) stood at US$9.9 billion, of which US$4.6 billion was owed to bilateral members of the Pakistan consortium, US$1.2 billion to OPEC, US$2.3 billion to multilateral agencies, and the balance to other bilateral and private lenders. At the same time, the Bank Group's share in Pakistan's external public indebtedness was 16.2%, and in external debt service it was 8.0%. According to Bank projections, if recent policy improvements are sustained and structural issues addressed, Pakistan's debt service will remain about 20% during the remainder of the 1980s, even with somewhat higher levels of commercial borrowing. PART II - BANK GROUP OPERATIONS IN PAKISTAN 15. As of March 31, 1986, the cumulative total of Bank/IDA commitments to Pakistan (exclusive of Loans and Credits or portions thereof that were disbursed in the former East Pakistan) amounted to approximately US$4.0 billion, and IFC's investments totalled $239.9 million. (Annex II contains a summary Statement of Bank loans, IDA credits, and IFC investments.) 16. During its long association with Pakistan, the Bank Group has been involved in most sectors of the economy. For example, it has participated with other donors, over a 25-year period, in a major program of works to develop the water resources of the Indus Basin. Approximately 30% of total Bank/IDA commitments to Pakistan have been for agriculture and irrigation; 28Z for industry, including import program credits; 18% for transport, telecommunications, and public utility services; 14% for energy, including power, gas pipelines, and petroleum; 5% for social programs in education, population, and urban development; and 5% for structural adjustment lending and technical assistance. 17. Currently, the Bank's assistance strategy is primarily to support the Government of Pakistan's efforts to formulate and implement policy reforms in three sectors--energy, industry, and agriculture--which shape the structural adjustment of the economy. To ensure that the gains from adjustment are sustained in the long term and shared more broadly, the strategy also includes investments in physical infrastructure and the social sectors (education, population, etc.) that have been neglected in Pakistan's development efforts. If this strategy is to succeed, the full range of traditional instruments of Bank support must be flexibly deployed--from sector work and active policy dialogue, to policy- and project-based lending, technical assistance and aid coordination. The Bank Group's lending program comprises two components, the larger of which supports specific high-priority investments in productive sectors and physical and social infrastructure. The smaller but nonetheless strategic component focuses on policy reforms in the key sectors of agriculture, industry, and energy and relies heavily on highquality economic and sector work. The program includes a series of technical

12 -7- assistance credits to finance studies and formulate action programs for policy reform. The experience with the first of these has been extremely positive. In addition, through its annual Country Economic Memorandum, the Bank Group tries to foster greater understanding on the part of Consortium members of the Government's structural adjustment program and aid requirements. This effort, coupled with increased cofinancing, should enhance the policy relevance and effectiveness of other official aid and help attract additional resources to Pakistan from nonconcessional sources. 18. Historically, the Bank Group has placed special emphasis on lendirng for agriculture, which is the mainstay of Pakistan's economy. The Bank and the Government have agreed that the main objective of the agricultural strategy and, consequently, lending to the sector should be to increase agricultural productivity through improvements in the efficiency of the irrigation system and supporting agricultural services. Among the issues being addressed are: the balance between short-gestation projects and projects with a longer-term focus, rationalization of input and output prices, marketing, improvements in operation and maintenance, cost recovery, and a wider role for the private sector. Projects in the sector have ranged from irrigation/drainage to agricultural inputs, research, and extension and have included institution-building components. Overall, progress in agriculture has been satisfactory. 19. In industry, the strategy has two complementary aspects: to strengthen and broaden the structural adjustment in Pakistan's industrial sector and to support the Government's efforts to revitalize the private sector through industrial financing. The industrial reform program has been designed to improve the competitiveness of the sector with a view to promoting export expansion and import substitution. Issues being addressed include trade and industrial incentives, deregulation, efficiency of public enterprises, pricing decontrol, and improvements in the credit delivery system. Lines of credit extended to development finance institutions and other financial intermediaries have been mainly for the private sector. Direct lending for industry has also included assistance to three large fertilizer plants and a refinery engineering loan. IFC's investments in 18 Pakistan enterprises were by way of loans (US$228.6 million) and equity participation (US$11.3 million). Although individual operations have generally achieved their objectives, the agenda for overall industrial reform remains formidable. 20. As a result of the progress under the Structural Adjustment Loan (SAL) in 1981/82 and the Energy Sector Loan in 1985, our lending program in energy is expanding rapidly. The overall objective here is to expand the domestic supply from all energy subsectors and simultaneously increase the efficiency of energy use through appropriate pricing, conservation, and other methods of managing demand. No less central have been the efforts to strengthen key institutions in the sector. In power, the Bank has helped both the Karachi Electric Supply Corporation and the Water and Power Development Authority to finance their power generation and transmission

13 -8- programs. The construction of tie Mangla and Tarbela dams under the Indus Basin Development Program, in which the Bank played a leadership role, has also assisted in achieving the objectives of the sector strategy. In oil and as, the Bank has financed a sound exploration and development program and has assisted in developing the extensive gas transmission system. Smaller efforts, involving mainly engineering studies and technical assistance, have been undertaken to support coal exploration, energy audits, and oil refining. Despite much progress, however, the Bank will need to continue participating in institution building and help the Government mobilize adequate funds for energy investments through tariffs, co-financing, and greater private sector participation. 21. Bank Group lending for transport and communications has focused both on new capital investments and on improving the efficiency of existing assets. Efforts have also been made to strengthen the institutions responsible for these services, especially the Karachi Port Trust, Pakistan Railways, the Telephone and Telegraph Department and federal and provincial highway agencies. However, inadequate transport infrastructure is now considered to be a critical constraint to overall growth, in large measure because infrastructure stock has run down. Thus, the balance between new investments and the efficient operation and maintenance of existing investments needs grearer attention. 22. With an overall literacy rate of only 24Z, a population growth rate of about 3.1%, and rapid urbanization, Pakistan faces an equally formiiable development agenda in the social sector. The Bank has supported the Government's programs in education through five credits designed to upgrade primary, post-secondary, and higher technical and agricultural education as well as middle-level training of primary teachers and agricultural extension agents. The focus has been and will continue to be on the lower end of the education spectrum (primary, technical, and nonformal education). A first population project designed to expand the demand for population control services was approved in FY83. Furthermore, the Bank has financed four projects in the urban and water supply sector. Besides providing urban services, these operations are designed to improve local resource mobilization and cost recovery; planning and efficiency of resource utilization; and urban management, especially at the provincial and municipal levels. 23. In addition to the above, policy-based lending was pursued through the SAL and an Energy Sector Loan mentioned in para. 20. The SAL program introduced a number of significant reforms in government development planning and in policies and programs in the agriculture, energy, and industrial sectors; by the time the loan was fully disbursed at the end of FY83, significant progress had been achieved in the above areas. The ESL supports the Government reform program for the energy sector and assists in the implementation of a core investment program for the sector. Continuing support ior the structural adjustment process is envisioned under other sector loans in the next few years.

14 In general, disbursements have been satisfactory. Some projects have experienced initial delays owing to protracted government procedures for project approval (but these problems are now being addressed), and the procurement of goods and services. Rapid turnover of managerial and technical staff, partly due to migration to the Middle East and partly to budgetary constraints, has also been a problem in some projects. 25. A number of operations are currently being prepared or appraised. These include projects for power transmission, generation, and conservation; oil and gas exploration and development; coal development; lines of credit for industrial financing for the private sector, and for industrial subsector restructuring, balancing, and modernization; irrigation/drainage, and agricultural inputs and services; highway construction and maintenance; primary and informal education; urban development and water supply. Sector loans that would support further structural adjustment in industry, agriculture and transportation are being discussed with the Government. Where successful, such loans would provide a policy umbrella for projects in those sectors. To help the Government finance agricultural and other high-priority projects having low foreign exchange component, the Bank Group is financing some local expenditures on a case-by-case basis. 26. Economic and sector work provides the basis for the continuing dialogue between the Bank Group and the Government of Pakistan on development strategy, the sector and project lending strategy and operations, and the coordination of external assistance within the Pakistan Consortium. The work program emphasizes resource mobilization, structural adjustment in the three key sectors, and the development of the physical and social infrastructure. PART III - THE TELECOMMUNICATIONSECTOR 27. Pakistan's unique history, including its creation out of partition of the Indian Subcontinent, has presented special problems in developing an integrated economy. These problems have been compounded by the distances separating population centers and the wide dispersion of agriculture and industry. The need for adequate telecoimiunication facilities to provide rapid comnunication and ensure effective use of available resources and expertise has been recognized for some time. More recently, Pakistan's impressive economic performance has accentuated the critical importance of communications. 28. If the country is to sustain rapid industrial and agricultural growth, it will need to shift increasingly to an outward looking strategy. In industry, greater emphasis on diversification, exports, and efficient import substitution will require responsiveness to changing international markets, as well as the ability to adjust technology, production lines, and sources of supply rapidly. To a large extent, Pakistan's ability to compete in a wider environment will depend on the adequacy of its communications system. Similarly, in agriculture, having approached self-sufficiency in foodgrains, Pakistan seeks to enter export markets through production of new

15 -10- crops including fruits and vegetables with special handling and marketing needs. At the same time, further increases in production of traditional crops will depend increasingly on higher yields which will in turn require far greater dissemination of timely information and services. To make this possible, a reliable communications network must be made available in the rural areas. Sector Organization 29. TeLecommunications services, comprising domestic and international telephone, telegraph, and telex, are managed and controlled by the Telegraph & Telephone (TMT) Department of the Federal Ministry of Communications. The military, police, railways, and other agencies operate separate networks for their own use. Other organizations, including the television corporation, lease T&T's facilities where appropriate. 30. Under the authority of the Ministry, Telephone Industries of Pakistan (TIP) and Carrier Telephone Industries (CTI) manufacture telecommunications equipment. The GOP is the majority shareholder in both companies and Siemens AG (FRG) has minority interests of 16% and 47%, respectively. Established in 1952, TIP employs about 3,500 people to produce assorted electromechanical equipment and install exchange equipment for T&T. Established in 1969, CTI employs about 360 people to manufacture radio systems and electronic components. Production of pulse code modulation equipment began recently. Facilities for domestic manufacture of telephone cables do not exist but a privately owned factory is scheduled to begin production by the end of T&T has recently signed a letter of intent with Siemens AG for local production of modern electronic digital switching equipment and direct import of 50,000 digital exchange lines to be financed with bilateral mixed credits under the proposed project. With the establishment of a domestic capability to manufacture electronic exchange equipment, domestic production of electromechanical switching equipment will be gradually phased out and used only for appropriate expansion of existing exchanges and for spares. Access, Demand and Quality of Service 32. As of June 30, 1985, Pakistan had about 469,000 direct exchange lines (DELs) and about 570,000 telephones serving a population of about 95 million. Pakistan's telephone density, at 0.6 DELs per 100 population, compares poorly with the 5.9 average for 12 developing countries in Asia. About 60% of the main lines serve only 11% of the population in the main cities of Karachi, Lahore, Islamabad, and Rawalpindi. Service in rural areas is mainly provided through public call offices and small manual exchanges. There are 341 telegraph offices, of which 220 are rural. Telex service is available only in 11 major cities. 33. The nationwide dialling system connects major and small cities, and the subscriber trunk dialling system connects only a few cities in the long

16 -1ldistance network. The manual interurban telephone system does not provide good connections and has a low quality. The call completion rate is about 35Z for local calls, 12% for long distance calls, and 132 for subscriber dialed international calls, which is poor. Delays for manual long distance calls usually range from one to four hours and for international calls from two to ten hours. Poor maintenance procedures, aggravated by insufficient financial resources and obsolete subscriber network equipment, account for the low quality of service. 34. Expressed demand,l/ currently 792,000 subscribers, has been growing at about 14% per annum over the last five years. T&T was meeting 652 of demand in the mid-1970s, but currently meets only 62Z. The shortfall is understated by the extent of unregistered demand, evident in recently commissioned exchanges where the resulting demand for service was more than double the number of registered applicants. Even with the investments under the proposed project, the gap between supply and demand is expected to widen. Although the demand for telex service has been growing at 161 per annum over the past five years, the percentage of demand satisfied has increased from 58Z to 63% due to a rapid expansion of telex facilities. Sector Objectives 35. The Government recognizes the critical role of telecommunications and the extent to which inadequate investment in the sector can inhibit economic growth. For this reason, the Sixth Five-Year Plan (FY84-88) provided T&T with sufficient resources to ensure an expansion rate of 15% per annum compared to the historical average of 7-8%; and this investment program has been protected in the Three-Year Priority Investment Program (FY86-88). The Sixth Five-Year Plan defined as the national objectives for the sector to: (a) improve T&T's operational and management efficiency and the quality of service; (b) expand the telephone network by 520,000 lines and expand and improve the international, telex, and telegraph networks; (c) extend local and long distance facilities to areas of highest demand and revenue per line bearing in mind the requirements of agriculture, industry, administrative, and social services; (d) introduce modern technology and standards and maintain and extend domestic manufacturing facilities; (e) study rhe feasibility of converting T&T into a self-financing entity; and (f) encourage the participation of private interests in the sector's development. Sector Constraints 36. Organizational, financial, and manpower constraints already cause inefficiency and poor quality telecommunications service. If not dealt with in a comprehensive fashion, these constraints will jeopardize the Government's ambitious growth plans. The proposed program will require major 1/ Working lines (DELs) plus pending applications.

17 -12- organizational changes, as well as new management systems and procedures to operate and maintain an expanded and technologically sophisticated network. To meet this challenge, the Government is considering some form of autonomy for T&T (see para. 48). T&T's operations generate sufficient local funds to meet its development objectives, yet T&T can only use these funds up to a government-approved budgetary ceiling. If the sector is to expand, within the overall macroeconomic constraints facing Pakistan, the budget ceiling for T&T must be increased and access to sufficient spending authority and foreign exchange for the entir- approved development program must be assured. T&T currently faces shortages of skilled and managerial personnel, and this problem will become critical with the introduction of new technology and systems. While T&T's difficulties in recruiting and retaining staff are to a large extent a reflection of service conditions throughout the Covernment, T&T's planned expansion should provide the potential for new incentive systems and career satisfaction. The challenge will be to take advantage of this opportunity within necessary GOP limitations. The Bank Group's Participation 37. The Bank Group has made four loans/credits, totalling US$91.8 million, for telecommunications projects in Pakistan. Satisfactorily completed in 1974, 1975, and 1979, the first three projects expanded and upgraded the local and long distance telephone network. The fourth project (Loan 2122-PAK), approved in 1982, is expanding further the telephone network and improving international telephone and telex facilities. 38. These four Bank Group assisted projects have enabled the telephone system in Pakistan to grow from about 110,000 DELs in 1970 to about 469,000 DELs at the end of FY85. Over the same period, national telephone density has increased from 0.29 to 0.6 DELs per 100 population. Subscriber direct long distance (STD) dialling and telex service have been introduced and international telecommunications developed and enhanced. 39. The Project Performance Audit Report (No. 3276, December 31, 1980) on the third project noted these substantial achievements even though there was a delay of about two and one half years in project execution owing to a delay in Government appropriation of funds (despite T&T's generation of adequate local funds). There was also a delay in the introduction of measures to permit T&T to operate on a semi-autonomous commercial basis. Improved procedures, such as the establishment of the T&T Fund and the introduction of commercial accounting practices, have since been introduced, and delays in government appropriations have not been a problem in recent years (see para. 46). Execution of the fourth project, after initial delays in completing cofinancing arrangements, is progressing satisfactorily and disbursements are generally consistent with the appraisal estimates. 40. The main areas in which the Bank Group has had influence are: (a) institutional improvements including greater financial autonomy through establishment of commercial accounting practices in 1979 and the creation of

18 -13- the T&T Fund, tariff increases in the late 1970s, reductions in staffing, and introduction of computers; (b) major technological decisions to introduce digital technology, satellite communication, and fiber optics in Pakistan; (c) the development of a balanced network with broader coverage of rural areas within existing constraints; and (d) assistance in arranging cofinancing, particularly for the fourth project. Despite these achievements, the quality of service still suffers from weaknesses in operational effectiveness which would be addressed under the proposed project. Rationale for Bank Support 41. In view of the importance of improved communications to sustained growth, the Bank considers the COP's proposed levels of investment in the telecommunications sector appropriate. T&T's investment program would constitute a quantum leap forward, combining technological transformation with unprecedented expansion. Given the constraints which T&T already faces, it is unlikely that Pakistan could successfully embark on this new program without the Bank's continued involvement. For this reason, the Government has requested the Bank's participation in the Fifth project to: (i) act as a catalyst to help Pakistan mobilize the required foreign funds and organize the associated procurement on optimum price and terms, and (ii) address or initiate activities designed to resolve the immediate and longer term institutional, manpower, efficiency, technological, and financial issues facing the sector. PART IV - THE PROJECT 42. The project was prepared by T&T and appraised in September A staff Appraisal report (Report No PAK, dated ) is being circulated separately to the Executive Directors. Negotiations were held in Washington, D.C. from April 21 to May 6, The Pakistan delegation was led by Mr. Rafiq Ahmad Akhund, Secretary, Ministry of Communications. A Supplementary Project Data Sheet is attached as Annex III. Project Objectives and Description 43. The project would support the growth of Pakistan's domestic economy and foreign trade by accelerating past Bank-supported efforts to develop a modern, expanding telecommunications system. To do so it would focus on institutional development to improve TUT's planning capability and operational efficiency. The major project components would be: (a) provision of local network facilities for an additional exchange capacity of about 400,000 Lines; (b) installation of the long distance network for an additional 94 towns and cities and expansion of its transmission capability by 9,000 channels;

19 -14- (c) continued modernization and improvement of telegraph and telex services to increase telex exchange capacity by about 11,800 lines and extend telex and telegraph facilities to smaller towns; (d) provision of new international teleconmnunications channels; Ce) replacement of worn out cable and exchange equipment (75,000 lines), open wire carrier systems, and trunk positions; (f) improvement of T&T's organizational structure and management systems to enhance T&T's operational efficiency, labor productivity, the quality of its services and its medium- and long-term planning capability; (g) studies and economic analyses of T&T's operations and investment program and a review of its tariff structure; (h) modernization and expansion of T&T's training and research programs and facilities. Project Implementation 44. The proposed project would constitute T&T's entire investment program for FY87-90 (except for completion of ongoing works and pre-investment costs for future years), or the last two years of the GOP's Sixth Plan and the first two years of the Seventh Plan. The Development wing of T&T, including decentralized staff throughout the country, would have overall responsibility for implementation. Upon completion of a given subproject, it would be transferred to T&T's local operations and maintenance staff. 45. From its creation, T&T has operated as a government department under the Ministry of Comunications with a number of its managerial and operating functions performed by other Government authorities. Financial control was exercised by the Ministry of Finance, accounting and auditing were performed by the Auditor General, personnel matters were controlled by the Public Service Commission, procurement by the Supply Department, and building design and construction by the Public Works Department. This arrangement was not conducive to efficient operation of T&T and did not adequately define accountability and responsibility for the sector. 46. Largely as a result of Bank involvement in the sector, there has been significant institutional development of T&T, including the introduction of commercial accounting practices in 1979, assumption by T&T of the accounting function in 1981, and the establishment in 1982 of the T&T Fund. While T&T still needs annual approval of its operational and development budget, deposit of all T&T revenues into the proforma T&T Fund within the COP's Consolidated Fund makes it clear that T&T generates more than enough funds to cover the local portion of its investment program. In addition, T&T's

20 -15- Director General has considerable authority to reappropriate funds and make expenditures within the approved ceilings. Under the fourth project, the COP has thus far approved the required annual investments. Nevertheless, in view of the magnitude of the funding levels under the proposed project, the Government has agreed (a) at all times to make available to T&T funds satisfactory to the Bank to meet its operating and maintenance costs and carry out the investment program for FY87-90 and (b) to review the proposed annual allocation to T&T with the Bank by April 1 of each year. Indicative amounts for each year of the investment program have been set out in a draft Side Letter. These measures would be in addition to the standard requirements for (a) provision by the Government of adequate annual budgetary and foreign exchange resources for the project and (b) approval of all the project PC-ls (the GOP's project document) by the GOP's Executive Committee of the National Economic Council (ECNEC) which would be a condition of effectiveness. 47. The Government recognizes that substantial additional changes will be required in T&T's organization and operations if it is to manage efficiently a sophisticated network expected to be over five times its current size by the year Over the years, the Bank has consistently recommended greater autonomy for T&T as a means to improve its management. This is particularly important as T&T embarks on an ambitious expansion and modernization program. 48. In May 1985 the Government created a Deregulation Commission to make recommendations on, inter alia, establishment of an autonomous government corporation for telecommunications. The Commission, headed by the Governor of the State Bank of Pakistan, recently submitted its recommendations to the Government. While no decision has yet been taken, once it has, the Government will consult with the Bank on the mechanism, timetable, and technical assistance required to implement the changes. In the meantime, the Government and T&T are firmly committed to improvements in T&T's organization, management, and efficiency. Toward this end, T&T has established a Fundamental Planning Unit and has agreed with the Bank on the broad responsibilities the Unit would have. Staffed with professionals representing a variety of technical, economic, financial, and planning skills, it would be assisted by local and internationally recruited experts. 49. The Unit would prepare T&T's technical strategy and promote the introduction of modern systems in a balanced fashion. A traffic engineering sub-unit would ensure optimal usage of the network to enable T&T to increase its revenues. The Fundamental Planning Unit would update T&T's Master Plan and plan for rehabilitation of the existing system. The Unit would also prepare performance indicators covering a wide range of physical, productivity, financial, and service quality criteria. The Government has agreed with the Bank on tentative indicators for all four years of the project and definite targets for the first year. T&T would report to the Bank each December 1 and June 1 on its actual performance against the indicators. The Bank and T&T would review this performance by April 1 each year and reach agreement on necessary corrective measures and the next year's performance indicators.

21 The Unit wouid also define TV's human resource development policy and make plans to meet T&T's personnel and training requirements. To a large extent, TV's ability to transform itself into a strong, independent institution will depend on recruitment and motivation of appropriate, qualified personnel. While the introduction of digital technology will permit substantial reductions in the ratio of staff to telephones, it will also require highly skilled personnel. Existing training capacity is underused because of a staff perception that training is not relevant to their work, and the facilities and courses are inappropriate for T&T's future needs. Consultants, financed by the UNDP (from the International Telecommunications Union) and the Bank, would assist T&T in designing appropriate career development and training programs. 51. The Unit would devise a medium- and long-term financial plan for T&T. For this purpose, it would draw upon the work of an economic sub-unit which would make studies of T&T's operations and investment program. The Sub-unit would also review the telecomunications tariff structure to enable T&T to recommend optimum tariffs to the Covernment (see para. 60). Terms of reference for consultants to assist the Fundamental Planning Unit in all aspects of its work would be submitted to the Bank by October 31, 1986 and they would be employed by March 31, Project Costs and Financing 52. Total project costs are estimated at US$817.2 million with a direct foreign exchange component of US$411.5 million and an indirect foreign exchange component of US$50.7 million. Estimated local expenditures include customs duties of US$161.3 million (TMT is exempt from taxes on local goods and civil works). Physical contingencies of 5% for local and foreign costs of equipment, 10% for local costs of civil works, and 10X for local and foreign costs of services, have been added to the base cost. Price contingencies are based on expected increases in foreign costs of 7.0Z in FY87, 6.8Z in FY88, 6.9% in FY89, and 7.1% in FY90, and local cost increases of 8.0Z in FY86, 7.8Z in FY87, 7.5% in FY88, 7.3% in FY89, and 7.0Z in FY90 Combined physical and price contingencies represent about 14% of base costs (April 1986 prices). 53. The proposed Bank loan of US$100 million would finance about 22% of foreign exchange costs, including about US$8.0 million of the indirect foreign exchange costs. The remaining foreign exchange requirements of the project would be met by the Asian Development Bank (ADB), Japan (OECF), Federal Republic of Germany (KfW), export credits, and the GOP/T&T. The GOP would finance all local costs from T&T's internal cash generation (see para. 46).

22 -17- Procurement 54. Procurement arrangements are summarized below: Procurement Arranteuents (uss million) Component ICB LCB OtheriJ Total DiRital Switching I I (Including Local Manufacturing Plant) I Cables I I I I I (Including Replacement I I I I I and Installation (40.0) (40.0)1 Locally Manufactured I I I SwitchingI (Including Replacement and Imported Material I I I I for CIT and TIP) I (7.0)1117.9(7.0) 1 I I! I I Submarine Cable I I I I I I I ODtica, Fiber Link (18.0)1 I (18.0)1 I ~ ~I I I I Transmission Equiument I I I I (Including RF Channel., I I I I Multiplex Equipment, etc.) I I Satellite Eauipment I Telex Eauipment I I Rural PCOO I Miscellaneous Eauinment I I I I (Including Replacement I I I I I Equipment) (25.5) (3.0) (28.5)1 I I I I I Consultants and TraininQ I I (1-5)1 9.8 (1.5) 1 Land and Buildins I DOMSAXT ) I I I I Data Trans. EquipmentO)3 I I I I I FACs Equipment ) I I I I I PCX Equipment ) I 5.0 ( 5.0) (5.0) 1 Total 88.5 (88.5) (11.5)1817.2(100.0)1 J Includes export credits, limited bidding, negotiated contracts, force account, direct purchase, local competitive bidding, reserved procurement, and procurement financed by other donors (ADB, OECF, UNDP, and fn). 3/ To be procured after bids on a price and terms basis. lote: Figures in parentheses are the mounts financed by the proposed Bank loan. Costs include proportionate contingency provisions.

23 Equipment and civil works totalling US$88.5 million to be financed from the Bank loan would be procured through international competitive bidding (ICB) in accordance with Bank guidelines. Local manufacturers would be allowed a preference of 15% or the import duty, whichever was lower, subject to usual Bank terms and conditions. Contracts for consultant services and training financed by the Bank, totalling US$1.5 million, would be let according to Bank guidelines. Contracts for proprietary items, to be financed by the Bank, totalling US$10 million for spare parts and system expansion would be let following negotiations between T&T and the original suppliers (TIP and CTI). Equipment totalling US$73 million to be financed by ADB would be procured in accordance with its guidelines. OECF would finance US$12 million of foreign supplied telex equipment procured according to its procedures. The UNDP would provide technical assistance (US$3.5 million) for training in accordance with its procedures. A contractor for digital switching equipment (including construction of a local manufacturing plant) (US$112 million) to be financed with mixed credits from KfW (FRG) was selected through international bidding taking into-consideration price and terms. Although this equipment would not be financed by the Bank, since it is central to the rest of the project, as a condition of effectiveness of the Bank loan, the Government would (a) execute a contract for direct import of digital switching for 50,000 local lines and 25,000 nationwide dialling lines and (b) issue a letter of intent for construction and installation of a digital switching equipment manufacturing plant and related transfer of technology. Some additional items would be procured on a price and terms basis (US$12.5 million) and limited bidding or direct negotiation for proprietary items (US$37.3 million). Some proceeds of the Bank loan (estimated to be US$5.0 million) vould be applied to those bids which did not attract good financing offers. In such cases the bid award vould be on the basis of price alone in accordance with Bank guidelines. Local competitive bidding would be sought from private contractors for cable construction (US$10 million) and for buildings (US$21 million). T&T would procure the remaining proprietary items and locally procured items through direct purchase, force account, or negotiated contacts (US$435.9 million). In order to avoid some of the delays incurred by earlier projects, standardized procurement documents will be used which have been reviewed and found satisfactory to the Bank. Prior Bank review of procurement documentation would be required for contracts larger than US$500,000 to be financed by the Bank. Disbursement 56. The proposed Bank loan would be disbursed against: civil works (100% of foreign expenditures and 65% of local expenditures); equipment, materials, and spare parts (100% of foreign expenditures, 100% of local expenditures (ex-factory cost) and 65% of local expenditures for other items procured locally); and consultants and training (100% of cost). All disbursements would be against full documentation. To facilitate disbursement against contracts under US$500,000, the Bank would advance funds into a Special Account opened by T&T in a commercial bank. The initial deposit by the Bank

24 -19- would be US$3.5 million, and an amount equal to about four months expenditures would be maintained in the account in accordance with standard Bank procedures. TMT's Financial Position and Tariffs 57. The breakdown between the Government's equity in and loans to T&T is somewhat unclear. While the distinction has not been critical as long as T&T has been a government department, the situation does undercut efforts to manage T&T as a commercial entity. The Government has agreed that once a decision has been made on T&T's future status, steps shall be taken to define the Government's equity in T&T, the loans from the Government to T&T, and a schedule for repayment of the loans. 58. The large unsatisfied demand for telephone and telegraph services suggests a potential for greater resource mobilization in the sector. However, the GOP has been reluctant to increase tariffs in recent years in view of the extremely poor quality of service (see para. 33). Thus, TUT's tariffs have remained practically unchanged in nominal terms since At the same time, inflation has caused operating costs to rise despite some gains in efficiency. As a result, operating income, in real terms per DEL, has fallen over the past four years. The rate of return on net revalued assets fell from 32X in 1980 to 241 in Even so, T&T has met the tariff covenants under past Bank projects and is expected to continue to do so without major changes in tariffs owing to the increased traffic and revenues which would arise from the additional equipment provided under the ongoing and proposed projects. Nevertheless, to ensure continued satisfactory financial performance, as under the ongoing project, assurances have been received that T&T would maintain a rate of return of at least 10X on net revalued fixed assets in operation. 59. After accounting for debt service and the return on government equity, T&T's contribution from net internal sources to capital expansion is expected to average about 52% over the project period, which is satisfactory. T&T has since FY76 consistently generated internally sufficient funds, before government retention, to cover its operating and investment requirements and produced substantial surpluses for the Government. This situation is expected to continue despite the magnitude of the proposed investment expenditures. Nevertheless, assurances have been received that in each year, self-generated cash as a percentage of the rolling average of the local currency requirements (about 43% of the total) of the investment program for the current year and subsequent year would be no be less than 100%. In view of T&T's healthy surpluses, the more significant assurance is the one discussed in para. 46 regarding the level of the investment program and annual budgetary authority. 60. A tariff review carried out in 1983, in accordance with a commitment under the fourth project, focussed on tariff rates in comparison to other countries and failed to provide a comprehensive review of the structure of

25 -20- T&T's rates. However, as a result of this review, telex rental fees were increased by about 20% in March All other tariffs have remained essentially unchanged since 1980, although the Government recently announced a very small increase in the rate for local calls effective JuLy 1, While the review made recommendations regarding differential rates for offpeak hours and for STD long distance calls versus operator-assisted calls, such changes cannot be introduced until the toll ticketing equipment and additional transmission capacity have been installed under the ongoing project. The Bank and the Government agree that the timing of overall tariff increases in rates should be considered in the context of the broader discussion of domestic resource mobilization in the course of our macroeconomic dialogue once some improvements have been made in telephone service. At the same time, given the substantial benefits to be derived from optimization of the system through a more appropriate tariff structure, it was agreed that the proposed economic sub-unit, to be established within T&T (para. 51) would complete a tariff structure review: (a) with terms of reference satisfactory to the Bank agreed by September 30, 1986; (b) review the progress of the study with the Bank by March 31, 1987; (c) submit the final study to the Bank by December 31, 1987; and (d) discuss the study recommendations with the Bank and apprise the Bank by March 31, 1988 of its tariff restructuring measures and a timetable to implement them. 61. While technological advances are required before the structural tariff changes can be introduced, this is not the case with regard to rupee collection rates for international calls - which have remained unchanged since As a result of devaluation of the rupee, international calls placed from Pakistan are now billed at rates about 302 below the full accounting rates which establish the amount T&T must pay to foreign telecomrmunications entities. While T&T still generates a foreign exchange surplus of about US$70 million a year because more international calls are received than made in Pakistan, this surplus is likely to be reduced if rupee billing rates are not brought in line with the international rates. Consequently, the Government has agreed to adjust the international billing rates not later than December 31, 1986 so as to produce revenues equal to the notional revenues which would be produced by application of the accounting rate calculated at the current exchange rate between the rupee and the Gold Franc (the currency used in internationally agreed rates); and, thereafter, periodically to review and, if necessary, adjust the billing rate. Billing and Collection 62. While T&T has been criticized by subscribers for its inaccurate bills, the technological advances under the ongoing project should improve this situation. Collection rates for private subscribers, with receivables at just over two months, are good. However, receivables for services rendered to the Government equalled over seven months of billing at the end of FY85. Consequently, assurances have been received that (a) as a condition of effectiveness, T&T's receivables from the GOP as of June 30, 1985 would be

26 -21- reduced by 20X and (b) such receivables would be reduced to 150 days by June 30, 1987 and to 90 days by June 30, Benefits and Risks 63. The majority of the proposed investments in long distance, nationwide dialling, international and telex facilities would benefit business and government subscribers. However, the provision under the program of new subsidiary routes, rural exchanges, and public call offices would mainly benefit currently unserviced rural areas. During the project period (FYB7-90), T&T would be ezpected to generate a fiscal surplus for the government of about Rs 10 billion (US$600 million). Subsequently, traffic increases resulting from the Fifth Project would be expected to result in substantial higher resource mobilization thereafter. Additional potential exists for increased mobilization of resources through efficiency gains (due to institutional improvements) and higher tariffs. 64. The rate of return calculations are based on UT's entire FY84-90 investment program, although the proposed project would cover only FY On the basis of projected incremental expenditures and revenues generated from the increased numbers of working telephone and telex line" and from reduced long distance and international call congestion, the financial rate of return of the FY84-90 program is about 19%. The program's economic rate of return is 22%. These rates of return understate the benefits from the investment program since no attempt has been made to estimate the consumer surplus for new subscribers or increases in consumer surplus for existing subscribers due to quality improvements. 65. Civen the large unsatisfied demand for telecommunications services, the project offers no significant risk from a possible reduction in economic activity. The technology to be introduced, while quite advanced, has been well tested in other countries, including some with comparable environmental conditions. The main risk would, therefore, be that of inadequate institutional capacity on the part of TUT to implement a program of such magnitude and scope. Concern for this risk was a primary consideration in project preparation and appraisal, and is reflected in the project design. The various management and operational reforms, supported by monitoring of performance indicators, extensive training, and technical assistance, are all intended to reduce this risk. PART V - LEGAL INSTRUMENTS AND AUTHORITY 66. The draft Loan Agreement between the Islamic Republic of Pakistan and the Bank, and the Report of the Committee provided for in Article III, Section 4(iii) of the Articles of Agreement, are being distributed to the Executive Directors separately. Additional conditions of effectiveness would be approval by ECNEC of the all PC-I documents for the project, a reduction by 20% of TT's receivables from the Government as of June 30, 1985, ezecution of a contract for digital switching equipment imports, and issuance of a

27 -22- letter of intent for construction of a digital switching manufacturing plant and transfer of technology. 67. Other special conditions of the project are listed in Section III of Annex III. 68. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. PART VI - RECOMMENDATION 69. I recommend that the Executive Directors approve the proposed loan. A.W. Clausen President Attachments Washington, D.C. June 19, 1986

28 -23- Annex 1 T A a L a 3A Page 1 of 6 PMKISTAN - SOCIAL INDICATORU DATA SKET PAfiStAN REFERENCE GROUP (SEIONTED AVERAGES) I MOST (xmot RgCONT ESTIMATE) fbl RECENT LOW INCOME MIDDLE INCOME 19mobt 7tk ESTINATL ASIA PACIFIC ASIA & PACIFIC ADUITD CENOLLWET RATIOS PRINARTt TOTAL 30.0 * PALi FMALE SICOE DAETs TOTAL MALE FgMALS VOCATIONAL (S0 or5condary) MPUPL-TgACIER RATIO F11IAM 39.0 * SECOUNAY PASSENGR CARB/TEOUSAND FOP * j RADIO UKlEVERSITUOUUAMD POP TV RKCEIVERB/TNOUSANDD POP NEUSPAPER (VDAILT CGNEAL INTERST") CIRCULATION PEE TUOUSAND POPN.ATION CINMA ANNUAL ATTEIDACE/CAPITA /t 2.2 /c total LABOR FORe (THOCS) FEMALE (PERCgNT) ACRICULTURE (PERCENT) INUSTERY (PCRCENT) PARTICIPATION RATEC (PERCET) TOTAL NALE PEMULC CCONOMIC DEPDNCT RATIO INCUS DIDSUtEITCo PERCENT OF PRIVATE INCCUS ucelvzo By EldEST 3t 01 OOSEROLDS 20.3 lk 17.8 URCHEST 20S OP NOUSUOLDS 45.37ki LoGIEsr 201 OF HOUSENOLDS 6.4 7; LOGIST 40* OF UmSENOWLS ; ESTDIATED ABSOLUTE POVEETT INCOME LEVEL (US$ PE CAPITA) URBAN / /c RUR"L o ESTIATED RELATIVE POVEcrY INCOM LEVEL (USS PEE CAPITA) URAN" / /c RDRAL o 7r s8.0f STIMATED POP. BELOW AJSOLCTE POVERnT INICONE LEMVL (I) URBAN /I 32.0 /c URAL rl 29.0o NOr AVAILABL NOT APPLICABLE N O T C S Ia The grop averaes for each Indicator are popalacti-welghted arithtlec asam. Coverag of countrieo amng the indicators depends on evailabilicy of data end la not unitfor. lb Unleso othevise noted, 'Dac for 1960" retor to any year between 1959 end 1961; "Data for 1970" between 1969 and 1971; n4 data for "Moe: Recent Eatiece" betwon 1981 end Ic 1979; /d 1968; te 1977; /f if regiscterd not all practciing in the country; LI 1980; lh 1973; JUNE. 1985

29 SuA flvus*d sq. 01 TOTAL ul3.v Su.3.9 bui.v AGIICLL. PAL J2?.% 'I.3J3.: Annex 1 T A w L ' A Page 2 of 6 PKlSTAN - SOCIAL ISItCATOU D4TA 5MET1 PAKIlTAJI LIFrERC GRUPS (WtEIINHU AbERAGLII 10 PCI'? ImiblT 09LENt msiuiatli lb swbo6lb Jb RVECLINT LO INCt MIDDLEu 1itCUM EISU btatl 14! AMIA E ACClIl- lat. rasifvl 0W PER CAPITA (URS.... iyu.j VIa :ual. ZR cn"s""rton CAPITA (KILLiu.s iff 2l_..7*.:.ALE%TI 9s. lj j :S.7 'ib. PCPUATION MD VITAL STATISTICS POPULATluN*qJ r-vear ITHOLSA-DS; '13SOS.: to& O URlA PUULATUIN (I.1 r T)ThL) 22.1 ' S9 POPULATION PNDJLCTIONS POPLULATION IN YEAR 2UtOO (NILLI l33.: SATAIONANY POPULATION (HILL) POPULATION ClINTUn 1.9 POPULATION DENSITY PEN SO. KM. S.J V PER SO. KM. ACGI. LAD 2fl ^ IS91.2 POPULAT ION ACE SIRLCTURE 1l) 0-1i ki4s & Jmd 1l-b. IRS 31.1 S0.S bs ASD AUVL ' Z...J 3.3 VOr'LATtQ6 CGRtfTh AtAL 1.) rttal 2. :.-I 3.0 2LU A. u035t &.4 &.0 *.4 * CRUDE BlRTH ATE (ER TNOCS) *I.4 A.b 4* Iu.: CRUDE DE.ATh SATE (PER THOUS) R V.6 GROSS REPRODUCTIOl- RATE I.Y FAMILY PLANSI.4 ACCEPTORS. ANNUAL TIrOL'S) c USERS 1S OF M ARRIED WOMN) *-.0 Id PM SAM NITRT lo.itoex OF FOOD PROD. PER CAPITA I IOul 9.0 U l1e.., 12'.. PER CAPtTA SUPPL-Y OF CALORIES (% OF RtEOUIttEIENTS) Iu'.0 1W PRCTEIIS (CRAMS PER DAYI 53.0 SH *0.1 e0.3 OF WHICH A1IIMAL AND PULSE /a CHILD (ACES I-_ fe4th RIATE t PALS1 LIFE EXP.CI. AT BIRTH (YEARS) 43.1 ' e0.5 beu. ISYANT MOkT. RArE (PLEA flras) &.9 ACCESS TU bafl watlr irop) TOTAL *. 21.U j *.u CIN e RURAL *- ' b 37.1 ACCESS TO EXCRETA 0ISPOSAL (2 of OPLLA'L?I& TOTAL : UIUi * RUWAL "4.7 POPULATION PV PHYVSICIAN *300.0 It 3&I POP. PEn IRSM14C PERSON d0.0 7F 5H20.0.eS t POP. PER WSPITAL RED TaTAL IE /c trb&% e ; 2z9.1 SSI.' RURAL 223S llewu.o 7e ADIISSIORq PER HOSPITAL REO 'l.a AVEWRE SIZE JF IOSEHOL0 TOTAL 5.. S.3 %.1 /c UR0S a... Ic W11RALS e.u c. AVERAE NO. Jf PESuINS;R0S: TOTAL *.1 2.8l in URuN 3.1 z.7 7. RUtAL s /h. PERCENTACE OF DWELLIICS WITH ELECT. TOTAL !h. RURAL S.9 IW

30 -25- ANNEX I page 3 of 6 DEFINTONS OF SOCIAL INDICATOaS Now Alhough the da tarn foin somro_ nramly judpd te mos suthonutauve ead relmabliti should also be notd thai they may not be untmaiona Il wmpt 1 bam of the lack of standadsd dellamons - concpts md by dilfrfnt countnr in mclletming the data The dat are. nonethele. mwful to dumnb aro of ma_ude, tits trods and characn sai major dlerem betwn coumntrm The rel- p lmpsrh) the maincoutry prompofs subjwtcourtry and 21 a country group with somewhat hilgheraverage income than the coumtry Woupodiemsistooatouytmptfor"High comeoil Exprtu groupwhere M"dWkincome Noreh Africa nd Mudde Ea aschosen beau of tronge coadtukwl Slwum In tie rnce pomp data the aveng am popuaaon weghied anthmetic means for eah indcicor and shown only when majonty ofduecoum to apgomphadan foir Lhat indctor. Sine t coverge ounmtrer among the indctorn depends on tm availability ofdata and s not uniform. cuuon mus be rcied nm reltng averas ofone indter to sneher Ths avrgs am only uwful in comparng the value of one indiator at a time among the country and refne proup. ARtEA (thousnd sq-kmi.) Cudr SeA Rate (perthusadd-number of live btnhs in the year Tera-Total surface amr compniing land area and inland waters; per thousand or mid-year population and 1983 data and 1983 data. Crude Dbeat Rate (per rhadusdj-number of deaths in the year A4gr twd-sinmate of agricultural area used temporarily or per thousand or mid-year population; and 1983 data pennaendy for crops, pasture market and kitchen grdens or to Gross Repredurieu Rune-Average number ol daughters a woman lie faiow and 1982 data. will bear in her normal reproductive penod if she cxpenences present age-specific fertility rates; usually five-year averages ending GNP PER CAPITA (USS)-CNP per capita estimates at current in and market prim cakulated by saue convermon method as World gb Plaming-Aprrs A_uua (theusaadrj-annual num- Dak A ds ( basis): 1983 data. ber of acceptors of birth-control devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignite, Fotdl Plmusg-Uss Urarnimarof-The (perus of perenpetroleum. natural ps and hydro-. nuclear and geothennal elec- tage of married women of child-besnng age who are practicing or tricity) in kilograms of oil equivalent per capita; and whose husbands are practicing any form ofcontraception. Women 1962 data of child-beanng age are generally women aged although for some countres contraceptive usage is measured for other age POPULATION AND VITAL STATISTICS groupstee PtopuIuigu. Mid- Yew (rth_u su-as of July 1; FOOD AND NUTRITION and 1933 data. Indx of Fed Proedani Per Capita (l IO)O-Index of per 1,hm Pepuluim (perce of aeldd)-ratio of urban to total capita annual production of all food commodities. Production population; different definitons of urban areas may affect compar- excludes animal feed and sed for agriculture Food commodities ability of data among countie and 1933 data include primarn commodities (e.g. sugarcane instead of supr; A*saoa Pleejam which are edible and contain nutrients (e.g. coffee and tea are Popsdukon in year 20cm-The projection of population for excluded); they compnse cereals, root crops. pulses. oil seeds. made for each economy separately. Starting with infornation on vegetables. fruits nuts. suprcane and sugr beets livestock, and total population by age and sex, fertility rates, mortality rates, and livestock products. Aggrepte production of each country is based international migration in the base year these paraneters on national average producer price weights; and were projected at five-year intervals on the basis of generalized 1982 data. assumptions until the population became stationary. P-er Capsa Suply of Cevies (pecen ofrq( simeens -comput- Statonary populaion-is one in which age- and sex-specific mor- ed from calorie equivaient of net food supplies available in country tality rates have not changed over a long period, while age-specific per capita per day. Available supplies comprise domestic producfertility rates have simultaneously remnained at replacment level tion. imports less exports. and changes in stock. Net supplies (net reproduction rate - I). In such a population, the birth rate is exclude animal feed, seeds for use in agriculture, quantities used in constant and equal to the death rate, the age structure is also food processing, and losses in distribution. Requirements were constant, and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was estimated on the basis of the projected characteristics of and health considering environmental temperature body weights. the population in the year 2000, and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent for rate to replacment level, waste at household level; 1961, 1970 and 1982 data. Population Monwetum-Is the tendency for population growth to Per Capta Supply of Protein (gras per pyj-protein content of continue beyond the time that replacement-level rertihity has been per capita net supply of rood per day. Net supply of food is defined achieved; that is. even after the net reproduction rate has reached as above. Requiremenis for all countries established by USDA unity. The momentum of a population in the year i is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein, of which IC grams the year t. given the assumption that fertility remains at replce- should be animal protein. These standards are lower than those of ment level from year r onward data. 75 grams of total protein and 23 grams of animal proten as an _p.hsk D average for the world, proposed by FAO in the Third World Food Per sa.knm.-mid-year population per square kilometer (100 hec- Supply and 1932 data. tares) or total arem and 1983 data. Per Ca Preein Supply Ptm AsI! ad Paie-Protein n supply Per sq.km. agrntcutrwa lcd-computed as above for agricultural of food derived from animals and pulses in grams per day; land only and 1982 data and 1977 data. hapuunime Age S iacare (per-cnn-children (0-14 years). work- CAid (es 1-4j Dun Rune (per ahoesmad-number of dcaths of ing age (15-64 years). and retired (65 years and over) as percentage children aged 14 years per thousand children in the same age of mid-year populatioo; and 1983 data. group in a gpven year For most developing countrics data derived P Gpo o from lifc tables: and 1983 data. Ampkue GkwhRae (preee-totd-annual growth rates of total mid-year population for and HEALTH Ptp.fain Growh Race (percesti-leh ---_Annual growth rates Life Erpcany at Ek (yew-)-number of years a newborn of urban population for 19S and data. infant would live if prevailing patterns of mortality for all people

31 -26- AMNEX I page 4 of 6 at the time or of its birth were to stay the same throughout its life; PupN-Leachrr Ratio - prtmar.y. and secondery-total students en and 19S3 data. rolled in primary and secondary levels dividod by numben of IiVat Murhahy Rate (per rhosa_d)-number of infants who die teachen in the corsponding levls. before reachung one year of age per thousand live btrths in a given year; and 1983 data. CONSUMIPTION Awntoav So Wagr (poeet o pt*s. oalld P_sqr Cm (per thosad pepal.oau-pssuenger can comrwal-number of people (total, urban. and rural) with reaonable priw motor can seating less than eight persons excludes ambulacsi to safe water supply (includes treted surface water or ances. hearse and military vehicin. untrted but uncontmnauted w.ter such as that from protected Rdlo Receien (per rhnosau pop.iiaiio)-all types or rceivers boreholes. spnnp and saniuwy wdb) as peeupae of their mpe- for radio broadcasts to general public per thousand of population; uve populations. In an urban area a public rounuin or stardpost excludes un-licensed receivers in countres and in years when located not more than 200 meter from a house may be consird registration of radio sets was in effect; data for recent years may as being within reasonable access of that house. In rural areas not be comparable since most countries abolished licensing. reasonable acces would amply that the houwewife or members of the houselhol do not have to spend a disproportionate pan of the day TVReeiwrs (per u-tv receivers for broadcast in fetching the fai ilys water needs to genl public per thousand population. excludes unlicensd TV Acess to Exr s pei (pertee of peopastim)-eal. _ar. receivers in countnes and in years when registrtion of TV ets was and rmai-number of people (total. urban, and rural) served by in elect excreta disposal as percentages of their respective populations. Newspeper CIcU5Eirad (per th pap.adfish-sihows the aver- Excreta disposal may include the collection and disposal. with or age circulation of -daily general intert newspaper." defined as a without treatment, of human excreta and waste-water by water- periodical publication devoted pnmarily to recording geeral news. borne systems or the use of pit privies and similar installations. It is considered to be -daily' if it appears at lt four times a weck. Prpmlavi per Physiiua-Pbpulation divided by number or practising physicians qualified from a medial school at university level, Cmirna Aumi Aurndse per Cpito per Yew-lased on the number of tickets sold during the year. including admissions to Pepalie per Nwrni Arswr-PFpulation divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses. assistant nurses. practical nurses and nursng uxilbaries. LABOR FORCE Rip.ba.e per Hepdal d-eetarilaw. irsirzu-population Total Labor Ftece (rh.asls)-economically active persons, in- (total, urban, and rurall divided by their respective number of cluding armed forces and unemployed but excluding housewives. hospital beds available in pubbc and pnvate general and specialized students. etc.. covering population of all ages. Definitions in hospitals and rehabilitation centers. Hospitals are establishments varouscounies afe not compambble *nd 1983 dat permanendy staffed by al klet one physicn. Establishments prov- Fe-{ma (Perceur)-Fmnale labor force as percentage of toul labor iding pnncipafly custodial care are not included. Rural hospitals, force. however, include health and medical centers not permanently staffed Agvscue (pcessrc-labor force in farming. forestry, hunting by a physican (but by a medical assistant, nurse. nidwife. etc.) and fishing as percentage of tota labor force and 1980 which offer in-patient acconunodation and provide a limited range data. of medical facilities. Ixhisry (percens.-labor force in mining, construction. manu- AAIWdsUOa pff Hospital hi-total number of admissions to or facturing and electricity, water and ps as percntage of total labor discharges from hospitals divided by the number of beds. force; 1960, 1970 and 1980 data. HOUSING PWuic a Rae IPerc -eeral. m k. MdfeS_-IParticipalion or activity rates are computed as total, male and female labor force Al,-We Size of H.nos aadrarua-a houshld consists fperses per husekemj-eetal. of a group of individuals who wroi share * as percentages of total, male and female population of all ages respectively; 1960, and 1983 data. Thes are bsed on ILOs living quarters and their main meals. A boarder or lodger may or mnay not be ncluded in the household for statistical purposes. participation rates refecting age-sex strucue of the population, and long time trend. A few estimates are from national sources. Areqe Nailer of Pmrom per R.n-t_esal. wham. and raml- E&oailc Dependeny RLat-Ratio of population urnder IS. and Average number of persons per room in all urban, and rural 65 and over, to the working age population (those aged 15-64). occupied conventional dwellings respectively. DweUings exclude non-permanent strictures and unoccupied parts. INCOME DlSTRIBUTION PerceAntae of DwfEnws wth mt m. and alr_- Percente of Toata Diwpsable lam (bah in cas aid MindJ- Conventional dwellings with electricity in living quartme as percen- Accruing to percentile groups of households ranked by total housetage or total, urban, and rural dwellings respectively hold income. EDUCATION POVERTY TARGET GROUPS Adjsred EmoUuuw Raies The following estimates are very approximate measures of poverty Pinarv school. total malr and fetao-gross total, male and levels, and should be interpreted with considerable caution. femal enrollment of al ages at the prinary lvd as percentages of Eimmaed Ahose Pbserty le Lrel (UvS per cypitja)-w respective primary school-age populations. While many countries ad ral-absolute poverty income level is that income lvel consider primary school age to be 6-11 years. others do not. The below which a minimal natritionally adequate diet plus essential differences in countrv practices in the ages and duration of school non-food requirements is not affordable. are reflected in the ratios given. For some countries with universal E ed 5Rel Ie pwve lacew Level (vus= pw ciep J_-arias educatuon, gross enrounent may exceed 100 percent since some a*vd rai-rural relative poverty income level is one-third of pupils are below or above the country's standard primarv-shool average per capita personal incomc of the country. Urban level is age. derived rrom the rural level with adjustment for higher cost of S&condrhy school - toal. male and female-computed as above; living in urban areas. secondary education requires at least four years of approved pn- Estiuated Jhp shman Brle Absolwe eabrty ler Lae (pemary instuction; provides general vocational or teacher training instructions for pupis usually of 12 to 17 years of age: correspondcet)-ba and rail- Percent of population (urban and rural who are -absolute poor." ence course are generally excluded. Vocanonal Enrollsmen rpercent of seconiarsj -Vocational institu- Comparative Analysis and Data Division tions include technical, industrial, or other programs which operate Economic Analysis and Projections Department independentdy or as departments of secondary institutions. June 1985

32 -27- Page 5 of 6 ICONONIC DECVLOPMENT DATA GNP PER CAPITA IN 1983: USS390 /e GROSS NATIONAL PRoDUCT IN 1918M5 Lk ANNUAL RATS OF- GRMO (2. constant oticeo USS billion 1969/ S /l A GUP at market price Gross dnmetic investment * Croea national mving Current account balance Exports of good.. FS Imports of goods, IFS OUTPUT. LAJOS FORCE AND PRODUCTIVITY /83 Value Added Labor Force /c V. A. Per Worker S illion L million S fus S Agriculture Induatry Li Service Total/Average 27, GOVERNNR)T FINANCE Central Government /c Federal Government (" iiml _o_)s of GIP (Rs billion) _ of GOP 19B4/85 LI II98EDLA-194I /85 LL /8i-194/D5 current receipta Current expenditurem _ ZLLQ L3 Current murplus Capit1 expeaditurca jl External amistance (net) MONE, CREDIT AMD PRICES / / (Rs billion) Money and quasi money /L Bank credit to public mector Dank credit to private sector (percentsges or index numberm) Money and quaai money as 2 of GDP Consumer price index (1969/70-100) Annual percentage changes in: Conauser price index Bank credit to public sector Dank credit to private sector I Eased on World bank Atlas methodology and calculated at an average of prices and exchange rates. All other conversiona to dollars in this table are at the average exchange rate prevailing during the period covered. Lb Proviionsl. IC Projection for 1933/84. Does not include unemployed labor force. ad Includes manufacturing, mining, construction and electricity and gas. LI Consolidated revenues and expenditures of Federal and Provincial Governments (excluding Federal-Provincial Government transfers). LE Revised budget data. LK Excluding principal repaymente of foreign loans. Capital expenditures as defined in governueit budget include certain current expenditures also. Not applicable. Not available. January 1986

33 -28- NALANCE OF PAYENITS NUCHODIsE EXPORTS (AV GACING ) 1I " U W815 US$ million I (USS million) Exports of goods, UPS 3, ,241 Raw cotton Imports of goodos "FS b 466 6e79 b6f558 7J05J t 1,021 Cotton yarn *.7 Resource gap (deficit b27-3,172-3,619-3,787 Cotton clotb Eitc Interest payments b2 All other comodities 1l Workers' remittances ,224 2,817 2,737 2,400 Total 2, Other factor payments (net) Uet transfers *..-,.,.,,, a Ilance on current account EITERNAL DENT, DECEIUER 1932 Direct foreign investment Uet IILT borrowing million Disbursements 956 1,302 1, ,219 Amortization ,.. Public debt, includinq guaranteed 9,952.9 Sub-total D Pon-guaranteed privete debt Jj Transactions with IXFfL b U4 Total outstanding.nd disbursed 9,952.9 Other iteos n.e.i. /A Increase in reserves ( ,102 13O -1,035 DENT SERVICZ RATIO ro Lk Gross reserves fend year)lg 1, , Petroleum imports JL ,710 1,410 1,423 1,425 tublic debt. including guaranteed 19.7 Petroleum exports fl Non-guaranteed private debt Total 19.7 RATE OF EXCAGZ I8RDfIDA LENDING (December 1963)(835 million) Through 11y 11J 1972 From Wav Feb MR la USSI - Re USSI - Na Outstanding and disbursed ,256.2 Es I - USS0.21 Re I - US$0.09 Undisburaed Outstanding including mundisbursed ,874.0 From Feb. 16, 1973-Jan. 7, 1982 From July 1981-June j From July 1982-June 1963 /4 From July 1983-June i From July 1934-Jun 19t uss I - Re 9.90 USSI - Rs USSI - Re US1 - Re fssi - Re Re I - USSO10 Rs 1 - US0.095 Rs I - USSO.078 Rs I - USS0.074 Na I - WS0.065 In Provisional. lb honetary statistics of Pakistan have been fully adjusted for demonetized notes, devaluation and revaluation of the rupee, etc. an from June 30, Data for from State Rank sources are not strictly comparable with IMP estiates for earlier years. Ic Including Trust Fund. Id Including net short-tern borrowing and errors end omissions. It Excluding sold reserves of about 1.8 million troy ounces. If Crude and derivatives. JA Non-guaranteed private debt service is negligible. Ih Ratio of actual debt service to exports of goods, non-factor services and vorkera' rmittances; debt service does not include short-ten or IMP charses. Li Effective January the rupee is to be mnaged with reference to a weighted basket of currencies. The sverage exchange rate shown is vis-a-vis USS for the period shown. NDt available. Janary 1986

34 -29- Aitx 11 Page 1 STAT0S OF BANK GROUP OPERAtIONS IN PAZISrAN A. STATENENT OF BANK LOANS AND IDA CREDITS (as of March ) In 6 tk (USS million) Loan/ (Amount net of cancellations) Credit Fiscal Undis- Number Year Purvose uhtk IDA buried 104 loans and credits fully disbursed , T 1977 Punjab Livestock Development Salinity Control 6 Reclamation Salinity Control & Recl. (Mardan) Third WAPDA Power Third Highway lc 1981 Vocational Training c 1981 Grain Storage B'c 1981 Agricultural Research c 1981 On-Farm Water Management c 1982 Industrial Development (IDBP 11) Fourth Telecomunication Fertilizer Industry Rehabilitation Reservoir Maintenance Facilities Agricultural Dev. (ADBP V) Fifth Sui Northern Gas Pipelines /c 1982 Irrigation Systems Rehabilitation /c 1982 Baluchistan Minor Irrig. & Agr kc 1982 Technical Assistance kc 1982 Eleventh Railway Project /c 1983 Lahore Urban Development kc 1983 Population kc 1983 Coal Engineering kc 1983 Karachi Water Supply kc 1983 Fourth Drainage kc 1983 Agricultural Development (ADBP V) Refinery Engineering Project Petroleum Exploration Second Toot Oil and Cas Development Industrial Investment Credit kc 1984 Industrial Inveatment Credit /c 1984 Integrated Hill Farming Development kc 1984 Second Technical Assistance kc 1984 Comniand Wster Management kc 1984 Second Small Industries kc 1985 Left Bank Outfall Drain - Stage kc 1985 Baluchistan Agricultural Extension Fourth WAPDA Power kc 1985 Second Primary Education kc 1985 Second On-Farm Water Management Energy Sector Loan Petroleum Resources Joint Venture Fifth VAPDA Power ld 1986 Industrial Investment Credit /d 1986 Industrial Investment Credit /d 1986 Karachi Special Development Total , ,615.1 of which has been repaid Total now outstanding ,254.5 Amount sold 30.0 of which has been repaid Total now held by Bank and IDA: 1_ Total undisbureed /s The status of the projects listed in Part A is described in a separate report on all Bank/IDA financial projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. /b Excludes the disbursed portion of loans and credits wholly or partly for projects in the former East Pakistan which have now been taken over by Bangladesh. kc IDA Credits under the 6th and 7th Replenisboents are denominted in SDRa. The principal and non-effective Credits are shown in US$ equivalent at the time of negotiations. Disbursed amounts are computed at the exchange rate applicable on the transaction dates. Undisbureed mounts are valued at the exchange rate applicable on the date of this statement. 7d Not yet effective.