Islamic Republic of Pakistan: Preparing the Second Sindh Devolved Social Services Program

Transcription

1 Technical Assistance Report Project Number: September 2006 Islamic Republic of Pakistan: Preparing the Second Sindh Devolved Social Services Program (Financed by the Japan Special Fund) The views expressed herein are those of the consultant and do not necessarily represent those of ADB s members, Board of Directors, Management, or staff, and may be preliminary in nature.

2 CURRENCY EQUIVALENTS (as of 6 September 2006) Currency Unit Pakistan rupee/s (Pre/PRs) PRe 1.00 = $ $1.00 = PRs60.49 ABBREVIATIONS ADB Asian Development Bank ASP annual sector plan M&E monitoring and evaluation MDGs Millennium Development Goals MOU memorandum of understanding NGO nongovernment organization PFC Provincial Finance Commission PPP public private partnership SDSSP-I First Sindh Devolved Social Services Program SDSSP-II Second Sindh Devolved Social Services Program SLGO Sindh Local Government Ordinance SPG Sindh provincial government TA technical assistance TMA taluka municipal administration WSS water supply and sanitation TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification Targeted intervention Sector Multisector: education; health, nutrition, and social protection; water supply, sanitation, and waste management Subsector Basic education, health, and water and sanitation Themes Inclusive social development, governance Subthemes Human development, public governance, gender equity in opportunities GLOSSARY district administrative unit below a province nazim the elected head of the district, taluka, town or union. taluka administrative unit below a district union administrative unit below a taluka that consist of two or more villages zila mohtasib district ombudsman NOTES (i) (ii) The fiscal year (FY) of the Government and its agencies ends on 30 June. In this report, "$" refers to US dollars.

3 Vice President L. Jin, Operations Group 1 Director General J. Miranda, Central and West Asia Department (CWRD) Officer-in-Charge I.H. Keum, Social Sectors Division, CWRD Team leader Rie Hiraoka, Social Sectors Division, CWRD

4 73o00'E 64o00'E PAKISTAN Ku na rr. SECOND SINDH DEVOLVED SOCIAL SERVICES PROGRAM Chitral National Capital NORTH - WEST FRONTIER Provincial Capital City/Town Dasu R. Dir 35o00'N Swa t 35o00'N Airport Saidu Sharif Batgram Malakand Buner Mansehra Batkhela Mardan Tarbela Dam Charsadda Swabi Kabul R Abbottabad. Nowsehra Haripur Peshawar Attock Kohat ISLAMABAD Hangu Rawalpindi Gujar Khan Mangla Dam Karak Port National Road Other Road Railway Parachinar River AFGHANISTAN District Boundary Provincial Boundary Bannu Talagang Chakwal M.K. Bazar Pishin Chamman Loralai Quetta Sibi Dadhar Narowal Kasur Okara Sahiwal Pakpattan R. lej Sut Bahawalnagar Vehari Lodhran Mastung Sialkot Jhelum Khanewal Multan Dera Ghazi Khan Muzaffargarh Kohlu Nushki Bhalwal Gujranwala Khushab Hafizabad Sargodha. br Lahore n e a Sheikhupura Bhakkar Ch Faisalabad Jhang Shorkot Layyah P U N J A B R. Toba Tek Singh vi Ra Kot Addu Barkhan Ziarat Gujrat R. Ind Dera Ismail Khan Zhob Jhelum R. Federally Administered Lakki Tribal Areas Tank Boundaries are not necessarily authoritative. Mandi Bhauddin Mianwali us International Boundary Hasilpur Bahawalpur Kalat Dera Bugti Rajanpur Liaqatpur Kharan Jhapat Jacobabad Jhal Magsi B A L O C H I S TA N Khuzdar Larkana Washuk In du s Kakar Na lr. Panjgur Dadu Turbat 26o00'N Sukkur Khairpur SINDH Naushahro INDIA Nawabshah Awaran Sanghar Dasni R. Uthel Gwadar Ghotki Ratodero R. IRAN Rahimyar Khan Shikarpur Jafarabad Pasni Hyderabad Karachi 26o00'N Mirpur Khas Thatta Badin Umarkot Mithi Port Qasim N ARABIAN SEA Kilometers 64o00'E 73o00'E HR

5 I. INTRODUCTION 1. The First Sindh Devolved Social Services Program (SDSSP-I) was approved by the Asian Development Bank (ADB) on 12 December 2003 for $220 million, and became effective in April The Program has been successfully implemented, with most tranche conditions met on time. Despite the progress and achievements of SDSSP-I, Sindh province faces formidable and complex developmental challenges. The Government of Pakistan requested that ADB provide assistance to Sindh province for deepening policy reforms initiated under SDSSP-I and expanding social sector investments to consolidate the gains of SDSSP-I. A related technical assistance (TA) was requested for the preparation of the Second Sindh Devolved Social Services Program (SDSSP-II). The TA Fact-Finding Mission took place in March During that Mission, an agreement was reached with the Government on the TA s impact and outcome, scope, cost and financing, and implementation arrangements. The TA is included in the Pakistan country strategy and program update for 2006, while the loan is included for The design and monitoring framework is in Appendix 1. II. ISSUES 2. Background. Whereas Sindh has the highest per capita income among the four provinces in Pakistan, it is the second least developed province in terms of human and social development. Human development indicators in Sindh have been improving slowly, as outlined in Appendix 2. The situation in rural Sindh is daunting, especially for girls. In rural areas, girls net enrollment rate in primary schools is only 29%, while the rate for boys is 45%. According to the Sindh Education Management Information System ( ), 63% of enrolled boys and 71% of enrolled girls in rural areas dropped out while moving from grade 5 to grade 6, while 9% of boys and 3% of girls dropped out in urban areas. Health indicators also show a substantial rural urban gap. The percentage of fully immunized children (aged months) is 87% in urban areas, but only 62% in rural areas. Only 40% of pregnant women receive prenatal care in rural areas, whereas 70% do in urban areas. The situation with access to drinking water and sanitation has been improving gradually in recent years. Still, only 56% of households in rural areas have access to tapped or pumped water, and 27% lack toilets. 3. When asked about the single most important development objective for the province in the medium term, 6 out of 10 policy makers chose human development. 4 Consistently low levels of public investment in the social sector, lack of accountability to the public, and limited planning and management capacity of executing bodies have been the most common causes of the social sector s underperformance. In August 2001, the Government introduced the Sindh Local Government Ordinance (SLGO) on the premise that locally managed basic services would improve responsiveness to local needs and improve delivery, since localized management generates political commitment and greater accountability to the public. Three levels of local governments were created, entailing political, financial, and administrative devolution. In Sindh, this initiative created 23 district governments, 119 taluka (town) municipal administrations (TMAs), and 1,044 union administrations to function as autonomous local bodies with their own responsibilities, financial shares, and revenue sources. The SLGO has had a promising start in creating social sector reform opportunities. SDSSP-I was conceived in 1 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Islamic Republic of Pakistan for the Sindh Devolved Social Services Program. Manila. 2 ADB Country Strategy and Program Update ( ): Pakistan. Manila. 3 The TA first appeared in ADB Business Opportunities on 5 April World Bank Pakistan: Securing Sindh s Future-The Prospects and Challenges Ahead. Washington, DC.

6 2 this context to provide financial and technical support to the Sindh provincial government (SPG) to improve devolved social services and thus improve human and social indicators. 4. SDSSP-I Progress To Date. SDSSP-I aims to help reduce poverty and gender imbalances by improving people s education, health, and access to water supply and sanitation (WSS). It especially focuses on improving the governance and financing of social services. SDSSP-I targets five principal policy reforms: (i) further devolution of social services to local governments; (ii) increased social sector financing; (iii) improved participation and accountability; (iv) rationalized services and setting minimum standards; and (v) promotion of public private partnerships (PPPs) to improve service delivery. SDSSP-I also includes a TA loan to (i) strengthen social sector and program management and monitoring, (ii) develop local governments and community-based organizations governing capacity in social services, and (iii) support work on specific policy reforms. SDSSP-I supports policy reforms at the provincial level and provides fiscal and technical support for education and health in district governments, and for WSS in TMAs. 5. As outlined in Appendix 3, SPG has made significant headway in the last 2 years in implementing the policy reforms and introducing innovative approaches. One of the most innovative approaches has been the conditional grant mechanism. Under this mechanism, financial support for local governments is transferred from SPG through conditional grants that are allocated based on a formula determined by the Provincial Finance Commission (PFC). The grants ("PFC awards") increase local governments budget predictability and transparency. This grant mechanism was the first of its kind in Pakistan. SDSSP-I also introduced annual sector plans to initiate rational, evidence-led, priority-based planning at the local government level. As implementation of the TA loan gathers momentum, capacity development of stakeholders is expected to accelerate and enable SDSSP-II to launch on stronger footing. 6. Some social sector indicators have improved since the introduction of SLGO (see Appendix 2). Between and , the percentage of children (aged months) fully immunized in rural areas increased from 33% to 62%, and prenatal consultation in rural areas increased from 17% to 40%. Improvements in education have been more gradual, however. Girls primary school net enrollment rate increased from 40% to 48%. 7. SDSSP-II. SPG requires additional time and resources to deepen and sustain the devolution and reforms of social service delivery. The Government requested that ADB support the second generation of policy reforms to deepen devolution, building on the experience of SDSSP-I. SPG has stressed the importance of maintaining momentum for reform and avoiding a gap between implementation of SDSSP-I and implementation of SDSSP-II. To ensure that lessons learned from SDSSP-I are fully reflected in SDSSP-II, SPG is undertaking a midterm review of SDSSP-I before the TA begins. 8. SDSSP-I and II should be regarded as a continuum, sharing the goal of helping SPG reduce poverty and gender imbalances by improving people s education, health, and access to WSS. Based on the experience of SDSSP-I, SDSSP-II will put more emphasis on social sector policies to improve the quality of social services, and will deepen governance reform in line with the SLGO. The issues that SDSSP-II, building on SDSSP-I, will address are outlined below. 9. Quality of Social Services. SDSSP-I helped SPG establish a mechanism to transfer financial resources and administrative social services responsibilities to local governments. Provincial line departments (PLDs) are responsible for overall quality control and should design, disseminate, and enforce technical and service standards; local governments should execute

7 3 the policies and strategies accordingly. A health sector reform policy and an education sector plan have been developed, and WSS and solid waste management polices have been drafted. These policies and plans will benefit from clarification of implementation arrangements, and estimation of budgetary requirements. Quality assurance mechanisms including a monitoring and evaluation system and minimum standards for services at different government levels and service providers must be adopted for these policies and plans to be effective. SDSSP-II should assist SPG in building (i) the capacity of provincial line departments to carry out quality control and assurance and formulate sound social sector policies; (ii) strategic planning capacity and management capacity of local governments; and (iii) technical capacity of the service delivery system. 10. The PFC awards should be allocated in such a way that encourages local governments to synchronize their investment priorities with provincial social sector policies. This will require careful design to balance the budgeting and planning autonomy of local governments with the need for leadership from provincial line departments in developing sector policies and strategies. 11. Administrative and Fiscal Management. Inconsistencies between the SLGO and existing laws and regulations often either prevent local governments from operating effectively as independent government tiers, or lead to operational and legal friction between different tiers of government. The role of local governments, which often have fewer managerial and financial resources than the provincial government, tends to be diluted. The roles of provincial and local governments should be rationalized, and administrative arrangements should be made to reflect the new legal mandates. It is also important to ensure that local governments have sufficient and qualified staff to handle their increased responsibilities. 12. The gap between expenditure and revenue needs to be narrowed by a mechanism which allocates adequate resources for the social sectors in an objective, effective, transparent, and predictable way. The PFC-award mechanism should be further improved to meet expenditure needs and provide incentives for better performance. It is also important for local governments to generate more revenue. 13. Poverty Targeting. The Government is committed to reducing poverty and targeting social service delivery to the vulnerable segments of society. Targeting may be done by selecting pro-poor policies and allocating more resource toward poorer districts and population groups. SDSSP-I originally used the human development index (HDI) to rank social deprivation and determine the amount of the conditional grants. It is necessary to identify a more accurate but feasible means of targeting resources and interventions at poor and/or vulnerable segments of the population. 14. Public Private Partnership. There are several successful PPP models in Sindh that could be scaled up. To further promote PPPs, the concept must be broadened beyond the conventional association of PPPs with nongovernment organizations. Partnerships with the forprofit private sector must also be considered. A broad strategy must be developed that includes clear and transparent guidelines for private sector participation in social service delivery. 15. Accountability. SLGO stresses public accountability and transparency. Strengthening the Sindh Local Government Commission, the PFC, the Director General Audit, the local fund auditors, and the zila mohtasib is crucial to effectively mitigating fiduciary, political, and administrative risks. Additional innovative approaches, such as citizens' report cards, may also be explored to involve direct recipients of social services in monitoring.

8 4 16. Implementation Arrangements. SDSSP-I s Executing Agency is the Department of Finance, and funds have been disbursed to local governments through the PFC. As a result, some provincial line departments have not actively participated in SDSSP-I. There is a need to identify a stronger, clearer role for provincial line departments not only in program issues and engagement with local governments, but also in program and project management. 17. External Assistance. The need for effective donor coordination is particularly acute in Sindh's education sector. Apart from the ADB-financed Decentralized Elementary Education Project, 5 the European Commission is planning to launch assistance in October 2006, while the World Bank-supported education policy framework is in its advanced stage of development. The resource needs of Sindh's education sector are substantial enough to absorb all of this assistance. However, for such external assistance to be effective, SPG needs to exercise stronger leadership in coordinating projects and setting a common policy framework. III. THE TECHNICAL ASSISTANCE A. Impact and Outcome 18. The impact of the TA will be to improve people s education, health, and access to WSS, with special attention to gender imbalances, to achieve Millennium Development Goals (MDGs). The outcome of the TA will be an effectively designed SDSSP-II comprising a program and a project or TA that will improve social services delivery and benefit the poor in health, education and WSS. The program will support SPG in implementing social sector reforms and deepening governance reforms in accordance with the SLGO. The project or TA will support implementation of the program through investment or capacity building activities. The outputs of the TA will be: (i) a comprehensive assessment of SDSSP-I that looks at intermediate social sector outputs and outcomes, the feasibility of innovative approaches, and lessons learned; (ii) identification of social sector policies that achieve MDGs, fulfill the needs of social service users, and target the poor; and (iii) administrative, financial, and accountability mechanisms for devolved social services that will help SPG, local governments, and communities make social services more efficient, equitable, and sustainable. B. Methodology and Key Activities 19. The TA will have three phases. The first phase is a comprehensive assessment of SDSSP-I, including (i) an assessment of SDSSP-I's impacts and the current status of its implementation in light of SLGO; (ii) identification of various implementation gaps in terms of both sector and devolution policies; and (iii) suggestions for social sector reforms and devolution mechanisms that will help achieve MDGs. The first phase will end with a provincial-level conference to share the findings and discuss possible improvements. The second phase will focus on (i) designing a program that addresses social sector and devolution policies and contains actions to further devolve and improve social service delivery, and (ii) designing an associated project or TA that will help SPG build capacity at different administrative levels in order to improve service delivery. The effectiveness of each policy and action should be gauged by measurable indicators. Baselines for these indicators should be established. The third phase will help SPG prepare to implement SDSSP-II. Concrete activities to be supported in the third phase will be identified by the end of the second phase. The TA should be implemented in a participatory manner, involving a range of stakeholders. Programs supported by the federal, 5 ADB Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the Islamic Republic of Pakistan for the Decentralized Elementary Education Project (Sindh). Manila.

9 5 provincial, and local governments, and other development agencies will be taken into account to avoid duplication and increase synergy. The initial poverty and social analysis is in Appendix 4. C. Cost and Financing 20. The total cost of the TA is estimated at $750,000 equivalent. The Government has requested ADB to provide $600,000 equivalent. The TA will be financed on a grant basis by the Japan Special Fund, funded by the Government of Japan. The remaining $150,000 will be contributed by the Government and will include office accommodation, utilities, transport, and remuneration of counterpart staff, and administrative support. The Government has been informed that approval of the TA does not commit ADB to finance any ensuing project. The cost estimates and financing plan is in Appendix 5. D. Implementation Arrangements 21. The TA will be implemented over 6 months tentatively from mid-february to mid- August The TA will start after release of the third tranche of SDSSP-I and completion of the midterm review of SDSSP-I. SPG's finance department will be the Executing Agency for the TA. The provincial steering committee of SDSSP-I will provide overall policy guidance to the TA. The provincial steering committee is chaired by the Additional Chief Secretary, Planning and Development, and comprises representatives of the SPG departments of finance, education, health and population welfare, and local government; representatives of district governments and TMAs; and nongovernment representatives. SPG will select the local government representatives to reflect the geographical, cultural, and economic diversity of the province. During the implementation phase of the TA, the committee will meet at least once every 2 months to monitor TA implementation. The project director of SDSSP-I will be the project director of the TA. The counterpart staff designated by departments concerned (including health, education, and local government) for SDSSP-I will continue to be the counterpart focal staff for the TA, and will work with the consultants. SPG's finance department, through SDSSP-I, will also provide support staff. The TA office will be established in the office of the program support unit of SDSSP-I after the TA signing, and will have utilities, furniture, and local telephone services. 22. ADB will engage 8 person-months of international consultants and 36 person-months of domestic consultants through an international firm. The experts will include a governance and institutional development specialist and team leader; a public resource management specialist; an education sector specialist; a health specialist; a water supply and sanitation specialist; an environmental specialist; a public private partnership specialist; a social scientist; a management and human resources specialist; and a monitoring and evaluation specialist. ADB will engage a consulting firm using quality- and cost-based selection procedures in accordance with ADB s Guidelines on the Use of Consultants (April 2006). Consultants will procure equipment in accordance with ADB s Procurement Guidelines (April 2006). The outline terms of reference are in Appendix 6. IV. THE PRESIDENT'S DECISION 23. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance not exceeding the equivalent of $600,000 on a grant basis to the Government of Pakistan for preparing the Second Sindh Devolved Social Services Program, and hereby reports this action to the Board.

10 6 Appendix 1 DESIGN AND MONITORING FRAMEWORK Design Summary Performance Indicators/Targets Data Sources/ Reporting Mechanisms Assumptions and Risks Impact Improved education, health, and WSS access, with special attention to gender imbalances, to achieve Millennium Development Goals By 2012, in Sindh province: Net primary school enrollment rate increased by 50% from the 2007 level Reduce gender differential in school enrollment by 50% from the 2007 level Infant mortality rate reduced by 30% from the 2007 level 90% of children fully immunized Access to drinking water and sanitation system increased by 50% from the 2007 level Government economic and social sector statistics Pakistan Integrated Household Survey and other household surveys Third party assessments and validation Assumption There is macroeconomic stability, and economic growth is maintained Both the federal and provincial governments sustain political commitment to human development Risk Federal or Sindh provincial government political commitment to devolution diminishes (The forthcoming 2007 election will be a test of that commitment) Outcomes Assumption An effectively designed SDSSP-II and project or TA that will benefit the poor in health, education and WSS, and will make social services more efficient, equitable, and sustainable. Outputs of the TA 1. Comprehensive assessment of SDSSP-I, including lessons learned 2. Administrative, financial, and accountability mechanisms for devolved social services 3. Design of program 4. Design of project MOU for appraisal signed by the Government and ADB. The reports on each output MOU Aide memoires of review missions and back-tooffice reports TA reports There is continued political will and commitment to institutionalize devolved local government system Risk Some departments wish to recentralize or weaken pro-poor policy focus Capacity of local governments, which is supposed to be strengthened under SDSSP-I, remains weak. Assumption Devolution has political support Executives are willing to implement reforms Sufficient data is available for assessing outcomes of SDSSP-I Line departments and local governments are actively engaged in designing a program and project.

11 Appendix 1 7 Activities and Milestones SDSSP-I assessment report submitted within 8 weeks. Sector analysis reports within 8 weeks. Refinement of reforms and related policy matrix: within 10 weeks Program loan design, capacity building, and program implementation support within 15 weeks. Identification of key activities to be conducted for smooth implementation within 15 weeks. Finalize program loan design and submit draft final report within 22 weeks. Final report submitted within 6 months of TA commencement Inputs ADB: $600,000 Government: $200,000 ADB = Asian Development Bank, MOU = memorandum of understanding, PIHS = Pakistan Integrated Household Survey, SDSSP-I = First Sindh Devolved Social Services Program, TA = technical assistance, WSS = water supply and sanitation.

12 8 Appendix 2 SOCIAL SECTOR INDICATORS, SINDH Item PIHS A. Education Literacy rate (age 10 and above) (%) Total 51 Male 65 Female 35 Gross enrolment rate at the primary level excluding katchi class (ages 5 9)(%) Net enrolment rate at primary level excluding katchi class (ages 5 9) (%) Total 64 Male 75 Female 54 Total 41 Male 47 Female 35 Urban Total 60 Male 63 Female 57 Rural Total 29 Male 37 Female 21 B. Health, Nutrition, and Population Welfare PIHS Total 46 Male 60 Female 31 Total 72 Male 83 Female 61 Total 40 Male 46 Female 34 Total 53 Male 56 Female 50 Total 33 Male 41 Female PSLM Total 53 Male 65 Female 40 Total 86 Male 94 Female 77 Total 48 Male 53 Female 42 Total 61 Male 64 Female 59 Total 38 Male 45 Female 29 Infant mortality rate per 1, Child mortality rate per 1, Maternal mortality ratio a Malnutrition rate (%) b Full child immunization rate (12 23 months) (%) Total 38 Male 42 Female 35 Urban Total 60 Male 66 Female 54 Rural Total 27 Male 31 Female 24 Total 45 Male 49 Female 40 Total 64 Male 66 Female 63 Total 33 Male 39 Female 26 Total 73 Male 74 Female 72 Total 87 Male 86 Female 87 Total 62 Male 64 Female 60 Total fertility rate c (children/women) Prenatal consultation (%) Urban Rural Child delivery at home (%) 75 Delivery by trained birth attendant (%) 37 Contraceptive prevalence rate d (%) C. Water and Sanitation Access to tap water (%) Urban 64 Rural 7 Access to hand pump or motor pump (%) Urban 26 Rural 54 Urban 67 Rural 4 Urban 25 Rural 70 Urban 71 Rural 20 Urban 23 Rural 61 Access to toilet (rural, %) = no data available, PIHS = Pakistan Integrated Household Survey, PSLM=Pakistan Social & Living Standards Measurement Survey. a Number of maternal deaths per 100,000 live births. b Proportion of children below 5 years of age who are underweight for their age. c Average number of children expected to be born alive to a woman based on current age-specific fertility rates. d Proportion of married couples who practice any modern family planning method. Source: PIHS ;

13 Appendix 3 9 PROGRESS AND ACHIEVEMENTS OF THE SINDH DEVOLVED SOCIAL SERVICES PROGRAM 1. The overall goal of the First Sindh Devolved Social Services Program (SDSSP-I) is to improve people s education, health, and access to water supply and sanitation (WSS), thus helping reduce poverty and gender imbalances. SDSSP-I provides a framework for pursuing crucial policy reforms at the provincial level. SDSSP-I also provides fiscal and technical support to help local governments provide devolved social services; supports education and health at the district level; and supports taluka (town) municipal administrations (TMAs) in providing WSS. Support for local governments is through formula-based conditional grants that increase budget predictability and transparency. SDSSP-I is groundbreaking in that is the first program in Pakistan to introduce conditional grants in line with the provisions of the Sindh Local Government Ordinance (SLGO) of Twelve services including education, health services, and WSS were devolved by the Government of Pakistan to local governments in In addition, SDSSP-I introduced annual sector plans (ASPs) as instruments to initiate rational, evidence-led, priority-based planning at the local government level. These ASPs promote district- and sector-wide approaches, outline proposed funding sources, and suggest effective ways to use social sector funds. 2. SDSSP-I targets five principal policy reforms: (i) further devolution of social services to local governments; (ii) increased social sector financing; (iii) improved participation and accountability; (iv) rationalized services and setting minimum standards; and (v) promotion of public private partnership to improve service delivery. Program support for province-wide devolved social services is provided over 3 years, while support for a technical assistance to strengthen social sector development is provided over 4 years. A. Status of Project Implementation 3. A provincial program steering committee, headed by the Additional Chief Secretary (Planning & Development), with the secretaries of health, finance, education, local government, nazims, and civil society representatives as members, provides policy oversight and guidance for SDSSP-I. To manage operations and the various activities under SDSSP-I, a program support unit has been established, with senior officers of the Government of Sindh acting as program director and deputy program director. Provincial line departments contribute five program officers in health, education, WSS, monitoring and evaluation, and administration as well as support staff. The program support unit has recruited a procurement specialist, a participatory planning specialist, a finance and governance specialist, a monitoring and evaluations specialist, and a Provincial Finance Commission (PFC) consultant; recruitment of several other consultants is at an advanced stage. The Sindh Provincial Government (SPG) has nominated the executive district officers for finance and planning to be the focal persons for SDSSP-I at the district government level. SPG is also establishing local support units in all districts; staff and finance and governance officers have been mobilized in 23 local support units. These local support units will provide direct technical support to districts and TMAs. 4. SPG is using the $110 million in ordinary capital resources funds provided under SDSSP-I to retire debt and thereby create fiscal space for social sector reform. It has already retired $67 million worth of the most expensive debt in FY2005. The savings generated through this debt retirement process will be channeled through PFC to improve delivery of social services. The Asian Development Fund is provided on top of the province s own budget funds, and are earmarked for onward transfer to local governments as conditional grants through PFC. The first tranche of 7,289,935,000 and SDR23,048,000 was released on 6 May 2004, and the second tranche of 4,025,785,000 and SDR23,048,000 was released on 14 July The third

14 10 Appendix 3 and final tranche is expected to be released in October The distribution of these grants is based on an objective, transparent formula, and transfer to local governments is based on approved ASPs. B. Achievements 5. Despite the many implementation challenges that the new modalities and innovative approaches bring, SPG, to its credit, has made several significant achievements under the SDSSP-I policy framework. These include: (i) Implementation of formula-based, performance-oriented, transparent transfers under the PFC-approved conditional grant mechanism. This grant mechanism was the first of its kind in Pakistan and is considered a model for other donorfunded grant mechanisms. The grant mechanism details eligibility requirements and access conditions that districts and TMAs must meet to qualify for PFC fund transfers. These conditions are articulated in a memorandum of understanding, which serves as the legal contracting instrument and which was developed in consultation with provincial and local governments. For , the Sindh PFC has changed the formula to 50% on population, 30% based on the deprivation index, 10% on inverse population density, and 10% on performance. The conditional grants under the SDSSP-I have been allocated based on a similar distribution formula 50% based on population, 30% on backwardness, 10% on equal share, and 10% on performance and divided among districts, which have received 70% of grant funds (for education and health) and TMAs, which have received 30% (for water and sanitation). (ii) Introduction of need-based, organized, participatory planning processes at local levels by developing ASPs in 15 out of the then 16 districts in Sindh, and in 63 out of the then 102 TMAs. (iii) Providing incentives and focusing on more efficient use of existing assets, operationalization of facilities, and consolidation of ongoing activities by local governments, with limited new schemes. (iv) Development and publication of institutional-restructuring papers by all provincial line departments to reflect their new roles and responsibilities in line with SLGO (v) Expansion of support for public private partnerships and community-based organizations through increased financial assistance for school management committees, and introduction of health boards. (vi) More predictable, regular, and transparent funds flow for non-salary allocations from provinces to local governments, enabling higher expenditures on operations and maintenance. (vii) Paving the way for second-generation devolution reforms through a Delegation of Powers Plan, approved by the chief secretary, which aims to devolve more administrative and financial powers to local governments. (viii) Memorandums of understanding signed with all 23 district governments, and 92% of the TMAs. (ix) 77% of the available Asian Development Fund ($33 million) transferred to the local governments, and 48% of those funds utilized. Sector allocation in the district governments has been as follows: 54% education and 46% health. (x) Drafting of the first-ever Sindh water supply, sanitation, and solid waste management policies.

15 Appendix 4 11 A. Linkages to the Country Poverty Analysis INITIAL POVERTY AND SOCIAL ANALYSIS Is the sector identified as a national priority in country poverty analysis? No agreement? Contribution of the sector or subsector to reduce poverty in Sindh province of Pakistan: Yes Is the sector identified as a national priority in country poverty partnership Yes No Nearly 600,000 additional people are seeking jobs each year in Sindh. The long-term job creation rate of the province has been about 350, ,000 jobs per year, leaving 100, ,000 people to the unemployment pool each year. The majority of rural residents are dependent on crop cultivation, forestry, fishing, and livestock for their livelihood. Recent droughts have put considerable stress on the livelihoods of rural households. Beginning in , Sindh experienced 5 consecutive years of unprecedented low rainfall, with annual precipitations of 35 to 80% lower than the long-term average of 500 millimeters. Partly as a result of these droughts, the production of major crops in Sindh has failed to keep pace with the population growth rate in recent years. The Government s poverty reduction strategy and program calls for major reforms in public sector governance, increased budget allocation, and efforts to improve social services. The government of Sindh has prepared a poverty reduction strategy and wants to accelerate devolution in the social sectors. Devolution has been under way since August Local governments are functioning at the district, taluka (town), and union levels. As per the Sindh Local Government Ordinance of 2001, district governments have been given responsibility for basic education and health services, and taluka municipal administrations have been given responsibility for water supply and sanitation services. The devolution policy anticipates that the local government structure will improve the efficiency of allocating public resources according to local needs, and enhance the quality, efficiency, accountability, and ownership of such services. As job creation in the agriculture sector is limited, new job creation depends mainly on the manufacturing and services sectors. For sustained and inclusive economic growth, youth from poor households need to have higher human capital to take advantage of increasing job opportunities in those sectors. This underlines the significance of access to good education for the poor. Likewise, improving access to health care and sanitation for the poor will lead to improved human capital among the poor, reduce the likelihood of morbidity and mortality, and reduce the likelihood of catastrophic events causing further impoverishment among poor households. B. Poverty Analysis Targeting Classification: Targeted intervention What type of poverty analysis is needed? The poverty analysis will use both statistical data and qualitative information. Statistical data to be analyzed will be from household surveys such as the Pakistan Integrated Household Survey and the Multi- Purpose Indicator Cluster Survey; qualitative information will be from participatory poverty assessments, published and unpublished studies, and participatory workshops to be conducted by the technical assistance (TA). A situation analysis will be undertaken. It will describe the characteristics of the poor in Sindh; identify districts with high concentrations of poor; review and assess service delivery systems (health, education, and water supply and sanitation), particularly in rural areas; identify constraints faced by the poor in accessing services; and gauge the capacity of service providers and the service providers attitude toward the poor. The analysis will explore mechanisms and strategies to involve poor communities, elected representatives, and provincial and local government officials, so as to improve the delivery of socials services to poor and marginalized groups.

16 12 Appendix 4 The Second Sindh Devolved Social Services Program will contribute to achieving key Millennium Development Goals by increasing the net enrollment rate, reducing the infant mortality rate, improving access to drinking water, and reducing the gender disparity in the school enrollment rate. C. Participation Process Is there a stakeholder analysis? Yes No The TA will undertake a stakeholder analysis and institutional mapping as part of the situation analysis. Is there a participation strategy? Yes No The TA will engage poverty, gender, and participation specialists whose tasks will include the application of participatory approaches to engaging men and women members of rural and urban communities to assess the service delivery system and to obtain inputs for designing potential program policy interventions related to local-level planning, for planning and monitoring services and for budget allocation. Consultations will be held with officials of provincial government line departments, district governments, taluka municipal administrations, and union councils to identify and analyze devolution-related issues to be addressed in the design of the program. D. Gender Development Strategy to maximize impacts on women: The TA will engage a poverty, gender, and participation specialist. Among other tasks, the specialist will examine the situation using published and unpublished studies and by interacting with women stakeholders. The specialist will undertake a gender analysis to evaluate the status of women in Sindh province. The gender analysis will look at human development indicators and identify constraints faced by women in public administration, accessing health and education services, and accessing safe drinking water and sanitation. The analysis will also study women's roles as elected representatives in local governments. The TA will identify areas for capacity building of women representatives. The TA will make recommendations to accelerate implementation of a gender reform action plan to be approved by the Sindh province cabinet and supported by Asian Development Bank. Has an output been prepared? Yes No Based on the gender analysis, a gender plan will be prepared for the proposed program. E. Social Safeguards and Other Social Risks Item Significant/ Not Significant/ None Strategy to Address Issues Plan Required Resettlement Significant Not significant Full Short None None

17 Appendix 4 13 Item Significant/ Not Significant/ None Strategy to Address Issues Plan Required Affordability Significant Not significant Yes No None Labor Significant Not significant Yes No Indigenous Peoples None Significant Not significant Data on the subject is not immediately available. The significance of the issue will be determined during the TA and IPA will be prepared if necessary. Yes No Other Risks and/or Vulnerabilities None Significant Not significant None Will be examined during the TA implementation Yes No

18 14 Appendix 5 COST ESTIMATES AND FINANCING PLAN ($'000) Total Item Cost A. Asian Development Bank Financing a 1. Consultants a. Remuneration and Per Diem i. Domestic Consultants ii. International Consultants b. International and Local Travel 50.0 c. Reports and Communications Equipment b Workshops, Training, and Studies Preparation for implementation c Miscellaneous Administration and 20.0 Support Costs 6. Representative for Contract Negotiations Contingencies 64.0 Subtotal (A) B. Government Financing 1. Office Accommodations, Utilities, and 40.0 Transport 2. Counterpart Staff and Administration Support Others 20.0 Subtotal (B) Total a Financed by the Japan Special Fund, funded by the Government of Japan. b Includes computers, a network printer, fax machine, and connection. The Government is responsible for all taxes and duties, if any. c Details will be worked out during technical assistance implementation. Source: Asian Development Bank estimates.

19 Appendix 6 15 OUTLINE TERMS OF REFERENCE FOR CONSULTANTS 1. The technical assistance (TA) for the Second Sindh Devolved Social Services Program (SDSSP-II) will be implemented by a team of domestic (36 person-months) and international consultants (8 person-months) engaged through a firm. The team will coordinate closely with other ongoing Asian Development Bank (ADB) activities and other donor activities in the area of governance and social sectors. The consultants will take into account the relevant ADB guidelines and requirements, especially on poverty and social analysis, and ADB s policy on gender and development. The specific technical tasks associated with each consultant are outlined in the following paragraphs. The TA will have three phases (i) comprehensive assessment of the Sindh Devolved Social Services Program (SDSSP-I) (1.5 months), (ii) design of SDSSP-II and project or TA (3.5 months), and (iii) preparation for program implementation (1 month). 2. The specific outputs of the TA will be (i) a report on the comprehensive assessment of SDSSP-I, analyzing to what extent the devolution policies supported by SDSSP-I have contributed to improving the social sector, and outlining lessons learned; (ii) review of the social sector, and identification of crucial social sector policies to achieve Millennium Development Goals (MDGs) on child and maternal mortality, nutrition, primary education, and access to safe drinking water and target social services to the poor; (iii) administrative, financial, and accountability mechanisms for devolved social services that will help provincial governments, local governments, and communities make social services more effective, efficient, equitable, and sustainable; (iv) a program to establish these support mechanisms and implement policies and activities that will improve delivery and quality of social services, responding to local needs; and (v) an associated project or TA for capacity building and program support. The TA should be implemented in a participatory manner and involve a wide range of stakeholders. Programs supported by the federal, provincial, and local governments and other development agencies will be taken into account to avoid duplication and increase cross-program harmonization. The consultant team will submit an inception report within 0.5 months of TA inception, an assessment of SDSSP-I and sector analyses together with sector policy matrices within 1.5 months, and a draft final report (feasibility studies for program and project loans) within 4.5 months. During the review of the draft final report, the Government and ADB will identify needs for further consultant or TA inputs and determine mechanisms for engaging additional consultants. The consultant should submit a strategy for involving stakeholders, including end users of social services, as part of the technical proposal. A. Governance and Institutional Development Specialist and Team Leader (national, 5 person-months) 3. The team leader will be a governance and institutional development specialist or the equivalent, with at least 7 years of experience in public sector reform and decentralization and institutional development. The team leader must have experience in designing projects and/or programs financed by international financial institutions. As team leader, the specialist will (i) lead the TA with the program director; (ii) prepare a task matrix for consultants and counterparts, and be responsible for overall quality of TA outputs; and (iii) ensure consultation and coordination with provincial and local governments, including line departments, and other stakeholders. The team leader will prepare a report on the comprehensive assessment of SDSSP-I that includes a problem tree, capacity constraint analysis, institutional mapping, and stakeholder analysis. The Team Leader's specific tasks include (i) coordinating closely with other ongoing programs and projects financed by development agencies or the Government in the area of governance and social sectors; (ii) identifying key issues in public social sector

20 16 Appendix 6 performance and requirements for reform; (iii) together with the sector specialists, identifying key sector policy reforms relating to service delivery at the district and taluka (town) levels; (iv) reviewing current and alternative approaches to strengthening devolution that support social service delivery in Sindh; (v) assessing the capacity of provincial line departments and local governments to implement reforms; and (vi) identifying the amount of governance support required for social sector development. 4. The specialist will have primary responsibility for designing a program and associated project or TA that meet the objectives described in the TA paper. The specialist will also (i) determine the social sector management roles and capacity requirements of communities and provincial, district, and taluka municipal administrations; (ii) with the help of sector specialists, prepare a framework and policy matrix for the program; (iii) prepare an action plan associated with the policy matrix that includes responsible stakeholders, resources required, and timing; (iv) prepare a comprehensive capacity building action plan to strengthen governance within provincial and local governments; (v) with district social sector staff, develop procedures to work closely at various local government levels including on community citizen boards, school management committees, and health management boards to improve the accountability of service delivery; (vi) with the help of the sector specialists, propose a set of district performance indicators to be used for performance-based budgeting and conditional grants; (vii) work with two selected districts to conduct in-depth analysis and prepare district social sector 5-year plans; and (viii) identify an optimal implementation arrangement for SDSSP- II that will increase ownership of provincial line departments. 5. Throughout TA implementation, the specialist will ensure that stakeholder consultation is undertaken (i) thoroughly discussing with responsible stakeholders the provisions included in the policy matrix and the action plan, and (ii) consulting with district and taluka municipal administrators to refine procedures for sector-specific guidelines and improve service delivery. The specialist will prepare the technical feasibility study according to ADB format and guidelines, including the sector analyses and the draft program implementation manual. B. Education Specialist (international, 2-person months, national, 4 person-months); Health and Population Welfare Specialist (international, 4 person-months, national, 4 person-months); Water Supply and Sanitation Specialist (international, 2-person months, national, 4 person-months) 6. Each international specialist should have a higher degree in the relevant field, and at least 7 years of experience in social sector reform and decentralized social service delivery. Each specialist should possess broad knowledge of international best practices in decentralization and public private partnerships (PPPs) in the relevant sector. The international health specialist should also support the Government in further refining the Sindh Health Policy. Each domestic specialist should have a minimum of 5 years experience in the sector. The international and domestic consultant in each sector should work closely together to accomplish assignments. The international consultants are expected to contribute especially to identifying the most crucial policies and actions for achieving social sector goals, which can be effectively assisted in the framework of SDSSP-II. The international consultants will also be expected to transfer knowledge on international best practices for improving governance of social sector services and PPPs. 7. The specialists will conduct regional and provincial workshops covering all districts to secure stakeholder participation and ownership in setting priorities in each sector. Each pair of