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1 Document of The World Bank FOR OFFICIAL USE ONLY Report No: PK EMERGENCY PROJECT PAPER ON A PROPOSED GRANT IN THE AMOUNT OF US$ 18.0 MILLION UNDER THE MULTI DONOR TRUST FUND FOR KHYBER PAKHTUNKHWA, FEDERALLY ADMINISTERED TRIBAL AREAS AND BALOCHISTAN TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR A KP SOUTHERN AREA DEVELOPMENT PROJECT September 28, 2012 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 Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective September 19, 2012) Currency Unit = Pakistan Rupee = US$1 FISCAL YEAR July 1 June 30 AAA ACS ADB CAF CDD CEIG CPS CSO DA DCO DG DNA EDO- CDD EIG EIRR ESA ESFP ESMP ESSAF EU FATA FM FR FY GDP GoP GPS ICT IDP Analytical and Advisory Activities Additional Chief Secretary Asian Development Bank Crisis Analysis Framework Community Driven Development Clustered Economic Interest Group Country Partnership Strategy Civil Society Organization Designated Account District Coordination Officer Director General Damage and Needs Assessment Executive District Officer for Community Driven Development Economic Interest Group Economic Internal Rate of Return Environment and Social Assessment Environmental and Social Focal Points Environmental and Social Management Plan Environmental and Social Screening and Assessment Framework European Union Federally Administered Tribal Areas Financial Management Frontier Region Financial Year Gross Domestic Product Government of Pakistan Global Positioning System Information Communication Technology Internally Displaced Person ABBREVIATIONS AND ACRONYMS IRR ISR IUFR KP LGERDD M&E MDTF NCRD NGO O&M ORAF PaRRSA PARD P&D PCNA PIU PKR PMU PPP PPCP PSC SAR TA UNDP USAID WB Internal Rate of Return Implementation Status and Results Report Interim Unaudited Financial Report Khyber Pakhtunkhwa Local Government, Election and Rural Development Department Monitoring and Evaluation Multi Donor Trust Fund National Center for Rural Development Non-Governmental Organization Operation and Maintenance Operational Risk Assessment Framework Provincial Reconstruction, Rehabilitation and Settlement Authority Pakistan Academy for Rural Development Planning and Development Post Crisis Needs Assessment Project Implementation Unit Pakistan Rupee Project Management Unit Public-Private Partnership Public-Private and Community Partnership Project Steering Committee South Asia Region Technical Assistance United Nations Development Program United States Agency for International Development World Bank Vice President: Country Director: Sector Director: Sector Manager: Task Team Leaders: Isabel M. Guerrero Rachid Benmessaoud John Henry Stein Shobha Shetty Tahira Syed and Chukwudi Okafor 2

3 PAKISTAN KP Southern Area Development Project (KP-SADP) CONTENTS Page A. Introduction... 6 B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project... 7 C. Bank Response: The Project D. Implementation Arrangements E. Appraisal of Project Activities F. Key Risks and Mitigating Measures G. Terms and Conditions for Project Financing Annex 1: Detailed Description of Project Components Annex 2: Results Framework and Monitoring Annex 3: Summary of Estimated Project Costs Annex 4: Operational Risk Assessment Framework (ORAF) Annex 5: Financial Management and Disbursement Arrangements Annex 6: Procurement Arrangements Annex 7: Implementation and Monitoring Arrangements Annex 8: Project Preparation and Appraisal Team Members Annex 9: Environmental and Social Safeguards Framework Annex 10: Economic and Financial Analysis Annex 11: Documents in Project Files Annex 12: Statement of Loans and Credits Annex 13: Country at a Glance Annex 14: Maps

4 PAKISTAN (KP-SADP) EMERGENCY PROJECT PAPER SOUTH ASIA REGION Basic Information Country Director: Rachid Benmessaoud Sector Manager/Director: Shobha Shetty / John Henry Stein Team Leaders: Tahira Syed and Chukwudi Okafor Project ID: P Expected Effectiveness Date: Oct. 31, 2012 Lending Instrument: Multi Donor Trust Fund Sectors: Water, sanitation and flood protection 40%; Public Administration, Law, and Justice 20%; Health and other social services 20%; and Agriculture, fishing, and forestry 20%. Themes: Participation and civic engagement 50%; Conflict prevention and post-conflict reconstruction 20%; Rural services and infrastructure 20%; and Other rural development 10%. Environmental category: B Expected Closing Date: June 30, 2015 Project Financing Data [ ] Loan [ ] Credit [ X ] Grant [ ] Guarantee [ X ] Other: MDTF Source Total Project Cost: Multi Donor Trust Fund: Borrower: Other: Total Project Financing Financing Plan (US$m) 3 Total Amount (US $m) Client Information Recipient: Islamic Republic of Pakistan Responsible Agencies: KP Secretariat Contact Persons: 1. Saleem Khan, Secretary Planning and Development Government of Khyber Pakhtunkhwa, Peshawar Telephone No.: (091) salim959@gmail.com 2. Aurangzeb Khan, Secretary Local Government, Election & Rural Development Local Government, Elections and Rural Development Department (LGERDD) Government of Khyber Pakhtunkhwa, Peshawar Telephone No.: (091) Faiz Muhammad Khan, Project Director Southern Area Development Project

5 Local Government, Election and Rural Development Department Government of Khyber Pakhtunkhwa, Peshawar Telephone No.: (091) and Estimated disbursements (Bank FY/US $m) FY 2012/ / / /16 Annual Cumulative Project Development Objective and Description Project development objective: To strengthen the capacity of the poor to improve their livelihood options through access to social and productive infrastructure using participatory approaches in the selected southern districts of Khyber Pakhtunkhwa province. Project description: The proposed project seeks to address the recovery and rehabilitation needs in three (3) districts in the Southern KP province i.e. Dera Ismail Khan (DIK), Tank and Lakki Marwat, which are adversely affected by the crisis. The project components include: Component A: Community Development Support: This would include facilitating communities to mobilize into economic interest groups at village and district levels; develop their capacities, provide advisory services and input support; and finance a communications and knowledge program. The output of this capacity building and planning process will be a community action plan (CAP) on which consensus has been reached with members of clustered economic interest groups. Component B: Community Driven Investment Program: This component includes three subcomponents that focus on providing the targeted communities with: (i) social infrastructure; (ii) on-farm and off-farm productive infrastructure for agriculture and its subsectors; and (iii) provide asset building support for poorest groups. The component will lead to empowering the communities and households in creating economic opportunity for self-reliance activities. Component C: Project Implementation Support: This component would include providing capital and incremental operating costs for implementation of the project; technical assistance for quality delivery and impact assessments including functional reviews and third party monitoring; and a functional and well-communicated complaints handling system. Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) [ X ]Yes [ ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No 4

6 Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) Does the project require any exceptions from Bank policies? Have these been approved by Bank management? Conditions and Legal Covenants: Description of Condition/Covenant KP Government to adopt an Operations Manual for Components A and B of the Project. KP Government to implement the Project in accordance with the Operations Manual. KP Government to establish a Project Steering Committee. KP Government to complete staff hiring and training. KP Government to ensure the key positions of Project Director, EDO- CDD and Facilitators are filled with qualified staff and are retained for the life of Project. KP Government to maintain a Project Management Unit within the Local Government, Election and Rural Development. KP Government to prepare Annual Work Plans and Budget for the Project by no later than April 30th of each year. Project to be implemented pursuant to the safeguard instruments (namely, the ESSAF and the Project ESA). Recipient and KP Government to avoid any involuntary resettlement KP Government to incorporate the Project in to the PIFRA system. [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ X ] No [ ]Yes [ ] No Date Due Condition for Bank approval Within one (1) month after signing of legal agreements Within three (3) months of negotiations Throughout Project implementation Throughout the Project. First annual work plan and budget within one (1) month after signing of legal agreements Throughout Project implementation Within nine (9) months after signing of legal agreements 5

7 PAKISTAN KP SOUTHERN AREA DEVELOPMENT PROJECT (KP-SADP) EMERGENCY PROJECT PAPER SOUTH ASIA REGION A. Introduction 1. The Regional Vice President (RVP) of the World Bank agrees to provide a GRANT under the KP/FATA/Balochistan Multi Donor Trust Fund (MDTF) in an amount of US$ 18.0 million to Pakistan for a KP Southern Area Development Project (KP-SADP). 2. The proposed GRANT would help finance the costs associated with the recovery and rehabilitation needs in the Khyber Pakhtunkhwa (KP) province as a result of the militancy crisis. It will help support the Government of KP respond to the crisis in affected areas by financing investments for community development activities, basic services and small scale productive infrastructure. The project will be implemented by the Local Government, Election and Rural Development Department (LGERDD) of KP in collaboration with line departments and the respective local administrations. 3. The KP-SADP, will cater to the economic rehabilitation needs of local communities in KP as identified by the Post Crisis Needs Assessment (PCNA) prepared by the Government of Pakistan (GOP) with support from Asian Development Bank, European Union (EU), the World Bank (WB), and the United Nations (UN) and formally issued in October The Bank is targeting its interventions through a Multi Donor Trust Fund (MDTF) established for KP, FATA and Balochistan. The MDTF became operational in August 2010 and now represents pledged commitments of $140 million. The MDTF Steering Committee (comprising representatives of the Federal and Provincial Governments and FATA, ten donors to the MDTF, and the advisory group) endorsed the Strategic Framework, including its four pillars: (1) Restoring Damaged Infrastructure and Disrupted Services; (2) Improving Local and Provincial Service Delivery; (3) Supporting Livelihoods and Creating Job Opportunities; and (4) Capacity Building and Institutional Strengthening. The guidance from the Steering Committee focused primarily on ensuring speed in preparation and implementation of the projects; working with a results framework; seeking the most strategic uses of the MDTF as a funding mechanism, and ensuring adequate communications within the Steering Committee and with the beneficiaries. 4. The proposed project will finance recovery and rehabilitation needs, under the World Bank s Operational Policy 8.0, in three (3) districts in southern KP province i.e. Dera Ismail Khan (DIK), Tank, and Lakki Marwat which have been adversely affected by the crisis. The selection of these districts is based on several factors including: (i) prevailing low human development indices even before the onset of the militancy crisis (all three districts are amongst the poorest 25 districts in the country); (ii) proximity to the Tribal Agencies of FATA (in particular the South Waziristan Agency that is under ongoing military operation); and (iii) all three districts were recipients of the largest number of Internally Displaced People (IDPs) that left the Tribal Agencies during the military operation in The proposed project is not co- 6

8 (%) financed by other multilateral or bilateral agencies. However, project activities, will be closely coordinated with other donors that participated in the PCNA. B. Emergency Challenge: Country Context, Recovery Strategy and Rationale for Proposed Bank Emergency Project Country Context 5. The northwestern region comprising KP and FATA has consistently been one of the poorest parts of Pakistan. Both areas lag behind other provinces on a wide range of social and economic indicators, with the lag even more pronounced when viewed through a gender lens. Illiteracy rates are as high as 68 % for women and 33% for men, respectively. The estimated GDP growth for KP was already slowing in the period leading up to mid-2009, declining to around 3 percent in 2007/8, compared to 4.2 percent for Pakistan. KP has also consistently experienced far higher rates of unemployment than the rest of the country (see Figure 1 below 1 ). The absence of visible progress contributes to a widely-held perception that existing government institutions lack either the interest or capacity to meet the basic needs of the population. Figure 1: Trends in Unemployment Rates across Provinces 14 Figure 2: Trends in Unemployment Rates Across Provinces 1992/ / Punjab Sindh NWFP Balochistan / / / / / /08 Note: NWFP is the former name of KP province. 6. The unemployment amongst young men aged is in particular a matter of concern as this is the main resource pool for militant recruitment. Young men generally lack access to capital and other avenues to productive livelihoods. The KP and FATA region hosts among the largest demographic segments of unemployed youth in the country. This age group of young men was particularly exploited as the most critical human resources pool for rank-and-file militants. In the absence of substantial competitive economic alternatives, financial incentives 1 Post-Crisis Needs Assessment,

9 were provided by the militant groups to sway many young men to join their forces. As illustrated in the Table 1 below 2, the stipend for a legal, well-paying unskilled job is half as much as the typical militant stipend offered by these elements. Table 1: Income Comparisons for Young Men 7. Acute development disparities create an environment conducive to conflict. Although economic backwardness, low human development and relative poverty do not by themselves give rise to violence, they do provide the underlying structural conditions that militant groups can exploit to achieve their goals by promising better opportunities and hope for social justice and equity. In a permissive environment that provides few economic options (other than the illicit economy), militants' prospects for success are greatly enhanced. The selected southern districts of DI Khan, Lakki and Tank are predominantly rural with poor infrastructure, an acute shortage of basic services, lack of economic opportunities and serious governance issues that collectively fuel the crisis. Large sections of the population still lack access to electricity, clean drinking water and sanitation facilities. Even where rudimentary facilities exist, service levels are barely functional. The three districts identified for implementation under this project are amongst the poorest 25 districts in the country with poor human and social infrastructure and development indicators even before the onset of the militancy crisis. 8. Agriculture and livestock are the dominant economic sectors, but unemployment, especially among young men, is very high. Unemployment among young men aged years is 10.5 percent in KP and dramatically higher in tribal areas as compared to the settled districts. The ranks of the unemployed rose as the crisis intensified in 2009/10, and continue to rise. Militant groups offer economic incentives for potential recruits that greatly outweigh alternative available options, thus drawing them into the conflict. Many people depend on the black economy drug trafficking and criminal activity to survive. Over time, militant groups have become increasingly active in the region, and pushed further east across the settled districts of KP into Swat. 9. In early 2009, the Government of Pakistan (GoP) launched major military operations in the KP-FATA to eliminate the local pockets of militants. The conflict has imposed a huge economic cost, on top of the obvious human tragedy. The crisis affected areas constitute 15% of the combined area of KP and FATA, are home to about 18% of the population, and account for some 17% of the value added. The military operations led to significant damage to physical infrastructure and services while displacing some 3 million people. While the 2 Information provided by communities and other stakeholders during consultations held as part of the PCNA. 8

10 majority of the internally displaced persons (IDPs) have returned to their places of origin, many have lost their homes and livelihoods. Those who stayed behind have suffered equally and tend to be just as poor and vulnerable as the IDPs The existing social structures in the KP largely comprises of Jirga which is often seen as contributing to the local informal decision making and resource distribution system. While the Jirga (traditional village councils of elders) upholds the traditional Pashtun Wali (code of life), at time it assumes a self-acclaimed authority as a dispute resolution mechanism and is subject to elite capture by local influential elements. Nevertheless, the existence and wide-spread acceptance of the traditional Jirga system makes it an essential stakeholder for outreach to rural and often remote communities in the region. Also, this system provides an obvious entry point to community participation as it has the convening power for rallying communities around issues of common concern e.g. local development and access to social service delivery structures. The Jirga has also played an important role in the response from local communities to infiltration by the militancy elements. The Jirga led Lashkar (combat groups of local men) were formed to partner with the law enforcement agencies in gathering intelligence as well as carry out boundary patrolling of the local villages during the crisis. The government (federal and provincial) recognizes the contributions made by the Jirga system in restoring government s writ in many parts of KP and FATA. While the development contribution from Jirga is yet to be fully explored, there is a broad acknowledgement of the existence and potential for this system to promote participatory approaches for local and remotely located communities. 11. Local/decentralized systems for service delivery existed in the form of 2001 Local Government Ordinance, which is currently suspended and a modified form of decentralized governance structure has been approved by the Provincial Assembly but is yet to be implemented. In whichever shape or form this system comes, it is critical for effective and participatory governance for building peace and gaining the trust of citizens and for ensuring that the government priorities are focused on the wishes of the electorate. The development planning, while it continues in the KP, will require clarity and strengthening of the role of local governments in the province as soon as these are formally announced by the Government. 12. Consultations with different stakeholder groups have informed the project preparation process. These groups included community representative groups from the selected districts, local opinion makers and district administration officials. Separate consultations were held with a representative group of women from the local areas. The key feedback from the stakeholder consultations included: (i) there is consensus on community driven process for development in these areas; (ii) there is a need for prioritizing activities that directly improve economic status of the households; (iii) agriculture and livestock are key activities of the local communities and the focus of this project should remain on building opportunities for economic growth in these sectors; (iv) the agriculture and livestock sector development should be looked at in a holistic manner where on-farm and non-farm production cycles are also developed along value chain approaches; and (v) given the large development gap in the selected districts, social 3 Based on the household survey data analysis reported by Food Security and Market Assessment in Crisis Affected Areas of KP and FATA, World Food Program,

11 service delivery including health, education and water and sanitation should also be included in the program. Government Response and Partnership Arrangements 13. The impact of conflicts spurred the GoP and donors to respond in helping KP and FATA rebuild infrastructure, livelihoods, and governance structures. The GoP requested emergency World Bank support to address the effects of this conflict. This emergency operation will support community development activities including reconstruction /rehabilitation of selected priority infrastructure and livelihood development program. 14. The GoP was quick to initiate the rapid post-crisis recovery and reconstruction efforts in collaboration with international and national humanitarian agencies. In 2009, the GoP asked the Asian Development Bank (ADB) and the World Bank to jointly conduct a Damage and Needs Assessment (DNA) to ascertain the impact on various sectors and local communities. Since the beginning, donor support has been coordinated by the Planning Commission at the Federal Level, while, the Provincial Rehabilitation, Reconstruction and Settlement Authority (PaRRSA) was established to coordinate and implement these initiatives for both KP and FATA. The Assessment covered the areas first affected by the GoP s action to combat the militants In view of the complex nature of the crisis and in order to address the root causes that lead to the crisis in a sustainable manner, GoP also requested development partners WB, the ADB, the United Nations Development Program (UNDP), and the European Union (EU) to jointly prepare a PCNA covering post crisis transitional/stabilization, medium term transformation/institution building, and consolidation/development periods. The PCNA, completed in 2010, assessed and quantified the short- and medium-term social and economic needs of the region. Recognizing the need for a harmonized approach to respond to the crisis, the GoP asked the Bank to administer the MDTF for the recovery and rehabilitation of the crisis affected areas of KP, FATA, and Balochistan. 16. The PCNA provides the underpinning for long term peace building in affected parts of the KP province. Drawing on extensive stakeholder consultations, the PCNA identifies key crisis drivers and the consequent priority areas that need to be addressed to support a coherent and durable peace-building strategy. These have been organized into four strategic objectives related to political and governance reform, employment and livelihood opportunities, provision of basic services, and efforts for counter-radicalization and reconciliation. 5 The KP-SADP responds to the Strategic Objectives 2 and 3 of the PCNA. 17. The proposed Project supports the government s strategic objective to enhance growth in rural on-farm and non-farm sectors to generate employment, ensure income diversification and reduce poverty; as well as improve productive capacity and access to services to achieve sustainable livelihoods. This will be achieved by increased organization and inclusion of the poor 4 Four districts in KP: Swat, Upper and Lower Dir, Buner, Shangla; and two agencies in FATA: Mohmand, and Bajaur. 5 The key strategic objectives of the PCNA are: (i) enhance responsiveness and effectiveness of state to restore citizen trust; (ii) stimulate employment and livelihood opportunities; (iii) ensure provision of basic services; (iv) counter-radicalization and reconciliation 10

12 including women, youth, disabled and ultra-poor households in community institutions and their (a) enhanced participation in economic activities, (b) skill enhancement for taking-up higher value employment, (c) increased asset base to improve productivity and incomes, and (d) improved infrastructure and market linkages. The Project has mainstreamed gender into its objectives and design. The Project will provide financial support to the recovery of subsistence and commercial agricultures (inputs, rehabilitation etc) for livelihoods as well as its long term restructuring to build growth and employment. 18. The primacy of agriculture and livestock in employment and livelihoods is maintained in the KP province. Being predominantly an agrarian economy (approximately 79%), the livelihoods in almost all parts of KP are largely based on agriculture and livestock. The PCNA consultations emphatically identified these sectors as the most critical in restoring employment and livelihood opportunities across the region. In KP agriculture accounts for 22% of the provincial GDP, but almost 44% of the employment in the province. Some 80% of the population relies upon agriculture for a large part of their income 6. Since many men work away from home, a large number of women are also engaged in agricultural activities although often without access to the associated extension and support services. Due to the agro-climatic conditions prevalent in the region, the rural economy is mainly pastoral with agriculture practices in valleys and two distinct farming systems i.e. irrigated and rain-fed. In arid areas, livestock hold more importance for livelihoods than cropping. In these areas, households keep up to 3 cows/buffalos, 5-8 sheep or goats, and 6-10 poultry. Women maintain an important role in caring for the livestock as much of their income derives from this. During the consultations, clear priority was placed on quick revival of agriculture through replacement of basic lost asset such as livestock, feed, seeds, fertilizers and farm tools. Equal importance was accorded to facilities for basic agriculture support services including advisory services, access to rural finance, extension services e.g. animal health and fruit, forest and fish nurseries with interventions geared to the needs and requirements of specific agro-ecological areas. Additionally, given that most farmers in KP have small plots of less than 5 acres (2 ha) of land with a few livestock, the KP- SADP design is conceived to respond to the needs of these farmers. In areas, where good land and water resources are scarce, agriculture cannot provide income and employment without associated interventions. Some level of skill development for better employment of youth from these areas would directly contribute to remittances for sustained livelihood and prosperity. C. Bank Response: The Project Brief Description of Bank s Strategy for Emergency Support 19. The proposed Project is in line with the Bank s operational policy OP/BP 8.00 and addresses the key challenges of restoring and creating systems for basic service provision in southern districts KP that were adversely affected from the crisis. KP-SADP is adapted to the emergency's particular circumstances as also reflected in the Bank s Country Partnership Strategy (CPS), which recognizes that conflict and insecurity represent major obstacles to economic development and poverty reduction. It contributes to the CPS objectives under Pillar 3: Improving Infrastructure to Support Growth and Pillar 4: Improving Security and Reducing the Risk of Conflict. 6 NWFP (renamed as KP) Economic Report,

13 20. In response to the DNA and PCNA, the World Bank has established and is administering an MDTF that will finance critical investments in support of reconstruction and peace building in the crisis affected areas. It finances stand-alone, flexible projects or program activities, including those co-financed by the government, bilateral or multilateral agencies 7. In the first phase, the MDTF has US$ 140 million in pledges from ten donors: Australia, Denmark, Finland, the EU, Germany, Italy, Turkey, UK, USA and Sweden. 21. In addition to the US$18 million allocated from the MDTF to support the livelihoods and community infrastructure rehabilitation the Bank has also approved the KP and FATA Economic Revitalization project (US$20 million), which aims to create employment opportunities and sustainable jobs for the people of KP and FATA. Additionally, the Bank has approved the KP and FATA Governance Support Project (US$ 6 million), which aims to improve the delivery efficiency of the PCNA program through institutional strengthening and support of the KP and FATA, while responding to priority needs of the PCNA governance program. The GoKP has also prepared the Revitalizing Health Service in KP (US$ 16 million) to improve the availability, accessibility and delivery of primary and secondary health care services at the district level in six crisis (militancy & floods) affected districts of KP. Additionally, the KP Roads Project (US$ 8 million) has been launched and another KP Value Chain project (US$ 9 million) has been approved by the MDTF Steering Committee. 22. The Bank continues to provide advisory support, critical for the success and sustainability of the overall response to the crisis. This includes sharing best practices in terms of institutional arrangements to ensure the best possible delivery mechanisms and sound governance arrangements including tracking of fund flows, procurement practices, grievance mechanisms, and monitoring and evaluation systems, to ensure accountability and transparency. Rationale for Proposed Bank Emergency Project 23. The KP-SADP supports the government s strategic objective to strengthen on-farm and non-farm income generating activities for the southern most districts of the KP province. These districts are characterized by poverty and poor development indicators and faced the brunt of militancy crisis. A large population of the internally displaced persons (IDPs) arrived in these districts and further burdened the limited economic and natural resources available to the local populations. The KP-SADP directly responds to the needs of the local population for improved productivity through sustainable livelihoods in the agriculture and associated sectors. The project also makes a conscious effort to reach out to the ultra-poor including women, youth, disabled and elderly households by providing asset building intervention and promoting their participation in economic activities with skill enhancement for the youth. The KP-SADP operation will support the financing and implementation of three main components designed to transfer financial and technical resources to the beneficiary groups in: (i) Community Development Support; (ii) Community Driven Investment Program; and (iii) Project Implementation Support. 24. The use of the Community Driven Development (CDD) approach in implementation of KP-SADP as an option for development assistance is well-placed, given good results and strong 7 The priority financing areas of the MDTF are (i) restoration of damaged infrastructure and disrupted services; (ii) local service delivery; (iii) provincial governance and service delivery; (iv) livelihoods; (v) capacity building and (vi) institutional strengthening. 12

14 experience with this approach in Pakistan 8 and the South Asia region. In particular, there are strong examples of successfully using CDD approaches in post-conflict and fragile contexts 9 where funds are channeled to the communities who democratically decide on their priority development plans and manage implementation of these through village/community councils that are supported through training and technical assistance by local governments and civil society. Strategic Choices 25. The main strategic choices made in project design include the following: a. Appropriateness of CDD approaches for demand based development: The PCNA identifies the significance of CDD approaches in enabling the local communities demand services while self-identifying the sequence and quality of services needed as part of their development process. However, while CDD approaches contribute to the self-determination of development priorities for communities, these need to be complemented with additional interventions that directly enable communities to become aware of and exercise their rights and voice. In doing so the communities are increasingly able to hold the government s delivery mechanisms accountable for delivering demanded services and with adequate quality. The higher level objective for this project will provide the complementary interventions of training, technical assistance and participatory monitoring for inclusive development. b. To restore citizen trust in government: The PCNA identified citizens lack of power and, voice and the poor access to basic services as constraints to peaceful co-existence and conflict. The CDD approach used in this Project will empower the poor to effectively organize themselves to access the goods and services that meet their needs and immediate priorities. This approach will ensure accountability in delivery of services at the provincial and district levels through broad-based participation by the poor in the strategies and decisions that affect them. The Project s Facilitators will enable the Economic Interest Groups (EIG) to contribute towards improved governance, institutions, and policies so that provincial and district governments, NGOs, and the private sector can respond to community demands. c. To improve livelihood opportunities: The Project will support productive activities, technical assistance and investment in assets and advisory services identified by communities as relevant to generation of higher incomes and better livelihoods. d. To promote socially-inclusive and community-based approaches: Integration of social inclusion and community-driven principles has proven to be cost-effective, responsive to local priorities and effective in reducing conflicts within communities. This proven approach 10 has demonstrated that the key to promoting investments that bring both private profitability and public benefits is to empower people to take charge of their development, improve governance, and enhance security of the poor. 8 The Community Infrastructure Project phases I and II used the CDD approaches for strengthening local government systems and making these responsive to the demands and priorities identified by the communities. 9 For instance the National Solidarity Program in Afghanistan, which since 2003 has used CDD approaches to channel more than US$ 1 billion in funds. 10 For example: Brazil (Parana and Santa Catarina), China Loess Plateau, Fadama II, and Afghanistan (NSP). 13

15 e. Sustainability issues what would be left behind : The investments in building strong social capital is intended to contribute towards citizen-state trust building. For achieving this intended higher level objective, the quality of social capital being developed through the community development support needs to be maintained. It is these Economic Interest Groups (EIGs) that are likely to evolve into micro and medium enterprises that can tap into the rural finance and micro credit programs being offered by other projects/programs (e.g. Economic Revitalization and PPAF etc.). Investing in building a sound capacity, for both exercising their voice and complying with adequate level of fiduciary performance, would be critical in enabling these EIGs graduate into bank-able enterprises that are at an advanced level of achieving their livelihoods objectives beyond this Project. Additionally, given the limited funds available, care would be needed in village selection process to avoid planting the seeds for conflict if some communities feel excluded from Project benefits. The scalability of successful pilots would be prioritized in communities that demonstrate interest but may not be catered in the first phase of this Project. The scale up could be vertical (i.e. covering additional areas in the same location) or horizontal (i.e. additional/neighboring locations). Similarly, the KP-SADP intends to adopt an innovative approach to disseminating information regarding funds flow to the communities with the use of ICT based banking technologies. Lessons from this innovation would directly feed into future programs and follow on projects. Project Description 26. This Project aims to reach the unserved and underserved low income communities in southern districts of KP. Under this Project, implementation will happen in three (3) districts of DIK, Tank and Lakki Marwat in order to concentrate coverage, effectively monitor processes and impacts, and demonstrate the potential of the approach. The selection of these districts is based on several factors including: (i) prevailing low human development indices even before the onset of the militancy crisis (all three districts are amongst the poorest 25 districts in the country); (ii) proximity to the Tribal Agencies of FATA (in particular the South Waziristan Agency that is under ongoing military operation); and (iii) all three districts were recipients of the largest number of Internally Displaced People (IDPs) that left the Tribal Agencies during the military operation in The key principles for Project design are flexibility, scalability and community participation. The Project will directly reach out to the communities at village/settlement levels to create a demonstrable impact of the Project interventions. Based on emerging results from the pilot interventions initiated during implementation, the potential for scaling up vertically and horizontally will be identified. The beneficiary selection process would be informed by the existing data available through the poverty score card completed for the three districts 11. This information is available through the Bank financed Benazir Income Support Program (BISP) and will be used in particular for the asset building support for ultra-poor groups. 28. The Project aims to provide opportunities for livelihood support to vulnerable groups and the poorest households, building social capital in particular, through skill development and organization of youth groups, and delivery of cost effective productive infrastructure. The 11 Poverty Score Card exercise has been completed in all three districts and data is available through the BISP Data Sharing Protocol. Detailed information and the complete Protocol is available at 14

16 Project interventions would be specifically adopted to reach out to vulnerable groups including women, girls, young men, as well as elderly and disable persons. Project Development Objectives 29. The Project responds to the recovery and rehabilitation needs in three (3) southern districts of the KP province i.e. Dera Ismail Khan (DIK), Tank and Lakki Marwat that are adversely affected by the crisis. The Project Development Objective is to strengthen the capacity of the poor to improve their livelihood options through access to social and productive infrastructure using participatory approaches in the selected southern districts of Khyber Pakhtunkhwa province. 30. Key Performance Indicators: The Key Performance Indicators (KPIs) to measure the results and Project impact would include: Support to at least100,000 Project beneficiaries, of which 30% women Change in % of population accessing social infrastructure improved by the Project Change in % of population accessing productive infrastructure and services provided through this Project Process indicators for achieving the KPIs will include: Establish and/or revitalize 1000 Economic Interest Groups (EIGs) and aggregate them into about 200 Clustered EIGs (CEIGs) at Tehsil level At least 80% of CEIGs use participatory planning and implementation (Community Action Plans CAPs) At least 50% of CAPs have established arrangements for community engagement for O&M Summary of Project Components 31. This Project aims to reach the un-served and underserved low income communities in southern KP. The project coverage and monitoring for quick impacts and demonstrative effects is ensured through limiting the implementation to three districts. The Project provides opportunities for livelihood support for vulnerable groups and poorest households and builds social capital in particular through skill development and organization of youth groups, delivery of cost effective productive infrastructure, and capacity building of beneficiaries. Additionally, while focusing on the agriculture and livestock sectors, the Project would also provide complementary investments for extension services (in particular for implementing the components A and B). The Project comprises of following three components: 32. Component A: Community Development Support (US$ 1.5 million): The objective of this component is to help the communities mobilize into Economic Interest Groups (EIGs) and federate at Tehsil level into Clustered Economic Interest Groups (CEIGs). A parallel or advanced Technical Assistance for Implementation Readiness is being procured to: (i) prepare the Operations Manual; (ii) identify and recruit staff (Facilitators and EDO-CDD); and (iii) provide training to all tiers of Project staff ahead of implementation stage. The TA should ideally be 15

17 launched ahead of Project approval and lead up to identification of staff that are selected through a competitive process and are in a ready state after receiving training and understanding of the Project objectives, implementation arrangements and Operations Manual, to begin implementation once the Project is approved and signed. The Component A has following subcomponents: 33. Sub-component A1 Facilitation: The Project would hire and train Facilitators to guide the EIGs and CEIGs to undertake social mobilization, capacity building and community planning process through inclusive transparency, participatory planning process leading to developing Community Action Plan (CAP) which will be the basis on which subproject will be financed. The CAP will comprise at a minimum: (a) an agreed list of priority private and public infrastructure subprojects that are technically and economically feasible, environmentally and socially sustainable, and will contribute towards raising the productivity and incomes of participating EIGs; (b) a list of constraints and opportunities to be addressed through advisory services with respect to enterprise production and marketing; (c) agreed mechanisms for financing the operations and maintenance of subproject investments; (d) a plan for training and building the capacity of CEIGs in financial management, community-based procurement, social and environmental impact screening of subprojects, conflict mitigation and management and other aspects of organization and management of the associations; (e) identification of recipients for an asset building grant if applicable; and (f) an agreed mechanism to manage and resolve conflicts, especially concerning user group rights. 34. The communities in the selected districts of KP have some level of prior knowledge and/or experience in self-organization. There are some community groups at village and higher levels that may already exist although the likelihood is that these may not fully functional and/or may be limited in their scope. The KP-SADP would work to reorganize/revitalize or form new groups with the specific requirement for mutual economic interests. Nevertheless, the quality of facilitation will be important to ensure that the information provided to communities is clear enough to promote participatory planning where priorities are being identified based on community needs and not based on the amount available to them. 35. Sub-component A2 Advisory Services and Input Support: The Advisory Services would be provided to the farmers (organized into various EIGs) and their federations (CEIGs). The Project would provide support to empower EIGs comprising of crop farmers or livestock farmers and other economic affinity based groups, working within their own villages and through their respective CEIGs, to purchase advisory services from both public and private sources. The Input Support would include access to new technology and farm inputs (mainly seeds, fertilizers, farm tools, etc.). The Project would provide training to CEIGs and their constituent EIGs, to equip them to access Advisory Services and Input Support. This training support will also give them the skills and know-how to carry out participatory planning as well as to implement, operate and maintain subprojects. 36. Additionally, the EIGs and CEIGs would be provided with economic mobilization to perform their economic development roles and manage their advisory and enterprise development needs. This would be done through a TA at Tehsil level for the CEIG and individually for EIGs that are more active and are assessed with the potential for evolving into micro-enterprises. Business development service providers would be identified and contracted to 16

18 provide these advisory services for individual EIGs to strengthen know-how (enterprise production) and address market linkage constraints for individual EIGs and help to establish sustainable linkages between them and other actors involved in complementary activities, such as input supply distribution, processing, marketing and credit (in support of possible supply/value chain development). 37. Sub-component A3 Communications and Knowledge Program: The sub-component would also finance a communications and knowledge program to reach the local communities and other stakeholders and will include the use of print and electronic media including FM radio, sensitization meetings, advocacy visits to communities, use of handbills and posters, use of traditional institutions, and use of folk songs, street theatre, cultural displays, etc. The target groups for the communication education program will include community members, opinion leaders and traditional authorities, religious leaders, CBOs, NGOs, district government and councilors, etc. Additionally, managing expectations of communities that are not included in the first round of Project investments would require a clear and well-defined communications and awareness program. 38. Component B: Community Driven Investment Program (US$ 14 million): This component has three sub-components that respond to the social infrastructure, productive infrastructure and addressing the asset building needs of the ultra-poor and most vulnerable groups including women headed households, disabled, elderly, and other socially and economically marginalized groups. A clear distinction between public and private infrastructure would derive from social and productive nature of these infrastructures. The social infrastructure would mostly include public goods e.g. schools, health facilities, water, sanitation, access/feeder roads. Whereas the productive infrastructure has a larger menu that revolves around productive activities leading to livelihood opportunities. A positive list of schemes aligned to the productive nature of infrastructure would be identified in the Operations Manual. In addition, in order to manage expectations there will be clear knowledge available to the communities on the amount available for individual CAPs. A ceiling of US$ 10,000 would be initially set for individual EIG s CAPs. This approach will be reviewed at the first Annual Review stage to assess the effectiveness and introduce any changes if needed. Component B has following subcomponents: 39. Sub-Component B1 Social Infrastructure (US$ 4.4 million): This would include rebuilding, improving and/or developing social service infrastructure. The Project would finance social infrastructure identified in the CAPs that are public-good subprojects for example minor repairs of local schools, feeder roads, culverts, bridges, drifts and stock routes, boreholes (with or without pumps), community health facilities, potable water supply facilities, rural electrification, community water storage tanks, etc. 40. Sub-Component B2 Productive Infrastructure (US$ 8.2 million): This sub-component would operate on an open menu and provide infrastructure as engine of economic growth in the affected communities. The Project would finance small scale physical and socio-economic infrastructure, income-earning assets and extension service-type subprojects. In addition, subcomponent will also cater to provision of one to three key infrastructures that may be a collective demand for the selected districts for instance inter-districts link roads, etc. But most of the subprojects will revolve around livelihood related activities in the agriculture and livestock 17

19 sectors with on-farm and off-farm activities. The examples may include vocational training/skill development centers, community grain storage facilities, community agro-processing facilities, cattle trough, small to medium irrigation schemes, resting points (along stock trading routes), livestock water pools, etc. Additionally on-farm technology improvement such as solar convergence of water pumps, drip and sprinklers for small scale irrigation, agricultural machines (power tillers and processing equipment e.g. maize shellers, oil press, rice thresher, drying platforms, fruit processing/packaging equipment, etc.) would be financed. 41. Sub-Component B3 Asset Building for Ultra-Poor (US$ 1.3 million): This would focus on specifically addressing the development needs of the ultra-poor and most vulnerable groups in the targeted villages, particularly groups not covered by the government safety net programs. Emergency assistance to vulnerable groups would include re-acquisition of lost asset e.g. home/shelter or income source (livestock, poultry, etc.). The objective would be to relieve the stress from the vulnerability in order for these groups to regain their lost assets and rejoin the economic activities. The assessment of vulnerability and guidelines for categories of asset related subprojects will be specified in the Operations Manual. 42. Component C: Project Implementation Support (US$ 2.5 million): This component would include: (i) project management through establishing an efficient, effective and responsive entity for successful Project implementation at the provincial, district and sub-district level; (ii) development of a communications strategy together with a governance and accountability framework to ensure that adequate and appropriate mechanisms are in place to monitor and support Project implementation; and (iii) development of an effective monitoring and evaluation system that will take regular stock of Project performance and inform any course correction. Additionally, this sub-component would explore introduction of new/innovative approaches for community-government partnerships. Examples of these innovations may include introducing ICT-based technologies for monitoring and community O&M. 43. Detailed description of each component is provided in Annex 1. D. Implementation Arrangements 44. The KP-SADP will have a dedicated Project Management Unit (PMU) for overall implementation and management of this project. The detailed implementation arrangements are as following: 45. Provincial Level Project Management and Coordination: The Local Government, Elections and Rural Development Department (LGERDD) of the Government of KP (GoKP) will be the main implementing agency for this Project. The Project Management Unit (PMU) will be housed in the LGERDD. The PMU would be headed by a Project Director and would also have dedicated staff available for overall management, coordination and fiduciary compliance for this Project. A provincial level Project Steering Committee chaired by the Additional Chief Secretary would provide overall decision making and policy guidance for Project implementation. 46. Facilitation: The Facilitators will be hired with preference for candidates who are locally based from within the same communities where Project implementation takes place. These 18

20 Facilitators would comprise men and women (preferably in equal numbers, but flexibility is kept in view of local cultural norms). The Facilitators would be hired by and report to the PMU and EDO-CDD. Primarily these Facilitators would be responsible for identification and formation of EIGs, CEIGs and development of CAPs. 47. District Level Project Implementation: The District Coordination Officer (DCO) would be the de facto project manager at the district level. A new position of the Executive District Officer for Community Driven Development (EDO-CDD) would be created. This position would report to the PMU and under the administrative reporting of the DCO, the office of the EDO-CDD would serve as the secretariat of the District Review Committee (DRC). 48. District Review Committee (DRC): The DRC is established by the PMU, with the assistance of project-supported Facilitators. The DRC would be chaired by the DCO and the EDO-CDD would be the Secretary of this Committee. The DRC would include representatives from key line departments including agriculture, livestock, irrigation and works and services. A key aspect of the DRC would be the community representation. At least two traditional or community leaders designated by the Clustered Economic Interest Groups would be members, one of which would also serve as the deputy chairperson of the DRC. 49. Clustered Economic Interest Groups (CEIGs): This would be an apex organization of economic interest groups which derive their livelihood in the communities within the Tehsil. CEIGs are entities created for the Project and will be registered according to existing local and district laws. They identify, prepare, implement, operate and maintain their subprojects, assisted by Facilitators and technical specialists whom they contract either through the relevant district sectoral departments or directly, and through technical assistance and training made available by the PMU. 50. Economic Interest Groups (EIGs): These are the primary beneficiaries of the Project. The size of an EIG may be between 5 and 10 households and as such, may comprise from 40 to 80 individuals. The EIGs may be comprise of members from existing groups of farmers or community organizations or may be formed anew where no groups exist. 51. Project Implementation Procedures: The Project will adopt a phased approach to implementation of CAPs and associated subprojects. Whether or not a CAP will be multi-year or annual and/or across villages/tehsils is an issue that will be resolved using participatory approaches to describe the socioeconomic setting of the community and the social-mapping, construct the livelihood profiles, identify the relevant technical, physical, environmental, and institutional constraints, leading to the development of a set of proposals designed to overcome these constraints. The first batch of subprojects is expected to include relevant details in terms of subproject sites, scale, and detailed design and cost estimates. This approach will give flexibility in the implementation of the Project allowing for continuous adjustments in response to change in production, market, or policy environment, thereby contributing towards achieving the PDO. 52. Overall implementation of the Project will be done according to detailed procedures defined in the Operations Manual. A user-friendly Operations Manual has been prepared and will be made available to the CEIGs. 19

21 53. Details of implementation and monitoring arrangements are provided in Annex 7. Eligibility for Processing under OP/BP The main reason for the application of OP/BP 8.00 in this context is the urgent operational support needed for peace building efforts, including the preservation of human and social capital through economic reintegration of crisis-affected population. Although Pakistan cannot be considered a typical conflict-affected country, several aspects of the ongoing situation in the northwestern areas require a rapid response as the one provided by the proposed Project. The volatile nature of the situation in the KP and FATA areas makes it difficult to predict when conflict might resume. Military efforts by the Pakistan forces against the militants may have helped to break the militant hold over some of the areas. This in turn would have a positive effect on overall regional security by facilitating a number of mutually reinforcing initiatives, including peace building initiatives. Given the significant inflow of IDPs back to their communities, a timely response to the Government s request for support is clearly warranted. The application of BP 8.0 is appropriate given the clear link that the Project would contribute to overall peace and security in the region through addressing the recovery and rehabilitation needs as well as improve livelihoods and services in selected districts. Consistency with MDTF Administration Agreement 55. The KP-SADP is supporting the counterparts in executing activities outlined in the MDTF Administration Agreement, such as restoring livelihoods of local communities through access to productive assets and skill development opportunities as well as restoring and developing rural infrastructure. As an administrator of the Trust Fund, the Bank is providing technical advice to, and coordinating capacity building activities for KP Government. Consistency with Country Partnership Strategy 56. The Pakistan CPS for FY10-13 recognizes that conflict and insecurity represent major obstacles to economic development and poverty reduction. The proposed Project is fully aligned with the CPS and contributes to the objectives under Pillar 3: Improving Infrastructure to Support Growth and Pillar 4: Improving Security and Reducing the Risk of Conflict. Under these pillars the CPS considers that addressing the longstanding economic deprivation and social inequities among the population in the northwestern region is critical to dealing with conflict as well as avoiding conflict relapse. The Project therefore has a strong focus on rehabilitating as well as developing rural infrastructure and associated services. The Project also addresses the strategic priority of increased responsiveness and effectiveness of the state. Lastly, the capacity building of various public sector departments in KP is envisaged to directly contribute to one of the expected outcomes of CPS, i.e. Strengthened capacity and strategic reform of governance institutions under Pillar 4. Expected Outcomes 57. The overall Project goal is to create livelihood opportunities through providing infrastructure and associated services for the rural population. The KP-SADP would support this outcome through rehabilitation and provision of rural infrastructure affected or damaged by the conflict, as well as new infrastructure identified by the local communities. The Project would 20

22 support Economic Interest Groups (EIGs) to plan and prioritize their development needs through a participatory process. This would strengthen the community-based planning and implementation processes in the region while ensuring that local communities remain in charge of their own development agenda. The community driven approach would also ascertain involvement of women and other marginalized groups. The agriculture and livestock based livelihoods would be strengthened also through a community oriented demand-and-participation process. Rehabilitation of infrastructure including water and sanitation, irrigation, and agricultural inputs is envisaged to support the economic growth of the region that is essentially an agro-economy. 58. The Project, on the whole, would indirectly enhance the capacity of the KP Government to take on community driven and demand based livelihoods and infrastructure provision in Southern KP, and address the issues of trust-deficit in state s capacity for service delivery and citizen interaction with government for demanding quality services. E. Appraisal of Project Activities Technical 59. The Project will make full use of community infrastructure design guides prepared under other Bank funded projects in the region. Designs, technical specifications, and procurement documents will be prepared by experienced staff of the government supported by independent evaluation of quality of design. Civil works will be constructed to established national standards, and supervised by experienced consultants. Since the actual number and type of infrastructure would be driven by communities own priority setting, the productive infrastructure component remains an open menu with a positive list of schemes that can be financed through this Project. Where applicable, the technical design for schemes would be prepared and evaluated by the line departments. The third party monitoring arrangements together with community participation would ensure quality. It is expected that most, if not all, works shall be of a nature that can be resourced locally by the communities. 60. Given the overall CDD approaches adopted for Project implementation, the technical soundness of social and productive infrastructure support, would require a well-functioning and well-communicated Grievance Redressal Mechanism (GRM). The GRM would be designed on the principles of raising awareness on the Project objectives, the interventions designed there in (eligibility, selection criteria, process flow, and positive lists, etc.). The GRM will adopt ICT based tools with service standards for tracking complaints, processing time included. Economic and Financial Analysis 61. The Project would support demand driven physical investments, likely to have significant economic benefits for the population, as well as strengthen local institutional systems. A straightforward economic analysis of the Project is not presently possible as investments in infrastructure and services under the Project are not a-priori known. Nevertheless, since the schemes will be initiated and supported by the local communities, experience in similar interventions shows that desired benefits in social uplift, institutional strengthening, and economic impacts on the community will likely be high. Some of the expected economic 21

23 benefits of the agriculture sector that may result from the community driven schemes may include: (i) increased operating efficiency at farm level (through improvements to production and marketing process, logistics and market institutions), (ii) extended value addition at farm and/or post-farm level with greater integration between producers, traders and processors along the value chains and (iii) increased market access and reduction in economic losses due to inadequate storage capacity and for management. Financial Management and Disbursement Arrangements 62. The Project FM Risk is assessed High that will be reassessed once the designed implementation arrangements are in place. The PMU will have the primary responsibility for maintaining the appropriate financial management system whereas EDOs CDD and EIGs will also have the financial management responsibility. The budget preparation process will be governed by the GoKP s rules and regulations and annual budget of the Project will be a part of GoKP s annual development budget. A segregated Designated Accounts (DA) in US Dollars will be established and disbursements will follow the report-based principle. DA will be operated by the PMU and disbursements will be based on quarterly Interim Financial Reports that will be submitted to the Bank within 45 days of the close of the quarter. A revolving fund advance equivalent to 3 months budgeted expenditure will be allowed to EDOs CDD for administrative expenses that will be replenished quarterly. Grants to EIGs will be transferred directly by PMU to their bank accounts on the basis of DRC approval. PMU will make a corporate level agreement with a commercial bank to provide banking services to the EIGs. PMU will initially maintain manual books and National FMIS will be implemented within 9 months of effectiveness. EDOs CDD and EIGs will maintain manual Cash Books and will prepare simplified periodic reports. Project financial statements will be prepared using Cash Basis IPSAS and will be audited by the Auditor General of Pakistan. Audited financial statements will be submitted to the Bank no later than 6 months of the close of the financial year. The designed Project implementation arrangements contain a strong internal control framework that includes Operations Manual, Financial Management Manual, Third Party Monitoring and Internal Audit. Procurement Arrangements 63. Procurement for the proposed Project would be carried out in accordance with the World Bank s Guidelines: Procurement Under IBRD Loans and IDA Credits dated January 2011; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated January 2011, as well as the provisions stipulated in the Grant Agreement. The general description of various items under different expenditure categories are described in Annex 6. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are to be agreed between the Recipient and the Bank Project team in the Procurement Plan. This plan is yet to be developed. The Procurement Plan will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. A General Procurement Notice is not envisaged to be published as no contracts subject to international competition are identified. 22

24 64. There is a component of livelihood support which envisages the use of funds for community based interventions in works and goods. The selection criteria for the beneficiaries (community groups or individuals) is agreed and documented in the project papers. Environmental and Social Safeguards Social Aspects: 65. Inequality, social exclusion and deprivation are some of the social development challenges that face the target areas, and the knowledge of these challenges informed the design and operational relevance of this Project. The Project design ensures that the voices of different economic interest groups including users groups that are traditionally marginalized by gender, income, age, religion and class are fully heard and that their interests are reflected in the CAPs and in all Project activities. The social guidelines in the PIM will ensure that vulnerability is addressed in subproject targeting, and that elite capture is prevented. 66. Broad-based participatory and extensive consultative process with stakeholders at both the provincial, district and community levels including representatives from public, private, nongovernmental, and representatives of beneficiary communities have provided much of the information used for the design of the Project. The key result of public consultations with stakeholders showed that communities are highly sensitized and are capable of organizing themselves to address risks to community welfare. It is envisaged that public consultation would be an on-going activity throughout the entire Project cycle. 67. In light of the scope of works, which comprise rehabilitation of existing social infrastructure such as roads, schools, and health centers, and establishment of small-scale productive physical and socioeconomic infrastructure, income-earning assets, and extension service-type activities, the risks of triggering negative social impacts in the project areas are minimal. Further, OP4.12 on Involuntary Resettlement is not triggered as the project does not anticipate any involuntary land acquisition. While the project footprint remains to be determined during the course of project implementation, the project anticipates that land requirement for sub project activities, however small, will be met through voluntary land donation through direct purchase using the principles of willing-buyer willing-seller. As part of the subproject selection process, the screening will include an assessment of whether there are potential land acquisition and/or involuntary resettlement issues. All such sub-project locations requiring involuntary land acquisition shall be avoided without compromising the project development objectives. The screening checklists and the selection criteria will be fully explained in the Operations Manual along with procedures for documenting voluntary contribution in the form of land. 68. In accordance with OP8.0, the Bank team had already prepared an Environmental and Social Screening and Assessment Framework (ESSAF) that would govern safeguards screening and compliance activities during and under the MDTF s implementation, which will be applied in this Project as discussed and agreed with the client. 69. To ensure effective application of the World Bank s safeguard policies and the national regulatory requirements, the ESSAF provides guidance on the approach to be taken during the selection and design of projects/subprojects and the planning of mitigation measures, specifically 23

25 it contains guidelines for land acquisition and resettlement planning as well as involuntary resettlement screening checklist to be used to ensure social safeguards compliance of Project activities. Further, all proposed operations are subject to resettlement impact screening. If any resettlement impacts are expected to occur, OP4.12 is to be triggered; and Resettlement Plans (RPs) for specific subprojects are to be prepared and approved before initiating the civil work. This Project has followed this approach. 70. The Environmental and Social Assessment (ESA) of the Project prepared by the KP Government in accordance with the above-mentioned ESSAF includes an Environmental and Social Management Plan (ESMP) setting forth measures to address the adverse environmental and social impacts of the subprojects. Compliance with the ESA is a legal requirement under the KP-SADP. Further, each subproject under the Project is required to be screened for potential environmental and social impacts and where needed subproject specific ESMPs are to be prepared to mitigate any potential adverse social and/or environmental impacts. Environmental Aspects: 71. Rebuilding/improving of social infrastructure, constructing/establishing productive infrastructure, and asset building for ultra-poor under the Component B of the Project may potentially cause negative environmental and social impacts, such as changes in land use and landform, soil erosion, water and soil contamination, air quality deterioration, damage to natural vegetation, and safety and health hazards for workers and surrounding population. However, most of these impacts are not likely to be irreversible, wide-spread, or unprecedented, and can be addressed with the help of appropriately designed and effectively implemented mitigation plan. Therefore the Project has been classified as Environment Category B, in accordance with the WB Operational Policy No other safeguard policy is presently triggered. However, further clarity and confirmation on safeguards policies would be sought during implementation for instance, if agriculture inputs support is being provided, which may lead to the need for developing a pest management plan. 72. To address the potentially negative environmental and/or social impacts associated with the projects under MDTF, the Bank has prepared an Environmental and Social Screening and Assessment Framework (ESSAF), in accordance with the OP 8.00 for emergency operations. Since the KP SADP is being proposed under MDTF, ESSAF is applicable to it also. A summary of ESSAF has been given in Annex 9. The ESSAF has been shared with the Government of KP (GoKP). It has been disclosed locally by the GoKP on March 28, 2012 and also at the World Bank s InfoShop on the same date. 73. In accordance with ESSAF requirements, the GoKP has prepared a Project-specific Environmental and Social Assessment (ESA). The ESA identifies the negative environmental and social impacts that are likely to be caused by the Project during its various phases, and proposes mitigation measures to address these impacts. The ESA also proposes the institutional arrangements to manage the environmental aspects of the Project, lists environmental monitoring requirements to ensure the effective implementation of the mitigation measures, identifies staff training needs, and also specifies the reporting and documentation requirements. All subproject investments will be subject to environment and social screening as per ESA study at the design stage. The adverse environment and social impacts associated with the subprojects will be 24

26 mitigated through the ESMPs developed under ESA for the related subproject. The ESA has already been sent for Bank s clearance, and will be disclosed locally by the GoKP on its website as well as on the InfoShop of the World Bank after the clearance. Lessons Learnt and Reflected in Project Design 74. The Bank has extensive experience in supporting CDD operations in post-conflict situations in the region 12. Some key lessons from these operations that apply to this Project are the following: Government commitment and ownership for rebuilding peace is critical for success of interventions that are directed towards impacting the quality of life for population returning to their communities after the conflict/crisis. An active role by the government is also critical for ensuring rebuilding of citizen-state trust that gets impacted as a consequence of conflict. This needs to be reciprocated by communities becoming able to demand quality services from their government and exercise self-organization and voice to ensure that development process is transparent and accountable. Promoting community participation generates greater ownership amongst local population for taking charge of their own development in a post-conflict situation. Motivation and sensitization of staff of implementing agencies in a gainful participation in project activities is one of the key ingredients for successful project performance and sustainable capacity building. Flexibility and scalability of design in post-conflict situation are important parameter for achieving intended results. The project design should be flexible with all components closely aligned with the PDOs with specific mechanisms to quickly reflect on what is working well and hence could be scaled up. Implementing projects in environments that are highly insecure need to have a flexible design and use locally trusted organizations to allow changes in approach. Monitoring for quick impacts in a post-conflict environment is critical. The re-construction efforts should target interventions that yield quick returns, with appropriate attention to putting in place basic building blocks to support transition from emergency recovery to medium to long term reconstruction and development. Alternatives Implementation Arrangements Considered and Proposed Arrangements 75. CDD approach versus government s regular programs involving communities in development planning and implementation may be a long drawn process with higher risks associated then is the case for government s program delivery. On the other hand, the persisting weak capacities and inability of government programs being designed on the bases of actual needs, renders CDD an appropriate mechanism of delivery for this Project. 12 E.g. Afghanistan NSP, Sri Lanka Gemi Dirya, Nepal PAF, etc. More recent examples include the India North East Rural Livelihood Program, launched in

27 76. Direct fund flow versus indirect Fund flow while involvement of District administration in managing funds for onwards disbursements to the community groups (CEIGs/EIGs) may strengthen the District government s role working directly with communities, this fund flow may create administrative issues and delays in funds disbursements. Instead identifying a clear role of the District administration in oversight, review and approval process ensure that their buy-in is maintained in the Project implementation while communities receive funds in the most direct and timely manner from the PMU. Bank Implementation Support and Monitoring Arrangements 77. Given the prevailing security situation in the Southern Area of the Khyber Pakhtunkhwa Province, the access to the intervention areas will be limited for World Bank staff in supervision. Adoption of alternative arrangements for implementation supervision, in particular for field monitoring and verification arrangements would be essential, and to be developed during the implementation depending on the evolution of the security level. A Project supervision plan would be developed which outlines the role of the PMU and of possible external independent parties for field supervision (i.e.: the third party to be involved not only in the evaluation, but also on the regular M&E and in monitoring specific aspects such as the impact on livelihoods). The supervision and monitoring arrangements for KP-SADP would include the following: Annual Review missions that will consist of detailed review of implementation progress of all components as well as Project management quality including fiduciary and safeguards compliance, implementation of Operations Manual and lessons learnt during implementation that require any adaptation in implementation strategy. The outcome of the Annual Review will provide the basis of the subsequent Independent Assessment and Joint Government/World Bank project performance and implementation progress to be used for re-planning the Project activities and intervention packages over the remaining Project life; re-allocation of funds where necessary; and re-designing Project approaches and implementation modalities, if required, as an input into the scaling up of the Project in other districts. Regular implementation support and supervision mission by the World Bank team every six months or more frequently if required visits to the KP Secretariat at Peshawar or Islamabad. Participatory M&E with community and beneficiary involvement through surveys, community scorecards, Project feedback fora, interactive case study, etc. and restitution of the M&E analysis to the beneficiaries. Well defined complaint handling system, which is widely communicated. Involving neighboring Universities or other parties in data analysis as Progress Review Partners; youth and student could collaborate on data collection for scientific purposes, too. 26

28 Independent third party evaluation for quality assurance and cross evaluation, for midterm and final evaluations. The tasks of asset verification, quality control of works and supervision of all investments will be the responsibility of the Project and the MDTF s Monitoring Agent will complement through sample based monitoring. Use of ICT based technologies including Global Positioning System (GPS) enabled cameras for geo referencing and cellular devices/smart phone technologies for monitoring quality and physical verification of all Project interventions. In addition, process monitoring will be an important area given the CDD nature of this Project and to capture evidence that the voices of the vulnerable and ultra-poor are included. 78. At the project level, the overall responsibility for M&E is assigned to the Project Management Unit (PMU). The M&E comprises of one dedicated Deputy Director at PMU in Peshawar with three M&E officers at District levels. The Facilitators will have the responsibility of M&E data collection at household level; they will interact with beneficiaries and ensure their inclusion in the M&E system, through data collection and communication of reports and analysis through appropriate tools. Community participation in M&E will be ensured through the EIGs and CEIGs. Communications Strategy 79. The communications and knowledge (CK) strategy will address three elements critical to meeting the Project Development Objective. First, it will help re-establish trust between the people and their government, which the PCNA identified as a critical deterrent to recovery, by establishing channels for dynamic communication among community members, government officials, NGOs, and the private sector. Second, it will create informed actors among the Project stakeholders to facilitate transparent management and informed decision-making at the community, cluster, district, and Project levels. Finally, the strategy will provide the technical knowledge necessary for creating and managing high quality investments with maximum impact at the community level. Each component will have its own particular focus: In Component A, each district will have a communications campaign targeting the broad population in the Project area to explain the Project, its goals, and processes (the rules of the game ). The Project will establish and notify the target population of feedback mechanisms for queries and grievances including how to access the system and service standards (expected response times). A training plan for social mobilization and Project sensitization has been prepared to facilitate stakeholder participation at all levels of Project implementation. Component B will add communications relevant to achieving quality in subproject investments e.g., technical, managerial, market, etc. This would include personal technical assistance, materials reinforcing messages from training, exposure visits were appropriate, meetings, and media. The focus is to maximize the impact of infrastructure, assets, and services by ensuring high quality and relevance from the outset. 27

29 Component C includes the implementation of the overall CK strategy. This covers dissemination of Project information vision, goals, activities, implementation progress, successes, and lessons to key stakeholders who have an influence on the Project s enabling environment. As part of this, the person charged with communications in the PMU, the EDO-CDD, and communities themselves, will regularly gather good practices, innovations, and lessons learned from problems in subprojects to increase learning within the Project system and understanding of the Project outside of the system. F. Key Risks and Mitigating Measures 80. The KP-SADP is rated as high risk, and therefore the Bank team and counterparts have incorporated mitigation measures in the Project design. While a detailed Operational Risks Assessment Framework will be developed as part of the Project preparation, some key risks include: (i) deterioration in security situation due to which access to some parts of the selected districts may become challenging; (ii) given the remoteness of the some parts of the selected districts, there may be certain areas which would remain far more difficult to reach than others; and (iii) limited access to the districts for supervision and quality assessment. These risks would be mitigated through adopting a sound supervision strategy that includes remote supervision and designing appropriate feedback and communication systems including and effective and wellfunctioning grievance handling system. Additionally, the Project design is based on the premise that not addressing the development deficits in Southern KP poses a greater risk of relapse into crisis. An effective feedback system would also mitigate the risks of misunderstanding or perceived favoritism by the government and managing raised expectations and impatience with delivery delays. G. Terms and Conditions for Project Financing 81. KP-SADP would be financed by a US $ 18.0 million MDTF Grant, with 100 percent disbursement percentage. Retroactive financing will be available against the approved procurement plan for eligible expenditures, incurred on and after May 1, 2012 up to US$ 1.5 million. 82. The closing date of the Project is 30 June

30 Annex 1: Detailed Description of Project Components PAKISTAN: KP Southern Area Development Project (KP-SADP) 83. This project aims to reach the unserved and underserved low income communities in Southern KP. Implementation will happen in three (3) districts of DIK, Tank and Lakki Marwat in order to concentrate project coverage, effectively monitor processes and impacts, and demonstrate the potential of the approach. The selection of these districts is based on several factors including: (i) prevailing low human development indices even before the onset of the militancy crisis (all three districts are amongst the poorest 25 districts in the country); (ii) proximity to the Tribal Agencies of FATA (in particular the South Waziristan Agency that is under ongoing military operation); and (iii) all three districts were recipients of the largest number of Internally Displaced People (IDPs) that left the Tribal Agencies during the military operation in The key principles for project design are flexibility, scalability and community participation. The project will directly reach out to the communities at village/settlement levels to create a demonstrable impact of the project interventions. Based on emerging results from the pilot interventions initiated during implementation, the potential for scaling up vertically and horizontally will be identified. The beneficiary selection process would be informed by the existing data available through the poverty score card completed for the three districts. This information is available through the Bank financed Benazir Income Support Program (BISP) and will be used in particular for the asset building support for ultra-poor groups. 85. The project aims to provide opportunities for livelihood support to vulnerable groups and the poorest households, building social capital in particular, through skill development and organization of youth groups, delivery of cost effective productive infrastructure, and where possible capacity building of local governments. The project interventions would be specifically adopted to reach out to vulnerable groups including women, girls, young men, as well as elderly and disable persons. 86. The KP SADP will therefore support the empowerment of communities to develop, implement and monitor micro productive and social infrastructure subprojects (public and common pool goods); and help vulnerable groups with special Needs to improve their standards of living by increasing their access to well-targeted and effective social care services. Project Description by Components: 87. The project aims to provide opportunities for livelihood support for vulnerable groups and poorest households, building social capital in particular through skill development and organization of youth groups, delivery of cost effective productive infrastructure, and capacity building of beneficiaries. Additionally, while focusing on the agriculture and livestock sectors, the project would also provide complementary investments for extension services (in particular for implementing components A and B). The KPSADP has three major components: 88. Component A: Community Development Support (US$ 1.5 million): The objective of this component is to help the communities mobilize into Economic Interest Groups (EIGs) and 29

31 federate at Tehsil level into Clustered Economic Interest Groups (CEIGs). A parallel or advanced Technical Assistance for Implementation Readiness is being procured to: (i) prepare the Operations Manual; (ii) identify and recruit staff (Facilitators and EDO-CDD); and (iii) provide training to all tiers of Project staff ahead of implementation stage. The TA should ideally be launched ahead of Project approval and lead up to identification of staff that are selected through a competitive process and are in a ready state after receiving training and understanding of the Project objectives, implementation arrangements and Operations Manual, to begin implementation once the Project is approved and signed. The Component A has following subcomponents: 89. Sub-component A1 Facilitation: The project would hire and train Facilitators to guide the EIGs and CEIGs to undertake social mobilization, capacity building and community planning process through inclusive transparency, participatory planning process leading to developing CAP which will be the basis on which project financing will be funded. The CAP will comprise at a minimum: (a) an agreed list of priority private and public infrastructure subprojects that are technically and economically feasible, environmentally sustainable, and will contribute towards raising the productivity and incomes of participating EIGs; (b) a list of constraints and opportunities to be addressed through advisory services with respect to enterprise production and marketing; (c) agreed mechanisms for financing the operations and maintenance of subproject investments; (d) a plan for training and building the capacity of CEIGs in financial management, community-based procurement, social and environmental impact screening of subprojects, conflict mitigation and management and other aspects of organization and management of the associations; (e) identification of recipients for a grant if applicable; and (f) an agreed mechanism to manage and resolve conflicts, especially concerning user group rights. 90. The communities in the selected districts of KP have some level of prior knowledge and/or experience in self-organization. There are some community groups at village and higher levels may exist although the likelihood is that those that may exist in past may have become dysfunctional and/or may be limited in their scope for community development. The KP-SADP would work to reorganize/revitalize or form new groups with the specific requirement for mutual economic interests. 91. Sub-component A2 Advisory Services and Input Support: The Advisory Services would be provided to the farmers (organized into various EIGs) and their federations (CEIGs). The project would provide support to empower EIGs comprising of crop farmers or livestock farmers and other economic affinity based groups, working within their own villages and through their respective CEIGs, to purchase advisory services from both public and private sources. The Input Support would include adoption of new technology by the farmers to enhance their financial capacity to purchase farm inputs (mainly seeds, fertilizers, farm tools, etc.). The project would build capacity of CEIGs and their constituent EIGs, so that they are equipped to access Advisory Services and Input Support. This training support will also give them the skills and know-how to carry out participatory planning as well as to implement, operate and maintain subprojects. 92. Additionally, the EIGs and CEIGs would be provided with economic mobilization to perform their economic development roles and manage their advisory and enterprise development needs. This would be done through a TA at Tehsil level for the CEIG and 30

32 individually for EIGs that are more active and are assessed with the potential for evolving into micro-enterprises. Business development service providers would be identified and contracted to provide these advisory services for individual EIGs. to strengthen know-how (enterprise production) and address market linkage constraints for individual EIGs and help to establish sustainable linkages between them and other actors involved in complementary activities, such as input supply distribution, processing, marketing and credit (in support of possible supply/value chain development). 93. Sub-component A3 Communications and Knowledge Program: The sub-component would also finance a communications and knowledge program to be used to reach the local communities and other stakeholders and will include the use of print and electronic media including FM radio, sensitization meetings, advocacy visits to communities, use of handbills and posters, use of traditional institutions, and use of folk songs, street theatre, cultural displays, etc. The target groups for the communication education program will include community members, opinion leaders and traditional authorities, religious leaders, CBOs, NGOs, district government and councilors, etc. Additionally, managing expectations of communities that are not included in the first round of project investments would require a clear and well-defined communications and awareness program. 94. Component B: Community Driven Investment Program (US$ 14 million): This component has three sub-components that respond to the social infrastructure, productive infrastructure and addressing the asset building needs of the ultra-poor and most vulnerable groups including women headed households, disabled, elderly, and other socially and economically marginalized groups. A clear distinction between public and private infrastructure would derive from social and productive nature of these infrastructures. The social infrastructure would mostly include public goods e.g. schools, health facilities, water, sanitation, access/feeder roads. Whereas the productive infrastructure has a larger menu that revolves around productive activities leading to livelihood opportunities. A positive list of schemes aligned to the productive nature of infrastructure would be identified in the Operations Manual. In addition, in order to manage expectations there will be clear knowledge available to the communities on the amount available for individual CAPs. A ceiling of US$ 10,000 would be initially set for individual EIG s CAPs. This approach will be reviewed at the first Annual Review stage to assess the effectiveness and introduce any changes if needed. Component B has following subcomponents: 95. Sub-Component B1 Social Infrastructure (US$ 4.4 million): This would include rebuilding, improving and/or developing social service infrastructure. The Project would finance social infrastructure identified in the CAPs that are public-good subprojects for example minor repairs of local schools, feeder roads, culverts, bridges, drifts and stock routes, boreholes (with or without pumps), community health facilities, potable water supply facilities, rural electrification, community water storage tanks, etc. 96. Sub-Component B2 Productive Infrastructure (US$ 8.2 million): This sub-component would operate on an open menu and provide infrastructure as engine of economic growth in the affected communities. The Project would finance small scale physical and socio-economic infrastructure, income-earning assets and extension service-type subprojects. In addition, subcomponent will also cater to provision of one to three key infrastructures that may be a collective 31

33 demand for the selected districts for instance inter-districts link roads, etc. But most of the subprojects will revolve around livelihood related activities in the agriculture and livestock sectors with on-farm and off-farm activities. The examples may include vocational training/skill development centers, community grain storage facilities, community agro-processing facilities, cattle trough, small to medium irrigation schemes, resting points (along stock trading routes), livestock water pools, etc. Additionally on-farm technology improvement such as solar convergence of water pumps, drip and sprinklers for small scale irrigation, agricultural machines (power tillers and processing equipment e.g. maize shellers, oil press, rice thresher, drying platforms, fruit processing/packaging equipment, etc.) would be financed. 97. Sub-Component B3 Asset Building for Ultra-Poor (US$ 1.3 million): This would focus on specifically addressing the development needs of the ultra-poor and most vulnerable groups in the targeted villages, particularly groups not covered by the government safety net programs. Emergency assistance to vulnerable groups would include re-acquisition of lost asset e.g. home/shelter or income source (livestock, poultry, etc.). The objective would be to relieve the stress from the vulnerability in order for these groups to regain their lost assets and rejoin the economic activities. The assessment of vulnerability and guidelines for categories of asset related subprojects will be specified in the Operations Manual. 98. Component C: Project Implementation Support (US$ 2.5 million): This component would include: (i) project management through establishing an efficient, effective and responsive entity for successful project implementation at the provincial, district and sub-district level; (ii) development of a communications strategy together with a governance and accountability framework to ensure that adequate and appropriate mechanisms are in place to monitor and support project implementation; and (iii) development of an effective monitoring and evaluation system that will take regular stock of project performance and inform any course correction. Additionally, this sub-component would explore introduction of new/innovative approaches for community-government partnerships. Examples of these innovations may include introducing ICT-based technologies for monitoring and community O&M. Other activities to be funded include equipment, vehicles, operations and maintenance costs, and minor civil works for office rehabilitation at the participating districts. It will finance specialized technical assistance and training of the project staff. 99. Community lead identification, prioritization, decision-making and implementation will remain the guiding province in implanting all parts of the Components A and B. While the detailed village selection criteria based on inclusion and exclusion parameters would be developed as part of the operational plan for implementing this component, the scheme development cycle with various stages is presented in the following process flow diagram for the KP-SADP: 32

34 Scheme Development Flow Chart Needs Identification (Consultative process leading to needs assessment and prioritization) Facilitation (EIGs) (Community consultation and mobilization) Prioritization (Assessing eligibility for project support as per criteria) Development of Community Action Plan (CAP) (Communities undertaking detailed assessment, walkthrough surveys, design and cost discussions, and community contribution and O&M arrangements before DRC consideration) DRC review and feedback to EIGs/CEIGs (Technical/financial review and approval for fund release) CAP approved (subject to scheme type, contract awarded with specified role of all parties involved) Implementation Supervision and Quality Control (by community and District with 3 rd party verification) Scheme Completion (Formally inaugurated by community and district administration and handed over to community for O&M) 33

35 Core 13 Annex 2: Results Framework and Monitoring PAKISTAN: KP Southern Area Development Project (KP-SADP) Project Development Objective: To strengthen the capacity of the poor to improve their livelihood options through access to social and productive infrastructure using participatory approaches in the selected districts of southern Khyber Pakhtunkhwa province. Cumulative Targets Data collection and reporting Project outcome indicators Baseline 14 Frequency of Data Collection Responsibility for YR1 YR2 YR3 Reports Instruments Data Collection Support at least100,000 project beneficiaries, of which 30% women 0 F 10,000 20,500 30,000 Annually Field surveys DD M&E, (Quarterly Facilitators, M&E 0 M 20,000 40,000 70,000 from YR2) officers Change in % of population accessing social infrastructure improved 0 F 5% 10% 30% At start, Perception survey DD M&E, third by the project middle and end party monitors 0 M 10% 20% 50% of project Change in % of population accessing productive infrastructure and 0 F 5% 10% 30% At start, Perception survey DD M&E, third services provided through this project middle and end party monitors 0 M 10% 20% 50% of project Process Indicators for KPIs: Establish and/or revitalize 1000 Economic Interest Groups (EIGs) and aggregate them into about 200 Clustered EIGs (CEIGs) at Tehsil level At least 80% of CEIGs use participatory planning and implementation (Community Action Plans CAPs) At least 50% of CAPs have arrangements for community engagement in post project sustainability or O&M Intermediate Outcomes Indicators Component A: Community Development Support 60% beneficiaries (disaggregated by gender) confirm project investments have reflected their needs. 50% of EIGs members (disaggregated by gender) benefitting from technical assistance Quarterly Field reports DD M&E, Facilitators, beneficiaries 0 10% 50% 80% Quarterly, Field reports, case DD M&E, EDO, Annually studies, impact Facilitators, 0 F 0% 35% 50% Annually 0 M 0% 40% 60% (Quarterly from YR2) evaluation Field survey and Reports, case studies beneficiaries DD M&E, Facilitators, M&E off, benef. 0 F 0% 50% 60% Quarterly Field Survey DD M&E, 0 M 0% 60% 70% Facilitators, beneficiaries 0 F 0% 35% 50% Quarterly Field survey and DD M&E, 0 M 0% 40% 60% Reports Facilitators, 13 Core Sector Indicators Results Platform 14 At project startup date (2012). 34

36 Core 13 Project outcome indicators Cumulative Targets Data collection and reporting Baseline 14 Frequency of Data Collection Responsibility for YR1 YR2 YR3 Reports Instruments Data Collection 90% of CAPs approved by the District Review Committee 0 10% 80% 90% Quarterly, Annually Component B: Community Investment Program 60% of approved CAPs completed in time after receipt of grant, and published in the project website. Number EIG members (disaggregated by gender) benefiting from social infrastructure Number EIG members (disaggregated by gender) benefiting from productive infrastructure Number of ultra-poor 16 EIG members (disaggregated by gender) benefitting from reacquisition of lost assets 17 Component C: Project Implementation Support Monitoring system established and functioning: timely reporting against activity and output indicators. 70% of project staff, disaggregated by gender, utilizing knowledge and skills gained through capacity development activities. 70% of grants disbursed timely to CEIGs out of the total approved CAP. 0 0% 50% 60% Quarterly, Annually Field reports, case studies, impact evaluation Field reports, case studies, impact evaluation 0 F 0 M Quarterly Field survey and reports 0 F Quarterly Field survey and 0 M reports 0 F Quarterly Field survey and 0 M reports beneficiaries DD M&E, EDO, Facilitators, beneficiaries DD M&E, Facilitators, beneficiaries DD M&E, Field Facilitators DD M&E, Field Facilitators DD M&E, Field Facilitators 0 85% 95% 100% Annual Annual reports DD M&E, EDO, all project s staff 0 50% 60% 70% Quarterly Staff questionnaires 18 DD M&E, EDO, all project s staff 0 50% 60% 70% Quarterly Reports and field survey *Please indicate whether the indicator is a Core Sector Indicator (see further **Target values should be entered for the years data will be available, not necessarily annually DD M&E, EDO, Facilitators, beneficiaries 15 Technical assistance refers to (i) advisory services; and (ii) input support. 16 Ultra-poor are defined as households that are directly impacted from the crisis and have lost their economic assets e.g. livestock, etc. These groups may comprise of women headed households, disabled, elderly, and other socially or economically marginalized groups. etc. 17 This indicator will provide also information on the share of vulnerable and marginalized people of total project beneficiaries, Core WB Indicator for social Inclusion. 18 Combined assessment based on pre-training/ capacity development event, immediately after-training, and six months after the training. 35

37 Annex 3: Summary of Estimated Project Costs PAKISTAN: KP Southern Area Development Project (KP-SADP) 100. Project cost summary component wise: Cost Including Contingencies (US$ Million) Year Year Year Total % Component US$ A. Community Development Support B. Community Infrastructure and Services B 1. Social Infrastructure B 2. Productive Infrastructure B 3. Asset building for ultra-poor C. Project Implementation Support Total Project Costs

38 Annex 4: Operational Risk Assessment Framework (ORAF) Project Development Objective(s) To strengthen the capacity of the poor to improve their livelihood options through access to social and productive infrastructure using participatory approaches in the selected districts of southern Khyber Pakhtunkhwa province. PDO Level Results Indicators: 1. Support at least100,000 project beneficiaries, of which 30% women 2. Change in % of population accessing social infrastructure improved by the project 3. Change in % of population accessing productive infrastructure and services provided through this project 1. Project Stakeholder Risks Rating Substantial Description: Presence of other development partners in the region may lead to overlap between the Bank project and other Risk Management: Regular meetings and coordination with the development partners to check overlap and duplication. Mapping of activities by the government and various development partners. ongoing programs as well as duplication of efforts. Resp: Client & Bank Stage: Prep & Imp Due Date : Status: Ongoing Consultative and participatory planning may be resisted by the traditional decision making structures of Jirga and may be seen as questioning traditions of local culture. Risk Management: Use the traditional structures of Jirga for local level group formation based on clan / kinship affinity. Incorporate local cultural norms in the communications campaign to introduce transparency and collective action. In addition, information about the project would be disseminated widely including processes for activity selection, expenditure reporting and O&M. Resp: Client Stage: Imp Due Date: Status: Not yet due 2. Implementing Agency Risks (including fiduciary) 3.1. Capacity Rating: High Description: The PMU will require strengthening in terms of implementation capacity (procurement, contract management, and FM) and ability of timely decision making. There is a general lack of technical and managerial capacities as well as Risk Management: The project will have a focus on building the capacity for procurement, contract management, safeguards, FM and technical and managerial issues as well as CDD approaches. Continuous training of staff would be provided to handle staff turn-over in Peshawar and at the District level through knowledge sharing and exposure to other Bank CDD operations. availability of staff willing to work in remote areas of the Southern KP. Resp: Client Stage: Imp Due Date: Status: Not yet Due Financial Management Rating: High Description: Misappropriation of funds. Limited physical access to project areas may result in weak oversight and verification for expenditures incurred at District and Tehsil level. Turnover and weak capacity of FM staff leading to delays in Risk Management: The adoption of a Financial Management Manual and use of the country FMIS should result in implementation of a comprehensive internal control framework, including segregation of duties, multi-tiered approval of payments and expenditures and minimum cash handling. In addition, the financial management will be centralized at the PMU to avoid fragmentation of bank accounts and dilution of payment controls. In addition, the Operations Manual will embed specific internal control measures in each activity type. Resp: Client Stage: Implementation Due Date: Status: Not yet Due 37

39 reporting and inadequate accounting records. Risk Management: Oversight of project activities and verification of the authenticity of expenditures will be ensured through the involvement of local staff, communities and also third party monitors. All supporting records related to payments and any advances given, will be kept at the PMU. Resp: Client & Bank Stage: Implementation Due Date: Status: Not yet Due Risk Management: Hiring of dedicated FM staff for the project is being fast-tracked through the TA on Implementation Readiness. In addition to hiring of dedicated staff for this project, the project can utilize services of the FM staff available at the LGERDD. Additionally, there is dedicated FM staff available under the Implementation Support Unit (ISU) of the Governance Support Project (GSP), which is mandated to support all MDTF financed projects. These arrangements will ensure that delays in implementation are avoided. The Bank team will maintain close coordination with the project management and the Office of Accountant General to ensure that any vacancies are promptly filled with competent staff. Bank staff will also provide regular guidance and training to the project staff to ensure adequate FM arrangements remain in place. Resp: Client & Bank Stage: Implementation Due Date: Status: Not yet Due Procurement Rating: High Description: Delayed and inefficient procurements and Risk Management: Procurement staff shall be hired and Bank shall impart training. contract management. Resp: Client Stage: Prep Due Date: Status: Effectiveness Lack of interest from consultants, NGOs and contracting firms in participating. Risk Management: Adequate packaging and dissemination. Resp: Client Stage: Imp Due Date: Status: Not yet Due Uneconomical and non-transparent procurements. Risk management: Web based dissemination and complaints redressal mechanism. Resp: Client Stage: Imp Due Date: Status: Not yet Due 3.2. Governance Rating: High Description: Possibility of political interference during the planning and implementation of project. The Project s effectiveness depends on the ownership of its public sector counterparts in KP. Any shift in the key positions within these two set ups can adversely affect the Project milestones. Risk Management: A Project Steering Committee (PSC) will be established which will be chaired by the Additional Chief Secretary (ACS) KP. The PSC will not only oversee project s performance but will also make policy decisions as and when required. In addition, public disclosure of project documents and progress reports along with third party monitoring will minimize this risk. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: While it is difficult to mitigate this risk at the KP, however, as these positions are always occupied by trained public sector officials, the project s continuity would not be impacted. In addition, any change to key positions in the PMU would be done in consultation with the Bank. Resp: Client Stage: Imp Due Date : Status: Not yet Due 4. Project Risks 4.1. Design Rating: High Description: Inadequate information on baseline data including household income levels, agriculture and livestock Risk Management: Initially the project preparation will be based on available information from government and other sources. These will be considered for initial planning purposes but detailed 38

40 assets, etc. may affect the project preparation especially designing of actual interventions. Given the post-crisis scenario, there may be greater levels of demand generated by the local communities than can be addressed through the project. Given the prevailing security situation of the region, the Bank team may not be able to physically supervise the project interventions for some time. District administrations may not fully own the project due to proposed direct fund flows to the communities. Involving the local Jirga system may lead to elite capture of project interventions, particularly those activities where women s participation is required Social & Environmental Rating: Moderate Description: The schemes to be implemented under Component B of the project may potentially cause negative environmental and social impacts. The nature and significance of these impacts will depend upon the type, size and location of these interventions Program & Donor Rating: Substantial Description: There could be delays in seeking approvals from the GoP and Bank procedures on various actions including release of funds and clearance of requests necessary for the commencement of certain activities under the project. assessments of project areas for needs and ongoing interventions on agriculture including irrigation, livestock and associated sectors will be collected within six months of project implementation. Resp: Client Stage: Prep & Imp Due Date : Status: Ongoing Risk Management: The project adopts a flexible design approach to respond to demands generated from the communities. Additionally, the project will geographically concentrate in an area to provide adequate coverage before moving to new areas. The geographic concentration will also ensure generating demonstrative effect and lessons that are incorporated in the project implementation. Resp: Client Stage: Impl Due Date : Status: Ongoing Risk Management: The M&E system for the project will incorporate technology based supervision techniques as well as third party monitoring and regular consultations with project beneficiaries. The communications campaign will incorporate information from the M&E systems in order to widely disseminate project results as well as promote CDD approaches. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: While it is difficult to mitigate this risk, the project will provide capacity building and training on CDD approaches to the District officials for them to understand the paradigm shift as they will be responsible for approval of the CAPs. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: Consultation with all stakeholders will be intensified to ensure local ownership and buy in through communications to mobilize and sustain community efforts. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: To assess the nature and significance of the potentially negative environmental and social impacts, and to determine appropriate mitigation measures environmental screening of the schemes would be carried out during the proposal/design phase. The implementing agency has also prepare an ESA to ensure compliance with the WB OP and national environmental requirements. The ESSAF defines the environmental and social assessment requirements for all MDTF financed projects and the KP-SADP implementing agency will also need to fulfill the same. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: The PMU will appoint Environment and Social focal points to follow screening procedures for social and environmental impacts against scheme specific checklists, and implementation of ESMP. The ESMP will include capacity building programs to enhance the capacity of staff for effective implementation. The PMU will also engage consultants for external monitoring of ESMP. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: MDTF Secretariat is housed in the Bank s Country Office in Islamabad. The services of the same Secretariat will be requested to pursue desired approvals and actions from the GoP on fast track basis. Bank s internal procedures have already been streamlined under OP 8.0 to enable project preparation and approval on fast track basis. 39

41 Presence of multiple development partners engaged in postcrisis rehabilitation and development activities in KP may create coordination issues Delivery Monitoring & Sustainability Rating: High Description: Project implementation through a separate PMU may not sustain the project activities after the PMU is dismantled, which may limit the extension of similar programs involving CDD approaches. Limited capacity for monitoring and evaluation in the PMU may impact the measurability and monitoring of results. There may remain the likelihood of escalation in security situation of the project areas. Due to prevailing lack of trust between citizens and state, communities may not be readily willing to participate in the project and may see it as a government s business-as-usual intervention. Resp: Bank & Client Stage: Prep Due Date : Status: Ongoing Risk Management: Coordination meeting with donors will be carried out to exchange information about the post-crisis related rehabilitation and development activities being financed in KP. Information from coordination meetings and monitoring of various projects and programs will also be shared. Resp: Bank & Client Stage: Prep Due Date : Status: Ongoing Risk Management: Before the close of this project sufficient coordination mechanisms will be introduced within KP Government for inter-line department coordination and joint planning and the staff hired in the PMU may be available for future projects. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: The project has a dedicated sub-component for M&E capacity building and implementation. In addition, monitoring and measurability of project indicators will also be effectively managed through supervision effort and designating staff at the implementation level. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: Mitigating this risk will require careful planning and implementation with flexibility to adapt or change plans and rely on credible local organizations already working in the project areas. Resp: Client Stage: Imp Due Date : Status: Not yet Due Risk Management: Communities ownership will remain the key to sustainability. Identification, prioritization, implementation and monitoring of all project activities will be done by the communities themselves in socially inclusive manner. Resp: Client Stage: Imp Due Date : Status: Not yet Due 5. Overall Risk Following Review 5.1. Preparation Risk Rating: High 7.2 Implementation Risk Rating: High Comments: The proposed rating takes into account the risks identified above as well as the team s knowledge of the capacity of KP Government s Planning and Development Department and the line departments at the time of project preparation. 40

42 Annex 5: Financial Management and Disbursement Arrangements PAKISTAN: KP Southern Area Development Project (KP-SADP) Country Issues 101. The Bank has carried out extensive analytical work on public financial management (PFM) systems in the country, both at national and sub-national levels. In May 2007, Public Financial Management and Accountability Assessments (PFMAA), using the PEFA 19 PFM Performance Measurement Framework, were completed for Balochistan, Punjab, and KP and a Federal level PFMAA using the same framework was delivered in June It noted that reforms underway have contributed towards improvements in PFM systems. Most notable are the ones initiated under the Bank-funded Project for Improvement of Financial Reporting and Auditing (PIFRA) and the implementation of a Medium Term Budgetary Framework (MTBF) which is supported by DFID. Donor-funded projects and a number of self-accounting entities currently remain outside the government FMIS. The government is yet to develop an effective internal audit function and continuing efforts are needed to improve effectiveness of tax collection and the management of cash balances impacting the predictability in availability of funds. Specific diagnostic and analytical work has not been done for FATA where Federal PFM systems are applicable. Existing FM Arrangements at the Local Government, Elections and Rural Development Department (LGERDD) 102. A brief FM Assessment of LGERDD was carried out that identified that though various financial management reforms are being implemented but the department s capacity to manage its financial matters is limited. Output Based Budget has been extended to the department but the outputs are not systematically monitored; the department has been provided National FMIS access to view its financial reports and monitor budget outturns but usage is limited; there are two separate sections one each for current and development budget and preparation of current and development budget are distinct activities that lack coherence. At present, LG&RDD is the administrative department of 31 development projects that also include foreign funded projects; however, the department has not implemented any Bank funded project Primary responsibility for the project s financial management will rest with the PMU whereas LGERDD will have a facilitation as well as oversight role. Communication between the project and any government department related to financial matters like request for opening of designated/ assignment accounts and annual budget estimates will be channeled through LGERDD. The project audit results will be a part of the overall audit report of LGERDD and will be discussed in the Departmental Accounts Committee and Public Accounts Committee. The project outputs will be a part of the LGERDD Output Based Budget and the department will monitor the project performance through quarterly financial and progress reports. 19 Public Expenditure and Financial Accountability 41

43 Project FM Arrangements 104. The Project Management Unit (PMU) will have the overall responsibility to maintain an appropriate financial management system for the project. However, the Executive District Officer Community Driven Development (EDO CDD) in the three districts and each Economic Interest Group (EIG) will also have a financial management responsibility. The following table summarizes the key FM responsibilities of the entities involved. Area PMU EDO CDD EIG Monthly payroll including Administrative/ operating the official at district level. expenses of EDO CDD, Payments to EIGs as DRC and the line approved by DRC departments incurred for the Funds transfer to EDO CDD purpose of the project. for administrative expenses Payment for goods, services and consultancies procured or contracted by PMU as well as administrative expenses of PMU Transactions to be handled Expenditure as per the approved CAP Staffing Full time FM staff One accountant A member to act as treasurer Budgeting Prepare annual consolidated budget of the project on the basis of data provided by EDOs CDD and the work plan of the activities to be carried out by PMU. Prepare annual district level budget by consolidating fund requirements of all EIGs as well as funds required for administrative expenses. Annual fund requirements will be included in the CAP of each EIG that will be the annual budget of the EIG Funds Flow Open and maintain the designated/ assignment account of the project for receipt of funds from the Bank. Enter into a corporate level agreement with a commercial bank to open accounts for EIGs and EDOs CDD. Transfer funds to EIGs on the basis of approval by DRC in three tranches. Transfer funds to EDO CDD for administrative expenses on the basis of quarterly forecast. Maintain a commercial bank account for administrative expenses where the PMU will transfer funds. Receive funds from PMU in the commercial bank account and will make payments for the expenditure as per the approved CAP. Maintain a commercial bank account where the PMU will transfer funds. Accounting Maintain accounts on cash basis as per government accounting procedure i.e. New Accounting Model Implement National FMIS within 9 months of Simplified accounting records to be maintained for administrative expenses. Cash book and supporting documents to be maintained. 42

44 Area PMU EDO CDD EIG effectiveness. Financial Reporting Prepare and submit quarterly IFRs to the Bank. Prepare and submit annual financial statements of the project to the Auditors. Complying with government reporting requirements Prepare a simplified financial report on monthly basis and submit to the PMU. Prepare a quarterly receipt & payment report and submit to EDO CDD. Internal Control Framework Government Financial Rules Operations Manual FM Manual Government Financial Rules Operations Manual FM Manual Operations Manual Audit Auditor General of Pakistan will carry out annual audit of the project. The audit scope will cover the PMU, EDOs CDD and the EIGs. The audit will also include field visits to EIGs and physical verification of assets created or the work financed from the grant proceeds. Staffing: 105. The financial management team at the PMU will be headed by a Deputy Director (Finance) who will be supported by an Accounts Officer and an Accounts Assistant. The FM staff will be hired under TORs agreed with the Bank by the start of project implementation (although this is not an effectiveness condition) through Technical Assistance for Implementation Readiness that is processed in parallel. Each EDO CDD will appoint an accountant to maintain accounts and at each EIG a member will be nominated as treasurer who will have the responsibility to write the cash book, maintain supporting documents and prepare reports. Component A of the project will finance relevant financial management trainings for EIG members. Financial management capacity is assessed weak as communities are not yet organized into EIGs and the literacy level in the implementing districts is also low. Budgeting: 106. PMU will prepare the annual budget of the project that will be a part of GoKP s annual development budget. The budget preparation process will be governed by the GoKP s rules and regulations; however, the preparation of realistic budget estimates based on planned activities will require extensive coordination between PMU and EDO CDD of each district. EDO CDD will prepare a detailed work plan and cash plan for the district and PMU will prepare a consolidated work plan and cash plan for the project that would form the basis of the budget. The Operations Manual of the project will provide detailed guidance to PMU and EDO CDD on planning and budgeting. Project activities will be totally financed through the Grant and budget allocation for counterpart funds will only be required to envelop the emoluments of civil servants deputed to the Project. The Government of Khyber Pakhtunkhwa has rolled out Output Based Budgeting (OBB) to the line departments and the project outputs will be included in the annual OBB of LG&RDD. 43

45 Accounting: 107. PMU will maintain separate books of accounts, on cash basis, for the project activities using the Chart of Accounts under the New Accounting Model (NAM). Sufficient subsidiary records will be kept to facilitate preparation of quarterly reports and annual financial statements providing details of receipts and expenditures by project components and activities. Manual books of accounts will be maintained, including: (a) Cash/ Bank Book to record all cash/ bank receipts and payments (b) General Ledger to record all receipts and payments by object code (c) Appropriation Register to monitor expenditure against budget allocation (d) Asset Register to maintain upto date record of assets procured (e) Invoice Register to track payments (f) EIG Payment Register to record EIG wise payments 108. After Effectiveness, the PMU will work with the PIFRA Directorate for incorporation of the project in the National Financial Management Information System (FMIS) and will prepare an action plan to ensure that the same is completed within nine (9) months of Project Effectiveness, unless otherwise agreed with the Bank. Once the PMU has live access to the National FMIS, manual books will be discontinued and only a Cash Book will be maintained EDOs CDD will maintain a Cash Book in a manner sufficient to render the classified account to the PMU on periodic basis for preparation of consolidated project financial reports. Certified cash book and vouchers/ receipts for the expenditures incurred will be kept by the respective EDO CDD for the purposes of annual audit Each EIG will maintain a simplified Cash Book to record all payments. For this, special training programs with adequate post-training performance evaluation would be provided to the EIGs and CEIGs. The facilitation officers will also be trained in maintaining cash book so that they can provide on job training to EIG members in maintaining Cash Book. Internal controls: 111. The internal control framework for the project will include the Operations Manual and Financial Management Manual. In addition a third party monitoring agent and an internal auditor will also periodically review control activities A generic Financial Management Manual (FMM) has been developed and has been approved by the Controller General of Accounts for use by all MDTF funded projects that will be adopted by the project. The FMM includes a comprehensive internal control framework by defining preventive, detective and corrective controls for different processes and transactions. For each process, FMM defines key tasks, responsibilities, specific steps and timelines so it also serves as a benchmark for management to measure its performance The Operations Manual of the project, under preparation, will include guidance on internal controls for each set of project activities. Grants to communities will be approved and monitored by a District Review Committee headed by the District Coordination Officer and the Operations Manual will clearly specify eligibility and approval criteria. Field Officers will be 44

46 working with the communities to facilitate implementation and the Operations Manual will provide relevant guidance to the field officers to review community operations A third party monitoring agent being hired by MDTF Secretariat will cover the entire project activities. The project activities will also be subject to internal audit and a firm of chartered accountants for internal audit of all MDTF projects is being hired by the Governance Support Project. The Terms of Reference of third party monitoring agent and internal auditor include review of the transactions, processes, procedures and performance as well as any other aspects of the project activities as may be considered necessary to provide assurance regarding the fiduciary controls, risk management and monitoring mechanisms in place. Funds Flow Arrangements: 115. A segregated Designated Account (DA) in US Dollars will be established at the National Bank of Pakistan for receipt of funds from the Bank. The DA will be operated by PMU and there will be joint bank signatories. Disbursements will be report based and the project will mainly use the advance method of disbursement where the funds will be front-loaded into DA based on 6 months cash forecast. Initial advance into DA will be provided by the Bank on the basis of projections for the first two quarters. Subsequent advances will be based on actual expenditure incurred and forecast for the following two quarters as reported in the quarterly Interim Financial Reports that will be submitted by PMU to the Bank within 45 days of the close of each calendar quarter For the implementation of Component B, PMU will provide advances to EIGs on the basis of CAPs approved by District Review Committees (DRC). The funds will be released in three tranches; 1 st and 3 rd tranches will be equivalent to 30% of the approved CAP amount and 2 nd tranche will be of 40%. The subsequent tranche will be released to the EIG on the basis of actual expenditure verified by the facilitation officers and recommendation of the DRC PMU will enter into a corporate level agreement with a commercial bank having presence in the implementing districts to provide banking services to the EIGs. All EIGs will open their accounts with a commercial bank and PMU will transfer the funds directly to EIG bank accounts, once payments are approved by DRC and communicated to PMU by EDO CDD. As part of the agreement, the commercial bank will also provide monthly district wise and EIG wise reports of the receipts and payments to the PMU for all districts and EIGs. Each EDO CDD will be provided details of the receipts and payments of the EIGs of its district by the commercial bank. It was also agreed that possibility of mobile alerts to EIG members on receipt and payment from EIG account will also be discussed with the commercial bank. This will improve transparency and social accountability that will be a deterrent to fraud and corruption For administrative expenses of EDOs CDD, an imprest account will be maintained and PMU will provide advances equivalent to three months forecast that will be replenished on quarterly basis The funds provided into DA as well as advances from DA to EIGs and EDOs CDD would only be used to meet the eligible expenditures under the project. 45

47 Disbursement Category Allocation of Grant Proceeds Amount of Grant (USD) Percentage of Expenditures to be Financed Subproject Grants, Goods, Works, Non- Consulting Services, Consultants Services (including for audits), Training, and Incremental Operating Costs 18,000, % TOTAL AMOUNT 18,000, The MDTF financing is inclusive of import duties and taxes. Incremental Operating Costs: 121. Incremental operating costs will cover operating expenditure that would not have been incurred in the absence of the Project excluding salaries and salary supplements of the employees of Government of Pakistan and Government of Khyber Pakhtunkhwa. Retroactive financing: 122. The project may require retroactive financing to meet eligible expenditures incurred starting May 1, 2012 up to the date of the signing of the Grant Agreement. The retroactive financing is for costs incurred to start-up the implementation related activities. Amount allowed is USD 1.5 million. Financial Reporting: 123. PMU will prepare and submit quarterly Interim Financial Reports (IFRs) to the Bank within 45 days of the end of each calendar quarter. The format and content of these reports will be agreed during project negotiations. Annual financial statements for the Project will be prepared by PMU in accordance with Cash Basis International Public Sector Accounting Standards. These financial statements will include details of expenditure incurred by Project components and activities and will be submitted to the auditors within 2 months of the close of the financial year EDOs CDD will prepare simplified monthly financial reports that will include details of receipts, payments and bank balance that will be submitted to PMU within 7 days of the close of the month. Each EIG will prepare a quarterly receipt and payment statement that will be submitted to the respective EDO CDD as well as to the members of the EIG The government financial rules and regulations require a project to submit certain financial reports to various offices. PMU will be responsible to provide the financial reports of the projects to the relevant government offices. 46

48 Auditing: 126. External audit of the project will be conducted by the Supreme Audit Institution, i.e., the Office of the Auditor General of Pakistan which is acceptable to the Bank. The audit scope will cover PMU, EDOs CDD and EIGs. The audit will also include field visits to EIGs to review their financial reports and physical verification of assets created or the work financed from the grant proceeds. Acceptable audited financial statements of the project will be submitted within 6 months of the close of each financial year. Currently there are no unsettled ineligible expenditures and overdue audit reports in respect of the project implementing entity. Audit Report Type Project Financial Statements for Financial Year ended June 30 each year Due Date December 31 each year. 47

49 Annex 6: Procurement Arrangements PAKISTAN: KP Southern Area Development Project (KP-SADP) 127. Procurement for the proposed Project would be carried out in accordance with the World Bank s Guidelines: Procurement Under IBRD Loans and IDA Credits dated January 2011; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated January 2011, as well as the provisions stipulated in the Grant Agreement. The general description of various items under different expenditure categories are described below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, estimated costs, prior review requirements, and time frame are to be agreed between the Recipient and the Bank Project team in the Procurement Plan. This plan is yet to be developed. The Procurement Plan will be updated at least annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity. A General Procurement Notice is not envisaged to be published as no contracts subject to international competition are identified There is a component of livelihood support which envisages the use of funds for community based interventions in works and goods. The selection criteria for the beneficiaries (community groups or individuals) is agreed and documented in the project papers. Procurement of Works 129. Civil works of various sectors are expected under the components B and C of the project. These would include simple works for irrigation, water supply and livestock sectors. Total cost of these components is US $ million (which also includes goods, non-consulting services, consultants services (including for audits), and training), and the costs of individual works contract is not expected to exceed US $ 1 million. All contracts estimated to cost more than US $ 200,000 shall be procured using NCB process, and contracts estimated to cost upto US $ 200,000 may be procured using shopping procedures. Works upto US $ 100,000 may be awarded based on community contracts. A sample contract shall be agreed and documented in the project manual. Direct contracting may be used to carry out emergency works (if any), after prior approval of the Bank. Bank s agreed bidding documents shall be used for NCB. Procurement of Goods 130. There could be some requirements of office equipment (furniture, and computers) and field equipment, besides machinery/vehicles for the participating sectors. Contracts for goods under ICB are not expected at this stage. Procurement methods for goods under the Project will consist of shopping for contracts costing up to US$200,000, NCB for contracts up to US$300,000, and ICB for contract costing more than US$300,000. Direct contracting may be used for any urgently required goods after prior approval of the Bank. Operational vehicles would be procured using shopping procedure regardless of cost. The Bank s SDBs for ICB and agreed bidding document for NCB shall be used. 48

50 Additional Provisions and Procedures for National Competitive Bidding (NCB) 131. When procuring goods, non-consultant services and works pursuant to the provision of (i) Rules 5 and 20 through 36(a) of the Federal Public Procurement Rules (2004) (S.R.O. 432(I)/2004), it shall be ensured that the following additional provisions are applied: (i) (ii) (iii) (iv) (v) (vi) (vii) Invitations to bid shall be advertised in at least one (1) national newspaper with a wide circulation, at least thirty (15) days prior to the deadline for the submission of bids. Bid documents shall be made available, by mail or in person, to all who are willing to pay the required fee. Foreign bidders shall not be precluded from bidding and no preference of any kind shall be given to national bidders in the bidding process. Bidding shall not be restricted to pre-registered firms. Qualification criteria shall be stated in the bidding documents. Bids shall be opened in public, immediately after the deadline for submission of bids. Single bids shall also be considered for evaluation. (viii) Bids shall not be rejected merely on the basis of a comparison with an official estimate without the prior concurrence of the World Bank. (ix) (x) (xi) (xii) Before rejecting all bids and soliciting new bids, the World Bank s prior concurrence shall be obtained. Contracts shall not be awarded on the basis of nationally negotiated rates. Contracts shall be awarded to the lowest evaluated and qualified bidder. Post-bidding price negotiations shall not be allowed with the lowest evaluated or any other bidders. (xiii) Bids shall be solicited and works contracts shall be awarded on the basis of unit prices and not on the basis of a composite schedule of rates. (xiv) (xv) Draft NCB contract would be reviewed by the World Bank in accordance with the prior review procedures. A firm declared ineligible by the World Bank, based on a determination by the World Bank that the firm has engaged in corrupt, fraudulent, collusive, coercive or obstructive practices in competing for or in executing a World Bank-financed contract, shall be ineligible to be awarded a World Bank-financed contract during the period of time determined by the World Bank. 49

51 (xvi) Each contract financed from the proceeds of the Grant shall provide that the suppliers, contractors and subcontractors shall permit the World Bank, at its request to inspect their account and records audited by auditors appointed by the World Bank. The deliberate and material violation by the supplier, contractor or subcontractor of such provision may amount to obstructive practice. (xvii) State-owned enterprises shall be eligible to bid only if they can establish that they are legally and financially autonomous, operate under commercial law, and are not a dependent agency of the Recipient. (xviii) The World Bank shall declare a firm ineligible, either indefinitely or for a stated period, to be awarded a contract financed by the World Bank, if it at any time determines that the firm has, directly or through an agent, engaged in corrupt, fraudulent, collusive, coercive, or obstructive practices in competing for or executing a contract financed by the World Bank. Procurement of Non-Consulting Services 132. No such requirements are identified at this stage. If any such procurement is agreed, the Banks sample documents for such procurements shall be used. Selection of Consultants 133. The major consultancy assignments would be for supervision and M&E. Contracts with consulting firms will be procured in accordance with Quality and Cost Based Selection procedures or other methods given in Section III of the Consultants Guidelines. Consulting services selection would be carried out through Quality and Cost Based Selection (QCBS) for contracts with consulting firms costing more than US $300,000 equivalent, and through Consultants Qualification (CQ) for contracts costing up to US $300,000. Other methods as mentioned in Section III of Consultants Guidelines shall be used as required. Individual Consultants 134. This is envisaged to include any full-time or part-time technical assistance required for the Project. Services for assignments that meet the requirements set forth in paragraph 5.1 of the Consultant Guidelines may be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.2 through 5.3 of the Consultant Guidelines, which stipulate that the selection should be made through comparison of at least 3 CVs that meet the requirements of the Terms of Reference including those for qualifications and experience. Under the circumstances described in paragraph 5.4 of the Consultant Guidelines, such contracts may be awarded to individual consultants on a sole-source basis Assessment of the Agency s Capacity to Implement Procurement 136. PP&I staff (located at P&D) supported the project preparation. As per the general implementation arrangements of this project there shall be a PMU who will be responsible for the management of this project. After the appraisal mission in May 2012 the Government informed that the project will be managed by the LGERRD. The Bank staff conducted an 50

52 assessment of the department. LGERRD is headed by Secretary Local Government. It is reported that department is following General Financial Rules (GFR) for processing, however the Public Procurement Rules are in place but the concern staff is unaware of it. At the central level of LGERRD there is very small amount of procurement for operating items like stationary etc., which is conducted by Deputy Secretary Administration reporting to Secretary. The major procurements are conducted at the field level under Donor Projects. The annual workplan of field level procurements is reviewed by the Project Steering Committee. The committee comprises of Additional Chief Secretary, 6 Secretaries from Provincial Government, PCNA Coordinator, Project Director(s), and Chief Rural Development Sector. There is no specific Procurement function with adequate capacity present at LGERRD. Whenever a project is initiated by a Donor, a PMU is formed headed by a Project Director with the support of a Procurement Specialist, and at the close of project the PMU staff has to leave and the developed capacity is not retained. Donors like USAID, DFID, IFAD etc. are working with the LGERRD on different project. The Bank was also involved in Community Infrastructure Project (CIP), the second phase of the project was closed in the year The staff involved in this project has left after the closure of the project. As there is no retention of capacity and absence of central Procurement unit, there are no standard procedures and documents available for Procurement. There is a dire need to build LGERRD own procurement capacity and formation of their own Procurement unit. Communities have been engaged in Procurement with Bank and other Donors. There are some Community Groups which are formally registered and have experience of conducting Procurements with Donors. Other communities which have no formal organization will register as per the requirement of forming EIG For this project LGERRD will form a PMU and will hire a well experienced Procurement Specialist who shall report to the Project Director. The Procurement Specialist should be hired by effectiveness (although this is not a condition of effectiveness). The Bank will conduct a training workshop for the project staff soon after the hiring of Procurement Specialist. Once PMU is setup there is a need for formulating SOP for PMU internal Procurement Function. There could be a limited number of participating contracting firms, while consulting firms may be reluctant to participate in the project given the law and order situation. The assignments shall be developed in a manner that local as well as external participation is encouraged and the contract sizes are large enough to solicit good response. There shall be adequate dissemination of the opportunities. PMU should setup a website and all procurement notices, bid documents /RFPs, evaluation reports, and award data shall be posted on the website. These websites shall also be used for posting of grant evaluations, awards, and performances. Bank s guidelines on publication of award paragraph 2.31 of consultancy guidelines and 2.60 of the procurement guidelines shall be followed for disclosure. PMU shall manage the complaint handling system. This system would include documentation and addressing of complaints within a period of 7 days. As discussed during preparation with the PP&I (at P&D) due to security and access issues in the project areas, there shall be an Interactive Voice Response system (in local language) for complaint registration at community level. For community procurements there will be an SMS based solution for tracking their funds flow. A GPS based monitoring system shall also be in place for verification of procurement output by the communities. 51

53 Table 1: Procurement Actions (Summary of the above identified issues and agreed actions) Issues Action Timeline Responsibility i. Capacity of PMU and line agencies Hiring of respective Procurement staff Before effectiveness* KP Training session of PMU ii. Procedural clarity SOP for PMU s internal approval procedures Sample contract forms for CBCs iii. Complaints Setting IVR based complaint registration system in local language for community complaints iv. Community Simplified Guidelines Procurement for Community Procurement v. Transparency Develop web site After hiring of staff Before effectiveness* Before works commence 2 months after effectiveness Before initiating Procurements With in1 month after effectiveness Bank PMU PMU PMU PMU/Bank PMU Disclosure on website vi. Monitoring SMS/ GPS based solution for verification of Procurement outputs at Community level. As required 2 months after effectiveness PMU Procurement Plan 138. The Recipient has developed a Procurement Plan for Project implementation which provides the basis for the procurement methods. Procurement plan will be made available in the Project s database, Project website, and the Bank s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual Project implementation needs and improvements in institutional capacity Frequency of Procurement Supervision In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended frequent supervision missions to visit the field to carry out post review of procurement actions. 52

54 Review of Procurement by the Bank 140. Thresholds for prior review of contracts under eligible expenditures are given in the table below. All other contracts will be subject to Post-Review by the Bank. PMU will send to the Bank a list of all contracts for post-review on a quarterly basis. Post-reviews as well as the implementation reviews would be done six monthly. Such review of contracts below threshold will constitute a sample of about percent of the contracts. 1.Civil Works Expenditure Category Table 2: Thresholds for Procurement Methods and Prior Review Aligned with The Rapid Response to Crisis and Emergencies: Streamlined Procurement Procedures Prior Reviews Identified in Approved Procurement Plan Contract Value (Threshold) US $ Procurement Method Contracts Subject to Prior Review US$ thousand >,200,000 NCB First Contract <200,000 Shopping First contract 2. Goods >300,000 ICB All <300,000 NCB First Contract by all entities <200,000 Shopping First contract by all entities Regardless of value Direct Contracting All 3. Consulting Services All TORs and Training Programs to be reviewed by Bank s TTL -3.A Firms QCBS,CQS, QBS,FBS,LCS, First contract by any process and thereafter as provided in Proc. Plan Regardless of value Single Source All Individual Consultants Comparison of 3 CVs First contract Note: ICB = International Competitive Bidding; NCB = National Competitive Bidding; QCBS = Quality- and Cost-Based Selection; QBS = Quality-Based Selection; FBS = Fixed Budget Selection; LCS = Least-Cost Selection; CQS = Selection Based on Consultants' Qualifications; TOR = Terms of Reference Details of the Procurement Arrangement involving International Competition. Goods and Works and non-consulting services: 142. List of contract Packages which will be procured following ICB and Direct contracting: Ref No. Contract Description Estimated Cost (US$) Procurement Method PQ No ICB Procurements Domestic Preference Review by Bank (Prior / Post) Expected Bid- Opening Date Comments Consulting Services 143. List of Consulting Assignments with short-list of international firms: 53

55 Expected Ref. Description Review Estimated Selection Proposals No. of Assignment by Bank Comments Method Submission (Prior / Post) No QCBS Procurement 54

56 Annex 7: Implementation and Monitoring Arrangements PAKISTAN: KP Southern Area Development Project (KP-SADP) Provincial Level Project Oversight and Coordination 144. The Planning and Development Department, as the project implementing entity, will have primary responsibility for project implementation, and will ensure that the World Bank s guidelines and procedures are adhered for all fiduciary aspects (procurement management, financial management, monitoring and evaluation), and reporting to the World Bank and other relevant agencies (such as MDTF) Project Steering Committee (PSC): The PSC would provide overall policy guidance to the project and perform tasks including approval of annual workplan and review of project s financial reports and audit reports (internal and external). The PSC would be chaired by the Additional Chief Secretary (ACS), KP province, and its members would include: Secretary Planning and Development, KP Secretary Finance, KP Secretary Agriculture and Livestock, KP Secretary Local Government, Election and Rural Development, KP Secretary Social Welfare and Women Development Chief Foreign Aid, P&D, KP Divisional Commissioners from DIK and Bannu Coordinator PCNA-ISU 146. The KP-SADP Project Director is the secretary to the PSC. Provincial Level Project Management 147. Project Management Unit (PMU): the overall project management functions would be performed by the Project Management Unit (PMU), established in the Local Government, Election and Rural Development Department under the Planning and Development Department (P&DD) within the KP Secretariat. The PMU would be responsible for the implementation of the project as well as the coordination with involved line departments for (sectors), for the implementation of the three components of the project. The PMU would have the overall responsibilities for planning, implementation, coordination, monitoring and reporting. The PMU would also perform the overall fiduciary management tasks, including procurements and financial management for all project components. The PMU would be strengthened with additional staff for technical and support functions through new recruitments as well as interdepartmental secondment. District Level Organization for Project Coordination and Micro-project Approval 148. The DRC is established by the PMU, with the assistance of project-supported Facilitators. The DRC would be chaired by the DCO and the EDO-CDD would be the Secretary of this Committee. The DRC would include representatives from key line departments including agriculture, livestock, irrigation and works and services. A key aspect of the DRC would be the community representation. At least two traditional or community leaders designated by the 55

57 Clustered Economic Interest Groups would be members, one of which would also serve as the deputy chairperson of the DRC Responsibilities of the DRC are as follows: (i) Review and approve CAPs which have been screened against a checklist of criteria by the EDO-CDD. (ii) Review and approve proposed micro-projects from the CEIGs. (iii) Transmit approved micro-projects to the PMU for funding. (iv) Harmonize agricultural projects within the District to avoid duplication and ensure judicious use of scarce resources. District-Level Project Implementation 150. The District Coordination Officer (DCO) would be the de facto project manager at the district level. A new position of the Executive District Officer for Community Driven Development (EDO-CDD) would be created. This position would report to the PMU and under the administrative reporting of the DCO, the office of the EDO-CDD would serve as the secretariat of the District Review Committee (DRC) Responsibilities of the EDO-CDD are as follows: (i) Collection of CAPS submitted by the CEIGs. (ii) Screening of the CEIGs to ensure that they conform to the checklist of criteria specified in the PIM, submitting the screened CEIGs which have been cleared to the DRC, or returning rejected CAPs to the CEIGs with specific recommendations on how these can be improved with a view to resubmission. (iii) Convening meetings of the DRC to review and approve CEIGs. (iv) Monitoring of community mobilization efforts. (v) Ensuring that CEIG priorities are reflected in the CAPs; (vi) Helping to coordinate technical assistance from relevant ministries to support the input or advisory services activities of the Project. Community-Level Project Implementation: Clustered Economic Interest Groups (CEIGs) 152. At the Tehsil level the Clustered Economic Interest Groups (CEIGs) are an apex organization of economic interest groups which derive their livelihood from the shared natural resources in the communities within the Tehsil. The CEIGs are entities created for the Project and will be registered according to existing local and district laws. They identify, prepare, implement, operate and maintain their micro-projects, assisted by Facilitators and technical specialists whom they contract either through the relevant district sectoral departments or directly, and through technical assistance and training made available by the PMU The role of the CEIGs is to link EIGs with the project resources to facilitate capacitybuilding, advisory services and investment financing for their development activities. To gain such access, CEIGs must meet specific eligibility criteria and follow specific procedures. Once micro-projects are approved by the DRC, CEIGs can access a share of the costs for design and implementation. 56

58 154. Subproject agreements are signed between the PMU and CEIGs. Resources are then transferred directly from the PMU level Special Account to a district level special account different from the normal district account (dedicated account for the CEIGs) The responsibilities of the Tehsil level Clustered Economic Interest Group (CEIG) are as follows: (i) Become registered as a legal entity in accordance with existing local and district laws. (ii) Elect a management committee, including a monitoring committee. (iii) Assign representatives to DRC meetings. (iv) Identify, through a consensus-building process, priority investments for the members they represent. (v) Use technical assistance, if needed, to prepare micro-project proposals that deal with members' priority concerns. (vi) Ensure that all required procedural and substantive elements are contained in the CAPs, particularly to ensure that a broad range of constituents have participated in CAP preparation; (vii) Ensure that all members receive appropriate training. (viii) Prepare draft CAPs, following a participatory and socially-inclusive process and ensure timely submission to the EDO-CDD. (ix) Sign any necessary agreements with the Project and with service providers. (x) Open a specific bank account to receive subproject funds. (xi) Open a specific account for deposits of CEIG members funds for a revolving investment recovery fund. (xii) Carry out approved and agreed upon activities, with responsibility for members' contributions to the financing of such activities. (xiii) Contract goods and technical assistance to develop operation and maintenance programs and techniques. (xiv) Operate and maintain micro-projects, with responsibility for collecting user fees that ensure the resources needed for the operation, maintenance and future replacement of financed investments are available. (xv) Be equipped with physical and financial control instruments. (xvi) Keep records of bookkeeping and other relevant information for project supervision missions Membership of the CEIG management committee is not to exceed nine (9) persons. The CEIG will have a management committee, consisting of: a Chairperson; a Treasurer; a Secretary; a Maintenance sub-committee (2 persons); a monitoring and evaluation sub-committee (2 persons); and a procurement sub-committee (2 persons) The committee should be transparently elected and should include representatives of different user groups. To ensure the representation of women on the committee, it is stipulated 57

59 that at least one quarter of the membership of the CEIG management committee should be reserved for women. Community-Level Project Implementation: Economic Interest or User Groups 158. Members of Economic Interest or User Groups (EIGs) are the primary beneficiaries of the Project. A user groups would be defined by the members themselves. The size of a Economic Interest Group is projected to be between 8 and 10 households and as such, may comprise from 80 to 100 individuals Members of various communities in the district are engaged in different types of on or off farm activities for income generation. In the context of this project, the EIGs may be organized along the following economic activities. Orchid growers associations pastoralists (sedentary or nomad) hunters fishermen gatherers of edibles and non-edible plants food and crop processing, marketing and distribution other economic interest groups 160. Each user group would have an association that represents its interests with the following responsibilities: (i) select a management committee, including a monitoring sub-committee. (ii) Represent members at the CEIG level and sign any necessary agreements. (iii) Identify, through a consensus-building process, priority investments for the members they represent. (iv) Use technical assistance, if needed, to prepare micro-project proposals that deal with members' priority concerns. (v) Be equipped with physical and financial control instruments. (vi) Operate and maintain micro-projects, with responsibility for collecting user fees to fund the resources needed for the operation, maintenance and future replacement of financed investments. (vii) Keep records and other relevant information for project supervision missions The EIG should have a management committee not exceeding three (3) persons, consisting of: a chairperson a treasurer a secretary Facilitators 162. EIGs should require project assistance to constitute CEIG as their apex organization and they later should require assistance in community needs assessment and rural participatory appraisal. Facilitators should be hired by and report to the PMU and EDO-CDD on performance contracts. 58

60 163. Responsibilities of Facilitators are as follows: (i) Introduce and sensitize EIG members to the goals and procedure of the project. (ii) Assist with the formation of CEIGs. (iii) Liaise with the EDO-CDD Desk. (iv) Facilitate needs assessments for EIGs; (v) Preparation of CAPs. (vi) Raising awareness about the environmental implications of micro-project implementation The implementation arrangements and funds flow chart is provided below Project implementation procedures: The Project will adopt a phased approach to implementation of CAPs and associated subprojects. Whether or not a CAP will be multi-year or annual and or across district is an issue that will be resolved using the Participatory Rural Appraisal (PRA) approach, which will describe the socioeconomic setting of the community and the social-mapping, construct the livelihood profiles, identify the relevant technical, physical, environmental, and institutional constraints, leading to the development of a set of proposals designed to overcome these constraints. The Report of the Community Needs Assessment (CNA) will be the source of information for the collective identification of the development priorities of the communities by the CEIGs and the translation of those priorities into investment subprojects and other activities to be funded under the Project. The first batch of subprojects is 59

61 expected to include relevant details in terms of subproject sites, scale, and detailed design and cost estimates. This approach will give flexibility in the implementation of the Project allowing for continuous adjustments in response to change in production, market, or policy environment, thereby contributing towards achieving the PDOs. Overall implementation of the Project will be done according to detailed procedures defined in the PIM. A user-friendly Operations Manual will be available to the CEIGs. Preparation and adoption of the Operations Manual is condition for presentation of the project for RVP approval. Monitoring arrangements 166. This section aims to set the ground to identify the Project s Results Framework and other M&E tools as required. In particular, this section includes: (i) principles and aims of the M&E system of KP-SADP; (ii) overview of the project results; (iii) specific M&E arrangements; and (iv) indicative list of required M&E tools. i. Principles and Aims of the Monitoring and Evaluation System 167. The M&E system will be guided by the following principles: (i) participation of beneficiaries at all levels of project M&E the assessment of the project implementation and of their livelihoods; (ii) enhanced accountability through transparency and open availability of the data and analysis, promoting a culture oriented towards knowledge sharing and enlarging the outreach of the project s results; (iii) simplicity of the system and of its indicators, in order to facilitate the data collection and analysis, both by the PMU and other parties; (iv) ownership by PMU, through its involvement in the formulation of the Operations Manual; (v) consistency with the existing M&E government systems Beneficiaries participation will be ensured at all levels, through specific tools such as community scorecards, project feedback fora, interactive case studies. The underlying principle of the involvement of beneficiaries is not only to make them participating in the assessment of the quality of interventions, but also to involve them in the restitution of their contributions after the project s analysis. This principle and approach will be reflected also in the communication strategy The aim of the M&E system is three-fold, comprising the following main objectives: a. To document implementation progress and guide project implementation in taking corrective actions for improvement. The M&E system will provide regular information about the project implementation giving directions to the PMU on the needs to reorient the activities and approaches. Such regular monitoring would also allow the World Bank to supervise progress on a regular basis, identify implementation bottlenecks in a timely manner and ensure that the project remains on track to achieve its PDO. b. To provide the basis for project evaluation and to draw lessons from implementation. The M&E system will ensure that appropriate information is collected throughout implementation so that the third party evaluation and the ICR Report can assess the success of project implementation as well as beneficiary-level impact. 60

62 c. To develop a knowledge sharing and dissemination outlet, as a cross cutting aim, through the publication of the Annual Reports and of the Community Action Plans. Knowledge sharing will be done at all levels and with the most appropriate tools, from the beneficiaries, to the targeted institutions, to external users and the open public. ii. Project results: 170. The results framework of the project focuses on both longer-term developmental results (Project Development Objective PDO) and medium-term effects of the interventions outputs (outcomes/ intermediate outcomes). These categories of results are measured during the course of project implementation and complemented by specific studies carried out with by a Third Party Evaluation. In support of the project objective, three project outcome indicators and twelve intermediate outcome indicators have been identified that constitute the project s Results Framework for which the project will be accountable (Annex 2) At PDO level, the project will measure the changes in share of population that access social infrastructures and productive infrastructures in turn improved and provided by the project. This aspect is measured through three indicators, which inform also on the possibility to scale-up the project s investments, and to assess the involvement of communities. Three additional indicators will measure the process towards the achievement of the PDO, focusing on the establishment or revitalization of existing Economic Interest Groups (EIG), on their use of CAP as participatory plans, and on the arrangements for community engagement in post project sustainability or O&M (this only where relevant). Given the CDD nature of the project, monitoring the process is an important area to capture evidence that the voices of the vulnerable and ultra-poor are included The interventions are likely to improve the livelihoods of targeted beneficiaries through their enhanced utilization of social services, improved access to productive infrastructure and through the implementation of community-based action plans (CAPs) funded by the project. Despite a significant part of the investment foreseen by the project are expected to contribute to improving targeted households livelihoods, this aspect is not part of the regular monitoring. At this pilot stage of CDD in KP Province, the priority is to focus on the increased access and utilization of productive infrastructure and social services. The impact on income will be studied in separate ad hoc studies (e.g.: mid-term/ final evaluation) At the intermediate outcome levels, the project will generate three main results, corresponding to the three components: A. The communities are able to prioritize their needs and to produce accordingly their development plans (Community Action Plans) through a participatory process. This result will be monitored through three indicators. Monitoring the progress towards the expected targets will also inform about the effectiveness of the adopted approach and the potential increase of the outreach of the project within the given timeframe. B. The capacity of the communities (both at Tehsil and lower levels) to increase their incomes and access to services are enhanced through the use of funds and implementation of the CAPs. This result is monitored through four indicators. 61

63 Analyzing the content of the CAP and the share between sub-components activities will inform about the composition of the target groups and will inform the analyses on the potential increase of income and improvement of livelihoods. C. Trained human resources (project s staff and government officials directly involved in implementation) are able to provide financial and technical support to beneficiaries through transparent management and monitoring system. Through three indicators, this result will measure the increased knowledge and skills of KP staff (ie: EDO, and additional M&E officers) and inform about the capacities available to respond to the targeted population needs in view of a possible increase of the activities outreach he activities being financed will likely have different impact on the different categories of beneficiaries: poor versus ultra-poor and marginalized households and women compared to men headed households. For this reason, the majority of indicators where specified in the Results Framework will be measured with gender disaggregation. Where appropriate, for Component B, the disaggregation will comprise also the socio-economic categories, types of services and type of infrastructure that is supported through project interventions. iii. Monitoring and Evaluation arrangements 175. The reporting system of the M&E is expected to inform on one side the official Government system the monitoring of the ADP projects, to which KP-SADP will adapt producing monthly reports on physical and financial progress against set targets; and, on the other side, the project requirements, focusing on results, against the agreed Monitoring and Evaluation results framework (Annex 2). The overall responsibility for the functions related to M&E is assigned to the Project Management Unit (PMU). More specifically, within the PMU: a) One dedicated Deputy Director with M&E functions, at PMU level, in Peshawar, will be responsible to manage the overall M&E system, will prepare or clear the formats and tools to be used for data collection, ensuring farmers participation at all stages, organizing data systematization through a dedicated Monitoring Information System, carrying out data analysis and reporting, ensuring the communication of the analyses at all levels; b) Three newly created Executive District Officers/CDD, at District level, will be increasingly involved in the preliminary analysis of results. This activity will serve as learning-on-the-job for the newly created government officials. c) Three M&E officers at District level will coordinate the data collection, carrying out sample field visits and will be responsible for the preliminary analysis of results. The M&E officers will ensure that basic information for the regular reporting are provided to the DD/M&E. d) 60 field Facilitators (social mobilization staff, 30 male and 30 female) at Tehsil level, will have the responsibility of M&E data collection at household level; they will 62

64 interact with beneficiaries and ensure their inclusion in the M&E system, through data collection and communication of reports and analysis through appropriate tools; e) Beneficiaries, part of the M&E process at all stages, will keep record of the activities at Economic Interest Group level (EIG), as well as at aggregated into Tehsil CEIGs; they will contribute to the evaluation of the activities through appropriate tools and through regular facilitations (quarterly). They will receive feedback of the reporting done at aggregated level, as a restitution of their contribution and as a learning exercise Outside the PMU, the M&E system will involve in its reporting the M&E Directorate of the Planning and Development Department; this will serve as basis for reciprocal development of capacities on M&E reporting focused on results. Responsible Role/ Responsibility Action Frequency Output PMU/ Peshawar Deputy Director M&E District Executive District Officers/CDD Monitoring Officer Tehsil Field Facilitators Village/ field Beneficiaries (EIG and CEIG) Coordination of M&E system, ensure involvement of beneficiaries Regular Government Reporting Supervision of staff, ensuring regular data collection and reporting. Coordination of field officials, data collection and reporting, plus preliminary analysis Data collection at HH/ EIG/ CEIG levels Maintenance of registers Supervision of M&E system and MIS, coordination of districts, analysis, reporting, communication Clearance of reports and submission Coordination of staff. Increasing participation in reports review and analysis. Sample field monitoring visits Regular field visits; data entry in MIS; preparation of draft district monthly M&E reports. Field based, continuous visits. Data collection, facilitation of beneficiaries evaluations Collection and maintenance of information on EIG/ CEIG, memberships, CAP and cash accounts Quarterly, Annually, end of project Monthly Quarterly Monthly and Quarterly Quarterly On need/ meeting basis Regular reports, with indication of beneficiaries involvement, by gender Monthly report; upload on web 20 Draft Monthly Reports submitted to PMU on a time to be agreed that ensures sufficient time for PMU review Monthly reports drafted; Data on M&E system collected and in MIS. Information for quarterly reports prepared. Formats filled and submitted to District M&E Officers Registers ready to be consulted and open to anyone in the community 20 M&E Directorate of the P&D Department has established an on-line system for monitoring project implementation. 63

65 iv. Indicative list of Monitoring and Evaluation tools 177. The project is going to measure its indicator through a set of M&E tools to be developed by the PMU at the beginning of project implementation. Among other tools, the project will establish: Monitoring Information System (MIS), to record all data and progress towards results at all levels. Formats for baseline information: A specific format to gather information on household beneficiaries. Source of specific information on the targeted area will be the database created by, e.g., the Benazir Income Support Project, to which the Bank is providing technical assistance, or other available surveys (Government Household Survey). Perception surveys, to measure the satisfaction and relevance of investments to the needs of farmers, to be carried out prior, during and after the investments are completed. Capacity development outcome questionnaire, through a combined assessment on knowledge and skills of PMU staff based on three phases: (i) pre-learning event, (ii) immediately after-training, and (iii) six months after the training Participatory Baseline: The targeting of beneficiaries and the gathering of information regarding the beneficiaries reached by the project will be done in a participatory manner. The beneficiaries will participate in the selection of the criteria and will then self-select themselves, providing information on poor/ ultra-poor within the community. The format for monitoring beneficiaries involved in the project (i.e.: EIG members) will include, among others: name of Village, pop of village, head of households, number of HH members, how many members work/ generate income, main economic activity within the HH, secondary economic activity, assets owned at date of survey. 64

66 Information flow and communication line of findings and results within PMU/ beneficiaries Project Steering Committee Project Management Unit Third party evaluation District Offices Tehsil level: facilitators and CEIG Other institutions Information flow Households Beneficiaries and EIG 65

67 Annex 8: Project Preparation and Appraisal Team Members PAKISTAN: KP Southern Area Development Project (KP-SADP) Name Title Unit Tahira Syed Co-Task Team Leader Senior Rural Development Specialist SASDA Chukwudi Okafor Co-Task Team Leader ECSSD Senior Social Development Specialist Uzma Sadaf Sr. Procurement Specialist SARPS Khalid Bin Anjum Procurement Specialist SARPS Syed Waseem Kazmi Financial Management Specialist SARFM Anwar A. Bhatti Financial Analyst SACPK Sameena Dost Sr. Counsel LEGES David J. Steel ORAF Reviewer Consultant SARDE Kamal Siblini Results Framework Reviewer Sr. Operations Officer OPCS Jong A. Choi Results Framework Reviewer Operations Officer OPCS Javaid Afzal Sr. Environment Specialist SASDI Salma Omar Sr. Social Development Specialist SASDS Syeda Maheen Zehra Sr. Institutional Development Specialist SAWSP Melissa Williams Sr. Rural Development Specialist SASDA Winston Dawes Rural Development Specialist SASDA Tommaso Alacevich Economist / M&E Specialist FAO Mohamad Omar Khalid Environment Consultant SASDI Altaf Iqbal Economic Analysis Consultant SASDA Robert Bou Jaoude Program Manager MDTF SASPK Chau-Ching Shen Sr. Finance Officer CTRFC Shabir Ahmad Sr. Program Assistant SASDO Lilac Thomas Program Assistant SASDO Afzal Mahmood Program Assistant SASDO Shahnaz Meraj Program Assistant SASDO Parmesh Shah Peer Reviewer SASDA Lead Rural Development Specialist Meena Munshi Peer Reviewer Senior Livelihoods Specialist AFTAR Abimbola Adubi Peer Reviewer Senior Agriculture Specialist AFTAR Hugh Riddle Peer Reviewer Senior Operations Officer OPCFC Jean Mazurelle Peer Reviewer Ex-Country Manager, Afghanistan OPCSC 66

68 Annex 9: Environmental and Social Safeguards Framework PAKISTAN: KP Southern Area Development Project (KP-SADP) 179. To address the potentially negative environmental and/or social impacts associated with the projects under MDTF, the Bank has prepared an Environmental and Social Screening and Assessment Framework (ESSAF), in accordance with the OP 8.0 for emergency operations. Since the KP-SADP Project is being proposed under MDTF, the ESSAF is applicable to this project also. The key aspects of the Framework are summarized below Impact Screening, Assessment and Mitigation Planning. While preparing any operations or projects for financing under the MDTF, the ESSAF will be followed to screen environmental and social impacts and plan any required mitigation measures. The screening process and its findings as well as the proposed mitigation measures will be documented as part of the project/subproject package. The following guidelines, codes of practice and requirements will be followed in the selection, design and implementation of any operations financed under the MDTF. a. Environmental impact assessment will be conducted for all projects/subprojects under MDTF, during the project implementation. Criteria for the type of assessment to be conducted for individual projects/subprojects are provided in Table 1. Full Environmental Assessments (EAs) will need to be conducted and clearance obtained from the Bank prior to initiating environmental category A projects/subprojects. Environmental and Social Management Plans (ESMPs) will need to be prepared and clearance obtained from the Bank prior to initiating environmental category B projects/subprojects. The EAs and ESMPs will also be submitted to the relevant EPA for obtaining No Objection Certificate (NOC) before commencing the project/subprojects implementation, in line with the national regulatory requirements in the Country. For smaller subprojects, environmental and social screening and assessment will be conducted with the help of checklists (a typical checklist is provided in the ESSAF). b. Each implementing agency for the projects under the MDTF will appoint/designate an environmental and social focal point (ESFP), who will be responsible for ESSAF implementation within his/her organization, and also for the preparation and submission of quarterly monitoring reports to the Bank on the screening of and the rationale for the proposed environmental categorization of each project. c. While conducting environmental assessment, cumulative impacts of a large number of projects/subprojects will also be considered. d. All projects/subprojects will be screened for need of land acquisition and resettlement. If confirmed, necessary planning efforts will be carried out to develop mitigation measures. A guideline for land compensation and resettlement planning is provided in ESSAF. e. All projects/subprojects will be screened for impacts on physical cultural resources and necessary mitigation measures. Procedures for the protection of cultural property, including the chance discovery of archaeological artefacts, unrecorded graveyards and burial sites are outlined in ESSAF. 67

69 f. All construction contracts for the projects/subprojects financed by the MDTF will include appropriate clauses to ensure effective implementation of the mitigation measures identified in EA/ESMP/Checklist. A sample environmental safeguards procedure for inclusion in the technical specifications of contracts is provided in ESSAF. g. The Environment, Health and Safety Guidelines developed by the International Finance Corporation (IFC) and the World Bank will also be applicable to the activities under the emergency projects/subprojects. The Guidelines are provided in ESSAF. h. The procurement plans for the proposed projects/subprojects will include milestones for preparation of EA/ESMP/Checklist, and obtaining clearance from the Bank. i. Subject to the needs as determined by the Bank s safeguards team, the implementing agency will engage an independent consultant or consulting firm to conduct an annual environmental and social audit as third party validation, of the subprojects undertaken during each year of the Project implementation Consultations. Consultations will be mainstreamed in the preparation of new operations under the MDTF. For environmental Category A and B operations 21, the implementing agencies will consult the potentially affected groups and local nongovernmental organizations on the project environmental and social aspects, and will take their views into account. The implementing agencies will initiate these consultations as early as possible, and for meaningful consultations, will provide relevant material in a timely manner prior to consultation, in a form and language(s) that are understandable and accessible to the groups being consulted For Category A projects/subprojects, the implementing agencies will consult these groups at least twice: (a) shortly after the environmental screening and prior to finalization of the terms of reference for the EA and Resettlement Plan (RP); and (b) once a draft EA report and RP are prepared. For the initial consultation, the implementing agencies will provide a summary of the proposed subproject's objectives, description, and potential impacts. For both Category A and B projects, the implementing agencies will provide these groups with a summary of the EA report and RP (including the conclusions of the assessment). In addition, the implementing agencies will make the draft reports publicly available to project-affected groups and local nongovernmental organizations Planning, Review and Approval. The entire environmental and social screening and assessment procedure described above will be integrated within the preparation of the operations under the MDTF. To this end, the screening and planning to address environmental and social impacts would be initiated during the operation preparation phase. The operation preparation agencies will be responsible for the screening and planning of any environmental and social action plans required in line with this Framework. The EA or ESMP and RPs will be submitted to the project approving authority as part of the project/subproject application package. The implementation agencies will assign specialists to review the environmental and social safeguard action plans, such as screening report, EA, ESMP and RP. The implementation agencies will submit the safeguard documents for World Bank s review and clearance, in accordance with the procedures as described earlier in the Annex. The implementation agencies will not approve the proposed operations until the required environmental and social safeguard action plans are 21 As defined in World Bank Operational Policy 4.01, Environmental Assessment. 68

70 cleared for compliance with the Framework by the World Bank. A simplified flow chart for subproject preparation, approval and execution along with the EA/ESMP/Checklist requirements is provided below. Subproject identification Subproject preparation Project /subproject implementation. Determine type of assessment required per criteria in Section VI Conduct EA, prepare ESMP, or fill Checklist ;prepare RP per criteria in Section VI Review and approval of EA, ESMP or Checklist; and RP by EPA and WB Project / subproject approval by Competent Authority Implementation of social and environmental mitigation measures as identified in EA/ ESMP/Checklist /RP The implementing agencies will implement the projects under MDTF in close coordination with the relevant line departments, local governments, and district administration. Each implementing agency and in turn, each line department, will be responsible for applying the safeguard screening and mitigation requirements to its own projects. Separate environmental and social focal points (ESFPs) will be identified in each of the implementing agencies, with responsibility for overseeing the implementation of the ESSAF. The provincial EPAs (for KP and Balochistan), and Federal EPA (for FATA projects) will be responsible for environmental clearance for operations or projects/subprojects that require statutory environmental clearance, in accordance with the law. Although the national/provincial environmental clearance procedures are adequate and fairly reliable, the Bank will still review a samples of the EAs/ESMPs prepared under each subcomponent and provide necessary concurrence for the approval of disbursements of funds All agencies and departments who are preparing and will implement operations under the MDTF will appoint officers as the environmental and social focal points (ESFPs), who will liaise and coordinate with relevant agencies to ensure compliance with this Framework Capacity-Building and Monitoring Of ESSAF Implementation. As part of the capacity-building to be provided for implementation of the proposed operations, the ESFPs and relevant staff of the concerned line departments will also receive training in ESSAF s application. The World Bank will monitor and provide guidance in the implementation of the ESSAF. The World Bank will also assist in this capacity-building in the implementation of approved safeguard action plans The implementing agencies through their ESFPs will be responsible, besides other functions, to monitor and supervise the implementation of any safeguard action plans. For this purpose, the implementing agencies will establish a monitoring mechanism as part of the project management system over the implementation of agreed safeguard action plans. In addition, the implementing agencies will also engage external monitors over the implementation of agreed safeguard action plans. The monitoring mechanisms should be detailed in the required action plans. 69

71 188. Disclosure. This ESSAF has been shared with all relevant agencies, line departments of the provincial and federal governments, concerned nongovernmental organizations, and development partners. Subsequently, it has also been disclosed in Urdu and English by the implementing agencies, and also made available at the websites of GoP, GoKP, FATA Secretariat, GoB and the relevant line departments. Copies of ESSAF have also been sent to Federal EPA, KP EPA, and Balochistan EPA. The document is also disclosed at the World Bank s InfoShop. Relevant project specific safeguard documents/mitigation plans to be prepared subsequently will also be disclosed in a similar manner. TABLE 1: CRITERIA FOR TYPE OF ENVIRONMENTAL INSTRUMENT Type of Subproject Infrastructure (such as water supply, sanitation, solid waste management, access roads, drainage, and street lighting) Roads Schools and health care facilities Category A Projects/Subprojects Full EA Required Cost: Rs 25 million or above Cost: Rs. 50 million or above Cost: Rs. 50 million or above Category B Projects/Subprojects ESMP Required Cost: less than Rs 25 million, but more than 1 million Cost: less than Rs 50 million, but more than 2 million Cost: less than Rs 50 million, but more than 2 million Smaller Projects/Subprojects Environmental Screening Required Cost: up to 1 million Cost: up to 2 million Cost: up to 2 million Note: These criteria may need to be customized for individual projects under MDTF and approval obtained from the Bank. Project-specific Environmental and Social Impact Assessment 189. Construction/rebuilding/improvement of infrastructure as well as operation of these facilities under Component B of the project may potentially cause negative environmental impacts, such as changes in land use and landform, soil erosion, water and soil contamination, air quality deterioration, damage to natural vegetation, and safety and health hazards for workers and surrounding population. In order to address these potential impacts and in accordance with ESSAF requirements described earlier, the GoKP will conduct a project-specific Environmental and Social Assessment (ESA). The key elements of this ESA are listed below. (a) Baseline description (b) Regulatory and policy review (c) Analysis of alternatives (d) Potential impacts of the project activities on soils, air, water, natural vegetation, wildlife, and people (e) Mitigation measures to address the above impacts 70

72 (f) An Environmental and Social Management Plan (ESMP), which defines institutional arrangements for the environmental management of the project. (g) Monitoring mechanism to ensure the implementation of the mitigation measures during the implementation of the Project. (h) Reporting and documentation protocol for environmental and social management. (i) Environmental training and capacity building requirements The ESA y will be made part of the construction contracts, making its effective compliance as one of the contractual requirements. The ESA is included in the legal covenants of the agreement between the GoKP and the Bank. The ESA has been disclosed locally as well as at the InfoShop To manage the preparation and implementation of ESA, a safeguards focal point will be appointed within PMU at the provincial level. In addition, an appropriate officer such as EDO- CDD will be designated as district safeguard coordinator to ensure ESA implementation within each district. Roles and responsibilities of these personnel will be detailed in the ESA. Environmental Aspects: 192. Rebuilding/improving of social infrastructure, constructing/establishing productive infrastructure, and asset building for ultra-poor under the Component B of the project may potentially cause negative environmental and social impacts, such as changes in land use and landform, soil erosion, water and soil contamination, air quality deterioration, damage to natural vegetation, and safety and health hazards for workers and surrounding population. However, most of these impacts are not likely to be irreversible, wide-spread, or unprecedented, and can be addressed with the help of appropriately designed and effectively implemented mitigation plan. Therefore the proposed project has been classified as Environment Category B, in accordance with the WB Operational Policy No other safeguard policy is presently triggered. However, further clarity and confirmation on safeguards policies would be sought during implementation for instance, if agriculture inputs support is being provided, which may lead to the need for developing a pest management plan To address the potentially negative environmental and/or social impacts associated with the projects under MDTF, the Bank has prepared an Environmental and Social Screening and Assessment Framework (ESSAF), in accordance with the OP 8.00 for emergency operations. Since the KP SADP is being proposed under MDTF, ESSAF is applicable to it also. A summary of ESSAF has been given in Annex 9. The ESSAF has been shared with the Government of KP (GoKP). It has been disclosed locally by the GoKP on March 28, 2012 and also at the World Bank s InfoShop on the same date. In accordance with ESSAF requirements, the GoKP has prepared a Project-specific Environmental and Social Assessment (ESA). The ESA identifies the negative environmental and social impacts that are likely to be caused by the Project during its various phases, and proposes mitigation measures to address these impacts. The ESA also proposes the institutional arrangements to manage the environmental aspects of the Project, lists environmental monitoring requirements to ensure the effective implementation of the mitigation measures, identifies staff training needs, and also specifies the reporting and documentation requirements. All subproject 71

73 investments will be subject to environment and social screening as per ESA study at the design stage. The adverse environment and social impacts associated with the subprojects will be mitigated through the ESMPs developed under ESA for the related subproject. The ESA has already been sent for Bank s clearance, and will be disclosed locally by the GoKP on its website as well as on the InfoShop of the World Bank after the clearance. Social Aspects: 194. Inequality, social exclusion and deprivation are some of the social development challenges that face the target areas, and the knowledge of these challenges informed the design and operational relevance of this Project. The project design ensures that the voices of different economic interest groups including users groups that are traditionally marginalized by gender, income, age, religion and class are fully heard and that their interests are reflected in the CAPs and in all project activities. The social guidelines in the PIM will ensure that vulnerability is addressed in subproject targeting, and that elite capture is prevented Broad-based participatory and extensive consultative process with stakeholders at both the provincial, district and community levels including representatives from public, private, nongovernmental, and representatives of beneficiary communities have provided much of the information used for the design of the Project. The key result of public consultations with stakeholders showed that communities are highly sensitized and are capable of organizing themselves to address risks to community welfare. It is envisaged that public consultation would be an on-going activity throughout the entire project cycle In accordance with OP8.0, the MDTF team had already prepared an Environmental and Social Screening and Assessment Framework (ESSAF) that would govern safeguards screening and compliance activities during and under the MDTF s implementation, which will be applied in this project as discussed and agreed with the client To ensure effective application of the World Bank s safeguard policies and the national regulatory requirements, the ESSAF provides guidance on the approach to be taken during the selection and design of projects/subprojects and the planning of mitigation measures ESA implementation: All sub-project investments will be subject to environment and social screening at the design stage, comprehensive environment and social screening reports detailing the procedures and evidences will be prepared, and disclosed prior to initiating implementation. The adverse environment and social impacts will be mitigated through the environmental and social management plan developed under ESA for all interventions In light of the scope of works, which comprise rehabilitation of existing social infrastructure such as roads, schools, and health centers, and establishment of small-scale productive physical and socioeconomic infrastructure, income-earning assets, and extension service-type activities, the risks of triggering negative social impacts in the project areas are minimal. Further, OP4.12 on Involuntary Resettlement is not triggered as the project does not anticipate any involuntary land acquisition. While the project footprint remains to be determined during the course of project implementation, the project anticipates that land requirement for sub project activities, however small, will be met through voluntary land donation through direct 72

74 purchase using the principles of willing-buyer willing-seller. As part of the subproject selection process, the screening will include an assessment of whether there are potential land acquisition and/or involuntary resettlement issues. All such sub-project locations requiring involuntary land acquisition shall be avoided without compromising the project development objectives. The screening checklists and the selection criteria will be fully explained in the Operations Manual along with procedures for documenting voluntary contribution in the form of land. 73

75 Annex 10: Economic and Financial Analysis PAKISTAN: KP Southern Area Development Project (KP SADP) 200. Open menu: The difficulty in undertaking ex-ante cost/benefit or cost/effectiveness analysis for this type of project is due to the key strength of the project design, i.e. the project will implement a devolved and decentralized demand-driven open-menu approach for subproject selection. It is difficult to quantify the benefits because the types of services and related infrastructure investments in subprojects will not be known with certainty, until the KP- SADP is well underway and specific decisions have been made at the local level by the communities Expected benefits: It is also difficult to quantify the economic benefits as the extent and types of services and related infrastructure investments in subprojects are not known with certainty before implementation starts. However, the project design indicates that all subprojects will be initiated and implemented by the local communities therefore their sustainability will expected to be high. Experience from similar operations also indicates that overall expected benefits in terms of social uplift, institutional strengthening, and economic impacts on the communities are likely to remain high. The project intends to focus on agriculture and its subsectors including irrigation, livestock, income generating activities for the unemployed youth, and would invest in rehabilitation as well as development of the local infrastructure. The type and extent of exact interventions and investments will be known only after the start of project implementation. Therefore, the economic analysis will be carried out for given subprojects as part of the planning and approval process for selection of these subprojects The key indirect economic benefits are also expected to result from investments in agricultural sector. These benefits may likely include: (i) increased operating efficiency at farm level (through improvements to production and marketing process, logistics and market institutions); (ii) extended value addition at farm and/or post-farm level with greater integration between producers, traders and processors along the value chains; and (iii) increased market access and reduction in economic losses due to inadequate storage capacity and for better management. In addition, the planned activities (e.g. advisory services and training) may also provide further indirect benefits in the form of stronger farmer/community groups able to actively and profitably engage with the market, more market oriented and active agribusinesses with stronger links to producers, as well as more structured planning for value chain improvements at district and village levels Potential Subprojects for Social and Productive Infrastructure: The expected demand for subprojects under the social and productive infrastructure complements may include the following: A. Social Infrastructure a. School rehabilitation (rooms/boundary wall/ water and sanitation facilities) b. Health facilitate rehabilitation (building repairs/sanitation facilities) c. Village streets/lanes (rehabilitation and repairs) d. Street lighting facilities e. Village sanitation and solid waste management 74

76 B. Productive Infrastructure a. Irrigation infrastructure (watercourses, tubewells, solar conversion of pumps, etc.) b. Farm to market access roads and access bridges connecting to segments c. Rain/flood water harvesting (e.g. spate irrigation, water storage tanks etc.) d. Drip and sprinklers for small scale irrigation e. Rehabilitation of livestock sheds and poultry farms f. Community grain storage facilities g. Community agro-processing facilities h. Tunnel farming of high value crops i. Livestock (including dairy and meat) management and processing j. Purchase of agricultural machinery and farm tools The above list is only indicative as the demand for infrastructure will be generated through community mobilization and decision making process. Therefore, while economic analysis has not been carried out for the above mentioned infrastructure investments, there are substantial social and economic benefits expected from these investments. Additionally, other indirect and non-quantifiable benefits like generation of employment, start of multiple economic activities and uplift of the society are also expected Subproject selection process: The selection of subprojects will take place at village level. The subproject selection process will be driven by the priorities of the communities involved in the project. The Economic Interest Groups (EIGs) will adopt a participatory process to agree on the subproject proposed for financing through the Project. The EIGs will prepare a Community Action Plan (CAP) with agreed/prioritized social, productive and asset building subprojects. The selection of social and productive subprojects that include infrastructure rehabilitation and/or development of new infrastructure will also include a detailed economic analysis based on the specifications of the infrastructure being proposed. The economic benefits expected from the proposed infrastructure schemes will carry specified weight for consideration of the overall CAP at the time of review and approval by the District Review Committee (DRC). Based on the detailed economic analysis provided for each infrastructure scheme proposed as subproject, the DRC will conclude its decision regarding approval of the proposed subprojects The Operations Manual will include the formats and guidelines for carrying our economic analysis for infrastructure schemes by the communities. The Project Management Unit (PMU) will ensure that these guidelines and formats are made available to the EIGs at the time they prepare their CAPs and are available in a form that is user friendly and easy to comprehend by the communities. Additional technical support and training will be provided by the Project staff to raise knowledge and understanding of the EIG members in using the economic analysis guidelines and formats and adopt these for future proposals Overall Economic Analysis: Based on the data of specific types of infrastructure schemes, the assessment of the Project s economic rates of returns will be updated at the stage of annual reviews and at mid-term. 22 It includes power tillers and processing equipment e.g. maize shellers, oil press, rice thresher, drying platforms, fruit processing/packaging equipment, etc. 75

77 Annex 11: Documents in Project Files PAKISTAN: KP Southern Area Development Project (KP-SADP) WB and ADB, 2009, Damage and Needs Assessment (DNA) 2010 Post Crisis Needs Assessment Report (PCNA) WB, ADB, EU, UN and Development Partners Country Partnership Strategy WB Project Appraisal Document of the Community Infrastructure Project Phase II (CIP-II) NWFP Economic Report (December 2005) WB Doing Business in Pakistan 2010 WB 2010 KP, FATA and Balochistan MDTF Administration Agreement 76

78 Annex 12: Statement of Loans and Credits PAKISTAN: KP Southern Area Development Project (KP-SADP) Original Amount in US$ Millions Difference between expected and actual disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev d P PK:Punjab Irrigated Agriculture Producti P PK: Punjab Education Sector II P PK:Tarbela 4th Extension Hydropower Proj P PK: Natural Gas Efficiency Project P PK: Karachi Port Improvement Project P PK: Skills Development Project P PK: Tertiary Education Support Project P PK: Punjab Barrages Improvement II Proj P PK: Flood Emegency Cash Transfer Project P PK: Sindh Education Sctr Project (SEP) P PK: PPAF III P PK: 3rd Partnership for Polio Erad P PK: Social Safety Net P PK: Punjab Education Sector Project P PK:Second Trade & Transport Facilitation P PK: Sindh Water Sector Improvement Proj P PK: Balochistan SSIP P PK:Electricity Distribution & Transmissi P PK: Water Sector Capacity Buidling Proj P PK:Land Records Mgmt & Information Syst P PK: PIFRA II P PK:Punjab Municipal Services Improvement P PK: Balochistan Educ Support Project P PK: Sindh On-Farm Water Management Proj P PK: HIGHWAYS REHAB Total: 1, , ,

79 PAKISTAN STATEMENT OF IFC s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. Total portfolio: Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. Total pending commitment:

80 Annex 13: Country at a Glance PAKISTAN: KP Southern Area Development Project (KP-SADP) 79