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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 67974-PK
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED CREDIT
IN THE AMOUNT OF
SDR 99.5 MILLION
(US$150 MILLION EQUIVALENT)
TO THE
ISLAMIC REPUBLIC OF PAKISTAN
FOR A
PUNJAB CITIES GOVERNANCE IMPROVEMENT PROJECT
August 8, 2012
Sustainable Development Department
Urban and Water Unit
South Asia Region
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.
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ii
CURRENCY EQUIVALENTS
(Exchange Rate Effective: August 1, 2012)
Currency Unit = Pakistan Rupees (PKR)
PKR 94.64 = US$1.00
US$ 1.00 = SDR 0.66
FISCAL YEAR
July 1 – June 30
ABBREVIATIONS AND ACRONYMS ADP Annual Development Plan MIS Monitoring and Information System
CDG City District Government MTBF Mid-Term Budgetary Framework
CIP Capital Investment Plan NAM New Accounting Model
CNG Compressed Natural Gas NCB National Competitive Bidding
CPUs City Program Units NPV Net Present Value
CQS Consultants Qualification Selection O&M Operation and Maintenance
DA Development Authority OP Operational Procedure
DAMP Development and Asset Management Plan ORAF Operational Risk Assessment Framework
DCO District Coordination Officer OSR Own Source Revenue
DLIs Disbursement Linked Indicators P&DD Planning and Development Department
E&TD Excise and Taxation Department PDCA Punjab Development of Cities Act
EDO Executive District Officer PDO Project Development Objective
EEP Eligible Expenditure Program PFC Provincial Finance Commission
EIA Environmental Impact Assessment PFM Public Financial Management
EPA Environment Protection Agency PFMAA Public Financial Management and
Accountability Assessment
ESMF Environmental and Social Management
Framework
PFM-PR Public Financial Management – Performance
Report
ESMP Environmental and Social Management Plan PHA Parks and Horticulture Authority
FBS Fixed Budget Selection PLGO Pakistan Local Government Ordinance
FDA Faisalabad Development Authority PMSIP Punjab Municipal Services Improvement
Project
FY Financial Year POL Petrol, Oil, and Lubricants
GDA Gujranwala Development Authority PPP Public Private Partnership
GDP Gross Domestic Product PPPRA Punjab Public Procurement Regulatory Act
GIS Geographic Information System PPRA Public Procurement Regulatory Authority
GoPunjab Government of Punjab QBS Quality Based Selection
GPN General Procurement Notice RDA Rawalpindi Development Authority
HUDD Housing and Urban Development
Department
RFP Request for Proposal
IAS Internal Audit Specialist SBDs Standard Biding Documents
IBRD International Bank for Reconstruction and
Development
SC Steering Committee
ICB International Competitive Bidding SIL Specific Investment Loan
SOP Standard Operation Procedures
IDA International Development Association SSS Single Source Selection
IDAMP Integrated Development and Asset
Management Plan
SWM Solid Waste Management
IEE Initial Environmental Examination TA Technical Assistance
IEG Independent Evaluation Group TEPA Traffic Engineering and Planning Agency
iii
IFR Interim Financial Report TMA Town Municipal Administration
LCS Least Cost Selection ToRs Terms of Reference
TPV Third Party Validation
LDA Lahore Development Authority UIPT Urban Immoveable Property Tax
LG Local Government USPMSU Urban Sector Planning and Management
Services Unit (Private) Limited
LGD Local Government and Community
Development Department
WASA Water and Sanitation Agency
MD Managing Director WB World Bank
MDA Multan Development Authority WHO World Health Organization
Regional Vice President: Isabel M. Guerrero
Country Director: Rachid Benmessaoud
Sector Director:
Sector Manager:
John Henry Stein
Ming Zhang
Task Team Leader/Co-Task Team
Leader:
Raja Rehan Arshad/Shahnaz Arshad
iv
Table of Contents
I. STRATEGIC CONTEXT ....................................................................................................... 1
A. Country and Provincial Context ....................................................................................... 1
B. Sectoral and Institutional Context .................................................................................... 3
C. Higher Level Objectives to which the Project Contributes .............................................. 7
II. PROJECT DEVELOPMENT OBJECTIVES......................................................................... 7
A. Project Development Objective ....................................................................................... 7
III. PROJECT DESCRIPTION .................................................................................................. 8
A. Project Components ......................................................................................................... 8
B. Project Financing............................................................................................................ 14
C. Lessons Learned and Reflected in the Project Design ................................................... 14
IV. IMPLEMENTATION ........................................................................................................ 15
A. Institutional and Implementation Arrangements ............................................................ 15
B. Results Monitoring and Evaluation ................................................................................ 16
C. Supervision Strategy ...................................................................................................... 17
D. Sustainability .................................................................................................................. 18
V. KEY RISKS AND MITIGATION MEASURES ................................................................. 19
A. Risk Ratings ................................................................................................................... 19
B. Overall Risk Rating Explanation.................................................................................... 20
VI. APPRAISAL SUMMARY ................................................................................................ 20
A. Economic, fiscal and financial assessment .................................................................... 20
B. Technical ........................................................................................................................ 21
C. Financial Management ................................................................................................... 22
D. Procurement ................................................................................................................... 22
E. Environment ................................................................................................................... 23
F. Social .............................................................................................................................. 26
ANNEXES
Annex 1: Results Framework and Monitoring.............................................................................. 28
Annex 2: Detailed Project Description ......................................................................................... 38
Annex 3: Implementation Arrangements ...................................................................................... 52
v
Annex 4: Operational Risk Assessment Framework (ORAF) ...................................................... 90
Annex 5: Implementation Support Plan ........................................................................................ 94
Annex 6: Team Composition ........................................................................................................ 96
Annex 7: Fiscal, Economic, and Financial Analysis .................................................................... 97
Annex 8: City Expenditure Review of Five Large Cities in Punjab Province ............................ 108
vi
PAD DATA SHEET
PAKISTAN
Punjab Cities Governance Improvement Project
PROJECT APPRAISAL DOCUMENT
South Asia Region
SASDU
Date: August 8, 2012
Country Director: Rachid Benmessaoud
Sector Director: John Henry Stein
Sector Manager: Ming Zhang
Team Leader(s): Raja Rehan Arshad/Shahnaz Arshad
Project ID: P112901
Lending Instrument: Specific Investment Credit
Sectors: Sub-national government
administration (45%), General water,
sanitation and flood protection sector
(35%), General transportation sector
(20%) Themes: Urban services and housing
for the poor (33%), Municipal
governance and institution building
(33%), Decentralization (17%),
Municipal finance (17%).
EA Category: B – Partial Assessment
Category
Project Financing Data:
Proposed terms: Fixed-Spread Loan (FSL) with commitment-based level repayments
[] Loan [X ] Credit [ ] Grant [ ] Guarantee [ ] Other:
Source Total Amount (US$M)
Total Project Cost:
Borrower:
Financial Contribution to project
components
Total Bank Financing:
IDA
154
4
150
Borrower: Islamic Republic of Pakistan
Responsible Agency: Province of Punjab, Planning and Development Department
Contact Persons:
Mr. Javed Aslam, Chairman, Planning and Development Board, Government of Punjab.
vii
Address: Civil Secretariat, Lahore.
Telephone No.: +92 42 99210002-04; Fax No.: +92 42 99214069
Email: [email protected]
Estimated Disbursements (Bank FY-July to June/US$ m)
FY FY13 FY14 FY15 FY16 FY17
Annual 28.1 30.0 41.6 50.3 0.0
Cumulative 28.1 58.1 99.7 150 150
Project Implementation Period: Start - October 19, 2012; End - June 30, 2017.
Expected effectiveness date: September 19, 2012
Expected closing date: June 30, 2017
Does the project depart from the CAS in content or other significant respects? ○ Yes ● No
If yes, please explain:
Does the project require any exceptions from Bank policies?
Have these been approved/endorsed (as appropriate) by Bank management?
Is approval for any policy exception sought from the Board?
○ Yes ● No
○ Yes ● No
○ Yes ● No
If yes, please explain:
Does the project meet the Regional criteria for readiness for implementation? ● Yes ○ No
If no, please explain:
Project Development Objective:
The project development objectives are to support the Province of Punjab‘s cities in
strengthening systems for improved planning, resource management, and accountability, and
to improve the Province of Punjab‘s capacity to respond promptly and effectively to an
Eligible Crisis or Emergency.
viii
The proposed project includes two components:
Component 1 Performance Grant1: This component focuses on two areas of urban
governance: resource planning and management, seeking to improve decision making,
consolidate revenue sources and strengthen resource mobilization; and transparency and voice
in the preparation, monitoring and evaluation of plans and programs in urban areas. This
component will provide an annual grant to the project cities, based on achievement of specified
annual targets against a set of DLIs in selected governance areas.
Component 2 Project Implementation and Capacity Building: This component supports
the cities and province through technical assistance and capacity building to achieve the DLIs
and enhancement in revenue. The Urban Sector Planning and Management Services Unit
(USPMSU), and a City Program Unit (CPU) in each of the five cities will be responsible for
providing this support and the corresponding costs will be financed from this component.
Component 3: Contingent Emergency Response: This component will support preparedness
and rapid response to disaster, emergency, and/or catastrophic events, as needed. The
provisional zero cost for this component will allow for rapid reallocation of credit proceeds
from other components under streamlined procurement and disbursement procedures. This
component could also be used to channel additional funds should they become available as a
result of the emergency.
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)
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)
● Yes ○ No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
○ Yes ● No
Conditions and Legal Covenants
Financing/Project
Agreement Reference
Description of Condition/Covenant Date Due
PA, Schedule, Section
I.D.1
GoPunjab will sign an Agreement with
USPMSU acceptable to the Bank
Within 1 month of
Effectiveness
1 As per the terms of the Project, the Bank shall provide credit to the Government of Punjab (GoPunjab). The
GoPunjab will in turn disburse funds to the cities in the form of a Performance Grant under Component 1.
ix
PA, Schedule, Section
I.D.1(c)(vi)(B)
USPMSU will appoint a financial
management specialist
Within 2 months of the
signing of the above
Agreement between
GoPunjab and
USPMSU
PA, Schedule, Section
I.D.1(c)(vi)
USPMSU will appoint an Internal
Audit Specialist
Within 2 months of the
signing of the
Agreement between
GoPunjab and
USPMSU
PA, Schedule, Section
II.D.2
GoPunjab will appoint a financial
management specialist for each CPU
Within 3 months of
Effectiveness
PA, Schedule, Section
I.C.1
Memoranda of Partnerships (MoPs)
with the five cities participating in the
project are adhered to
Recurrent
PA, Schedule, Section
I.B.1(a)
The Project is carried out according to
the Operations Manual
Recurrent
PA, Schedule, Section
I.F.4
The Eligible Expenditure Programs are
implemented according to the
Environment and Social Management
Framework
Recurrent
FA, Appendix, Section
I.7
Each CDG maintains a City Program
Unit under the DCO for Project
implementation
Recurrent
FA, Appendix, Section
I.33
Each CDG maintains a Planning and
Coordination Committee (PCC) with
requisite terms of reference
Recurrent
1
I. STRATEGIC CONTEXT
A. Country and Provincial Context
1. Country context: Pakistan is the world's sixth most populous country, yet its economy is
ranked the 45th
largest in the world. As such, with a per-capita income of US$1,050 in 2010,
Pakistan is ranked as a low-income country. After a period of strong economic growth and
poverty reduction in the early part of this millennium,2 progress appears to have slowed
considerably due, in part, to external shocks emanating from volatility in international
commodity and financial markets, but also as a result of policy inaction, as heightened
macroeconomic imbalances have not been adequately addressed. Increased macroeconomic
instability, political volatility, and unfavorable security conditions adversely affected the
profitability of firms and employment activities. Natural calamities too exacted a heavy toll on
the country and the economy. In addition, weak public sector governance remains a major
obstacle for economic recovery.3
2. In 2011/12, economic growth accelerated to 3.7 percent from 3.0 percent in 2010/11.
Although economic growth fell short of the growth target of 4.2 percent set at the beginning of
the year, considering that the economy had to bear another round of devastating floods in
2011/12, the acceleration in growth signifies the resilience in the economy. Despite the robust
growth in workers‘ remittances, the current account situation worsened as terms of trade changed
against Pakistan‘s exports. With weak capital inflows and large obligatory payments on its
international debt (including those to IMF), the foreign exchange reserves declined from 3.9
months of imports in the beginning of the year to 2.5 months by the end. Tax collection
improved by almost 1 percent of GDP, yet shortfall in non-tax revenue and overrun in power
subsidy (including the ―one-time‖ payment of 1.9 percent of GDP for consolidation of subsidy-
related debt) caused the fiscal deficit to increase to 7.4 percent of GDP.4 Increased reliance on
monetary mode of financing the fiscal deficit kept inflationary pressures high with inflation
averaging about 11.5 percent, somewhat lower than 12 percent anticipated at the beginning of the
year.
3. Looking ahead, GDP growth rate is projected to accelerate to 4.3 percent in 2012/13 and
stay around 4.5-5.5 percent in the next two years with strong domestic demand, recovering
exports, and continued robust growth in remittances providing the growth impetus. Inflation is
expected to ease only gradually toward single digits. The fiscal deficit should tend towards a
target 3-4 percent of GDP, a range that would closely approach a golden rule matching current
spending to revenue. A key determining variable in facilitating this will be the tax-to-GDP-ratio,
which is projected to gradually increase to around 12 percent as a result of a broadened tax base,
new taxes, reduced tax expenditure, and solid improvements in tax administration.
2 The economy grew at an average of 7.3% between fiscal years 2004 and 2007 and the poverty rate fell by half
from 34.5% in 2001/02 to 17.2% in 2007/08. 3 As one indicator, the country is ranked 42nd most corrupt out of 183 countries in the 2011 Corruption Perceptions
Index produced by Transparency International. Weak governance has been identified as one of the main constraints
to economic growth and development in the federal government's Growth Strategy (Planning Commission,
Government of Pakistan, 2011). 4 On the basis of fiscal transactions during the year, the fiscal deficit declined from 5.9 percent of GDP in 2010/11 to
5.5 percent in 2011/12.
2
23.9 23.416.8
12.1 9.7
33.0 34.8
28.4
21.0
18.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
1998-99 2001-02 2004-05 2005-06 2007-08
Percen
t o
f P
op
ula
tio
nFigure 2: Incidence of Poverty in Punjab and Pakistan
Punjab Rural Punjab Urban Pakistan Punjab
58.0
51.7
61.1
53.7 54.1
46.0
48.0
50.0
52.0
54.0
56.0
58.0
60.0
62.0
Agriculture Industry Commerce Other Services GDP
Percen
t
Figure 1: Share of Punjab in National Income,
2010/11
4. Provincial context: Partly because of its size, Punjab has a significant influence on the
level and change of national economic and social indicators. With a total population of about 74
million in 19985—well over half of the
national total—and a close to 60 percent
share of the economy (Figure 1), Punjab
is a major determinant of national
economic growth and poverty reduction.
During the early 2000s, Pakistan‘s solid
economic and social performance was
closely related with robust economic
growth and poverty decline in Punjab.
Social indicators in Punjab, like those in
rest of Pakistan, have shown noticeable
improvements in recent years, but still
lag those of comparable countries and
regions. Punjab still faces significant
development challenges. Economic
growth has slowed down over the last
three years. Poverty in Punjab declined
sharply between 2001/02 and 2007/08
(Figure 2). However, with economy
slowing down sharply and inflation
remaining persistently high, there is
strong possibility that poverty may be on
the increase.
5. In the early to mid- 2000s, Punjab managed its finances quite prudently. Abundant
transfers from the federal government, and fiscal and financial management reforms created
sizable fiscal space. Between 2002/03 and 2006/07, provincial revenue almost doubled. As a
result, it‘s recurrent expenditure increased by 52 percent and its development program increased
almost six-fold from Rs 18 billion in 2002/03 to Rs 110 billion in 2006/07. In 2008/09, however,
as economic conditions deteriorated due to external and internal shocks, the provincial fiscal
situation was badly impacted. Large shortfalls in revenue and sharp increases in expenditure led
to a fiscal deficit, prompting the provincial government to borrow heavily from the State Bank of
Pakistan. Servicing this debt has imposed an additional burden on already weak finances.
Nonetheless, the province showed a significant fiscal surplus in 2010/11. This was partly an
outcome of a favorable NFC Award that significantly enhanced the province‘s share of federal
revenue, but partly was also due to a strong effort made by the provincial government to reduce
its low priority expenditure.6
5 According to the results of the most recent population census.
6 Most of the untargeted subsidies were eliminated in 2010/11. However, some new ones, especially the yellow taxi
scheme, were introduced in the 2011/12 budget.
3
B. Sectoral and Institutional Context
6. Cities are at the center of Pakistan’s economic development and growth. Of Pakistan‘s
current population of 177 million, over 65 million (or 37%) live in cities7 compared to 43 million
(32%) in 19988. Urban economic sectors have become the drivers of economic growth in
Pakistan9 as a whole, as well as in the Punjab. It is estimated that cities contribute 78% of the
country‘s GDP10
; in the Punjab, the five largest cities account for 50% of the gross value of
industrial production11
.
7. Punjab is among the most urbanized regions of South Asia and is experiencing a
consistent and long-term demographic shift of the population to urban regions and cities. The
urban population in 2011 is projected as 48% of the total on the basis of the inter-census rate of
3.4% per annum recorded in 199812
. While Lahore, the capital of Punjab and its largest city, is
currently home to about 8 million people, its population is expected to reach 10.8 million people
in 202513
owing to its position as an urban magnet in the region. Punjab has four other cities with
populations in excess of one million, namely Faisalabad (3 million), Gujranwala and Rawalpindi
(2 million each), and Multan (1.7 million)14
. Collectively, about half of the urban population in
Punjab is concentrated in these five cities. In addition, three other large cities (Sialkot,
Bahawalpur and Sargodha) are poised to cross the one million mark.
8. Yet cities in the Punjab face many challenges. Cities have inadequate infrastructure and
urban management capacities to meet current needs, let alone an ability to respond to growing
demand. Water and sanitation service in the largest cities is unreliable and intermittent providing
only 4-16 hours of water supply per day and to only about half of the urban population. Service
provision is not financially sustainable due to a combination of low tariffs, low collections, and
the steep increase in energy tariffs. Aquifers are over exploited: for instance in Rawalpindi, the
water table has gone down from 8-20 meters in 1985-86 to 40-85 meters by 2010. Wastewater is
disposed off untreated in natural channels and water-bodies. Similarly, the solid waste service
collects only about half of the waste being collected; and this waste is disposed off in
substandard dumps and waterways. Widespread under-performance in service delivery and
infrastructure deficiencies affect living conditions and handicap business growth reducing the
productive potential of cities. Yet they remain the engines of provincial and national economic
activity15
.
7 Government of Pakistan, Finance Division (2011). Economic Survey of Pakistan 2010-11, Islamabad.
8 Government of Pakistan (2001). 1998 Census Report of Pakistan, Islamabad
9 Government of Pakistan, Planning Commission (2007). Vision 2030. The economic dynamics of Pakistan‘s cities
makes them ―important engines of growth‖ Section 10.4: Cities as Engines of Growth, p.95. 10
Government of Pakistan, Planning Commission (2011). Task Force Report on Urban Development. Executive
Summary, p.vi. 11
Government of Punjab, Asian Development Bank, World Bank and UK Department for International
Development (2005). Pakistan: Punjab Economic Report. Table 5.23, p. 96 based on the Punjab Census of
Manufacturing Industry. 12
Government of Pakistan (2001). 1998 Provincial Census Report of the Punjab, Islamabad. 13
Government of the Punjab, (2006). Poverty Focused Investment Strategy for Punjab, Lahore; this figure would be
12.4 million if projected on the basis of the inter-census growth rates from the last census are used. 14
Projected on the basis of the inter-census growth rates from the last (1998) population census. 15
Ibid. ―The challenge for Punjab is to develop a strategy to manage the accelerating urbanization in a manner that
the province‘s cities become more livable, while also serving as engines of growth.‖ p.29.
4
9. Institutional and systemic obstacles pose significant challenges to improved performance
in urban areas:
Fragmented mandates and vague jurisdictional boundaries hinder spatial planning.
A multitude of agencies are operating both at the local and provincial level without
distinctive mandates and well-defined roles, and with vague functional boundaries.
The division of responsibilities amongst individual agencies is nebulous, highly
overlapping, and largely indistinguishable. Each of these entities has a different
planning remit, and their plans do not cover the same spatial distribution. This in
addition to lack of coordination, hampers the efficient use of development funding.
In Lahore for example, the city district government (CDG), the development
authority (DA), and the traffic management agency (TEPA) are all involved in road
construction works within the city. In addition, the provincial government
departments are also implementing road projects directly. Moreover, the second-tier
of local government in the city, the town municipal administrations (TMAs) also
maintain, repair, and rehabilitate roads and streets.
City level systems for resource planning and management are severely lacking. The
strategic framework and direction for economic development and spatial growth is
weak, and even where plans have been prepared, they are not followed as they have
no legal force and in any case are too broad and general to be implementable. There is
no medium term prioritization of projects beyond the annual portfolio of ‗schemes‘-
the Annual Development Program (ADP), although this is a requirement of the local
government budget rules. In the ADP, projects are not prioritized according to public
preferences and fail to address needs on a consistent, sustainable, and strategic basis.
Budgetary planning and resource allocation practices suffer due to the lack of a
coherent vision, with the consequence that spending is largely erratic, where smaller
development projects are preferred and selected at the expense of important civic
needs that require a longer, multi-year commitment. Punjab cities do not possess
adequate planning and management capacity, or the channels required to elicit
information from the community on their preferences so as to develop a responsive
and coherent funding strategy. Finally, many aspects of financial management in the
city government and city entities are inadequate, including management of budgets,
expenditure controls, cash-flow management, management of creditors, asset
management, and liability management. Internal audit capacity and audit controls are
weak.
Urban areas also suffer from non-predictable capital investment funding and low
own source revenues. The Provincial Finance Commission (PFC) award, through
which formula based fiscal transfers are made to local governments, does provide a
solid and predictable basis for basic service delivery. However, own source revenues
(OSR) are small and declining in proportion to the overall budgets, reflecting poor
revenue effort. OSR as a percentage of total revenues varies between 3% for
Gujranwala to 8% for Lahore. An absence of revenue management and lack of
political will are the main factors behind poor revenue effort since both provincial
legislators and local councilors are reluctant to approve increase in fees, charges, or
taxes. As financing of major capital investment is controlled and managed directly by
the provincial government, the volume of development funding beyond the PFC, is
5
non-predictable and relies heavily on provincial schemes and political allocations
(‗tied‘ grants and ‗vertical‘ programs).
There is an absence of accountability of local governments to citizens. Oversight
responsibilities are not clearly distributed amongst various entities involved at the
provincial, local government, and service delivery levels. Policy-making and service
delivery roles are generally found converged within the same agencies, leaving little
room for effective oversight of their performance. As a result, officials and agencies
at all levels are not held accountable for failures due to inappropriate reporting lines
and lack of sufficient monitoring arrangements. Service delivery agencies in
particular are not accountable to the communities they serve, since they are controlled
directly by the provincial government instead of the cities.
10. Government of Punjab’s Urban Agenda: The government‘s fundamental urban goal is to
improve the performance and accountability of cities – by strengthening the planning, financing,
execution, and monitoring functions of local governments. The Government of Punjab
(GoPunjab) Urban Agenda is reflected in the Mid-Term Budgetary Framework (MTBF) 2011-
201416
. According to the MTBF the vision of GoPunjab for the urban sector is to ―develop
modern and efficiently managed urban centers to serve as engines of growth for provincial
economy‖ (see Figure 3).
11. Water and Sanitation Agencies (WASAs) and DAs of the large cities (Lahore,
Faisalabad, Rawalpindi, Gujranwala & Multan) and District Governments of selected
intermediate cities (having population ranging 0.24 - 0.54 million) of Punjab are covered under
the MTDF. The proposed project is in line with the following policy interventions highlighted in
MTDF 2011-2014:
Streamline functional and operational alignment of District Governments, DAs,
WASAs, TEPA, etc.;
Update legislation for empowered, responsive, efficient and accountable City
Governments;
Review and rationalize all levies, fees, and rating areas;
Encourage greater ‗own-source revenue‘ generation by CDGs /WASAs/DAs with
matching provincial grants;
Prepare Capital Investment and Asset Management Plans. Link new schemes to such
plans of the city; and,
Undertake provincial Master Planning to guide all future investments.
12. GoPunjab has recognized that carrying out of urban reforms is a long-term undertaking,
and therefore is approaching it in three stages. In the first stage, which is largely complete, the
GoPunjab has initiated, through a series of provincial instructions, changes aimed at improving
the operating environment for urban development i.e., institutional coherence in strategic and
medium term planning, transparency in procurement decisions, professionalization of service
delivery entities, and introduction of GIS based information system.
16
MTDF 2011-2014, Annual Development Program 2011-12 Vol-II, Government of Punjab
6
13. As a second step, GoPunjab is currently focusing on strengthening urban governance –
the institutions and management systems need to ensure that these reforms are successful. These
governance actions include: (i) boundaries alignment; (ii) improving the planning process; (iii)
introducing development and asset management planning across the urban space; (iv)
strengthening and integrating fiscal transfers and enhancing resource mobilization at the local
level; (v) strengthening accountability of urban institutions; and (vi) transparency in decision
making.
14. Based on these policy and governance improvements, GoPunjab plans to tackle service
delivery in the third stage of its urban strategy aiming at: (i) sustainable urban development and
expansion of municipal services in city areas; (ii) administratively and financially autonomous
city entities; and (iii) participatory and informed decision making.
Figure 3: Government of Punjab Urban Agenda
Step 1: Urban Reforms
•Reintroduction of urban identity in the law.
•Medium Term Development Framework.
•Approved Policy Framework for Urban Immoveable Property Tax (UIPT) Reforms.
•Transfer of full UIPT receipts to Local Governments (LG).
•Punjab Public Procurement Regulatory Authority Act & Punjab Procurement Rules.
•Orperationalization of Urban Unit in Planning and Development Department (P&DD) as technical support for GoPb and LGs.
•Performance criteria based and competitively recurited management team for WASA.
•Service delivery standards for WASAs.
•GIS based information system (IRIS).
•Notified city area in five CDGs
Step 2: Improve Urban Governance
•Alignment of planning areas of city entities with city areas.
• Improved fiscal consolidation & enhanced revenue mobilization efforts.
•Automation of UIPT system.
•Framework for participatory 3 years integrated, rolling development and asset management planning.
•Operationalization of public disclosure and access to information.
•Enhanced transparency and accountability of institutions through citizen feedback mechanisms and one window complaint redress systems.
• Improved asset management system with GIS based invertory of assets.
• Institutional capacity building.
Step 3: Improve Service Delivery
•Expansion of service delivery in a phased manner in city areas.
•Operationalization of fully autonomous entities with clarity of mandates and jurisdictions.
•Scaled up investments and budgets allocations for asset maintenance.
• Increased OSR with widened tax base, increased user charges, and fee, etc.
•Hard budget constraints.
•Urban development in accordance with 3 years integrated, rolling development and asset management plans of CDGs.
• Improved asset management.
• Improved service delivery with operationalization of citizen feedback and implementation of effective grievance & complaint redress systems.
•Application of safeguards procedures and policies.
7
C. Higher Level Objectives to which the Project Contributes
15. The project is aligned to the priorities of the Pakistan Country Partnership Strategy 2010-
2013 which include ―fostering livability and economic growth and dynamism within Pakistan‘s
major cities and rapidly growing urban settlements‖, and the need for ―greater transparency and
accountability, improved responsiveness, and a better interface with the citizens‖. At the national
level, the project furthers the objectives of the Pakistan Framework for Economic Growth by
supporting city management systems necessary to underpin the emergence of ―creative cities‖ as
the hubs of innovation, entrepreneurship, and culture17
. The framework provides a number of
recommendations for local/city governments, such as18
:
Shift focus from expanding urban infrastructure to increasing productivity and
efficiency of the existing networks;
Reform the existing institutions that manage the infrastructure and facilitating them to
adopt innovative engineering and maintenance techniques;
Encourage the local/city governments to improve systems for the collection of Own
Source Revenue (OSR);
Make urban governance system more responsive, efficient and accountable, by
adopting two essential prerequisites - political power to administer and trained
manpower to run the system.
16. Keeping in line with the overall objective of the framework, the project contributes to the
provincial government‘s vision of cities as engines of economic growth, and its committed
agenda to unlock their potential19
and strengthen city management. The Project is expected to
have a transformative impact on the management of urban areas in Punjab. It will also allow for
rapid reallocation of credit proceeds or additional funding under streamlined procedures, as
needed, in order to support preparedness and rapid response to disaster, emergency, and/or
catastrophic events.
II. PROJECT DEVELOPMENT OBJECTIVES
A. Project Development Objective
17. The project development objectives are to support the Province of Punjab’s cities in
strengthening systems for improved planning, resource management, and accountability, and to
improve the Province of Punjab’s capacity to respond promptly and effectively to an Eligible
Crisis or Emergency. The project builds on the policy reforms already undertaken by GoPunjab,
and focuses on the institutional issues in stage 2 of the urban agenda. The achievement of the
development objective will help the provincial government and cities to address the third stage of
17
Government of Pakistan, Planning Commission (2011). Framework for Economic Growth – Pakistan.
18
Government of Pakistan, Planning Commission (2011). Task Force Report on Urban Development. Executive
Summary, p.vi.
19
Government of Punjab, Planning and Development Department (2009). op.cit. and MTDF 2011-2014, Annual
Development Program 2011-12 Vol-II, Government of Punjab
8
GoPunjab‘s urban agenda, i.e., to improve delivery of municipal services in the medium to long
term on a more sustainable basis.
Project Beneficiaries
18. The direct beneficiaries of the project are the five largest cities (city governments and
agencies) in Punjab participating in the Project. Indirectly, the other cities in the Punjab,
particularly the remaining three large non-project cities (Sialkot, Bahawalpur and Sargodha), will
benefit from the capacity building and system development activities under the project. In
addition, secondary beneficiaries from the Project will also include the 14.5 million urban
residents of the five large cities of the Punjab (Lahore, Faisalabad, Rawalpindi, Gujranwala and
Multan), which are classified as City Districts.
Project Development Objective (PDO) Level Results Indicators20
19. Success in meeting the project development objective will be measured against a baseline
in FY 2012 by the following outcome indicators. The strengthening of planning and resource
management systems will be measured by the first indicator while the second indicator is
designed to capture improvements in accountability of city governments towards citizens:
Table 1: Project Outcome Indicators
Baseline End of Project
(2017) Percentage of development and asset maintenance
expenditure of the city and city entities which are
spent according to the three-year rolling development
and asset management plan (DAMP)(%)
0% 80%
Percentage of service area population having an
institutionalized mechanism available at city service
delivery entities for providing feedback and
grievance redress.
0% 100%
III. PROJECT DESCRIPTION
A. Project Components
Component 1: Performance Grants 21
(US$ 145 million)
20. Component 1 focuses on two areas of urban governance and is aligned with the seven
DLIs. The first sub-component addresses resource planning and management, seeking to
improve decision making, consolidate fragmented revenue sources and strengthen resource
mobilization. The second sub-component addresses transparency and voice in the preparation,
monitoring, and evaluation of plans and programs in urban areas.
20
Relevant PDO level indicators related to the second part of the PDO will be included in case the contingent
emergency response component (Component 3) is activated 21
As per the terms of the Project, the Bank shall provide credit to the Government of Punjab (GoPunjab). The
GoPunjab will in turn disburse funds to the cities in the form of a Performance Grant under Component 1.
9
21. This component will provide an annual grant to the project cities based on satisfactory
performance in selected governance areas. The disbursement decision will be based on
achievement of pre-specified results: annual targets that will need to be achieved for
disbursements against a set of Disbursement Linked Indicators (DLIs). The achievement of
annual targets for disbursements against the seven DLIs (Table 2 below and Annex 1) will be
individually assessed for each city every year by the Directorate General Monitoring and
Evaluation (M&E), P&DD Punjab, through independent assessment teams. The assessment
teams deployed hence will comprise third party/ private sector firm(s) contracted by the M&E
Directorate of P&DD Punjab as independent assessment agencies. The DLIs and corresponding
annual targets have been identified with the Government over the course of preparation to reflect
specific areas of improvement. The achievement of all annual targets specified for
disbursements against the entire set of DLIs by each city applicable for the year would be
required for disbursement for that city.
22. Sub-component 1.1: Resource Planning and Management (DLIs 1-4): Four
improvements are supported:
a) Capital Improvement and Asset Maintenance: Cities will prepare three-year rolling
Development and Asset Management Plans (DAMP). The preparation of these plans
will be coordinated at the city level and will be based on integration of the capital
improvement and asset maintenance plans of the city and its entities. The planning
will be for a three year period with the first year detailed to form the annual budget
for that year. These plans will be updated each year for a three year period on a
rolling basis. This will help improve the consistency of development and asset
maintenance plans across the city space and for all services, and to prioritize and
rationalize investment decisions;
b) Financial Reporting and Procurement Procedures: Arrangements will be made for
producing annual consolidated financial statements of CDGs and efficient
implementation of procurement procedures. Cities will develop Standard Operating
Procedures (SOPs) focusing on streamlining of the procurement rules with other
directives; and implementation of procurement rules, including but not limited to,
procurement planning, equal opportunity, transparency and efficiency;
c) Intergovernmental Finance: Currently there are multiple funding windows, some
supporting CDGs and others service entities (e.g., WASAs), with the result that the
CDG does not have a complete picture of the level of funding coming to the city for
infrastructure and service delivery. To address this, the Government of Punjab will
report to the CDGs, all transfers including amounts to city entities, at the time of
making the transfers. This will provide a complete picture to each CDG of the
funding available to the city as a whole, and the funds flowing to the city entities. In
turn, this will help the CDGs to prepare city budgets keeping in view predictability of
funding. Each CDG will also be able to hold city entities accountable for results
against such funding. This consolidation will in turn allow improved planning and
control of resources for city level development expenditures; and
d) Strengthening Own Source Revenue: Cities will be supported to achieve
improvements in the property tax regime through the digitization of Urban
Immovable Property Tax (UIPT) records, GIS based spatial-mapping of urban
properties, and the establishment of a UIPT database and billing system that allows
10
the taxpayers to use a web based interface to view property valuations as well as to
generate vouchers for annual payment.
23. Sub-component 1.2: Transparency and Voice (DLIs 5-7). Three improvements are
supported:
a) Boundary Alignment: The project will support the introduction of an integrated
spatial planning, development, and asset management planning process that will use a
common urban boundary definition, and in which all city level entities participate. A
common boundary will be used by the city and the city entities for the purposes of
spatial and service delivery planning, which will be coordinated at the city level.
Similarly, the city will coordinate the preparation of multi-year development and
asset management plans, which will prioritize the demands of the citizens, and the
needs of the city and the city entities;
b) Public Disclosure of Information: The project will support improvements in the
collection (and up-dating) of data, preparation of periodic reports, and disclosure of
information to citizens. The city and its entities will post budgets, half yearly and
annual reports including financial statements, notices of award of contracts, etc. on
their websites and disseminate to the public through radio, television, newspapers and
at public notice boards in prominent places at all their offices accessible to the public;
and
c) Citizen Feedback: The project will also support the development of a complaint and
grievance redress mechanism for citizens. The city and its entities will operationalize
a ―one-window‖ complaint center and follow-up mechanism linked to all service
providers in the city.
Table 2: Disbursement Linked Indicators
DLIs Indicators DLI 1: Resource Planning Three-Year rolling and integrated Development and Asset
Management Plans implemented by each CDG for area within its
‗city‘ boundary. DLI 2: Procurement Good procurement performance practices operationalized in CDGs
through implementation of the provincial procurement rules. DLI 3: Intergovernmental
Finance System Reporting of flow of funds to CDGs and city entities, at the CDG
level. DLI 4: Revenue Collection
System Improvements in Own Source Revenue (OSR) collection systems.
DLI 5: Boundary Alignment Boundary of ―city‖ area adopted by each city and its entities as the
spatial planning and service delivery area. DLI 6: Public Disclosure and
Access to Information Public Disclosure and Access to Information mechanism
operationalized. DLI 7: Accountability Effective and transparent feedback and grievance redress
mechanisms operationalized.
24. Disbursements under Component 1 will be tracked against a set of Eligible Expenditure
Programs (EEPs) that reflect non-salary O&M expenditures of existing urban assets and services
such as roads and water supply in the city. The amount of the performance grant for each city is
determined on the PFC formula basis, at an increasing scale of distribution across four years. The
11
detailed schedule for commencing of the assessment, the finalization of results from the annual
assessment, and the announcement of the consequent disbursements is included under Annex 2.
25. The EEPs are under two departments/entities for each city included in the project: the
Works and Services Department of CDGs and WASAs. Based on the 2010-2011 government
budgets, the EEPs identified under the project account for about 7.8% of total expenditure of five
cities and their service entities (including expenditure of CDGs, DAs, and WASAs), 10.8% of
total current expenditure22
, and 34.8% of total current expenditure related with urban related
functions23
. The EEPs are under the city current budget, and are: (i) power/energy needed for
machinery, operations for asset maintenance and service delivery (56% of the EEP
expenditures); and (ii) repair and maintenance of machinery, equipment, roads, buildings, and
water supply/drainage (44% of the EEP expenditures). The Bank‘s guidelines on procurement
will be applicable to the EEPs and the framework for addressing social and environmental
safeguards will be applicable to all activities included in the EEPs.
26. First-year targets against the set of DLIs were met by Project Appraisal, and therefore,
disbursement for the first year will be made on Project Effectiveness. For the following years, a
city will need to meet all annual targets specified for disbursements against the seven DLIs for
that particular year, in order to be eligible for disbursement for that year. A city that does not
meet the entire set of annual DLIs targets for a particular year, will have the opportunity to meet
the combined set of annual targets against DLIs the subsequent year, in which case it will be
eligible for the funds for both years together (the previous year and the current year). If a city
does not meet the annual targets for disbursements against DLIs for two consecutive years, the
funds for the city will be distributed among the other cities that have met the disbursement
targets against DLIs, in accordance with the PFC formula.
27. A city that has received funding on achievement of annual targets for DLIs, shall have to
spend in that year on the EEPs in aggregate terms, more than or equal to the amount received. If
a city spends less on EEPs in aggregate terms, than what it received at the start of the year, in the
subsequent year it will only receive an amount equal to what it spent on EEPs for the previous
year, while the remaining amount out of its allocation based on the PFC formula will be rolled
over to the following year. In that case, the city would need to meet the specified targets for all
DLIs and spend at least the disbursed amount and the remaining balance from previous year‘s
disbursement against the EEPs in aggregate terms, in order for full disbursement for the
following year. If the city does not meet the spending requirement against the EEPs in aggregate
terms for two consecutive years, the difference between project funds going to the city and actual
spending on EEPs by that city, will be distributed across other eligible cities. The amount
disbursed to defaulting cities would be refunded to the Province for allocating to the other
partner cities.
22
Current expenditure includes mainly salary related expenditure and O&M related expenditure. 23
Urban related functions refer to expenditures under DAs, WASAs, and the Works and Services Department and
Municipal Services Department of the CDGs.
12
Component 2: Project Implementation and Capacity Building (US$ 5 million)
28. This component supports the cities and province through technical assistance and
capacity building to achieve the DLIs and enhancement in revenue. The Urban Sector Planning
and Management Services Unit (USPMSU), and a City Program Unit (CPU) in each of the five
cities will be responsible for providing this support and the corresponding costs will be financed
from this component. Funds will be disbursed through a lapsable Assignment Account, managed
by USPMSU against forecast of TA expenditures for the next year to be submitted by the
P&DD, GoPunjab.
29. Disbursement under component 2 will be made each year based on annual tranches
subject to the achievement of the respective annual DLI targets of Component 1 by at least one
Project city. This is important so that the TA and Capacity Building funds essential to help cities
achieve the DLIs are available in a timely manner.
30. On behalf of the GoPunjab, USPMSU will be responsible for: (i) project administration
and coordination; (ii) project financial management; (iii) project reporting; (iv) monitoring and
evaluation; and (v) strategic communications.
31. The USPMSU will also manage the capacity building activities under the project
including: (i) formulation of TORs/ RFPs; (ii) assistance to CPUs for conducting the selection
process and contract management; (iii) ensuring quality assurance on the delivery of the capacity
building initiatives; and (iv) facilitating knowledge sharing between the five project cities. The
capacity building will be in areas including but not limited to: (i) city-wide urban planning; (ii)
resource planning; (iii) procurement; (iv) management of environmental and social impacts; (v)
citizen participation and use of social accountability approaches and tools; and (vi) preparation
of service delivery investment pipeline for third stage of GoPunjab urban strategy.
32. The CPUs will be responsible for: (i) liaison with the provincial departments and
coordinating with the focal persons at the city entities; (ii) supporting the cities to make the
provincial urban agenda operational at the city level; (iii) facilitating progress towards
achievement of the DLIs at the city level; (iv) trouble shooting and advising the city to
implement the improvements; (v) monitoring project implementation, preparing city level
reports, and implementation of requisite impact evaluations; (vi) facilitating the annual
assessment of progress achieved against DLI targets undertaken by independent agents; (vii)
assisting city departments and agencies in identification of capacity building requirements; (viii)
communicating consolidated city-specific capacity building requirements to the USPMSU on an
annual basis for approval of the annual city specific capacity building plan; and (ix) assisting in
identification of technical assistance requirements, including but not limited to preparation,
design and engineering of sub-projects and city specific studies and assessments, and drawing-
up/approving their terms of reference.
33. Component 2 will also support the Directorate General M&E in engaging M&E firm/s
for independent third party assessment of achievement of the DLIs as outlined under Component
1. Moreover, required capacity for procurement and contract management to be engaged at the
DG M&E for the procurement and supervision of third party M&E firm/s will also be supported.
13
The resource engaged in this regard will also be responsible for building the capacity of M&E
Directorate in the area of procurement and contract management.
34. Component 2 will also provide support to the USPMSU for UIPT automation.
Furthermore, part of the proceeds under Component 2 may also be utilized for the development
of a follow up project aimed at improvement of service delivery in the third stage of GoPunjab‘s
urban strategy. Any uncommitted / undisbursed funds from Component 2 in the last year of the
Project may be reallocated to Component 1.
35. In addition to this, USPMU will also be supported under this Component to work with
relevant national and provincial entities to undertake GIS-based disaster risk modeling and
assessments of selected urban centers. These efforts will be coordinated with other relevant
ongoing/planned Bank supported initiatives.
36. In view of Punjab Municipal Development Fund Company‘s (PMDFC) experience and
expertise, its services may be utilized for undertaking capacity building initiatives for city
governments and their entities under this component. PMDFC, over the past several years, has
been the implementing agency for the Bank-funded Punjab Municipal Services Improvement
Project (PMSIP), which has achieved impressive results in the institutional development and
performance improvement of local governments.
Component 3: Contingent Emergency Response (US$ 0)
37. This component will support preparedness and rapid response to a natural disaster,
emergency, and/or catastrophic event as needed. The provisional zero cost for this component
will allow for rapid reallocation of credit proceeds from other components under streamlined
procurement and disbursement procedures. Following an adverse natural event that causes a
major natural disaster, the GoPunjab may request the Bank to re-allocate project funds to this
component (which presently carries a zero allocation of credit proceeds) to support response and
reconstruction24
. The component would hence allow the GoPunjab to request the Bank to re-
categorize and reallocate financing from other project components to partially cover emergency
response and recovery costs. This component could also be used to channel additional funds
should they become available as a result of the emergency.
38. Disbursements under Component 3 will be contingent upon the fulfillment of the
following conditions: (i) The Recipient has determined that an Eligible Crisis or Emergency has
occurred and the World Bank has agreed and notified the Recipient; (ii) The Province of Punjab
has prepared and adopted the Contingent Emergency Response (CER) Implementation Plan that
is agreed with the World Bank; and (iii) The Province of Punjab has prepared, adopted, and
disclosed safeguard instruments required, as per Bank guidelines, for all activities from the CER
Implementation Plan eligible for financing financed under Component 3.
24
Such a reallocation would not constitute a formal Project restructuring, as permitted under the particular
arrangements available for contingent emergency response components (ref. Including Contingent Emergency
Response Components in Standard Investment Projects, Guidance Note to Staff, April 2009, footnote 6).
14
39. Disbursements will be made against a positive list of critical goods or the procurement of
works, and consultant services required to support the immediate response and recovery needs.
All expenditures under this component, should it be triggered, will be in accordance with BP/OP
8.0 and will be appraised, reviewed and found to be acceptable to the Bank before any
disbursement is made.
40. Retroactive financing will also be available for payments made under the contingent
emergency response component, up to 12 months prior to the activation of the Component. The
amount available for retroactive financing will be up to 40 percent of the contingent component
amount (after reallocation, if any). The eligibility of expenditures that are claimed under this
facility will be subject to the corresponding terms for retroactive financing included under Annex
3 of the document, and the legal agreements.
B. Project Financing
Lending Instrument
41. The project is a US$150 million five-year results based Specific Investment Credit. An
additional US$ 4 million will be contributed through counterpart funding by the Government of
Punjab.
Table-3: Project Cost and Financing
Project Components Project Cost (USD
million)
IDA
Financing (USD million)
%
Financing
1. Performance Grants 2. Project Implementation Support and
Capacity Building 3. Contingent Emergency Response Total Baseline Costs Total Financing Required
145 9
0 154
145 5
0
150 150
100% 55%
0
97%
42. The counterpart funding of US$ four million provided by GoPunjab will be utilized for
financing operating expenditures at the USPMSU, towards meeting the project objectives. IDA
Credit will support dedicated resources needed for achievement of TA and Capacity Building
needs.
C. Lessons Learned and Reflected in the Project Design
43. Institutional development versus service delivery. The project supports GoPunjab‘s
phased approach to urban development i.e., broad urban reforms, followed by improvements in
urban institutions and systems, and finally investments in service delivery. This approach builds
a strong enabling environment for urban level improvements, and avoids burdening cities with
investment programs that are poorly planned and executed, under financed, and ultimately badly
maintained. Emerging global lessons indicate that successful cities change their ways, improve
their finances, attract private investors, and take care of their citizens. Enabling these values
implies cities have to be well managed and sustainable. These lessons are particularly important
15
in the context of emerging evidence that growth is taking place in small and medium sized cities.
There are large benefits of urbanization, driven by rising productivity, fluid labor markets, and
greater market access. Preparing cities in Punjab to reap from these benefits is the core
underpinning of this operation, with a strong focus on the bedrock of building credible and
strong city institutions.
44. Performance grants. The project builds on experience from PMSIP, as well as the Bank‘s
global experience specifically with local government grant programs. The lessons learnt from
performance-based conditional grants indicate that these grants are effective at bringing about
institutional change. A recent Independent Evaluation Group (IEG, 2009) report noted that the
best municipal development programs implemented several reforms, including performance-
based grants, to incentivize cities to improve revenue and expenditure management,
procurement, and planning and budgeting with a focus on improving municipal information
systems. Local level discretion in revenue allocation and management improved operation and
maintenance, made monitoring more effective, and was successful in providing higher quality
services at a lower cost, and in a manner more reflective of local needs. The Bank‘s Urban
Strategy: System of Cities—Harnessing Urbanization for Growth and Poverty Alleviation (2009,)
emphasizes that performance grants and municipal contracts can provide incentives for reform
and capacity strengthening. A major lesson is that performance measures need to be incremental,
clear, and easy to measure objectively. Another lesson is that in order to be credible, the system
needs to have clear, transparent, and objective formulae for allocations and reallocations of
performance grants. This experience and the lessons learnt have been incorporated in the project
design.
45. Disbursement linked indicators. The project builds on the experience of other projects
utilizing disbursement linked indicators. Most specifically it builds on the Bank‘s experience in
the education sector in Pakistan, particularly the Punjab Education Sector Project. Its lessons – a
strong commitment by the provincial government to a comprehensive action program, a small
number of key DLIs and specific protocols for monitoring and evaluating their achievement –
have been incorporated into the proposed project.
IV. IMPLEMENTATION
A. Institutional and Implementation Arrangements
46. The project implementing entity will be the Government of Punjab through the Planning
and Development Department (P&DD). P&DD will be responsible for coordination between
relevant provincial departments, for which it has established a Steering Committee (SC) for the
project headed by the Chairman, Planning and Development Board. It comprises of Secretaries
from four provincial departments (Finance, Local Government and Community Development,
Housing and Urban Development, and Public Health Engineering), the five District Coordination
Officers of the project cities, and the Project Director USPMSU as the Secretary. The SC will be
responsible for overall guidance and monitoring of project implementation. External monitoring
will rest with the Directorate General Monitoring and Evaluation, Planning and Development
Department (P&DD).
16
47. P&DD will entrust project management and implementation to the Urban Sector
Planning and Management Services Unit (USPMSU) through an Agreement between GoPunjab
and the USPMSU (Private) Limited. Under this arrangement, the liaison, internal monitoring,
and coordinated project reporting at the provincial level will be the responsibility of the
USPMSU on behalf of the P&DD. In addition, USPMSU will be the main agency responsible for
implementation of Component 2 of the project.
48. A City Program Unit (CPU) will be established in each of the five cities to support
project implementation and assist in delivering on the city level activities. CPUs will function
under the office of the executive head of the city (DCO) who shall be ultimately responsible for
delivering on the project activities. Each CPU shall be adequately staffed with requisite skills to
support the cities to deliver on the project results.
49. The GoPunjab has signed Memorandum of Partnerships (MoPs) with the five
participating cities, delineating roles and responsibilities of all parties. The MoPs lay out the
envisaged institutional roles, operational responsibilities, and results required to be achieved
under the Project at the provincial and city levels.
50. Upon the activation of Component 3 subject to the fulfillment of due conditions, the
GoPunjab will need to designate the responsible agency for implementation of activities under
Component 3, and may delegate the development and adoption of Contingent Emergency
Response Implementation Plan as well as the development, adoption, and disclosure of
safeguards instruments to the responsible agency.
B. Results Monitoring and Evaluation
51. Annex 1 provides the results framework including outcome indicators and intermediate
outcome indicators for each project component. The CPU will have the overall responsibility for
ensuring that the implementing departments and entities (WASAs, and DAs) produce half-yearly
and annual progress reports as required by the provincial government. These departments/entities
will establish and/or improve on the management information systems (MIS) to ensure better
links between the cities‘ consolidated budgets and improvements in O&M and asset
management. The data and reports generated from the MIS will enable monitoring these
improvements in cities‘ performance in budget and ADP execution and service delivery through
enhanced O&M and asset management. In addition, the project will strengthen implementing
entities‘ capacities in core business functions of expenditure management, procurement, asset
management, participatory planning and accountability. All together these system improvements
will enhance the flow of information between the citizens and their service providers, and as a
result strengthen accountability for better results.
52. The USPMSU will be responsible for internal monitoring and coordinated project
reporting at the provincial level. The Directorate General M&E at the P&DD will be responsible
for: (i) external monitoring of the implementation of the project on an annual basis, and (ii) mid-
term and implementation completion reviews of the project. Moreover, third party evaluations
will provide the basis for measuring the achievement of the project outcomes, using publicly
available information. The project will also establish a baseline, which will help develop a robust
17
monitoring and evaluation system of the project. Analysis of this information will facilitate
analyzing the potential impacts of the project on urban governance.
53. With respect to performance grants, the disbursement decision will be based on
achievement of pre-specified results, i.e., annual targets against all DLIs. The achievement of
annual targets for DLIs at the city level will be individually assessed for each city, every year, by
independent assessment teams under the DG M&E (P&DD). The DLIs include intermediate
outcomes, incremental steps and results contributing to improved efficiency and effectiveness
during and beyond the project. The achievement of all annual targets against DLIs applicable for
the year would be required to ensure disbursement.
54. For standard reporting to the Bank, the USPMSU will be responsible for: (i) preparation
and submission of financial and technical progress reports under the project; (ii) submission of
project accounts to audit in a timely way and for onward submission of audit reports to the Bank;
and, (iii) ensuring funds flow, accounting, audit, financial reporting and control are maintained
as envisaged in the project operational manual.
C. Supervision Strategy
55. The supervision strategy for the Project is based on several mechanisms that will enable
enhanced implementation support to the Government of Punjab and timely and effective
monitoring of Project activities. These are described in detail in the PAD and Financing
Agreement of the Project. Key features of the supervision strategy are explained below:
56. Joint Review Missions: The Bank Supervision Team will join the Government of Punjab
to formally review program implementation semi-annually. The March/April missions will focus
on assessing progress towards DLI targets, implementation of TA, and review of financial
management reports. The September/October missions will conduct a comprehensive review of
Project performance against the Results Framework and agree on planned actions (including
financing plan) for coming years, in addition to progress under the TA component. As part of
formal and ongoing technical missions, extensive field visits will be undertaken to determine
reform outcomes, and to take corrective actions for improvement at the district and school levels.
One month prior to the joint review missions, USPMSU will provide to the Bank Supervision
Team a comprehensive progress report on Project activities, studies and evaluations.
57. The TTL and other key members of the Bank team including fiduciary and safeguards
staff are based in the country office which will enable continuous dialogue with the IA
supplemented by missions throughout the duration of the project for additional support as and
when needed.
58. Mid-term Review: A mid-term review would be undertaken to identify any divergences
from the planned outcomes and identify any mid-course corrections that may be needed with
particular focus on ensuring sustainability and scalability of improvements engendered under the
project. The mid-term review would also serve as a platform to plan for the post-project
completion phase. It is anticipated that improved and strengthened management and operational
systems introduced during the course of the project will be embedded within the core urban
systems prior to the conclusion of the project.
18
59. Independent Third Party Validations (TPVs): The engagement of third party/ private
sector firm(s) as independent assessment agencies by the M&E Directorate of P&DD Punjab to
undertake assessment of progress against annual DLIs‘ targets provides another independent
monitoring and supervision mechanism. While the independent assessment agencies will fully
mobilize for annual assessments in line with the schedule presented under Annex 2, collection of
data from primary / secondary sources will continue year round to facilitate the annual
assessment exercise. The data collected hence will be shared with the M&E Directorate of
P&DD Punjab for review and onward transfer to the Bank Supervision Team as part of the
progress reports shared before the September/October review missions.
60. Security risks: The prevailing security situation in Punjab is not anticipated to have a
significant impact on the supervision of the Project. If conditions warrant, the Bank Supervision
Team will consider alternate forms of supervision, such as greater use of electronic means,
reliance on TPVs and inbuilt monitoring. The emerging e-monitoring system of Punjab
Government will also be utilized and further developed.
D. Sustainability
61. The legislative framework for local governments in Punjab is under review by the
GoPunjab. Under the Punjab Local Government Ordinance 25
(PLGO) 2001, local governments
were constituted at various levels including in the large cities. After two terms of elected local
governments, the GoPunjab has undertaken a review and reform exercise aimed at introducing
improvements in the urban governance and management system through changes in the local
government legislative framework. Consequently, the GoPunjab has developed the Draft Local
Government Bill 2012 which is expected to be discussed and approved by the legislative
assembly later this year. The Bill further strengthens the legislative underpinnings, preserves the
institutional arrangements envisaged for the project, and strongly supports the project objectives
and the proposed set of governance improvements.
62. System management improvements introduced under the project shall be implemented as
the core system at city level: in the city government, city entities, authorities and agencies. The
project utilizes an incremental approach, where changes are phased in at the city level in
accordance with enabling framework to be provided by the provincial government. This
approach will ensure that the improvements brought about during the initial years are
strengthened and sustained in the later years of the project and beyond.
63. All operational and process level systems are being introduced as mainstream systems
with full faith and backing of the higher tier of the government. A mid-term review would be
undertaken during project implementation to assess project sustainability as well as to identify
and remedy any divergences from the planned outcomes. The mid-term review would also serve
as a platform to plan for the post-project completion phase. It is anticipated that improved and
strengthened management and operational systems introduced during the course of the project
will be embedded within the core urban systems prior to the conclusion of the project. The
25
Punjab Local Government Ordinance (Ordinance No VIII of 2001) was promulgated in August 2001 after
repealing Punjab Local Government Ordinance, 1979 (VI of 1979).
19
government is already incorporating elements of the improvements under the project in the
design of the new local government system.
64. With regards to physical asset sustainability, the project supports EEPs in repair and asset
maintenance. The project also provides for creating transparency in, and public disclosure of, the
funding allocated for operations and maintenance. The capacity-building and technical assistance
activities supported by the project include development of systems and staff training in asset
management.
65. Communication Strategy: The Bank will support the Implementing Agency in developing
an effective internal and external communications strategy during project implementation which
would ensure adequate dissemination of information regarding the broader reforms undertaken
as part of the project. It is important that the communications strategy is designed in a way that it
distinguishes between the achievements under the project, which focus on improvements in the
urban governance systems of the five cities, and areas beyond the scope of this project, such as
service delivery. Strategic communication will help in creating buy-in and support both from
within the various government entities involved and the external stakeholders to ensure
sustainability of reforms. A well designed and implemented communication strategy not only
helps in managing perceptions and expectations of the project interventions but can actually
remove some of the developmental bottlenecks by striking partnerships.
66. As part of focusing on the systemic reforms achieved under the project, the
communications strategy should highlight the availability of various previously non available
mechanisms, such as grievance redressal and information disclosure systems. The
communications strategy should aim to not only inform the citizens of such initiatives, but also
create ownership of the systemic reforms and their outputs among the citizens of the five cities
and stakeholders beyond them to enable scaling up and replication.
67. In order to align the communication strategy behind the wider urban reforms undertaken
by the provincial government, the communication function for this project will be housed in the
USPMSU. This communication unit will design the overarching communication strategy and
help coordinate and supervise its implementation through communication staff in the respective
CPUs, and city entities.
V. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings
Table-4: Risk Ratings Summary Table
Stakeholder Risk Rating Implementing Agency Risk
- Capacity High
- Governance High Project Risk
- Design Substantial
- Social and Environmental Low
- Program and Donor Low Overall Implementation Risk High
20
B. Overall Risk Rating Explanation
68. The overall risk rating at preparation as defined in the project ORAF (Annex 4) is ‗High‘.
The geographic span of the project as well as the number of entities involved in project
implementation across the five cities, pose risks that may hamper timely progress towards DLIs
and importantly, the PDO.
69. Weak capacity in City District Government and affiliated entities as well as weak
systems arising from fragmented mandates, procedural deficiencies and lack of accountability
represent a substantial part of risks associated with project implementation. Furthermore, there is
a possibility that provincial and city level entities‘ non-familiarization with the Bank‘s fiduciary
and safeguard requirements could risk quality of preparation and project execution, particularly
monitoring and evaluation (M&E). The project itself provides key mitigation measures to
address systemic weaknesses and capacity risks through the undertaking of a capacity assessment
during project preparation and provision of capacity building and technical support, in addition
to implementation support at the provincial and city levels during project execution.
Additionally, the USPMSU, which played a key role in developing the GoPunjab‘s urban
agenda, has demonstrated a high level of capacity for policy analysis, information management
and program implementation.
70. Potential changes in the Local Government System as well as turnover in key leadership
positions, affecting Government ownership of, and commitment to, the project also potentially
represent high risks to the realization of the PDOs. The project design, however, mitigates this to
a large degree by focusing on strengthening institutions and systems. The Bank will also support
the implementation agency in developing and disseminating an effective communications
strategy to lend voice to the reform agenda across successive provincial administrations, and to
create public awareness of systemic and institutional reforms. Furthermore, to demonstrate
commitment to the project, the Government would have to undertake the initial set of DLI targets
at both the provincial and city levels prior to disbursements to be undertaken under component 1
for the first year of the project.
VI. APPRAISAL SUMMARY
A. Economic, fiscal and financial assessment
Economic analysis
71. The economic analysis provides the justification for project intervention in the five large
cities of Punjab. The operation will invest in deferred stock maintenance rather than expansion of
new infrastructure. This focus will enable the cities and associated entities to improve
efficiencies in service delivery and in addition, allow for savings in scarce resources to be
channeled on other city development priorities rather than expansion of new infrastructure. In
addition, cities‘ will establish or improve monitoring databases, which will enable tracking unit
costs of investments supported by the operation. In turn, during the course of implementation,
cities‘ and associated entities will be provided technical support through the project to enable
them select investments based on cost-benefit analysis.
21
72. In the absence of government intervention, the immediate implication is that the current
stock of infrastructure and cities‘ systems will continue to deteriorate. Concurrently, the
operational costs will continue to increase as the existing stock of assets will consume more
energy as opposed to well maintained assets. In other words, the option of doing nothing at the
moment is much more costly to the Government of Punjab. These benefits include better
managed cities with the potential to generate greater efficiencies in service delivery, savings
scarce resources for alternative investment priorities by the provincial government, and improved
cities‘ finances.
73. The benefits that arise from GoPunjab being able to generate more revenues from
property taxes include possible investments in basic infrastructure in cities, improved
maintenance of assets, and enhanced service provision. The benefits from such investments can
generate significant benefits that we claim can exceed the estimated costs on the DLIs shown
above. Other potential benefits could arise from improvements in procurement practices. Cities
will be able to better manage and allocate their resources, and as a result, access and quality of
basic services will be improved. Cost-benefit analysis is not applied since most of the funding
goes to improved maintenance of assets and technical assistance. However, the project will
support cities‘ to develop monitoring databases upon which unit costs of investments will be
established and hence, during the course of implementation it will be possible to quantify some
of the benefits and enable a cost-benefit analysis.
Fiscal and financial analysis
74. The reforms supported through the project are likely to strengthen systems and processes,
including physical planning, financial management, revenue mobilization, procurement, e-
governance, performance monitoring and local planning and budgeting. The analysis also
demonstrates that there is potential to improve revenues from property tax enhancements
supported through the project. The project will support ongoing reforms on property taxation
being implemented by the USPMSU on behalf of the Government of Punjab. Through this
project technical assistance will be provided to enhance the documentation of the properties. This
will simplify the process of rolling out the GIS-based property tax system. Lastly, supporting
water and sanitation authorities in Punjab is likely to improve their abilities to maintain existing
infrastructure of water supply and sanitation. It is expected that the utilities will lower
operational costs that arise in part due to high electricity costs and use of obsolete water
equipment.
B. Technical
75. The project directly supports the Government of Punjab‘s urban agenda, and more
specifically, it strengthens the institutions and systems needed to carry out the critical urban
policy reforms that have already been introduced. The project design is based on an extensive
policy dialogue with GoPunjab, and is grounded in capacity assessments of the provincial cities,
sectoral assessments (water and sanitation and solid waste management), analysis of the legal
structure of local governments and reviews of the municipal finance and property tax regimes,
As such, the project will support the capacity in CDGs and city entities to plan, implement and
monitor programs, and manage resources more effectively. This will include strengthening
22
functional alignment, capital budgeting procedures, procurement and safeguards, and citizen
involvement. Finally, the results based structure of the project (performance grants) will
reinforce the achievement of planned outcomes.
C. Financial Management
76. The overall project‘s residual risk rating is considered ―Moderate‖ on completion of risk
mitigating measures. The inherent risk is ―High‖. Country level risk is Substantial to Moderate as
CDGs (part of its revenues and expenditures) and the entities, authorities and entities in the city
lie outside the domain of PFM system. FM arrangements exist, but system requires improvement
and harmonization with PFM system under agreed upon action plan to enable fiscal
consolidation. The inherent risks can be mitigated once institutional arrangements are in place.
Key FM staff needs training and capacity building. Qualified and experienced, internal audit
staff is being appointed for an effective internal audit function that ensures effective control
environment. A Finance Manager is also being appointed to work exclusively for the project.
77. Project funds for Component 1 would be disbursed annually in to the Punjab
Consolidated Fund (Provincial Account No.1, Non-Food), subject to completion of identified
eligibility criteria and achievement of DLIs. A forecast for expenditure to be tracked as EEPs
would be provided every year along with the statement of DLIs achieved. Provincial
Government funds from the Punjab Consolidated Fund (Provincial Account No.1, Non-Food)
would be transferred to WASAs under intimation to the respective District Coordination Officers
(DCOs) and Executive District Officers (EDO) Finance & Planning. Adequate controls would
be exercised in processing payments for the selected EEPs, accounting and reporting. The fiscal
transfers from the Punjab Consolidated Fund (Provincial Account No.1, Non-Food) will be
utilized for meeting operational expenses related to Component 1(Performance Grants). Bank
funds disbursed would be tracked (by each city) against expenditure on EEPs in that year, and
thereafter to see that cities continue to meet the agreed criteria.
78. Project funds for Component 2 will also be disbursed annually in to the Consolidated
Fund (Provincial Account No.1, Non-Food) as an advance against forecast of TA expenditures
for the next year. The Finance Department, GoPunjab will immediately release these funds as a
grant to an Assignment Account of USPMSU; a sub-account of Punjab Consolidated Fund
(Provincial Account No.1, Non-Food) maintained with the National Bank of Pakistan for
managing Project Implementation Support and Capacity Building costs. Documentation of
advance will be based on actual TA expenditures (supported by invoices, receipts, etc) reported
in the semi-annual Interim Financial Reports (IFRs) to be submitted to the Bank within 45 days
after end of each period. The USPMSU has handled a Bank grant some years back and their staff
has the required experience of keeping books of account and preparing IFRs. The Auditor
General of Pakistan will audit the annual financial statements of the project.
D. Procurement
79. This project focuses on systemic procurement strengthening as well as the transactions
under EEPs. The project will develop the procurement capacity of the participating City District
Governments and WASAs with specific focus on planning and implementation. In the context of
23
the transactions under the project, the Bank‘s procurement procedures shall be applicable only to
the procurable items within the EEPs.
80. At the provincial level, Punjab enacted a procurement law in late 2009. Procurement
rules have also been adopted which are based on the procurement rules of the federal
government. Custodianship of the regulatory framework is however yet to be effectively
established. The office of provincial Managing Director (MD) Public Procurement Regulatory
Authority (PPRA) is not resourced adequately. Currently a full time MD PPPRA is appointed
with no other technical/support staff. PPPRA has identified the next step as effective
institutional functionality, development of Standard Bidding Documents (SBDs) and
implementing regulations, setting up of complaint redressal mechanism, developing an M&E
system, and overall capacity building of the procuring agencies through training programs.
81. The city district governments are required to use the provincial procurement rules, but
compliance is partial due to gaps in implementation instruments, certain conflicting directives, as
well as dissemination issues. As a part of the systemic improvements, the participating entities
shall establish a SOP for procurement and contract management systems streamlining the
applicable rules, and circumscribing procurement planning system linked to the budget, web
postings, disclosures and complaints redressal mechanism. The pre-registration (enlistment)
procedure shall also be rationalized. Eligible expenditures subject to Bank‘s procurement
guidelines are civil works (repair and maintenance of roads etc) and goods (procurement of
machinery, replacement of pumps, etc.) included within the EEP of repair and maintenance of
machinery, equipment, roads, buildings, and water supply/drainage. All procurements under the
TA shall also be subject to the Bank‘s procurement and consultancy guidelines. The details are
provided in the procurement section Annex 3.
82. The DLI matrix provides the timelines for all agreed actions. These actions will assist the
government in furthering their procurement reform agenda through better implementation of the
notified procurement rules which aim at enhancing the economy, efficiency and transparency of
the system.
E. Environment
83. The project development objectives are to support the Province of Punjab‘s cities in
strengthening systems for improved planning, resource management, and accountability, and to
improve the Province of Punjab‘s capacity to respond promptly and effectively to an eligible
crisis or emergency. Under the component 1 on Performance Grants, funds are to be provided to
strengthen the system through improved operation and maintenance (O&M) of existing urban
assets and services, such as roads and water supply service. Even O&M activities are to be
confined to repair and rehabilitation of the existing right of way for the roads, and repair and
rehabilitation, change of existing water supply pipelines, which are in dilapidated conditions.
Other eligible expenditures include: (1) power/energy needed for machinery, operations for asset
maintenance and service delivery; and, (2) repair and maintenance of machinery, equipment,
roads, buildings, and water supply. No new schemes investments are eligible or going to be
funded under this component. The proposed project has accordingly been categorized as ―B‖
per Bank’s Operational Policy on Environmental Assessment.
24
84. Over one-half of the urban population in Punjab province lives in these five large cities
and contributes to around 50 percent of industrial production in the province. Unfortunately,
urban air quality, solid waste management, sewage disposal and water quality, - environmental
indicators related with urban development, remain major issues needed to be tackled in a more
systematic way than the current business as usual. Except in Multan, where there exists one
sanitary landfill site, which caters for around 30 percent of the solid waste generated there – in
all other cities solid waste management remains a major issue. Similarly, PM10 and PM2.5 levels,
indicators reflecting the state of air quality, in these five cities are also well above the WHO
thresholds. In terms of sewage disposal, except in Faisalabad where about 20 percent effluent is
treated prior to its disposal, no other city has got treatment facilities installed. Receiving water
bodies, like the river Ravi in case of Lahore, have therefore turned into sort of a sewer. Some of
the data numbers on these aspects have already been presented in section B ‗Sectoral and
Institutional Context‘ of this document. It becomes therefore imperative that environmental
management considerations are integrated into urban planning and development process so that
gains made in terms of economic and industrial growth in the province are sustainable in the long
run.
85. Recognizing the fact that the project will finance only O&M activities of existing urban
assets and services, which have low to moderate, short to medium duration and reversible
environmental impacts, the borrower has considered the project as an opportunity to introduce
reforms for the integration of environmental management aspects in the cities‘ urban planning
and development process. The project has therefore prepared an environmental and social
management framework (ESMF) with an aim to guide the five cities on the internalization of
environmental and social considerations at large in the cities‘ planning and development process.
The ESMF has been prepared after detailed in-house discussions, desk research on the legal and
institutional framework, analysis of priority issues in the infrastructure sector, consistency
checks with operational policies of the World Bank and other multilateral agencies. The ESMF
also defines environmental and social assessment procedure to be followed by the City District
Governments (CDGs) and other city entities while preparing, appraising, and implementing
individual schemes under the Project. These procedures include i) environmental and social
screening of every scheme to be implemented under the Project; ii) undertaking corresponding
environmental assessments (EAs) and preparing an Environmental and Social Management Plan
(ESMP) for each scheme having moderately to adverse significant environmental and/or social
impacts; iii) implementing the ESMPs; and iv) undertaking environmental and social monitoring
to ensure effective implementation of the mitigation measures included in the ESMP.
86. The ESMF team visited five cities and held meetings with CDGs and other stakeholders
in December 2011. The focus of discussions during meetings was on identification of broader
environmental and social issues, review of procedures for the integration of environmental
aspects into cities' urban planning, development and service delivery process. The consultations
with the CDGs specifically focused on: (i) review of existing overall planning and development
process including in agencies like WASA and Development Authorities in the five cities; (ii)
gathering views on adequacy of environmental legislation and regulatory requirements for urban
development; (iii) existing practices in the CDGs to integrate environmental considerations in the
planning and development process; (iv) review of adequacy of existing institutional
arrangements for the implementations of environmental management plans (EMPs) where IEEs /
EIAs were prepared including review of documentation and reporting arrangements in response
25
to clearance conditions imposed by Punjab EPA while issuing licenses; and (v) review of
availability of human, technical and financial resources in the participating cities in conformity
to environmental laws and regulatory regime in relation to planning and development
requirements of the cities.
87. The ESMF also explains the organizational structure to ensure effective and coordinated
implementation of the recommendations in the document. The overall responsibility for the
implementation of ESMF will remain with the Project Director, USPMSU. A dedicated
Safeguards Coordinator will be appointed by the Project Director at the USPMSU, who will be
responsible for operationalisation of the ESMF, and will coordinate with the implementing
agencies at the CDGs and monitor their activities during the implementation phase. The
Safeguard Coordinator will also ensure that the cities are properly capacity built to be able to
perform the activities as per the requirements of the ESMF by designing training programs and
generating discussions on various forums. The Safeguard Coordinator will also be responsible
for arranging an independent assessment, a third party validation of ESMF implementation,
which will be carried out on an annual basis. At the CDGs, each large city will also have a
dedicated Safeguards Specialist at the City Program Unit (CPU), who will ensure effective
implementation of the ESMF within the respective city. S/he will prepare the scheme-specific
ESMPs, carryout monitoring to ensure effective implementation of the mitigation measures
proposed by the ESMPs, and produce regular reports, which will document the process and
outcome of the entire ESMF implementation during the reporting period. Besides, District
Officer – Environment in each city will facilitate the Safeguards Specialist in the review of
screening checklist, and getting clearances from Punjab EPA, where required. He will also
supervise and provide technical support in the ESMP monitoring program.
88. The ESMF implementation cost has been estimated to be about PKR 52 million,
provided through the project. This covers cost of personnel, capacity building, and third party
validation. The cost of implementation of individual ESMP will be included in the scheme cost.
89. Component 3 may have certain environmental issues associated with activities that may
be financed under the component, should it be triggered. As a condition for disbursement under
Component 3, the implementing agency will carry out a screening of the activities included in
the CER Implementation Plan for any potential environmental impacts. Furthermore, any
safeguard instruments required under the ESMF will be prepared, submitted to the World Bank
for review and approval, and thereafter adopted and locally disclosed by the implementing
agency prior to disbursements under Component 3. Should this screening require a modification
of the Environmental Assessment categorization of the Project and / or trigger any of the Bank's
safeguards policies, a restructuring will be carried out to record these changes and make
applicable the attendant requirements.
90. Furthermore, in case Component 3 is triggered, safeguard aspects of project activities
would be in line with the ESMF. The ESMF provides guidelines on the implementing agency‘s
responsibilities for integrating and managing environmental aspects into the investment design
and implementation. This document would guide the implementing agency in undertaking a
rapid environmental assessment for the potential activities under this component.
26
F. Social
91. The project will assist in the strengthening and improvement of the urban management
system in the areas of citizen engagement, transparency and social accountability. There are
various relevant policy provisions adopted and good practices under implementation by the
cities. However, its implementation performance varies. The project will conduct a review of
existing mechanisms and initiatives draw lessons from their implementation and build on best
practices to promote their replication. Necessary policy provisions or implementing guidelines
will be developed and introduced to promote good practices and guide their implementation.
The project will also include capacity building activities and technical support to ensure that
cities continue citizen engagement and that urban governance systems are strengthened in order
to become more responsive to public needs. In line with this, DLIs and performance criteria
have been developed for actions to be undertaken at the provincial and city levels.
92. Public Disclosure of Information: DLI 6 will support the release of information to the
public. Key documents such as Annual Development Program (ADP), Budgets and documents
related to award of contracts are to be made available to be public. A range of options for public
disclosure of documents, both internet-based and others, to ensure that dissemination are
undertaken widely and free of cost to the public. Public consultations on accounts as required
under the existing rules, and stakeholder consultations on ADP and Budgets are to be undertaken
to ensure public participation.
93. Grievance/Complaints Redress Mechanism: DLI 7 on citizen involvement will pertain to
the establishment of a comprehensive grievance redress mechanism, developing the complaint
cells required under the PLGO 2001. A ―one-window‖ operation will be made operational where
it is non-existent. Where existing, it will be improved and strengthened to receive complaints on
services. The mechanism will provide means of tracking a complaint and institute a ―follow-up
system‖ to ensure that complaints are addressed quickly.
94. The project as designed will not require any land, involuntary resettlement or affect
indigenous communities Therefore, it is concluded that the project will not trigger World Bank
OP 4.10 on Indigenous People or OP 4.12 on Involuntary Resettlement. An Environmental and
Social Management Framework has been prepared in line with relevant local laws and OP 4.12
to address unexpected safeguard impacts in case they do materialize.
95. As a condition for disbursement under Component 3, GoPunjab will carry out a screening
of the activities included in the CER Implementation Plan for any potential social impacts.
Furthermore, any safeguard instruments required under the Environmental and Social
Management Framework (ESMF) will be prepared, submitted to the World Bank for review and
approval, and thereafter adopted and locally disclosed by the implementing agency prior to
disbursements under Component 3. Should this screening require a modification of the
Environmental Assessment categorization of the Project and / or the triggering of any of the
Bank's safeguards policies, a restructuring will be carried out to record these changes and make
applicable the attendant requirements.
96. Furthermore, in case that Component 3 is triggered under the project, the ESMF will
specify the social assessment requirements of project implementation. Should this component be
27
triggered, the implementing agency will be assisted to apply this framework to address any social
impacts in post disaster recovery and reconstruction programs, including temporary and
preventive resettlement.
28
Annex 1: Results Framework and Monitoring
PAKISTAN: Punjab Cities Governance Improvement Project
Results Framework
Project Development Objective (PDO):
To support the Province of Punjab‘s cities in strengthening systems for improved planning, resource management, and accountability, and to improve the Province of Punjab‘s capacity
to respond promptly and effectively to an Eligible Crisis or Emergency.
PDO Level Results Indicators26
Unit of
Measure Baseline
Cumulative Target Values Frequency
Data Source/
Methodology
Responsibility for
Data Collection
2013 2014 2015 2016
Percentage of development and asset
maintenance expenditure of the city and
city entities which are spent according
to the three-year rolling development
and asset management plan
(DAMP)(%)
% 0 80% Baseline,
mid-term
(Year 2);
Year 4; and
at project
closure
(Year 5).
CDGs, city
entities, P&DD.
USPMSU will
collect all
expenditure
information and
compare it with
the three-year
rolling
development
and asset
management
plan.
USPMSU
Percentage of service area population
having an institutionalized mechanism
available at city service delivery entities
for providing feedback and grievance
redress.
% 0 80% 100% Baseline,
mid-term
(Year 2):
Year 4; and
at project
closure
(Year 5).
The quality and
effectiveness of
the feedback
mechanisms
will be
evaluated
through citizen
surveys. CDGs
and city entities.
USPMSU will
also collect all
data on
availability of
mechanism to
USPMSU
26
Relevant PDO level indicators related to the second part of the PDO may be included in case the contingent emergency response component (Component 3) is
activated
29
the ‗city‘
population.
INTERMEDIATE RESULTS
Intermediate Results Area One: Improving resource planning and management.
Intermediate
Results
Indicators27
DL
I Unit of
Measure Baseline 2013 2014 2015 2016 2017 Frequency
Data Source/
Methodology
Responsibility
for Data
Collection
Three year rolling
plans for capital
investment and
asset maintenance
are adopted by
city district
governments.
1
Text CDG and its
entities prepare
annual
development
plans
independent of
each other.
There is no
coordination or
integration of
development
and
maintenance
needs and
plans.
Consolidated
Annual
Development
Plans
available at
the CDG
level
Outline draft
3 year rolling
Development
and Asset
Management
Plan
prepared
including
completion
of asset
inventory
3 year rolling
integrate
Development
and Asset
Management
plan prepared
3 year rolling
integrate
Development
and Asset
Management
plan
prepared
3 year
rolling
integrate
Developmen
t and Asset
Management
plan
prepared
Ongoing CDG and city
entities.
USPMSU will
monitor
progress
USPMSU
Procurement
process conforms
with provincial
rules
2
Text Inconsistent
application of
Punjab Public
Procurement
Regulatory Act
(PPPRA) rules
and lack of
clarity due to
conflicts with
some directives
and
administrative
Instructions
issued to
CDGs and
city entities
on
enforcement
of and
compliance
with the
Punjab
Public
Procurement
Cities have
documented
processes as
standard
operating
procedures
for planning,
procurement
and contract
management.
Stipulations
of the
procurement
rules (and
the SOPs)
complied
with for all
city level
projects.
Stipulations
of the
procurement
rules (and
the SOPs)
complied
with for all
city level
projects.
Ongoing CDGs and city
entities.
USPMSU will
monitor
progress
USPMSU
27
Additional intermediate results indicators may be included in case the contingent emergency response component (Component 3) is activated
30
issues. Regulatory
Authority
(PPPRA)
Act, the
Punjab
Procurement
Rules 2009,
and all
procedures
established
under
PPPRA.
Reporting on the
flow of funds
from GoPunjab to
urban areas is
consolidated at
the city level.
3
Text There are
multiple
parallel funding
sources to
CDGs and the
city entities,
due to which
the CDG does
not have
knowledge of
the total
funding
coming to the
city.
Instructions
issued that all
development
and non-
development
allocations/
UIPT
proceeds/
funds/ grants/
foreign
assistance for
all city
entities shall
be reported
to the CDG
at the time of
being
transferred
from the
GoPunjab to
the city
entities.
Each CDG is
being
provided
details by the
Finance
Department
regarding
transfers
being made
to the city
entities, at
the time of
the transfers.
Each CDG is
being provided
details by the
Finance
Department
regarding
transfers being
made to the
city entities, at
the time of the
transfers.
Each CDG is
being
provided
details by the
Finance
Department
regarding
transfers
being made
to the city
entities, at
the time of
the transfers.
Each CDG
is being
provided
details by
the Finance
Department
regarding
transfers
being made
to the city
entities, at
the time of
the transfers.
Ongoing CDG, city
entities, and
FD. USPMSU
will monitor
progress.
USPMSU
Systems for Own
Source Revenue
collection are
improved 4
Percent
age
The UIPT
records are
maintained
manually and
not fully
ordered and
updated
An approved
Action Plan
for mapping
and
automation
of UIPT, and
instructions
issued to
UIPT
automation
pilot
completed
Each city entity
has
operationalized
the approved
Action Plan
At least 75%
UIPT
automation
completed
At least 75%
UIPT
automation
completed
Ongoing CDGs,
WASAs,
Excise and
Taxation
Department.
USPMSU will
monitor
progress
USPMSU
31
each city
entity,
authority and
agency to
prepare an
Action Plan
for
enhancement
of self
collected
OSR.
Intermediate Results Area Two: Improved voice and transparency.
Intermediate
Results
Indicators*
DL
I Unit of
Measure Baseline 2013 2014 2015 2016 2017 Frequency
Data Source/
Methodology
Responsibility
for Data
Collection
A common
boundary for
urban planning is
utilized by urban
institutions to
achieve an
integrated
planning process.
5
Text Planning
boundaries of
CDG and city
entities are
different
Boundary for
planning
purposes
aligned to
city boundary
Action plan for
phased
extension of
service
boundary to
align it to city
boundary
Implementat
ion of the
first year of
the
extension of
the service
boundary of
each city
Implementat
ion of the
first year of
the
extension of
the service
boundary of
each city
Ongoing CDGs, city
entities, LGD
and H&UDD.
USPMSU will
monitor the
progress on the
actions on an
ongoing basis
USPMSU
Periodic reports
on plans and
programs are
prepared by city
district
governments and
disclosed to
public.
6
Text
There is no
consistent and
transparent
mechanism of
public
disclosure and
access to
information, in
particular
financial and
procurement
CDGs
instructed to
establish a
mechanism
for public
disclosure
and access to
information,
in particular
financial and
procurement
CDGs
developed
mechanism
approved
CDGs
implement the
approved
mechanism
CDGs
implement
the approved
mechanism
CDGs
implement
the approved
mechanism
Ongoing
CDGs.
USPMSU will
monitor
progress.
USPMSU
32
information,
across all cities
and city entities.
information
Citizens can
utilize feedback
and grievance
redress
mechanism.
7
Text There is no
established
system or
mechanism of
feedback and
grievance
redress at the
city and city
entity levels.
Although CDGs
and city entities
has established
complaint cell
which need to
be strengthened
CDGs
instructed to
establish a
mechanism
for feedback
and grievance
redress.
CDGs
developed
mechanism
approved
CDGs
implement the
approved
mechanism
CDGs
implement
the approved
mechanism
CDGs
implement
the approved
mechanism
Ongoing CDGs.
USPMSU will
monitor
progress
USPMSU
Disbursement Linked Indicators
Area Indicator Baseline Targets for Disbursement Protocol
Year 1 DLIs
(At
Effectiveness)
Year 2 DLIs
(End of Year
1)
Year 3 DLIs
(End of Year 2)
Year 4 DLIs
(End of Year
3)
DLI 1: Resource
Planning
Three-Year
Integrated
Rolling plans
for
Development
and Asset
Management
implemented by
each CDG for
area within its
‗city‘ boundary.
CDG and its
entities28
prepare
annual
development
plans
independent of
each other. There
is no
coordination or
integration of
development and
maintenance
Each CDG and
its entities have
been instructed
to adopt a 3
Year Rolling
Integrated
Development
and Asset
Management
Plan (IDAMP)
as mandatory
integrated
Each CDG
has prepared
a
consolidated
Annual
Development
Plan (ADP),
which
includes the
ADPs for
municipal
services of
Each CDG has
prepared a
consolidated ADP
(as for the
previous year). A
mechanism for
preparation of
IDAMP has been
approved, and
each CDG has
prepared a
complete GIS
Each CDG
has prepared
an IDAMP,
including
development
and asset
management
plans of the
CDG for
municipal
services and
of each
Year 1 Protocol:
Instructions have been issued by
P&DD vide No.3(36) ECA/P&D/2003-
VII, dated Feb 23, 2012, directing each
CDG and its entities to adopt a 3 Years
Rolling IDAMP for municipal services.
Instructions have been issued by
LG&CDD vide No. SO.FPs (LG)1-
3/2010(P), dated Feb 3, 2012 to CDGs,
and by HUD&PHED HUD&PHED,
vide No. SO(UD)1-34/2011, dated Jan
23, 2012 to city entities, directing them
28
City entities include Development Authority (DA), Water and Sanitation Agency (WASA), Traffic Engineering and Planning Authority (TEPA), Parks and
Horticulture Authority (PHA), and Solid Waste Management (SWM) department/Lahore Waste Management Company (LWMC).
33
needs and plans. development
and asset
maintenance
planning
exercise for
municipal
services.
each CDG, its
entities.
based inventory of
assets.
entity. to prepare GIS based inventory of
assets.
Year 2 Protocol: Consolidated ADP reflects all
programs/projects being undertaken in
the ‗city‘, by sector and entity (to include
all on-going, new and planned
investments, separately for creation of
new assets, refurbishment and
replacement).
Year 3 Protocol: Assessment of the GIS based inventory
of assets prepared by each CDG, to
ascertain that the inventory is complete.
Year 4 Protocol: 3 Year Rolling IDAMP prepared in
accordance with the approved
mechanism, reflecting all
programs/projects being undertaken in
the ―city‖, by sector and entity (to include
all on-going, new and planned
investments, separately for creation of
new assets, refurbishment and
replacement), with details for the first
year and outline plans for the second and
third years, in accordance with the
approved mechanism.
DLI 2:
Procurement
Good
procurement
performance
practices are set
up at CDGs
through
implementation
of the
Provincial
procurement
rules.
Inconsistent
application of
Punjab Public
Procurement
Regulatory Act
(PPPRA) rules
and lack of
clarity due to
conflicts with
some directives
and
administrative
issues.
Instructions
issued to CDGs
and city entities
on enforcement
of and
compliance
with the Punjab
Public
Procurement
Regulatory
Authority
(PPPRA) Act,
the Punjab
Procurement
Cities have
documented
processes as
standard
operating
procedures
for planning,
procurement,
and contract
management.
Stipulations
of the
procurement
rules (and the
SOPs)
complied
with for all
city level
projects.
Year 1 Protocol: MD-PPRA has issued instructions vide
No. MD(PPRA)10-1/2011, dated Jan 10,
2012 to relevant provincial departments,
CDGs and city entities to comply with
PPRA rules and procedures.
Year 2 Protocol:
Processes of planning, transparent pre-
registration, bidding, bid acceptance and
rejection, administrative authorities,
dissemination, and contract management
aligned with the provincial rules, and
documented in the SOPs which are
34
Rules 2009, and
all procedures
established
under PPPRA.
notified for implementation.
Year 4 Protocol:
Assessment to ascertain that compliance
is assessed is being achieved.
DLI 3:
Intergovernmental
Finance System
Reporting of
flow of funds to
CDG and city
entities, at the
CDG level
There are
multiple parallel
funding sources
to CDGs and the
city entities, due
to which the
CDG does not
have knowledge
of the total
funding coming
to the city.
Instructions
have been
issued stating
that all
development
and non-
development
allocations/
UIPT proceeds/
funds/ grants/
foreign
assistance for
all city entities
shall be
reported to the
CDG at the
time of being
transferred from
the GoPunjab to
the city entities.
Each CDG is
being
provided
details by the
Finance
Department
regarding
transfers
being made to
the city
entities, at the
time of the
transfers.
Each CDG is
being provided
details by the
Finance
Department
regarding
transfers being
made to the city
entities, at the
time of the
transfers.
Each CDG is
being
provided
details by the
Finance
Department
regarding
transfers
being made to
the city
entities, at the
time of the
transfers.
Year 1 Protocol: FD of GoPunjab has issued Policy letter
No. LD(L)4-319/2006 (Part-1), dated
March 15, 2012 stating that all
development and non development
allocations /funds for all the city entities
shall be made under intimation to the
CDG.
Year 2, 3 and 4 Protocol:
Assessment of all provincial transfers
including for entities, authorities, and
agencies in city are reported to the city
government at the time of the transfer
with details of the transfer.
DLI 4: Revenue
Collection System
Improvements
in Own Source
Revenue (OSR)
Collection
Systems.
The UIPT
records are
maintained
manually and not
fully ordered and
updated
An Action
Plan has been
approved for
mapping and
automation of
UIPT.
Instructions
have been
issued to each
city entities to
prepare an
Action Plan for
enhancement
of self
collected OSR.
GoPunjab
has
completed
the UIPT
automation
pilot.
Action Plans
prepared by
city entities
for
enhancement
of self
collected
OSR have
been
approved
Each city entity
has
operationalized
the approved
Action Plan
The
GoPunjab has
completed at
least 75%
UIPT
automation.
Year 1 Protocol:
Instructions have been issued by FD,
vide No.SO(TAX)1-11/2011-12, dated
Feb 17, 2012 to each city entity,
authority, and agency to prepare an
Action Plan for enhancement of
revenues and recovery of arrears.
E&TD has approved the Action Plan
for automation of UIPT system.
Year 2, 3 and 4 Protocol:
Assessment of UIPT automation.
Relevant level has approved Action
Plans for enhancement of self collected
OSR by city entities
Assessment of operationalization of
approved Action Plans.
35
DLI 5:
Boundary
Alignment
Boundary of
―city‖ area
adopted by each
city and its
entities as their
planning and
service area.
In each City
District, planning
and service areas
of CDG and city
entities are
different. As
such, the notified
―city‖ boundary
has not been
adopted by city
entities for urban
spatial and
development/mai
ntenance
planning.
Adoption by city
entities of city
boundary as their
respective
planning area for
the purposes of
Integrated
Development and
Asset
Management
Planning
(IDAMP).
A notified and
approved Action
Plan for phased
extension in
―Service
Delivery‖ area for
city entities to
align such area to
―city‖ boundary
over the Action
Plan time period.
Year 1 Protocol:
Under Section 1 (2) of LDA Act 1975
.LDA area is the entire City District of
Lahore area.
Instructions have been issued by
HUD&PHED under PDCA 1976
directing the DA in each city to adopt
the ‗city‘ boundary for spatial and land-
use planning, and WASA, TEPA, and
PHA to adopt ‗city‘ boundary for
planning of infrastructure and service
delivery29
.
Instructions have been issued by
LG&CDD under PLGO 2001 directing
CDG‘s SWM Department/LWMC in
each city to adopt ‗city‘ boundary for
planning of infrastructure and service
delivery.
Year 3 Protocol:
Instructions are issued by
HUD&PHED, along with an approved
Action Plan, instructing each WASA,
PHA, and TEPA to implement a
phased extension of ―Service Delivery‖
boundary to align with the ―city‖
boundary in accordance with the
phasing and timeline in the Action
Plan.
Instruction are issued by LG&CDD,
along with an approved Action Plan,
instructing SWM/LWMC to implement
a phased extension of ―Service
Delivery‖ boundary to align with the
―city‖ boundary in accordance with the
phasing and timeline in the Action
Plan.
- Service Delivery Area is defined as
29
The functional areas of TEPA Lahore, WASA (Rawalpindi, Gujranwala, Multan & Faisalabad) and PHA ((Lahore, Multan & Faisalabad) are already defined
as DA areas / city areas in their notification for establishment. Therefore fresh notification for planning areas is only required for WASA Lahore and PHA
Rawalpindi
36
the area within which the entity is
responsible for infrastructure
development and service delivery.
- Action Plan is defined as a detailed
time-bound plan with
activities/resources, needed for the
extension of the Service Delivery
Area boundary to be aligned with the
―city‖ boundary.
DLI 6:
Public Disclosure
and Access to
Information
Public
disclosure and
Access to
Information
mechanism
implemented.
There is no
consistent and
transparent
mechanism of
public disclosure
and access to
information, in
particular
financial and
procurement
information,
across all cities
and city entities.
The CDGs and
city entities
have been
instructed to
establish a
mechanism for
public
disclosure and
access to
information for
municipal
services, in
particular
financial and
procurement
information.
Mechanism
developed and
approved for
public disclosure
and access to
information fully
implemented by
each CDG and its
entities.
Year 1 Protocol: LG&CDD has issued instructions vide
No. SO.FPs(LG)1-3/2010(P), dated Feb
3, 2012 to CDGs, and HUD&PHED has
issued instructions vide No. SO (UD)1-
34/2011, dated Jan2 3, 2012 to city
entities, to establish a mechanism for
public disclosure and access to
information in accordance with the
provisions of PLGO 2001.
Year 3 Protocol:
A detailed mechanism for public
disclosure and access to information
has been developed, and approved by
the GoPunjab. This mechanism should
describe in detail the objective, scope,
and procedures for implementation of
public disclosure and access to
information.
Assessment has been done of each
CDG and its entities to ascertain that
the mechanism has been implemented
in accordance with the approved
mechanism. The implementation of the
mechanism shall apply to all
information being generated for
municipal services at the CDG and its
entities‘ levels, as described in the
scope of the approved mechanism.
DLI 7:
Accountability
Effective and
transparent
feedback and
grievance
There is no
established
system or
mechanism of
The CDGs and
city entities
have been
instructed to
Mechanism
developed and
approved for
complaint
Year 1 Protocol:
Instructions have been issued by
LG&CDD vide No. SO.FPs(LG)1-
3/2010(P), dated Feb 3, 2012 to CDGs,
37
redress
mechanisms
implemented.
feedback and
grievance redress
at the city and
city entity levels.
Although CDGs
and city entities
has established
complaint cell
which need to be
strengthened
establish a
mechanism for
complaint
monitoring and
resolution, and
for grievance
redress related
to municipal
services.
monitoring and
resolution, and
grievance redress
related to
municipal services
fully implemented
by each CDG and
its entities, in
accordance with
the provisions of
PLGO 2001
and by HUD&PHED HUD&PHED vide
No. SO(UD)1-34/2011, dated Jan 23,
2012, to city entities, directing them to
establish a mechanism for complaint
monitoring and resolution, and grievance
redress in accordance with the provisions
of PLGO 2001.
Year 3 Protocol:
A mechanism for complaint monitoring
and resolution, and grievance redress
has been developed and approved.
This mechanism should describe in
detail the objective, scope, and
procedures for implementation of
complaint monitoring and resolution,
and grievance redress.
Assessment has been done of each
CDG and its entities to ascertain that
the mechanism has been implemented
in accordance with the approved
mechanism. The implementation of the
mechanism shall apply to all municipal
services being offered by the CDG and
its entities, as described in the scope of
the approved mechanism.
38
Annex 2: Detailed Project Description
PAKISTAN: Punjab Cities Governance Improvement Project
Overview
1. The project is a US$150 million five-year results based Specific Investment Credit. The
project design evolves from a comprehensive urban sector dialogue between the Bank and the
provincial government over the last several years. The project builds on the policy reforms
already undertaken by GoPunjab, and focuses on the stage 2 of the urban agenda: strengthening
urban governance – the institutions and management systems. The dialogue has centered on a
review of the province-led reform process aiming to improve urban management; remove
impediments at the operational and structural levels; and plug any gaps that might exist in terms
of monitoring and control mechanisms required for transparent and streamlined operations at the
city level. The urban agenda has supported several critical reforms, and the GoPunjab now seeks
to foster results, especially at the city level. There is a general agreement between the Bank and
GoPunjab that any major increase in resources for urban areas needs to focus on the results that
can be achieved by strengthening the planning, expenditure, and accountability frameworks. The
achievement of the development objective will then help the provincial government and cities to
address the third stage of GoPunjab‘s urban strategy, i.e. to improve delivery of municipal
services in the medium to long term on a more sustainable basis.
2. The project utilizes a results based approach, and consistent with this focus, the
disbursement decision will be based on achievement of pre-specified results referred to as
Disbursement Linked Indicators (DLIs), determined in partnership with the government. The
DLIs reflect priority elements in furthering the government‘s urban agenda, critical at the
provincial level, within the existing legislative, regulative, and policy framework of the
government. They include intermediate outcomes, incremental steps and results contributing to
improved efficiency and effectiveness during and beyond the project.
3. Component 2 supports capacity building and project implementation, which will disburse
against Interim Financial Reports (IFRs).
Component 1: Performance Grants30
(US$ 145 million)
4. Component 1 focuses on two areas of urban governance and is aligned with the seven
DLIs. The first sub-component addresses resource planning and management, seeking to
improve decision making, consolidate fragmented revenue sources, and strengthen resource
mobilization. The second sub-component addresses transparency and voice in the preparation,
monitoring, and evaluation of plans and programs in urban areas.
5. Sub-component 1.1: Resource Planning and Management (DLIs 1-4): Four
improvements are supported:
30
As per the terms of the Project, the Bank shall provide credit to the Government of Punjab (GoPunjab). The
GoPunjab will in turn disburse funds to the cities in the form of a Performance Grant under Component 1.
39
a. Capital Improvement and Asset Maintenance: Cities will prepare three-year rolling
Development and Asset Management Plans (DAMP). The preparation of these plans
will be coordinated at the city level and will be based on integration of the capital
improvement and asset maintenance plans of the city and its entities. The planning
will be for a three year period with the first year detailed to form the annual budget
for that year. These plans will be updated each year for a three year period on a
rolling basis. This will help improve the consistency of development and asset
maintenance plans across the city space for all services, and prioritize and rationalize
investment decisions;
b. Financial Reporting and Procurement Procedures: Arrangements will be made for
producing annual consolidated financial statements of CDGs and efficient
implementation of procurement procedures. Cities will develop Standard Operating
Procedures (SOPs) focusing on streamlining of the procurement rules with other
directives; and implementation of procurement rules, including but not limited to,
procurement planning, equal opportunity, transparency and efficiency;
c. Intergovernmental Finance: Currently there are multiple funding windows, some
supporting CDGs and others service entities (e.g., WASA). Government of Punjab
will report to the CDGs, transfer of funds including amounts to the city entities at the
time of the transfers. This will provide a complete picture to each CDG of the
funding available to the city as a whole, and the funds flowing to the city entities.
This will help the CDG to eventually prepare city budgets keeping in view
predictability of funding. Each CDG will also be able to hold city entities
accountable for results against such funding. This consolidation will in turn allow
improved planning and control of resources for city level development expenditures;
and
d. Strengthening Own Source Revenue Collection Systems: Cities will increase revenues
through improvements in the property tax regime. The provincial government is
planning to improve the administration and collection of property tax by
computerizing property registers and the automation of billing and collection systems.
This activity shall involve the digitization of Urban Immovable Property Tax (UIPT)
records, GIS based spatial-mapping of urban properties, and the establishment of a
UIPT database and billing system that allows the taxpayers to use a web based
interface to view property valuations as well as to generate vouchers for annual
payment. The approach is being piloted in Sialkot, which is an intermediate city in
Punjab. WASAs are preparing action plans to improve billing and collection of water
tariffs through computerization and regularizing non-legal connections.
Related Technical Assistance Activities:
(i) annual budgets, capital investment plans, and asset management plans; (ii)
expenditure management; (iii) ensuring compliance with uniform norms and
standards for financial reporting, legislative compliance, (iii) introducing
management information systems and ensuring IT standardization in line with the
integrated financial management frameworks; (iv) implementation and operational
planning, e.g. developing strategies for project execution; capacity building for
project monitoring, developing contract management frameworks (key players, roles,
40
authorities, reporting arrangements, bills preparation and clearance procedures,
quality certification etc).
Implementation of provincial safeguard rules; development of 3rd party monitoring /
validation;
Implementation of provincial procurement rules; procurement planning and execution
(procurement plans, adoption of e-procurement, contract detailing and packaging);
assessment of capacity of contractors / consultants / suppliers and implementing
agencies, and safeguards;
Automation of property records and enhancing database, entry, verification, and
billing and collection procedures;
6. Sub-component 1.2: Transparency and voice (DLIs 5-7). Three improvements are
supported:
a. Boundary Alignment: The project will support the introduction of an integrated
spatial planning, and development and asset management planning process that
will use a common urban boundary definition, and in which all city level
institutions participate. In any given urban area there are CDGs and other city
level service entities, i.e., WASA, DA, PHA, TEPA, and Solid Waste
Management (SWM) Department. Each of these entities has a different planning
remit, and their plans do not cover the same spatial distribution. The resulting
lack of coordination hampers the efficient use of development funding. A
common boundary will be used by the city and the city entities for the purposes of
spatial and service delivery planning, which will be coordinated at the city level.
Similarly, the city will coordinate the preparation of multi-year development and
asset management plans, which will prioritize the demands of the citizens and the
needs of the city and the city entities;
b. Public Disclosure of Information: The project will support improvements in the
collection (and up-dating) of data, preparation of periodic reports and disclosure
of information to citizens, in particular financial and procurement information.
The city and its entities will post budgets, half yearly and annual reports including
financial statements, notices of award of contracts, etc. on their website and
disseminate to the public through radio, television, newspapers and at public
notice boards in prominent places at all their offices accessible to the public; and,
c. Citizen Feedback: The project will also support the development of a complaint
and grievance redress mechanism for citizens. The city and its entities will
operationalize a ―one-window‖ complaint center and follow-up mechanism linked
to all service providers in the city.
Related Technical Assistance Activities:
City Development Plans (CDPs) and Master plans; multi-jurisdictional spatial and
service delivery planning; land use planning and land management strategies; land
records management; local economic development.
Design of Annual Reports, dissemination strategies, , website design, use of social
media
41
Design of hotlines and design of grievance redressal systems;
7. Disbursement Linked Indicators. As noted above, the disbursements under Component 1
will be linked to the achievement of pre-specified annual targets against Disbursement Linked
Indicators (DLIs). The achievement of the seven DLIs (Annex 1)) will be individually assessed
for each city every year by Monitoring and Evaluation (M&E) Directorate of the P&DD Punjab,
through independent assessment teams. The assessment teams deployed hence will comprise
third party/ private sector firm(s) contracted by the M&E Directorate of P&DD Punjab as
independent assessment agencies. The DLIs and corresponding annual targets have been
identified with the Government over the course of preparation to reflect specific areas of
improvement. The achievement of all DLIs by each city applicable for the year would be
required to ensure disbursement.
8. First-year DLIs were met by Project Appraisal, and therefore, disbursement for the first
year will be made on Project Effectiveness. For the following years, a city will need to meet all
the DLIs for that particular year in order to be eligible for disbursement for the year. A city that
does not meet the DLIs for a particular year will have the opportunity to meet the combined
DLIs the subsequent year, in which case it will be eligible for the funds for both years together
(the previous year and the current year). If a city does not meet the DLIs for two consecutive
years, the funds for the city will be distributed among the other cities that have met the DLIs, in
accordance with the PFC formula.
9. The annual schedule for commencing of the assessment, the finalization of results from
the annual assessment and the announcement of the consequent disbursements is given below:
42
Table 2.1: Annual Schedule for DLIs’ Targets’ Achievement Assessment and Disbursement for EEPs (2013-2017)
Activity Responsible Agency Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
Ongoing annual assessment of the
achievement of specified DLI targets
by each city undertaken
Independent agencies
contracted by DG
M&E, P&DD
Results from the assessment exercise
presented to M&E Directorate,
P&DD, Punjab for analysis and
consolidation
Independent agencies
contracted by DG
M&E, P&DD
Sharing of consolidated results from
the DLI target achievement analysis
for the 5 Cities with the Bank
DG M&E, P&DD
Disbursement decisions for the
subsequent year based on the
achievement by each City of DLI
targets communicated to the
provincial government and the Cities
Pⅅ World Bank
Disbursement of funds under
Component 1 of the Project to the
Provincial Government as credit
World Bank
Transfer of Funds from Provincial
Government to the Cities as
Performance Grants against the
achievement of specified DLI Targets
for the preceding year
FD
43
10. Eligible Expenditure Programs: Disbursements under Component 1 will be tracked
against a set of Eligible Expenditure Programs (EEPs) that reflect non-salary O&M expenditures
of existing urban assets and services, such as roads and water supply. The Bank‘s guidelines on
financial management and procurement will be applicable to the EEPs, and the framework for
addressing social and environmental safeguards will be applicable to all activities included in the
EEPs.
11. Based on the 2010-2011 government budget, the EEPs identified under the project
account for about 7.9% of total expenditure of the five cities and their service entities (including
expenditure of CDGs, Development Authorities, and WASAs), 10.8% of total current
expenditure31
, and 35.2% of total current expenditure related with urban related functions The
EEPs are under two departments/entities for each city included in the project: the Works and
Services Department of CDGs and WASAs.
12. The following two types of expenditures will constitute EEPs and will be financed under
this project (Tables 2.2-2.5)
13. Repair and maintenance of transport, machinery, equipment, roads, buildings, and
water supply/drainage: Expenditure items included in this category for Works and Services
Department of CDGs refer to major expenditures needed for repair and maintenance for existing
urban roads, streets, buildings, transport (vehicles), machinery, and equipment. This will not
include any new road construction or road/street widening expenditures. Expenditures in five
cities in 2010-201132
for this category are about 17.5 million US Dollar (USD). For WASAs, this
category refers to expenditures related with operation and maintenance for water supply and
drainage assets and operations and does not include any expenditure related with sewage.
Expenditure in five WASAs in 2010-2011 for this category is about 10.5 million USD. It is
important to note that the repair and maintenance activities are usually under-budgeted for most
WASAs and have become a major bottleneck to operate efficiently. For example, the O&M
expenditure for Lahore WASA for 2010-2011 was about 34 million USD, while the budget for
Lahore WASA for 2011-2012 is 40 million USD.
14. Power/energy needed for machinery, operations for asset maintenance and service
delivery: This refers mainly to the power and energy consumption needed for service delivery
operations and associated machinery for both Works and Services Departments and WASAs.
These expenditures are needed and critical for urban asset management and maintenance, and
they are translated into various budget items across CDGs and WASAs.
32
Expenditure number for 2010-2011 is used here as indication and baseline of how much cities spend on identified
EEP items. Analysis shows that expenditure over recent years is quite consistent.
44
Table 2.2: EEPs and Expenditures for Works and Services Department, CDGs
EEP budget items for CDG
(Works & Services Dept)
Expenditures 2010-2011 (in million USD)
Lahore Faisalabad Multan Rawalpindi Gujranwala Total
Repair and
Maintenance
A130 (R&M of
transport)
4.6 7.1 1.3 1.1 3.4 17.5
A131 (R&M of
machinery and
equip.)
A136 (R&M of
roads and streets)
A 137 (R&M of
buildings and
structures)
A033 Utilities (including
electricity, gas, and water)
0.5 0 0 0 0 0.5
Total 5.1 7.1 1.3 1.1 3.4 18.0
Source: expenditure data from CDGs’ budget books 2010-2011
Table 2.3: EEPs and Expenditures for WASAs
EEP budget items for WASA Expenditures 2010-2011(in million USD)
Lahore Faisalabad Multan Rawalpindi Gujranwala Total
Repair and
Maintenance
*
Water supply
system
6.8 1.4 0.4 1.8 0.1 10.5
Drainage system
Purchase of
maintenance
materials and store
items for operation
Power and Energy 24 3.8 3.2 2.3 1.5 34.8
Total 30.8 5.2 3.6 4.1 1.6 45.3
Note*: R&M for WASAs does not include Sewage related R&M.
Source: expenditure data from WASAs’ budget books 2010-2011
Table 2.4: Breakdown of EEP Expenditures for Five Cities, 2010-2011
Expenditure
(Million USD)
Percentage of
Total EEP
Expenditure Repair and maintenance 28 44% Power/energy 35.3 56% Total EEP Expenditure 63.3 100%
45
Table 2.5: EEP Comparison with Government Expenditure for Five Cities (Million USD)
2010-11(actual expenditure) Total Expenditures (CDGs+ DAs+ WASAs) 798.2 Total Current (Recurrent) Expenditures 586.6 Total Current Expenditures of Urban-related Functions 180.1
Total expenditure for EEP items 63.3 Avg. credits supported by this project for five cities each year 36.3
Expenditure in EEP items as % of Total Expenditure 7.9% Expenditure in EEP items as % of Current Expenditure 10.8% Expenditure in EEP items as % of Current Expenditure on Urban-related
functions 35.2%
Note: *Budget data includes CDG, DA, and WASA
** Urban-related functions include: Works and Services Dept, Municipal Services Dept, DA, WASA
*** Exchange Rate: USD 1 = PKR 87
15. Allocation of Component 1 Funds. (Tables 2.6-2.8)The allocation for the funds under
Component 1 to the cities is determined on a PFC formula, at an increasing scale of distribution
across four years. Out of total $145 million for Component 1, there is an increasing scale of
distribution of funds from Year 1 to Year 4 of the project, from 18% for Year 1, 20% for Year 2
to 28% for Year 3, and 34% for Year 4 (Table 2.6 for allocation of funds across four years). The
incremental increase, in parallel with the improvement and strengthening of the city systems for
planning, budget allocation, procurement, expenditure management and systems and procedures
for O&M of infrastructure and services provides a check against waste and misuse of the funds.
Beginning with the third year, when most of the essential frameworks are in place, and critical
city procedures and processes are operational, there are significant increase in the funds available
to the city. These increases in the performance grants, it is expected, will begin to be matched by
progressive and sustainable increases in cities‘ revenue.
Table 2.6: Allocation of Project Funds for Each Year (million USD)
Year 1 Year 2 Year 3 Year 4 Total Share of Project Funds 18% 20% 28% 34% 100% Number of Project Funds
for Each Year 26.1 29.0 40.6 49.3 145.0
Table 2.7: Provincial Finance Commission (PFC) Allocation Shares
PFC Formula Share
Lahore 29% Faisalabad 24% Rawalpindi 16% Gujranwala 16% Multan 14% Total 100%
Source: PFC Formula
46
Table 2.8: Allocation of Project Funds for Each City, Each Year (million USD)
Component 2: Project Implementation and Capacity Building (US$ 5 million)
16. This component supports the cities and province through technical assistance and
capacity building to achieve the DLIs and enhancement in revenue. The Urban Sector Planning
and Management Services Unit (USPMSU), and a City Program Unit (CPU) in each of the five
cities will be responsible for providing this support and the corresponding costs will be financed
from this component.
17. Disbursement under component 2 will be made each year based on annual tranches
subject to the achievement of the respective annual DLI targets of Component 1 by at least one
Project city. This is important so that the TA and Capacity Building funds essential to help cities
achieve the DLIs are available in a timely manner.
18. Funds will be disbursed through a lapsable Assignment Account, managed by USPMSU
against forecast of TA expenditures for the next year to be submitted by the P&DD, GoPunjab.
The component will provide an annual grant to the project by way of an advance against forecast
of TA expenditure for the next year. The financing will be made from the Punjab Consolidated
Fund (Provincial Account No.1, Non-Food) into the Assignment Account of the USPMSU,
maintained at the National Bank of Pakistan. Documentation of the advance will be based on
actual TA expenditures supported by invoices, receipts, etc as reflected in the semi-annual
interim financial reports.
The USPMSU is will be responsible for:
19. Project management and administration: (i) oversee the CMUs; (ii) liaise and coordinate
with provincial departments; (iii) monitor contract implementation and payments to consultants;
and (iv) ensure disclosure of project related documents.
20. Monitoring and evaluation: (i) track the DLIs; (ii) maintain project related baseline
information; (iii) provide progress reports to GoPunjab and the World Bank.
21. Project FM: (i) prepare accounting and financial reporting of all moneys received under
the project; (ii) submit project accounts to audit in a timely way and for onward submission of
audit reports to the Bank; and (iii) ensure funds flow, accounting, audit, financial reporting, and
controls are maintained as envisaged in the Operations Manual.
22. Strategic Communications: (i) develop an effective communications strategy during
project implementation highlighting the project‘s focus on improvements in the urban
Year 1 Year 2 Year 3 Year 4 Total City EEP Expenditures 2010-2011
Lahore 7.7 8.5 11.9 14.5 42.7 36.0 Faisalabad 6.4 7.1 9.9 12.0 35.3 12.3 Rawalpindi 4.3 4.8 6.7 8.1 23.9 5.1 Gujranwala 4.1 4.6 6.4 7.8 22.9 5.0 Multan 3.6 4.0 5.7 6.9 20.2 4.9 Total 26.1 29.0 40.6 49.3 145.0 63.3
47
governance systems of the five cities, and areas beyond the scope of this project, such as service
delivery.
23. The USPMSU will also manage the core capacity building program intended for all cities
sponsored under the project, including: (i) formulation of TOR/ RFP; (ii) conduct the selection
process and contract management; (iii) ensuring quality assurance on the delivery of the core
capacity building activities; and (ii) facilitating knowledge sharing between the five project
cities. The USPMSU will further be responsible for approving the annual city-specific capacity
building programs proposed by the CPUs to address additional individual capacity needs of the
city governments and agencies.
The CPUs will be responsible for:
24. Project coordination and implementation at city level: (i) liaison with the USPMSU,
external auditors etc. at the provincial level and coordinate with the focal persons at the city
entities.
25. Ensure progress towards achievement of DLI targets by: (i) supporting the cities to make
the provincial urban agenda operational at the city level; (ii) facilitating progress towards
achievement of the DLIs at the city level; and (iii) providing trouble shooting and advising the
city to implement the improvements.
26. Reporting, monitoring and evaluation: (i) monitoring project implementation, preparing
city level reports, and undertaking requisite impact evaluations; and (ii) facilitating the annual
assessment of progress achieved against DLI targets undertaken by independent agents.
27. Capacity building, resourcing and technical assistance: (i) assisting city departments and
agencies in identification of capacity building requirements; (ii) communicating consolidated
city-specific capacity building requirements to the USPMSU on an annual basis for approval of
the annual city specific capacity building plan; (iii) assisting in identification of technical
assistance requirements, including but not limited to preparation, design and engineering of sub-
projects and city specific studies and assessments, and drawing-up/approving their terms of
reference.
28. The capacity building support and technical assistance provided under this component to
the city governments as well as other city departments and agencies will be strongly outcome
based with a predominant focus upon critical requirements in areas that are essential to the
meeting of annual targets for the provincial and city level disbursement linked indicators. The
capacity building support will be available to the cities in the form of two simultaneous
programs. First, the USPMSU will develop and manage a core capacity building program
focused on across the board capacity needs for the achievement of DLI targets that are common
to all the participating cities. Simultaneously, the CPU established at each city will facilitate the
city government and other departments/agencies to identify city-specific capacity needs, and
communicate the consolidated requirements to the USPMSU in the form of a proposed annual
capacity building program for the city. The USPMSU will then manage the approved city-
specific capacity building program each year to address specific support needs.
48
Core Capacity Building Programs:
29. City-wide urban planning: improved and better researched and participatory City
Development Plans (CDPs) and Master plans, addressing the current legal and systemic
constraints to integrate planning across different parts of city governments/ agencies and multiple
institutions; better land use planning and land management strategies; planning for urban
development and redevelopment; metropolitan planning and local economic development.
Specific planning challenges for example, include modernizing physical planning approaches
and processes; enabling property title certification, improving land records management and the
creation of project development plans. The adoption of concurrent boundaries by each city and
its entities as their planning area under the project will ensure that consistent mandates exist
across the entire designated ―city area‖ in terms of responsibility for planning. Similarly, the
notified and approved action plan for phased extension in ―Service Delivery‖ area for city
entities to align such area to ―city‖ boundary will attempt to regularize mandates for service
delivery functions with the long term aim to overcome fragmentation of mandates between
various service delivery agencies responsible for the same services.
30. Resource planning: This module will assist CDGs in institutionalizing links between
planning and budgeting processes: (i) annual budgets, capital investment plans, and asset
management plans); (ii) expenditure management; (iii) ensuring compliance with uniform norms
and standards for financial reporting, legislative compliance, (iii) introducing management
information systems and ensuring IT standardization in line with the integrated financial
management frameworks; (iv) implementation and operational planning, e.g. developing
strategies for project execution; capacity building for project monitoring, developing contract
management frameworks (key players, roles, authorities, reporting arrangements, bills
preparation and clearance procedures, quality certification etc).
31. Urban immovable property tax (UIPT): This module will seek to improve the
effectiveness, reliability, and transparency of property taxation by automation of property
records and enhancing database, entry, verification, and billing and collection procedures;
support under Component 2 will be utilized by the USPMSU for the incremental operating costs,
or costs for the procurement of technical consultancies for data entry and field surveys under the
UIPT automation activity;
32. Procurement: Implementation of provincial rules; procurement planning and execution;
development and implementation of standard operating procedures (SOPs) ensuring good
procurement practices;
33. Management of environmental and social impacts: Implementation of provincial rules;
development of 3rd party monitoring / validation.);
34. Citizen involvement and participation: This module would seek to improve the content
and quality of the interactions between local officials and citizens through support for citizen
awareness and participation (e.g. design of hotlines and design of grievance redressal systems);
49
35. Preparation of service delivery investment pipeline for third stage of GoPunjab urban
strategy. (i) Service delivery strategies; (ii) Business Plans for the overall asset development,
operations, maintenance and sustainable service provision; preparing clear-cut road maps or
business plans to commit to improved service levels with clear indicators (e.g. staffing ratio,
collection improvements, energy consumption, non-revenue water (NRW) reduction etc;
providing sector finance overviews, for example in water supply and sanitation operations,
reflecting true picture of costs, which is needed to make sound management and investment
decisions and designing tariffs; developing financial models for assessing various investment /
operational scenarios; (iii) Revenue management, tariff frameworks, subsidy design, billing and
collection systems.
36. In view of Punjab Municipal Development Fund Company‘s (PMDFC) experience and
expertise, its services may be utilized for undertaking capacity building initiatives for city
governments and their entities under this component. PMDFC, over the past several years, has
been the implementing agency for the Bank-funded Punjab Municipal Services Improvement
Project (PMSIP), which has achieved impressive results in the institutional development and
performance improvement of local governments.
37. Component 2 shall also support the Directorate General M&E in engaging M&E firm/s
for independent third party assessment of achievement of DLIs as outlined under Component 1.
Moreover, required capacity for procurement and contract management to be engaged at the DG
M&E for the procurement and supervision of third party M&E firm/s will also be supported. The
resource engaged in this regard will also be responsible for building the capacity of M&E
Directorate in the area of procurement and contract management.
38. In addition to this, USPMU will also be supported under this Component to work with
relevant national and provincial entities to undertake GIS-based disaster risk modeling and
assessments of selected urban centers. These efforts will be coordinated with other relevant
ongoing/planned Bank supported initiatives
39. In addition to the above, part of the proceeds under Component 2 may also be utilized for
the development of a follow up project aimed at improvement of service delivery at the third
stage of GoPunjab‘s urban strategy. Any uncommitted / undisbursed funds from Component 2 in
the last year of the Project may be reallocated to Component 1.
Component 3: Contingent Emergency Response (US$ 0)
40. This component will support preparedness and rapid response to natural disaster,
emergency, and/or catastrophic events, as needed. The provisional zero cost for this component
will allow for rapid reallocation of credit proceeds from other components under streamlined
procurement and disbursement procedures. Following an adverse natural event that causes a
major natural disaster, the GoPunjab may request the Bank to re-allocate project funds to this
component (which presently carries a zero allocation of credit proceeds) to support response and
50
reconstruction33
. The component would hence allow the GoPunjab to request the Bank to re-
categorize and reallocate financing from other project components to partially cover emergency
response and recovery costs. This component could also be used to channel additional funds
should they become available as a result of the emergency.
41. Disbursements under Component 3 will be contingent upon the fulfillment of the
following conditions: (i) The Recipient has determined that an Eligible Crisis or Emergency has
occurred and the World Bank has agreed and notified the Recipient; (ii) The Province of Punjab
has prepared and adopted the Contingent Emergency Response (CER) Implementation Plan that
is agreed with the World Bank; and (iii) The Province of Punjab has prepared, adopted, and
disclosed safeguard instruments required as per Bank guidelines for all activities from the CER
Implementation Plan eligible for financing under Component 3.
42. Disbursements would be made against a positive list of critical goods or the procurement
of works, and consultant services required to support the immediate response and recovery
needs. All expenditures under this component, should it be triggered, will be in accordance with
BP/OP 8.0 and will be appraised, reviewed and found to be acceptable to the Bank before any
disbursement is made. In accordance with BP/OP 8.00, this component would provide
immediate, quick-disbursing support to finance goods (positive list of imports agreed with the
GoPunjab), works and services needed for response, mitigation, recovery and reconstruction
activities. Emergency operating costs eligible for financing would include the incremental
expenses incurred by the GoPunjab for early recovery efforts arising as a result of the impact of
major natural disasters.
43. Goods, Works and Services under this component would be financed based on review of
satisfactory supporting documentation presented by the government including adherence to
appropriate procurement practices in emergency context. All supporting documents for
reimbursement of such expenditures will be verified by the Internal Auditors of the GoPunjab
and by the Project Director, certifying that the expenditures were incurred for the intended
purpose and to enable a fast recovery following the damage caused by adverse natural events,
before the Application is submitted to the Bank. This verification should be sent to the Bank
together with the Application.
44. Specific eligible expenditures under the category of Goods include: (i) construction
materials; water, land and air transport equipment, including supplies and spare parts; (ii) school
supplies and equipment; (iii) medical supplies and equipment; (iv) petroleum and fuel products;
(v) construction equipment and industrial machinery; and (vi) communications equipment.
45. Specific eligible expenditures under the category of Works may include urgent
infrastructure works (repairs, rehabilitation, construction, etc.) to mitigate the risks associated
with the disaster for affected populations. Specific eligible expenditures under the category of
Services may include urgent studies (either technical, social, environmental, etc.) necessary as a
33
Such a reallocation would not constitute a formal Project restructuring, as permitted under the particular
arrangements available for contingent emergency response components (ref. Including Contingent Emergency
Response Components in Standard Investment Projects, Guidance Note to Staff, April 2009, footnote 6).
51
result of the effects of the disaster (identification of priority works, feasibility assessments,
designs of adequate works, delivery of related analyses, etc).
46. Retroactive financing will also be available for payments made under the contingent
emergency response component (Component 3) up to 12 months prior to the activation of the
Component. The amount available for retroactive financing under Component 3 will be up to 40
percent of the contingent component amount (after reallocation, if any). The eligibility of
expenditures that are claimed under this facility will be subject to the corresponding terms for
retroactive financing included under Annex 3 of the document and the legal agreements.
52
Annex 3: Implementation Arrangements
PAKISTAN: Punjab Cities Governance Improvement Project
Project Administration Mechanisms:
1. The project implementing entity will be the Government of Punjab through the Planning
and Development Department (P&DD). P&DD will be responsible for coordination between
relevant provincial departments, for which it has established a Steering Committee (SC) for the
project headed by the Chairman, Planning and Development Board. It comprises of Secretaries
from four provincial departments (Finance, Local Government and Community Development,
Housing and Urban Development, and Public Health Engineering), the five District Coordination
Officers of the project cities, and the Project Director USPMSU as the Secretary. The SC will be
responsible for overall guidance and monitoring of project implementation.
2. P&DD will entrust project management and implementation to the Urban Sector
Planning and Management Services Unit (USPMSU) through an Agreement between GoPunjab
and the USPMSU (Private) Limited. Under this arrangement, the liaison, internal monitoring,
and coordinated project reporting at the provincial level will be the responsibility of the
USPMSU on behalf of the P&DD. In addition, USPMU will be the main agency responsible for
implementation of Component 2 of the project.
3. External monitoring will rest with the Directorate General Monitoring and Evaluation,
Planning and Development Department (P&DD). The Directorate will contract third
party/private sector firm(s) as independent assessment agencies for the annual appraisal of DLIs‘
targets‘ achievement.
4. The implementation of project activities at the city level will be supported by the City
Program Units (CPUs) established in each city. In addition, the provincial Finance Department
will be responsible for the administration of Performance Grants under Component 1 to cities.
5. In case the Component 3 is activated, the GoPunjab will need to designate the responsible
agency for implementation of activities under Component 3, and may delegate the development
and adoption of CER Implementation Plan as well as the development, adoption, and disclosure
of safeguard instruments to the responsible agency.
6. Urban Sector Planning and Management Services Unit (Private) Limited has been
established as a private company owned by the GoPunjab. The USPSMU is tasked with
formulating and coordinating policy reforms related to urban management and infrastructure
service delivery, and is staffed with multi-disciplinary skills.
7. GoPunjab will sign an Agreement with the USPMSU under which the USPMSU, on
behalf of the P&DD, will be responsible for liaison, internal monitoring, fiduciary, M&E, and
consolidated overall reporting of implementation progress. USPMU will also be the main agency
responsible for implementation of Component 2 of the project, as well as for delegated tasks
under Component 3 (if and when activated) on behalf of P&DD. A Project Director will be
appointed at the USPMSU for overall management of USPMSU tasks, functions and activities
53
under the project. The Project Director USPMSU may also provide the higher-level guidance to
ensure complementarily with other ongoing urban sector activities in the Punjab.
8. Additional resource and capacity needs of the USPMSU for fulfilling its obligations
under the project will be supported by the project. These will include, but not be limited to the
following:
Financial Management Specialist
Internal Audit Specialist
Procurement Specialist
Environmental Specialist
Social Safeguards Specialist
Monitoring and Evaluation Specialist
Communications Specialist
9. Provincial level functions for the USPMSU include (i) provincial level inter-departmental
coordination and consultation amongst the P&DD, Finance Department (FD), Local Government
and Community Development Department (LG&CDD), Housing, Urban Development and
Public Health Engineering Department (HUD&PHED), and the Excise and Taxation Department
(E&TD) in relation to the project implementation; and (ii) contracting-out to independent
contractors to undertake technical assistance.
10. Project coordination and internal monitoring shall entail (i) liaising with the Bank; (ii)
monitoring implementation progress towards achievement of the DLIs; (iii) ensuring province
and cities meet reporting requirements by collating and summarizing progress reports for review
by provincial government and the Bank; (iv) working with the provincial P&DD and the Bank to
determine reallocation of performance grant funds, if and where necessary; (v) co-coordinating
with the E&TD with regard to the technical assistance for UIPT and other project related
matters; (vi) monitoring key governance requirements of the project, particularly fiduciary issues
and procurement, and safeguards considerations; (vii) preparing consolidated annual reports of
progress in project implementation; (viii) trouble shooting as requested by the cities or the Bank,
including identifying and reporting problem areas during implementation and facilitating
solutions as necessary.
11. Capacity building activities to be implemented by the USPMSU under Component 2
includes, among others include: (i) preparing an overall capacity building plan for the project;(ii)
procuring independent contractors for the capacity building activities at the provincial level and
in the cities, and managing the activities; (iii) approval of the proposed city-specific annual
capacity building programs; and (iv) conducting reviews and assessments of the supply side
capacity building activities undertaken.
12. Strategic Communications: In order to align the communication strategy behind the
wider urban reforms undertaken by the provincial government, the communication function for
this project will be housed in the USPMSU. This communication unit will design the
overarching communication strategy and help coordinate and supervise its implementation
through communication staff in the respective CPUs, civic agencies and utilities.
54
13. UIPT Automation: The USPMSU will also be responsible for implementing the UIPT
automation activity as per the specified annual targets for the corresponding DLI. This will
involve co-coordinating with the Excise and Taxation Department 34
(E&TD).
14. Finance Department: A performance grants mechanism will be created in the Finance
Department, GoPunjab to manage and administer the performance grants to the city. In addition,
Finance Department will transfer funds from the Punjab Consolidated Fund (Provincial Account
No.1, Non-Food) to WASAs and DAs under intimation to the respective District Coordination
Officers (DCOs), Executive District Officers (EDO) Finance & Planning of each CDG and
USPMSU.
15. The Directorate General Monitoring and Evaluation (DGM&E), P&DD35
will be
responsible for: (i) external monitoring of implementation of the project on an annual basis; and
(ii) mid-term and project completion reviews of the project. The Directorate will contract third
party/private sector firm(s) as independent assessment agencies for the annual appraisal of DLIs‘
targets‘ achievement. Required capacity for procurement and contract management to be
engaged at the DG M&E for the procurement and supervision of third party M&E firm(s) will be
engaged under the project.
16. City Program Unit (CPU): A City Program Unit will be established in each of the
project cities to support project implementation and assist them to deliver on the city level
activities. CPUs will provide all necessary support in achieving the project objectives at the city
level and will work in close coordination with the administrators in each city who shall be
ultimately responsible for delivering on the project activities. CPUs shall be adequately staffed
with requisite skills to assist the city deliver on the project results.
17. Structure and Functions of CPU: The CPU will be established within the city
government, as part of the office of the executive head of the city (currently the District
Coordination Officer). The CPU will facilitate the city government departments and city level
entities, authorities and agencies, and coordinate with them on various project related activities.
The CPU will be provided with sufficient operational capacity for performing its designated
functions including: (i) liaison with the USPMSU, FD, external auditors etc at the provincial
level and coordinate with the focal persons at the city entities; (ii) supporting the cities to make
the provincial urban agenda operational at the city level; (iii) facilitating progress towards
achievement of the DLIs at the city level; (iv) providing trouble shooting and advising the city to
34
E&TD has already approved Action Plan for automation of UIPT system. However, the recently enacted
legislation ―Punjab Revenue Authority Bill 2012‖ has resulted in the establishment of Punjab Revenue Authority
(PRA), which is envisaged to assume the taxation and revenue collection functions over the coming years from
E&TD in a phased manner. Subject to the eventual transfer of the functional mandate for UIPT collection from
E&TD, the PRA will assume responsibility for the implementation of the action plan as the successor entity. 35
The Directorate General Monitoring and Evaluation (DGM&E) was established under the administrative control
of P&DD in October 2007, for independent monitoring and evaluation of public sector / multilateral donor funded
projects, and to undertake Third Party Validations of specified projects. In the last two years, more than 100 projects
under various sectors have been evaluated by DGM&E ranging from PKR 10 million to PKR 8,000 million. There
are a total 45 employees of the Directorate including 19 gazetted officers.
55
implement the improvements; (v) monitoring project implementation, preparing city level
reports, and implementation of requisite impact evaluations; (vi) facilitating the annual
assessment of progress achieved against DLI targets undertaken by independent agents; (vii)
assisting city departments and agencies in identification of capacity building requirements; (viii)
communicating consolidated city-specific capacity building requirements to the USPMSU on an
annual basis for approval of the annual city specific capacity building plan and contracting
independent contractors for its implementation at the city level; and (ix) assisting in
identification of technical assistance requirements, including but not limited to preparation,
design and engineering of sub-projects and city specific studies and assessments, and drawing-
up/approving their terms of reference.
18. Resources to be engaged at the CPUs are expected to include, but not be limited to:
Implementation and Coordination Specialist
Institutional Development Specialist
Urban / Planning Specialist
Financial Management Specialist
Procurement Specialist
Safeguards Specialist
Monitoring and Evaluation Specialist
19. Planning and Coordination Committee (PCC): Each CDG will establish and
operationalize a Planning and Coordination Committee (PCC) with requisite terms of reference.
The meetings of the PCC will facilitate the resolution of intra-city and inter-jurisdictional
coordination issues as well as the achievement of such DLI targets as the consolidation of
Annual Development Plans (ADPs) and the preparation of integrated city-wide rolling
development and asset management plans.
56
Figure 3.1 Implementation Arrangements Chart
Steering Committee
Composition: Chairman P&DD, 4 provincial department Secretaries, Project Director of USPMSU as Secretary,
1 representative from the Urban Sector Planning and Management Services Unit, and 2 political representatives
from Punjab
Responsible for overall guidance and monitoring of project implementation
KEY:
Approval and Reporting
Reporting and Monitoring
Liaising and Coordination
Urban Sector Planning and Management Services Unit, P&DD Punjab Headed by Project Director
Responsible for:
Liaison with provincial departments (P&DD, FD, LG&CDD, HUD, PHED, E&TD)
Project coordination and all fiduciary responsibilities
Administration of the performance grants
Internal monitoring and reporting
Implementation of the core capacity building program intended for all cities
Facilitating CPUs for undertaking annual capacity building programs based on city-
specific needs
City Program Unit
(Lahore, Faisalabad, Gujranwala, Rawalpindi, and Multan) In City District Governments
Liaison with the USPMSU, external auditors etc. at the provincial level
Coordination for ensuring progress towards achievement of the DLIs at the city level
Assist city departments & entities to develop and implement city specific capacity
building programs
Assist city departments & entities to identify additional human resource needs and
undertake recruitment
Assist city departments & entities to identify technical assistance requirements
Monitor project implementation and develop city level reports
Facilitate the annual progress assessment against DLI targets by designated
independent agents
Directorate
General
Monitoring and
Evaluation,
P&DD, Punjab
Independent
Annual
Performance
Assessment
Agency(ies)
Provincial
Departments
City
Governments
Planning and Development
Department
57
Financial Management, Disbursement, and Procurement
20. Country issues related to Public Financial Management System. The World Bank has
carried out extensive analytical work on the public financial management (PFM) systems in the
country. The Pubic Financial Management and Accountability Assessment (PFMAA) reports of
the Punjab Government and the Federal Government of May 2007 and June 2009 respectively
were conducted using PEFA-PFM Performance Measurement Framework. PEFA assessments
for the Federal and Punjab have been completed in June 2012 and cleared by the PEFA
Secretariat and it is expected that Government of Pakistan will soon authorize their publications.
21. A number of initiatives and actions are being implemented to remedy weaknesses noted
in the PFMAA reports. Most notable are the ones initiated under the Bank-financed project
(PIFRA) at the federal, provincial, and district levels. PIFRA has computerized accounting and
financial reporting using the New Accounting Model (NAM). Significant progress has been
achieved so far to increase effectiveness, transparency, and accountability in public expenditure
management and, as a result, the state of public financial management is gradually improving.
22. Timeline of year-end financial reporting has improved at the federal and in all provinces
and districts owing to the introduction of the automated budget management systems. Civil
Accounts are prepared and submitted to the Ministry of Finance/ Finance Department within 12
to 15 days of the end of each month. Annual financial statements are being prepared by the
federal government and provinces using International Public Sector Accounting Standards
(IPSAS). Draft financial statements for FY‘11 for the federal government and provinces were
submitted for audit in August, 2011.
23. To enhance effectiveness of external audit, a risk-based audit methodology compliant
with international standards is being applied at federal and provincial levels and will be rolled
out in districts. In addition, the efficiency has improved through the use of Computer Assisted
Audit Techniques and the application of systems-based audit methodology. Moreover, legislative
oversight across the federal and provincial governments has seen marked improvement over the
last few years.
24. The Public Financial Management – Performance Review (PFM-PR) for the Punjab five
large City District Governments (CDGs) and affiliated entities comprising DAs, WASAs and
TEPA – sub-entity of Lahore Development Authority was carried out as part of this project. The
PFM-PR that is based on PEFA Assessment framework, indicates weaknesses in the financial
management performance of CDGs and affiliated entities in the areas governing: implementation
of development activities as envisaged in the annual approved budget mainly due to frequent
delays in transfer of committed funds, both on account of annual PFC Award and disbursement
of development funds by the provincial government; decline in Own Source of Revenues (OSRs)
due to non-revision in customers fee-rates, for example, WASAs monthly tariffs have remained
unchanged for more than 6-8 years; staff at the affiliated entities of CDGs require necessary
training in PFM system to comprehend reporting under the New Accounting Model (NAM);
access to budgetary information is not adequate; multi-year fiscal planning using the Mid-Term
Budgetary Framework (MTBF); and lack of: fixed assets management, effectiveness of internal
auditing, and procurement practices.; Risk-Based Audit (RBA) methodology has not been
58
adequately followed by the government auditors while conducting the audit of annual accounts
of CDG and affiliated entities; unresolved audit observations (mostly relate to inadequacy of
internal control systems) have accumulated over the years; as well as the extent of legislative
scrutiny of budget and audit reports are the important issues which must be addressed on priority
basis.
25. Acceptable Performance Indicators- PIs for the respective CDG and affiliated entities in
the PFM performance, in a statistical form, are summarized below:
CDG Faisalabad – Almost 28% PIs are at acceptable level; consist of As and Bs
whereas FDA and WASA-Faisalabad indicate 37% and 26 % high level
performance respectively.
CDG Gujranwala –28% are rated as acceptable level PIs as against 32% each
acceptable PIs for GDA and WASA-Gujranwala.
CDG Rawalpindi – Rawalpindi PIs rated acceptable level constitute 28% whereas
RDA and WASA-Rawalpindi have shown 28% and 42% rated as acceptable PIs.
CDG Lahore – Has the lowest number of acceptable performance indicators of
12% whereas LDA, WASA-Lahore and TEPA show 26%, 32% and 37%
respectively as acceptable PIs.
CDG Multan – Almost 36% PIs are rated as acceptable. The MDA and WASA-
Multan good performance indicators comprises of 42% and 32% respectively.
26. Affiliated Entities of CDGs comprise of: Lahore CDG - Lahore Development Authority
(LDA) and WASA-Lahore whereas TEPA-Lahore is affiliated to LDA ; Gujranwala CDG –
Gujranwala Development Authority (GDA) and WASA-Gujranwala; Faisalabad CDG –
Faisalabad Development Authority (FDA) and WASA-Faisalabad; Multan CDG - Multan
Development Authorities (MDA) and WASA-Multan; and Rawalpindi CDG – Rawalpindi
Development Authority (RDA) and WASA-Rawalpindi are autonomous bodies, but made
affiliated entities under the Punjab Local Government Ordinance, 2001 (PLGO,2001). These
affiliated entities currently received annual development funds from the HUD&PHE Department
of the GoPunjab.
27. FM Risk Assessment and Mitigation. The overall FM risk in the project is rated as
Substantial that may come down to Moderate after mitigation measures have been taken.
Table 3.1: Financial Management Risk Assessment and Mitigation
Risk Risk Rating Risk Mitigation Measures Residual
Risk Rating
Inherent Risk Substantial Moderate
Country/provi
nce specific
risks
High - Integrated use of country wide FM systems.
- Use of results based disbursement mechanism based on
DLIs
Moderate
Entity specific
risk
Substantial - Capacity building of CDGs and departments;
- Provision of SAP terminals to PMU, CMU, DAs and
WASAs for real time monitoring of budget execution.
Moderate
59
Risk Risk Rating Risk Mitigation Measures Residual
Risk Rating
Project
specific risk
Substantial - Internal auditing throughout project life ensuring control
effectiveness of policies and procedures and timely
reporting of receipts and uses of funds ;
Moderate
Control Risk Moderate Low
Budgeting Substantial - Identification of all relevant budget and account codes
for sub departments (DAs, WASAs and TEPA) of CDGs
and Implementation of NAM – COA to record, classify,
and report, fund, function, program, and objects.
- Communicate PFC award by May 31, under PLGO, for
budget approval by June 30.
- CDGs need to fully adopt PLGO rules for budget
documentation
Moderate
Accounting Moderate - Immediate measures needed to record outstanding
liabilities at CDGs‘ level.
- Reconciliation of accounts to be completed (on 20th of
each month) between DAO and DDOs and banks.
- Staff needs training to produce financial statement in
accordance with IPSAS.
Low
Internal
Controls
Substantial - Formation of Internal Audit department within CDGs
and affiliated entities,
- Training of internal auditors on modern practices and
LGO Audit Rules, 2003;
- At present manual and inadequate fixed assets records
being maintained in a scattered manner. There is a need
to developed proper computerized Fixed Assets
Management system.
- Daily wages workers data to be computerized and
established output based agreement.
- Any change in the payroll would be based on the
personnel record.
Moderate
Funds flow Moderate - Release of payments against only budget allocations
already made and documented adequately.
- Funds for program implementation to be released by
GoPunjab in timely manner.
Low
Financial
Reporting
Substantial - Adoption of uniform reporting format by CDGs and
affiliated entities as developed under PIFRA for
provincial government financial statements and semi-
annual financial reports format of the Project in
concurrence with the Bank.
- Timely production of financial statement for audit
purposes.
Moderate
Auditing and
follow up on
issues
Substantial - Resolution of outstanding audit observations through
regular Departmental Accounts Committee meetings.
- Agreement on general scope of audit (fully adopt FAM)
for the Project annual financial statements, combining
the certification and regularity aspects of auditing.
- Provision of DAs annual financial statements in timely
manner for management use and audit purposes.
Moderate
60
Risk Risk Rating Risk Mitigation Measures Residual
Risk Rating
- Review of ZACs formation and committee members
(consisting provincial assembly law makers).
- Training for auditors about implementation of FAM
2005.
- Inquiries on wrong audit paras by auditors.
Overall Risk Substantial Moderate
28. Implementation Entity: All aspects of financial management and disbursement for the
Project will be managed by the Urban Sector Planning and Management Services Unit, on behalf
of the Planning & Development Department, GoPunjab. A City Program Unit (CPU) will be
established in each of the five cities to support project implementation and assist it to deliver on
the city level activities and results. CPUs will assist cities in meeting DLIs, and will also provide
USPMSU with the necessary financial data on EEPs for the respective CDGs and WASAs,
enabling them to produce half-yearly IFRs and project annual financial statements on a timely
basis.
29. Staffing: Staff at the CDGs and their affiliated entities are adequately qualified and
experienced in current accounting processes. However, they require some training to fully
understand the New Accounting Model (NAM) and IPSAS. The Bank would coordinate with
PIFRA to provide the required training.
30. The role of Finance and Accounts Departments in the CDGs is suggested for expansion
under the proposed instituational framework whereby the staff will not just manage functions of
its own entity(ies) but will also provide faciliation to other entities / department like DAs,
WASA and TEPA in the prepartion of accounts under NAM and financial reporting.
31. The USPMSU is recruiting a Finance Manager and an Internal Audit Specialist fully
dedicated to the project to perform the FM functions at USPMSU and CPUs. They would
provide support to both the components. A SAP terminal would be provided to the USPMSU for
this purpose.
32. Budgeting: EEPs would be a part of the existing budget with separate budget and
account codes to enable monitoring and reporting. Government‘s existing budgeting system
would be used for the project.
33. Arrangments would be made at a later stage to link financial data / records of affilated
WASAs to the financial records at CDGs for consolidation purposes. The consolidated report
would be sent to the CDGs Executive District Officer- Finance & Plannig [EDO (F&P)] for
incorporation in SAP using PIFRA system. Payments against approved expenditures would be
made by the District Accounts Officer after veryifying avaiable budget ceilings for expenditure.
34. Internal Controls and Internal Auditing: The PEFA diagnostic assessment report
identifies absence of adequate internal audit arrangements in CDGs and affiliated WASAs.
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35. As per Local Government (Internal Audit) Rules, 2004 Nazim of each CDG has to have
in place Quality Services and Standards Office headed by an Internal Auditor to ensure effective
risk management, control and governance. Internal Auditor is supported by a Deputy Internal
Auditor. As per rules, the Internal Auditor has to report to the Principal Accounting Officer,
Nazim and Council members. Functions and responsibilities of internal audit are adequately
defined in the Rules. Posts have been created in all the five CDGs but not filled up. The
GoPunjab would ensure compliance with the Internal Audit Rules. Resident auditors have been
posted in WASAs from Local Fund Audit – an attached office of Finance Department, however,
they are performing pre-audit of payments only and no comprehensive internal audit of these
agencies is being carried out. Internal audit needs to be strengthened in WASAs in order to
evaluate their performance regularly and improve service delivery. An Audit plan has to be
prepared and selected offices audited. The Internal Auditor has to submit an annual report to the
Nazim and the Council. Findings have to be followed up within a couple of months.
36. The USPMSU will appoint an Internal Audit Specialist for purposes of the internal audit
of project funds to fill the vacuum of non functional internal audit office at CDGs and WASAs.
Separate third party validation would be carried out during the project life to further evaluate the
process of institutional strengthening of cities and service delivery effectiveness. These studies
may also review the social accountability principles enshrined in these processes.
37. For utilization of Component 2 funds, a lapsable Assignment Account to be established
with the National Bank of Pakistan and operated by USPMSU under joint signatures of two
senior officials of the USPMSU will be used. The transactions from this account will be subject
to internal audit. Dedicated financial management staff would be engaged for the project.
Separate books of account would be maintained and bank account reconciled on a monthly basis.
38. Funds flow, disbursement, and financial reporting arrangements: Disbursement in
respect of Component 2 will be released annually to the Punjab Consolidated Fund (Provincial
Account No.1, Non-Food) as an advance against forecast of TA expenditures for the next year.
The Finance Department, GoPunjab will immediately release these funds to a lapsable
Assignment Account maintained with the National Bank of Pakistan and operated by USPMSU.
Documentation of advance will be based on actual TA expenditures (goods, non-consulting
services, consulting services, training, and operating costs) supported by invoices, receipts, etc.,
reported in the semi-annual IFRs to be submitted to the Bank within forty five days of the end of
each period. Disbursement under component 2 will be made each year based on annual tranches
subject to the achievement of the respective annual DLI targets of Component 1 by at least one
Project city.
39. Project funds for Component 1 would be provided on an annual basis into the Punjab
Consolidated Fund (Provincial Account No.1, Non-Food) on achievement of Disbursement
Linked Indicators (DLIs) verified by the Director General (M&E), Planning & Development
Department. Therefore, no segregated Designated Account will be established for receiving
Bank funds for this Component. As DLIs for Year 1 have been met at Project Appraisal, first
disbursement from the Bank to Punjab Consolidated Fund (Provincial Account No.1, Non-Food)
will be made upon Project Effectiveness against forecast EEPs (as included in the Interim
Financial Reports) for the following year from Effectiveness. Subsequent actual EEPs will be
62
submitted for documenting previous advances made, before next batch of advance is made. Any
advances made by the Bank remaining un-documented at the closing date of the project will be
refunded to the Bank. Bank funds so disbursed will be transferred from the Punjab Consolidated
Fund (Provincial Account No.1, Non-Food) to the CDGs.
40. The funds transfers are based on achievement of DLIs by CDGs and would be tracked
against EEPs in that financial year. For following years, a city needs to meet all DLIs for that
particular year in order to be eligible for disbursement for the year. Shortfall in expenditure on
EEPs in aggregate terms, if any, than what it received at the start of the year, would be rolled
over to the following year to enable the participating entity to make up for the shortfall. If the
city does not meet the spending requirement against the EEPs in aggregate terms, for two
consecutive years, the difference between project funds going to the city and actual spending on
EEPs by that city would be refunded to the Province for allocating to the other partner cities.
Bank‘s financial management guidelines would apply to the EEPs. Punjab Government‘s
existing system for processing payments, recording and financial reporting in respect of EEPs is
adequate and meets Bank‘s requirements. The Punjab Government would ensure timely transfer
of funds (as per instructions issued by the Finance Department on 15 March, 2012) received
from the Bank to the respective CDGs in the respective Special Drawing Accounts.
41. The following two types of expenditures will constitute EEPs under Component 1 and
will be financed under this project:
i) Repair and maintenance of machinery, equipment, roads, buildings, and water
supply/drainage: This EEP item refers to both Works and Services Departments and
WASAs. Expenditure items included in this category for Works and Services
Department of CDGs refer to major expenditures needed for repair and maintenance
for existing urban roads, streets, and buildings. This will not include any new road
construction or road/street widening expenditures.
ii) Power/energy needed for machinery, operations for asset maintenance and service
delivery: This refers mainly to the power and energy consumption needed for service
delivery operations and associated machinery for both Works and Services
Departments and WASAs.
42. Separate account codes exist in CDGs and WASAs for the EEPs. These account codes
are being consistently applied by the implementing agencies. CDGs and WASAs would ensure
that EEP transactions are recorded promptly, preferably on a daily basis.
43. Participating cities have been allocated project funds that would be disbursed on a yearly
basis on achievement of agreed DLIs. The allocation has been determined on the basis of %ages
in the PFC Award. If any city fails to fully achieve DLIs for a particular year and incur the
minimum expenditure on EEPs, the remaining undisbursed amount would be carried forward for
disbursement in the subsequent year. However, if any city fails to do so for two consecutive
years its share may be reallocated to the other participating cities. The funds disbursed to the
defaulting city would be refunded to the Province for allocation to the other partner cities. If the
aggregate amount spent on EEPs falls short of the total amount disbursed under Component 1 by
closing date, the shortfall will have to be refunded to the Bank.
63
44. Provincial Government funds from the Punjab Consolidated Fund (Provincial Account
No.1, Non-Food) will be transferred to WASAs in accordance with the instructions issued by the
Finance Department under intimation to the respective District Coordination Officers (DCOs)
and Executive District Officers (EDO) Finance & Planning. Adequate controls would be
exercised in processing payments for the selected EEPs, accounting and reporting. A focal
person would be designated by each participating entity for purposes of the project.
45. Each implementing entity will prepare six monthly Budget Execution Reports (BERs) in
respect of EEPs. WASAs would forward their BERs to the respective CDGs who would review
and forward these to the USPMSU for consolidation. However, the P&DD, GoPunjab would be
responsible for submitting six monthly agreed IFRs to the Bank within forty five days of the end
of each period. IFRs would be supported by BERs. IFRs would show sources and application of
funds in respect of selected EEPs i.e. Bank and GoPunjab‘s share in EEPs. Annual Withdrawal
Application supported by IFRs and BER would be signed by officials of the Finance
Department. IFRs would include a forecast of expenditure to be incurred on EEPs in the next two
six monthly periods.
46. Disbursements in respect of Component 1 will be based on anual Withdrawal
Applications (WAs) duly signed by an authorized representative of the P&DD, GoPunjab. The
Withdrawal Application will include statement of DLIs achieved, IFRs and BERs for the
relevant period. Disbursement from the credit proceeds, in US Dollars, will be transalted to Pak
Rupees by the State Bank of Pakistan, and the local currency shall form part of the transaction
basis for the operation‘s accounting and reporting. The IFRs will include EEPs for
documentation against previous advance and forecast of the next year‘s EEPs as the basis for
disbursement.
47. The format and content of IFRs will be agreed during Negotiations. The USPMSU has
primary responsibility for preparing these statements on behalf of the P&DD, GoPunjab.
However, the P&DD, GoPunjab would have complete responsibility for submitting six monthly
agreed IFRs to the Bank.
48. Disbursement arrangements under Component 3 will be established upon triggering of
the component and agreed under the required CER Implementation Plan.
49. Disbursement Linked Indicators (DLIs). The disbursements against Component 1 and
Component 2 will be tracked against selected categories of key budget items referred to as
Eligible Expenditure Programs (EEPs) for five cities. The amount available for Component 1 to
each city will be decided according to the Government fiscal transfer principle which is based
primarily on the size of population of each city. The funds will be disbursed for those cities
which have met all the agreed DLIs. The rest of the funds for the cities which do not qualify for
disbursement during the year will be rolled over to the next year for same cities. Disbursement
under component 2 will be made each year based on annual tranches subject to the achievement
of the respective annual DLI targets of Component 1 achieved at a minimum by one city. This is
important so that the TA and Capacity Building funds essential to help cities achieve the DLIs
are available in a timely manner.
64
50. DLIs reflect the key results that are expected during the course of project implementation,
that are related with achievement of intermediate outcome and therefore contribute to the PDOs.
The DLIs reflect critical outcome areas for both provincial level and city level governments.
51. Proposed EEPs under Component 1 focus on selected operation and asset maintenance
expenditures of existing urban assets and services, such as roads and water supply service. These
expenditures are critical for urban asset management and maintenance. Similarly, EEPs under
Component 2 will finance technical assistance expenditures. Eligible expenditures will include
(i) expenditures for goods, works, and non-consulting services required for the carrying out of
EEPs under component 1; and (ii) expenditure on goods, non-consulting services, consultants‘
services (including for audits), Training, and Operating Costs for the carrying out of Technical
Assistance Activities under Component 2. The allocation of credit proceeds are depicted in the
following Table.
Table 3.2: Allocation of Credit Proceeds
Category
Amount of the
Financing Allocated
(expressed in US$)
Percentage of
Expenditures to be
Financed
(inclusive /
exclusive of Taxes)
(1) Eligible Expenditure Programs under Component 1 of
the Project:
(a) First scheduled disbursement
(On or about the Effective Date)
(b) Second scheduled disbursement (Approximately
one (1) year after the Effective Date)
(c) Third scheduled disbursement (Approximately
two (2) years after the Effective Date)
(d) Fourth scheduled disbursement (Approximately
three (3) years after the Effective Date)
$26,100,000
$29,000,000
$40,600,000
$49,300,000
100
(2) Performance Grants for Technical Assistance under
Component 2 of the Project:
(a) First scheduled disbursement (On or about the
Effective Date)
(b) Second scheduled disbursement (Approximately
one (1) year after the Effective Date)
(c) Third scheduled disbursement (Approximately
two (2) years after the Effective Date)
(d) Fourth scheduled disbursement (Approximately
$2,000,000
$1,000,000
$1,000,000
$1,000,000
100
65
Category
Amount of the
Financing Allocated
(expressed in US$)
Percentage of
Expenditures to be
Financed
(inclusive /
exclusive of Taxes)
three (3) years after the Effective Date)
(3) Emergency Expenditures under Component 3 of the
Project:
(a) Critical Goods under Part 3 (a) of the Project
(b) Goods, works, non-consulting services,
consultants‘ services, and Training under Parts 3
(b) and (c) of the Project
0
0
100
Total Amount $150,000,000
52. Operating Costs means the incremental operating costs under the Project incurred by the
Recipient and the Project Implementing Entities for purposes of Project management,
implementation, and monitoring and evaluation on account of office supplies and consumables,
utilities, bank charges, communications, mass media and printing services, vehicle rental,
operation, maintenance, and insurance, office space rental, building and equipment maintenance,
domestic and international travel, lodging, and subsistence allowances, and salaries and salary
supplements of contractual and temporary staff, but excluding salaries and salary supplements of
members of the Recipient‘s or the Province of Punjab‘s civil service. Where the salaries and any
salary supplements of contractual and temporary staff go, those of such staff in the dedicated
team established at USPMSU for purposes of Project implementation will be financed out of the
credit, whereas those of such staff at USPMSU outside of the dedicated team will be financed
out of GoPunjab‘s funding.
53. GoPunjab may request the Bank to re-allocate project funds to Component 3 in the event
of a major natural disaster. Disbursements under Component 3 will be contingent upon the
fulfillment of the following conditions: (i) The Recipient has determined that an Eligible Crisis
or Emergency has occurred and the World Bank has agreed and notified the Recipient; (ii) The
Province of Punjab has prepared and adopted the Contingent Emergency Response (CER)
Implementation Plan that is agreed with the World Bank; and (iii) The Province of Punjab has
prepared, adopted, and disclosed safeguard instruments required as per Bank guidelines for all
activities from the CER Implementation Plan eligible for financing financed under Component 3.
54. For critical goods under Component 3, the Bank will reimburse expenditure made on the
basis of: (a) evidence of the purchase of Critical Goods (e.g. bills of lading) certified by the
Recipient‘s customs department for imported goods and the Accountant General of the Province
of Punjab for locally procured goods; (b) evidence of payment for said Critical Goods (e.g.
receipts or retirement documents with respect to letters of credit, payment vouchers); and (c)
letters of comfort or affidavits from the Auditor General of Pakistan certifying the retroactive,
current, or expected use of said Critical Goods for the carrying out of said Part of the Project,
including details of the use of any of said Critical Goods consumed as of the date of such letters
or affidavits. The Recipient will not use the critical goods financed under the component for
military or paramilitary purposes. If the World Bank determines at any time that the proceeds of
66
the Grant were used to make a payment for either: (i) ineligible expenditures; or (ii) goods
eventually used for military or paramilitary purposes, the Recipient shall the amount of such
payments or the costs of these goods. All amounts so refunded to the World Bank shall be
subsequently cancelled by the World Bank.
55. Retroactive Financing: Retroactive financing will be applicable for the contingent
emergency response component (Component 3) up to 40 percent of the contingent component
amount (after reallocation, if any). Furthermore, retroactive financing for Component 3 under the
project will be applicable for eligible procurements, carried out not more than 12 months before
the implementation of the contingent component is triggered, as per the provisions of the Bank‘s
Procurement Guidelines, and all expenditures, for which retroactive financing is sought, will be
submitted to the Bank in order to verify their eligibility as per the project objectives and
procurement guidelines.
56. Financial Reporting: Accounting records will be maintained using the government-wide
integrated financial management information system implemented under PIFRA and in
accordance with the country accounting procedures and policies defined in the New Accounting
Model (NAM). These policies and procedures are being progressively and consistently applied at
the provincial as well as district government levels. Use of NAM policies and procedures
conforms to International Standards and are acceptable to the Bank.
57. WASAs would provide to the USPMSU, through respective CDGs, statements of receipt
and expenditure (using their existing accounting system) on formats designed by the USPMSU
in consultation with the Bank on a monthly basis. The USPMSU will also obtain monthly
accounts of CDGs from the PIFRA terminal, would work out entity and city wise consolidated
expenditure under EEPs for Component 1, and would prepare consolidated financial statements
(IFRs) on behalf of P&DD, GoPunjab, for both the components on the format agreed with the
Bank.
58. Reports will be designed in the FMIS to provide detailed information (object head-wise)
of budgeted and actual expenditure for all components of the project. These will form
documentation of expenditures against Bank‘s financing of the project. Half yearly IFRs would
be submitted by the P&DD, GoPunjab within forty five days of the end of period in respect of
Component 1 and Component 2.
59. Auditing: The annual financial statements of the project with a comprehensive disclosure
of the operations, resources and expenditures will be prepared, audited and submitted by
GoPunjab to the Bank within 6 months of the close of each financial year. The Auditor General
of Pakistan will conduct audit of the project financial statements and this arrangement is
acceptable to the Bank. Financial statements would show sources and application of funds in
respect of the three components of the project. The audit report on the financial statements of the
project for the year ending June 30 each year is due December 31 each year. There are no
overdue audit reports in respect of any of the implementing agencies.
60. Supervision Plan: The project will require regular implementation support, particularly
on collection of EEPs data from the WASAs and financial reporting. Bank staff will review
67
during implementation: (a) the IFRs, project audited financial statements; and (b) the project‘s
financial management and disbursement arrangements to ensure compliance with agreed
requirements.
Table 3.3: Agreed Actions
Sr. No. Action Required Responsibility Time Line 1. USPMSU will appoint a financial
management specialist USPMSU Within 2 months of the signing of
the above Agreement between
GoPunjab and USPMSU 2. USPMSU will appoint an Internal
Audit Specialist USPMSU Within 2 months of the signing of
the Agreement between GoPunjab
and USPMSU 3. Each CPUs will appoint a financial
management specialist USPMSU Within 3 months of Effectiveness
4. Internal audit arrangements as required
by the Government to be in place CDGs and
WASAs December 31, 2012
Procurement
61. In this project design, the activities subject to the Bank‘s procurement review include
goods, works and services under the EEPs and the expenditures (goods and services) under the
TA. The two EEPs are (i) power/energy needed for machinery, operations for asset maintenance
and service delivery, and (ii) repair and maintenance of machinery, equipment, roads, buildings,
and water supply/drainage. Procurements under the latter EEP and the TA would be carried out
in accordance with the World Bank‘s Guidelines: Procurement under IBRD Loans and IDA
Credits of January 2011, and Guidelines for Selection and Employment of Consultants by World
Bank Borrowers of January 2011.
62. At the city district governments level the project will assist in developing a system of
adequate planning, and documentation of SOPs for procurement. The CDGs and WASAs are
required to use the provincial procurement rules, but compliance is partial due to gaps in
implementation instruments, as well as dissemination issues. The participating entities shall
establish a procurement planning system linked to the budget, developing an SOP for
procurement and contract management systems, web postings, pre award disclosures and
complaints redressal mechanism. The pre-registration (enlistment) procedure shall also be
rationalized. These SOPs shall also streamline the various directives and notifications etc. which
seem conflicting with the procurement rules. These timelines of these actions are documented in
the DLI matrix.
Procurement of Works
63. Civil works under the project fall within the EEP of repair and maintenance. This
category refers to the W&S department of CDGs and WASAs. In the last fiscal year the total
expenditure on this category was about US $ 17.3 m and 10.5 m respectively for the five cities.
These works shall be taken up by the five city governments and city entities in adequate
packages, to the extent possible. The project takes cognizance of the fact that procurement
planning for repair and maintenance activities shall be limited to routine actions, and subject to
changes for emergency requirements. ICBs are not envisaged in works. Contracts estimated to
68
cost upto US $ 100,000 shall be done using shopping procedures, and contracts estimated to cost
upto US $ 6 million shall be done using NCB procedures for which the NCB documents agreed
with the Bank shall be used. Contracts estimated to cost more than US $ 6 m (if any) shall be
done using ICB procedures.
Procurement of Goods
64. The identified EEPs are expected to entail procurement of machinery, equipment,
vehicles for operation etc. International Competitive Bidding (ICB) procedure would be used for
all contracts estimated to cost more than US$500,000 equivalent, using Bank‘s standard bidding
documents. Some goods including office equipment etc. could also be procured by the
USPMSU. Goods contracts costing more than US$ 50,000 would be procured through NCB,
using the bidding documents acceptable to the Bank and contracts costing upto US$ 50,000 may
be procured through shopping procedures.
Improvement of Bidding Procedures under National Competitive Bidding
65. The procedures applicable to the procurement of goods and works under
contracts awarded on the basis of National Competitive Bidding shall be those set out in
Rules 5 and from 20 till 36 (a) of the Punjab Public Procurement Rules (2010) (No. MD
(PPRA)2-1/2010), with the modifications set out below in order to ensure economy,
efficiency, transparency, and broad consistency with the provisions of Section I of the
Procurement Guidelines, pursuant to paragraph 3.3 of said Guidelines. In the event of a
conflict between the Recipient's procedures and the modifications set out below, the
latter shall govern.
66. The following improvements in bidding procedures will apply to all procurements of
Goods and Works under National Competitive Bidding, in order to ensure economy, efficiency,
transparency and broad consistency with the provisions of Section 1 of the Guidelines:
a) Invitations to bid shall be advertised in at least one (1) national newspaper with a
wide circulation, at least thirty (30) days prior to the deadline for the submission of
bids.
b) Bid documents shall be made available, by mail or in person, to all who are willing to
pay the required fee.
c) Foreign bidders shall not be precluded from bidding, and no preference of any kind
shall be given to national bidders in the bidding process.
d) Bidding shall not be restricted to pre-registered firms.
e) Qualification criteria shall be stated in the bidding documents.
f) Bids shall be opened in public, immediately after the deadline for the submission of
bids.
g) Single bids shall also be evaluated.
h) Bids shall not be rejected merely on the basis of a comparison with an official
estimate without the prior written agreement of the Association.
i) Before rejecting all bids and soliciting new bids, the Association‘s prior written
agreement shall be obtained.
69
j) Contracts shall not be awarded on the basis of nationally negotiated rates.
k) Bids shall be solicited and works contracts awarded on the basis of unit prices.
l) Contracts shall be awarded to the lowest evaluated and qualified bidder.
m) Post-bidding negotiations shall not be allowed with the lowest evaluated or any other
bidder.
n) Draft contracts shall be reviewed by the Association in accordance with Prior Review
procedures.
o) A firm declared ineligible by the Association, based on a determination by the
Association that the firm has engaged in corrupt, fraudulent, collusive, coercive, or
obstructive practices in competing for or executing an Association-financed contract,
shall be ineligible to be awarded an Association-financed contract during the period
of time determined by the Association.
p) Each contract financed from the proceeds of the Financing shall provide that the
suppliers, contractors, and subcontractors shall permit the Association, at its request,
to inspect their accounts and records relating to the performance of the contract and to
have said accounts and records audited by auditors appointed by the Association. The
deliberate and material violation by the supplier, contractor, or subcontractor of such
provision may amount to an obstructive practice.
q) Recipient-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.
r) The Association shall declare a firm ineligible, either indefinitely or for a stated
period, to be awarded a contract financed by the Association 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 Association.
Selection of Consultants
67. Consultancy services would be hired by USPMSU, and office of DG M&E. Selection of
firms for supporting capacity building of CDGs and WASAs and other project support shall be
done by the USPMSU. The third party validation firm shall be selected by the office of DG
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,
such as quality based (QBS), fixed budget (FBS), least cost selection (LCS), consultants
qualification (CQS) or single source selection (SSS). For contracts with consulting firms
estimated to cost less than $500,000 equivalent per contract, the shortlist of consultants may
comprise entirely national consultants in accordance with the provisions of paragraphs 2.7 of the
Consultant Guidelines.
68. Selection of Individual Consultants: 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. 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.
70
69. Selection of non-Consulting Services: Some of the data entry contracts are expected to
be contracted out using the procedures for selection of non-consulting services. There could be
multiple contracts estimated to cost at an aggregate US $ 550,000. International Competitive
Bidding (ICB) procedure would be used for all contracts estimated to cost more than
US$500,000 equivalent, contracts costing more than US$ 50,000 would be procured through
NCB, and contracts costing up to US$ 50,000 may be procured through shopping procedures.
The Bank‘s sample documents for non-consulting services shall be used for the ICBs and NCBs.
Assessment of Agency’s Capacity to Implement Procurement
70. An assessment of procurement system and practices was conducted for the city district
governments, development authorities and WASA of Lahore and Rawalpindi. Although there are
established systems of procurement committees and approval authorities, there is a need to have
adequate competencies of procurement planning and management as well as contract
implementation and monitoring. Certain deficiencies were also identified in the bidding and
contract documents being used. The overall dialogue with Provincial Project Unit as well as city
district governments addresses the aspects of adequate procurement planning of overall portfolio
with budget linkages as well as a robust system of contract management. The TA for support of
the cities shall be administered in the USPMSU and a procurement manager shall be hired to
coordinate all selection processes. The office of DG M&E is staffed with 30 technical experts
and the DG himself has extensive experience of consultancies and contract management. A
project specific staff for procurement and contract management shall additionally be hired at the
DG M&E office. While the project will address these aspects for improving the overall
procurement environment in general and the sector in particular, the following action are agreed
in order to ensure that the procurements subject to the Bank‘s review (EEPs and TA) are done in
an efficient, and transparent manner. Currently the project risk is the categorized as
‗substantial‘, which shall be reviewed during implementation.
a) A procurement link would be maintained at the relevant implementing agency of the
various cities website to provide the overall procurement plans and updates. It will be the
responsibility of the City Program Units to ensure that the website is current for all
goods, works and consultancies; for which procurement plans, procurement notices,
invitation to bid, bid documents and Request for Proposal (RFPs) as issued, latest
information on procurement contracts, complaints and actions taken, contract award and
performance under the contracts and other relevant information related to procurement
shall be displayed. The website would be accessible to all bidders and interested persons
equally and free of charge.
b) A standard operating procedure for the project procurements shall be prepared which
shall identify a procurement focal point within each City Program Unit, the evaluation
committees, approval authorities, contract signing authorities, and timelines.
c) The Bank will hold Procurement training sessions for all the relevant implementing
entities as well as USPMSU to ensure that the requirements and timelines of the Bank
financed procurements are clearly understood at the very commencement of the project.
d) Adequate packaging of various procurement activities is very essential in this project as
the EEPs with procurable items address the overall portfolio, and there has been a very
71
vague concept of an overall packaging in the system. The Bank will support the
implementing agencies on this aspect since the very initial stage.
e) A credible system of handling complaints would be put in place. The respective CPUs
will manage the complaint handling system, which would include maintenance of a
database, a standard protocol with appropriate triggers for carrying out investigations,
and taking action against involved parties. A second tier would be formed at the
USPMSU level. For ICB/international selection of consultants the Bank prescribed
complaint redressal mechanism will apply. The details shall be described in the SOP and
shall be amended if the overall system is developed by the Punjab PPRA and found
acceptable to the Bank. Status report for complaints handling mechanism shall be
included in the quarterly progress reports.
Table 3.4: Procurement Actions
Sr.
# Action Responsibility Date Status
i. Procurement link maintained on
the website CPUs Aug 31, 2012 Websites exist,
procurement link to be
developed.
ii. SOPs for project procurement CPUs
/Implementing
agencies
Aug 31, 2012 Basic systems exists
iii. Procurement training Bank Apr 7, 2012 and follow ups
Initial session held
with CDGs and
WASA on Apr 7.
Follow up as soon as
staff hired at
USPMSU.
iv. Adequate packaging CPUs
/Implementing
agencies
Ongoing To be incorporated in
the procurement plans
iv. Complaint handling system CPUs/ USPMSU Dec 31, 2012
71. With these above arrangements, the procurement under the project is likely to be
effective and transparent resulting in smooth implementation of the project leading to
achievement of the project development objectives. At this stage procurement risk rating of the
project is kept ―substantial‖.
Procurement Planning
72. The Borrower is developing a Procurement Plan for project implementation which
provides the basis for the procurement methods. This plan will be agreed between the Borrower
and the Project Team before negotiations, and would be available at the borrower‘s website. It
will also be available in the Project‘s database and in the Bank‘s external website. The
72
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.
Review of Procurement by the Bank
73. Thresholds for prior review of contracts under eligible expenditures are given below.
These thresholds would be reviewed in 18 months and adjustments upwards or downwards
would be made based on implementation experience.
a) All ICB contracts for works, goods and non-consulting services;
b) All single source selections or direct contracts;
c) First NCB contract for Goods, irrespective of value to be awarded by each city;
d) First NCB contracts for works, irrespective of value to be awarded by each city;
e) First NCB contract for non-consulting services;
f) First contracts procured through shopping, for goods and works to be awarded by
each city;
g) The first Consultants‘ Services contract with consulting firms, irrespective of value,
and thereafter all contracts with firms estimated to cost US$200,000 equivalent or
more;
h) First consulting services contract with individual consultants, irrespective of value,
and thereafter all contracts with individuals estimated to cost US$50,000 equivalent
or more.
74. All other contracts will be subject to Post-Review by the Bank. Each implementing
agency 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 15-20 percent of the contracts.
Procurement Information and Documentation – Filing and Database
75. Procurement information will be recorded and reported as follows:
a) Complete procurement documentation for each contract, including bidding documents,
advertisements, bids received, bid evaluations, letters of acceptance, contract agreements,
securities, related correspondence etc., will be maintained by the implementing agencies
in an orderly manner, readily available for audit.
b) Contract award information will be promptly recorded and contract rosters as agreed will
be maintained.
c) Comprehensive quarterly reports by CPU /USPMSU indicating: (i) revised cost
estimates, where applicable, for each contract; (ii) status of on-going procurement,
including a comparison of originally planned and actual dates of the procurement actions,
preparation of bidding documents, advertising, bidding, evaluation, contract award and
completion time for each contract; and (iii) updated procurement plans, including revised
dates, where applicable, for the procurement actions.
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Frequency of Procurement Supervision
76. Bank Joint Review Missions would be carried out every six months, however, more
frequently in the early stages of the project, with a procurement specialist participating. In
addition to the prior review, Bank supervision missions would carry out for post review of
procurement actions. The Bank‘s procurement specialist based in the Country office in Pakistan
will be available to discuss procurement issues with the implementing guidance as and when
needed.
Details of the Procurement Arrangements
Table 3.5: Consulting Services
1 2 3 4 5 6
Ref. No.
Description of Assignment
Estimated
Cost
(US$)
Selection Method
Review by Bank (Prior /
Post)
Expected Proposals
Submission Date
Activity
1 Consultancy for Training to
prepare provincial level
officials for resource planning
at the provincial Level,
Development of Formats with
relevant provincial
departments, Pretesting of
formats for the downstream
training for city officials,
particularly MTDF (or
IDMAP), pretesting of
operational testing with city
governments and city level
agencies and development of
consolidated ADPs (City
Government, MTDF Cell, city
entities) with an interface with
Provincial Government.
290,000
Competitive
Method
(Firm) CQS
Prior End of Oct.
2012 DLI- 1 Resource
Planning
Activity
2 Consultancy for Development
of Software for Automation of
UIPT and its Pilot in Sialkot
District
300,000
Competitive
Method
(QCBS)
Post End of Oct,
2012 DLI-4 Revenue
Collection
Regime Activity
3 Consultancy for Automation
of UIPT in selected 5 city
district governments
500,000
Competitive
Method
(QCBS)
Post DLI-4 Revenue
Collection
Regime Activity
4 Consultancy for UIPT
Automation across the
province.
500,000
Competitive
Method
(QCBS)
Post DLI-4 Revenue
Collection
Regime Activity
5 Consultancy to develop MIS,
Database its integration with 290,000
Competitive
Method
Post End
Dec.2012 DLI-7
Accountabi
74
1 2 3 4 5 6
Ref. No.
Description of Assignment
Estimated
Cost
(US$)
Selection Method
Review by Bank (Prior /
Post)
Expected Proposals
Submission Date
GIS, for Performance
Reporting System at CDG
Level with an interface at
Provincial Level.
Development and Finalization
of Reporting Formats &
Channels for district &
Provincial Levels. Training & Capacity Building
for usage of the developed
systems at District &
Provincial Level.
(Firm) CQS lity
Activity
6
Consultancy for the
development of an assets
management and infrastructure
investments system & capacity
building of CDGs for Asset
Inventories at the City Level
200,000
Competitive
Method
(Firms) CQS
Post
End Dec,
2012
DLI- 1 Resource
Planning
Activity
7
Consultancy for data
collection and inventorization
of assets based on existing
records and surveys with
information on age and
original investment cost &
allied information for Asset
Inventories at the City Level
550,000
Competitive
Method
(Individual) QCBS
Post End Nov,
2012 DLI- 1 Resource
Planning
Activity
8
Activity
9
Activity
1. Consultancy for
development of Urban
Land Records
management system
and zoning plan for
city areas 2. Consultancy for
development of SOPs
for Urban Land
Records Management
Consultancy for Urban Land
Records Field Surveys
1,500,000
150,000
500,000
Competitive
Method
(Firms) QCBS
Competitive
Method
(Indiv) CQS Competitive
Method
(Firm)
QCBS
Prior
Post
Post
End Dec ,
2012
End Oct,
2012
End Oct,
2012
DLI-5
Boundary
Alignment DLI-1
Resource
Planning DLI-4 Revenue
Collection
Regime
75
1 2 3 4 5 6
Ref. No.
Description of Assignment
Estimated
Cost
(US$)
Selection Method
Review by Bank (Prior /
Post)
Expected Proposals
Submission Date
10
Activity
11
Consultancy for Capacity
Building of CDGs in
Procurement Systems/
Performance, Development of
SoPs & Trainings.
200,000 Competitive
Method
(Firm) CQS
Post End Oct,
2012
DLI-2
Procureme
nt
Activity
12
M&E Firm for 3rd
Party
Validation (to be hired by DG
M&E)
10,00,000 immediate USPMSU
to transfer
funds to
DG M&E
to process
the hiring.
Environmental and Social (including Safeguards)
77. Component 1 on Performance Grants to the five participating cities is to be used for
strengthening systems and funds are to be provided for the improved operation and maintenance
(O&M) of existing urban assets and services, such as roads and water supply service. Other
eligible expenditures include: (1) power/energy needed for machinery, operations for asset
maintenance and service delivery; and, (2) repair and maintenance of machinery, equipment,
roads, buildings, and water supply. No new schemes investments are eligible or going to be
funded under this component. Furthermore, even O&M activities will be confined to repair and
rehabilitation of the existing right of way for the roads, and repair and rehabilitation of existing
change of water supply pipelines, which are in dilapidated conditions.
78. The project has therefore prepared an environmental and social management framework
(ESMF) with an aim to guide the five cities on the internalization of environmental and social
considerations at large in the cities‘ planning and development process. The ESMF also aims to
ensure that city governments adopt and pursue sound environmental and social procedures and
practices given in the document. The ESMF has been prepared after detailed in-house
discussions, desk research on the legal and institutional framework, analysis of priority issues in
the infrastructure sector, consistency checks with operational policies of the WB and other
multilateral agencies. The ESMF also defines environmental and social assessment procedure to
be followed by the city governments and other city entities while preparing, appraising, and
implementing individual schemes under the Project. This procedure includes i) environmental
and social screening of every scheme to be implemented under the Project; ii) preparing an
Environmental and Social Management Plan (ESMP) of each scheme having moderately
significant environmental and/or social impacts (schemes having significant environmental
and/or social impacts are not included in the Project); iii) operationalizing this ESMP during
scheme implementation; and iv) environmental and social monitoring to ensure effective
implementation of the mitigation measures included in the ESMP.
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79. Environmental and Social Management Procedures: In order to address the potentially
negative environmental and social impacts associated with PCGIP, and equally importantly to
integrate environmental management aspects in the cities‘ urban planning and development
process, the borrower has prepared an Environmental and Social Management Framework
(ESMF). The ESMF conforms to the national regulatory and World Bank safeguard policy
requirements.
80. Screening of Schemes: Screening will be first step of the environmental and social
management procedure. Each scheme during its preparation stage will be screened with respect
to environmental and social considerations. The Safeguards Specialist at the CPU will be
responsible to carry out this screening. The screening criteria are presented below.
81. Environmental Categories: Depending on size, cost, location and the nature, scheme
will have varying impacts on city environment. The rigorousness of environmental assessment
requires identifying and mitigating the impacts, largely dependent upon the complexities of
scheme. To facilitate effective screening, schemes are categorized into three categories viz. E-1,
E-2 and E-3.
a) E-1 schemes are those wherein major environmental impacts are foreseen;
b) E-2 schemes are expected to have only moderate environmental impacts; and
c) E-3 schemes are the schemes with negligible environmental impacts and hence, these
can be termed as ―environmentally benign‖.
82. Since PCGIP funds are exclusive for operation and maintenance and rehabilitation
schemes, schemes falling under E-1 category shall not be funded. Table 3.6 below illustrates
tentative categorization of schemes based on their environmental sensitivity.
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TABLE 3.6: PROFILE OF SCHEMES WITH TENTATIVE ENVIRONMENTAL CATEGORIZATION
Schemes Environmental
Category
Requirement Schemes Environmental
Category
Requirement
I. Water Supply & Sewerage II. Transportation
A. Water Supply A. Roads
1. Water bodies intake works E-1 EIA 1. New Roads E-1 EIA
2. Water treatment plants E-1 EIA 2. Widening of roads outside ROW E-1 EIA
3. Water supply augmentation E-2 ESMP 3. Widening of roads within ROW
avoiding any effect on
environmental sensitive
components
E-2 ESMP
4. Water supply distribution lines E-2 ESMP 4. Rehabilitation and improvement
of roads’ surface.
E-2 ESMP
5. Repair and Maintenance of water
tanks
E-3 EIA 5. Construction and improvement
of foot paths.
E-2 ESMP
6. Repair and Maintenance of
overhead reservoirs
E-3 None 6. Construction of Traffic islands E-3 None
7. Up-gradation of existing head
works
E-3 None 7. Construction and improvement
road dividers.
E-3 None
8. Generators for tube well, pumping
station etc.
E-3 None 8. Other traffic and transport
management measures.
E-3 None
B. Storm water Drainage B. Street Furniture (O&M)
1. Rehabilitation of open drains E-2 ESMP 1. Traffic signals E-3 None
2. Rehabilitation of closed drains E-2 ESMP 2. Street lights E-3 None
3. Repair and maintenance of open
and close drains.
E-3 None 3. Sign boards E-3 None
C. Sewerage/Sanitation C. Road Structures
1. Rehabilitation of sewerage
networks including pumping stations
and treatment plants
E-1 EIA 1. ROBs / RUBs E-1 EIA
2. Rehabilitation of sewers E-1 EIA 2. Under passes
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Schemes Environmental
Category
Requirement Schemes Environmental
Category
Requirement
3. Rehabilitation of sewerage
networks and pumping stations
E-2 ESMP - Pedestrian ways E-2 ESMP
4. Public conveniences E-2 - Cycle E-2 ESMP
5. Pay and use latrines E-2 ESMP - Fast moving lanes E-2 ESMP
6. Septic tanks E-2 ESMP 3. Small Bridges/ pedestrian
bridges
E-2 ESMP
4. Culverts E-3 None
III. Solid Waste Management IV. Community Amenities
1. Landfill site E-1 EIA 1. Landscaping E-2 ESMP
2. Compost yards E-1 EIA 2. Parks E-2 ESMP
3. Other waste treatment facilities E-1 EIA 3. Playgrounds E-2 ESMP
4. Construction of storage points E-2 ESMP 4. Community centers E-2 ESMP
5. Door to door waste collection E-3 None V. General
6. Segregation and recycling of
waste facilities
E-2 ESMP 1. Computer Facilities E-3 None
7. SWM Vehicles E-3 None 2. Weighbridges
Note: For investment schemes that have not been environmentally categorized, they will initially be considered as category E-1, unless otherwise specified by the GoPunjab.
Schemes falling in E-1 and S-1andS-2 categories will generally be on negative list. Moreover standard established checklist procedure such as Leopold Matrix aided with sector
specific guidelines published by Ministry of Environment, Pakistan would be used to evaluate environmental impacts of schemes and sub-schemes activities in order to classify the
same into E-1, E-2 or E-3 category.
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83. Social Categories: Based on the number of households that may be affected by the
scheme, i.e. Affected Households (AHs) and magnitude of impacts, schemes are categorized as
S-1, S-2 and S-3.
a) S-1 schemes are those schemes that will involve the resettlement of more than 40
households, and are expected to have significant negative social consequences;
b) S-2 schemes are those which will involve the resettlement of less than 40 households
and are expected to have significant social consequences affecting local inhabitants;
c) S-3 schemes are not expected to have any significant adverse social impacts;
84. Since PCGIP funds are exclusively allocated for operation and maintenance and
rehabilitation schemes, thus schemes falling under S-1 and S-2 categories shall not be funded
through the project.
Table 3.7: Categorization of schemes based on social sensitivity
Category Description Type of Scheme
Requirement
Level of Issues Management Measures
S-1 Serious negative
social impact
expected
Resettlement and
Rehabilitation Plan will be
required, in addition to a
Social Assessment Report
> 40 households
involved RAP
S-2 Moderate
negative social
impact expected
Social Management Plan
(SMP) in addition to Social
Assessment Report
1-40 households
involved RAP
S-3 No negative
social impacts
expected
Social Assessment Report No involuntary
resettlement
Affected Persons
(APs) involved
None
85. Subsequent to the screening discussed above, the type of environmental and social
assessment requirements for each scheme will be determined according to the following criteria:
a) Schemes having E1 and S1 categories: full EIA (or ESIA) will need to be conducted
for each individual scheme. In addition, a Resettlement Action Plan (RAP) will be
prepared for each scheme with S1 category.
b) Schemes having E2 and S2 categories: Environmental and Social Management Plan
(ESMP) will be prepared for each individual scheme. In addition, an Abbreviated
Resettlement Action Plan will be prepared for each scheme with S2 category.
c) Schemes having E3 and S3 categories: no further assessment is needed.
86. ESMPs Preparation: For each scheme with E2 category, ESMP will be prepared by the
Safeguards Specialist at the city government level. The ESMP preparation will be an integral
part of the scheme preparation/appraisal process, and ESMP will be an integral part of the
scheme documentation. The ESMP will include details of the works to be carried out under the
scheme, the site-specific environmental and social information (baseline), and site-specific and
scheme-specific mitigation measures. The ESMPs will be reviewed and cleared by the
DO (Environment) of the respective City.
80
87. First five ESMPs of the schemes under the Project will be sent to WB for their review
and approval.
88. EIAs (and RAP) Preparation: The schemes with E1 and S1/S2 categories will not be
implemented under the Project; hence EIA/ESIA or RAP will not be conducted/ prepared.
However, city governments/city entities may undertake schemes with E1 category with
government financing, and for such schemes, EIAs will need to be conducted and their formal
approval obtained from the Punjab EPA. Similarly, for the government-financed schemes having
S1/S2 category, RAP will need to be prepared.
Implementation of ESMPs and EIAs
89. ESMP Implementation. During the scheme implementation, the mitigation and
monitoring measures included in the ESMP will need to be implemented. The ESMP will be
included in the bidding documents (if the scheme is to be contracted out), and hence it will be
included in the contractor‘s scope of works/services. Similarly, if the scheme is to be
implemented by the concerned department itself, the ESMP will be included in the scope of
work/services. The ESMP cost will be included in the scheme implementation cost.
90. Environmental and social monitoring will also be carried out to ensure effective
implementation of the ESMP. First tier of monitoring will be conducted along with the
monitoring of the works being carried out under the scheme. At the second tier, the Safeguards
Specialist will carry out spot checks to ensure ESMP implementation. Checklists prepared on the
basis of mitigation measures proposed in the ESMP will be used for this purpose. Photographic
record will also be maintained for this purpose.
91. EIA Implementation: A similar procedure as described above will be used for the
schemes for which EIAs are prepared. The EIA will be included in the bidding documents (if the
scheme is to be contracted out), and hence it will be included in the contractor‘s scope of
works/services. Similarly, if the scheme is to be implemented by the concerned department
itself, the EIA will be included in the scope of work/services. The EIA cost will be included in
the scheme implementation cost.
Integration of Environmental and Social Safeguards Management in Scheme Life Cycle
92. The environmental and social management procedure described above will be seamlessly
integrated within the scheme identification, preparation, appraisal, approval, and implementation
cycle. Environmental and social screening will be carried out at the scheme identification stage.
The scheme-specific EIAs/ESMPs will be prepared during the scheme preparation/appraisal
stage. Finally, ESMPs and EIAs will be implemented during the scheme implementation stage.
This is further explained in the sections below and also presented in Table 3.8.
93. Preparation of Scheme: During preparation stage, the implementing entity (city
government/other city entity) will include the following details in scheme proposal:
81
a) Technical aspects such as scheme eligibility for loan funding; details on suitability of
scheme site; availability and appropriateness of inputs, and proven experience with
the technology offered, engineering designs, and rehabilitation, operation and
maintenance arrangements;
b) Economic aspects such as cost estimates, financial operating plan, economic and
financial viability, and adequacy of proposed financing;
c) Organizational aspects such as institutional, legal and contractual framework; risk
analysis; necessary clearances from regulatory entities; and required covenant format;
and
d) Each scheme will be screened according to the criteria defined in Table 3.6. The
screening will be done on the format as provided in the form of checklists Screening
will be carried out by the Safeguards Specialist.
94. Scheme Appraisal: During scheme appraisal stage, the following activities will be
performed:
a) Review of the technical aspects such as scheme eligibility for loan funding; details on
suitability of scheme site; availability and appropriateness of inputs, and proven
experience with the technology offered, engineering designs, and rehabilitation,
operation and maintenance arrangements;
b) Review of the economic aspects such as cost estimates, financial operating plan,
economic and financial viability, and adequacy of proposed financing;
c) Review of the organizational aspects such as institutional, legal and contractual
framework; risk analysis; necessary clearances from regulatory entities; and required
covenant format; and
d) If the Scheme is categorized as E1, an EIA will be conducted. If the Scheme is
categorized as E2, an ESMP will be prepared. For the scheme categorized as E3, no
further environmental assessment is needed. ESMPs will be prepared by the
Safeguards Specialist, whereas EIA preparation will be outsourced.
95. During the appraisal stage, the environmental and social appraisal shall focus on the
following aspects:
a) Compliance with regulatory requirements and clearances;
b) Comprehensiveness of the ESMP in light of the activity specific environmental and
social issues;
c) Integration of environmental and social measures in to the design wherever relevant;
d) Arrangements for implementation of ESMP, including institutional capacity and
contractual provisions;
e) Inclusion of ESMP budgets in the scheme cost;
f) ESMP monitoring and reporting arrangements;
g) Adequacy of the social issues identified and suggested mitigation measure;
h) Need for any legal covenant to address any specific environmental risks including
regulatory risks.
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96. The Safeguards Specialist will ensure that the above requirements are fulfilled. The DO
(Environment) will review and approve the ESMPs and also advise the implementing entity on
the environmental regulatory requirements.
Sanction, Funds Disbursement and Scheme Implementation
97. The scheme will be approved once all the technical requirements are fulfilled and the
ESMP/EIA is cleared. As stated above, ESMPs will be cleared by the DO (Environment),
whereas EIAs will be approved by the Punjab EPA.
98. The ESMP or EIA of each scheme will be included in the bidding documents and the
contracts. In this manner, the ESMP or EIA will be included in the overall scope of
works/services, and the contractor will implement the mitigation measures included in the ESMP
or EIA alongside other works/services included under the contract.
99. Monitoring, Audit, and Evaluation: The implementing entity will monitor the
contractor to ensure complete and proper implementation of the works/services in accordance
with the contract.
100. During this phase, the Safeguards Specialist will conduct environmental and asocial
monitoring to ensure that the mitigation measures given in the ESMP or EIA are effectively
implemented. The environmental and social monitoring will include the following:
a) Frequent site visits by the Safeguards Specialist
b) Environmental and social monitoring to ensure effective implementation of
ESMPs/EIA particularly the mitigation measures included in these documents. The
monitoring will be conducted with the help of checklists prepared on the basis of the
mitigation plans included in ESMPs/EIAs.
c) Laboratory analysis will be conducted if so specified in the ESMPs/EIA.
d) Photographic records will be maintained where applicable/useful.
101. Third Party Validation: A sample-based third party validation (TPV) will be carried out
on an annual basis to evaluate the overall effectiveness of ESMF implementation for all the
schemes undertaken by each of the CITY GOVERNMENT/other entities in a particular year.
The Safeguards Coordinator will be responsible for this validation and will engage suitable entity
(such as consultants) for this purpose
.
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Table 3.8: Environmental, Social Assessment, and Management Process
Milestones/ Objectives
Process Responsibility Decision/Outcome
1. Scheme Screening Screen from
environmental and social
perspective
The implementing entity will prepare the Proposal including: Environmental Screening report including
categorization (E1, E2, or E3; S1, S2, or S3 Social Screening report including
categorization (S1, S2, or S3)
Safeguards Specialist Environmental and
social categorization
of scheme; Determination of type
of assessment needed
(EIA; ESMP; or no
further assessment)
2. Scheme Appraisal Detailed Environmental
and Social Appraisal
Preparation of ESMP Preparation of EIA
Safeguards Specialist Safeguards Specialist
(through outsourcing)
Completed ESMP Completed EIA
Review of ESMP DO (Environment) Approved ESMP Review of EIA Punjab EPA Approved EIA
3. Funds Sanction and Disbursement Finalization of Contract
Agreement a. Disburse first funding/money installment. b. Include ESMP/EIA in bidding documents and contracts
Implementing entities
ESMP/EIA included in
contracts
Scheme implementation ESMP/EIA implemented alongside the scheme works Contractor ESMP/EIA
implemented. 4. Monitoring, Audit and Evaluation of a Scheme Monitoring Environmental and social monitoring to ensure effective
implementation of mitigation measures included in
ESMP/EIA
Safeguards Specialist Monitoring reports
Third party validation Sample based assessment and evaluation of ESMF
implementation for all schemes implemented by each CITY
GOVERNMENT/city entity in a particular year
Safeguards Coordinator
(through outsourcing) Environmental and
Social TPV Reports
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102. Capacity Building: GoPunjab envisages capacity building of its own personnel, city
governments and city entities in order to ensure that the ESMF is effectively implemented. The
government personnel will be exposed to formal training in the management of environmental
and social issues. The training program for various personnel will include an orientation program
on the ESMF, social and environmental assessment processes, participatory methodologies, and
other related aspects.
103. The training will focus on the environmental and social issues. The contents will
basically focus on the ESMF profile, concept, regulatory requirements, environment and social
priority issues, cycle, outline of Environmental Assessment (EA) / Social Assessment (SA) and
report formats in respect of the environmental aspects. In respect of social aspects the course
content will focus on the resettlement and restoration policies and procedures, national and
provincial requirements, land acquisition process, identification of affected persons, social
entitlement frameworks, social assessment, resettlement action planning techniques, risk
assessment and management skills, complaint redress mechanism, disclosure of information and
mechanism of citizen accountability such as citizen score cards system. The program will be
structured in such a way that it clearly brings out the value addition and enhancement benefits of
proper management of environmental and social issues. The generic training program is
elaborated in Table .9.
104. The Safeguards Coordinator will be responsible for the overall implementation of the
training program. S/he will be assisted by the Safeguards Specialists of each city government in
their respective city for this purpose.
105. In addition to the above, the USPMSU will make concerted efforts to mainstream the
environmental and social topics with the main training program of capacity building of
concerned departments of GoPunjab. The Unit will help improve the effectiveness of
management of environmental and social impacts during planning, implementation and operation
of proposed investments by city governments and city entities. Proposed criteria for graduating
city governments and city entities are shown in Table .9, which will be used as modules in
capacity building for all city governments and city entities. Each module will be field based,
allowing real application of the critical practices such as the following:
a) Basic practices: screening impacts, scoping assessments, planning mitigation options,
public consultation to assess feasibility and acceptability options;
b) Social: land acquisition methods, census methods, classifying severity of impacts and
entitlements, responsibilities for planning and delivery of entitlements before site
handover;
c) Environment: site selection and route alignment to minimize environmental impacts
and social disruption; restoration of drainage patterns, land use; including mitigation
measures in Bill of Quantities (BOQs) and contracts; management of impacts during
construction; monitoring of effectiveness of measures; and
d) Monitoring and grievance redress: transparency and public administration in
planning, reporting and supervision responsibilities and formats during
implementation, documenting land transactions, complaint response record keeping
and procedures.
85
Table 3.9: Generic Training Program Program Contents Duration Schedule Participants
Program 1 Orientation Program /
Workshop for city
governments and city
entities
Module 1 – ESF Profile
GoPunjab Concept
ESMF Concept
Regulatory
Requirements-E&S
Priority Issues
Scheme/ Project Cycle
EA/SA Process Outline
Reports & Formats
Module 2 Environmental
Assessment Process
Environmental Laws &
Regulations
EIA process
Identification of
Environmental Impacts
Impact identification
Methods
Identification Mitigation
Measures
Formulation of
Environmental
Management Plan
Implementation and
Monitoring Institutional
Mechanism
Module 3 Social
Assessment Process
R&R policies and
procedures
National & Provincial
requirements
Land Acquisition
process
Identification of APs
Social Entitlement
Frameworks
Social Assessment
RAP Techniques
1½ day
(1st , 2nd and 3rd
year of the PCGIP)
Professionals at provincial
and city government level
Heads of implementing
city governments and city
entities and other
monitoring agencies
Program 2 Orientation Program /
Workshop for
Implementing city
governments and city
entities
Module 1 – ESF Profile
GoPunjab Concept
ESMF Concept
Regulatory
Requirements-E&S
Priority Issues
Scheme / Project Cycle
EA/SA Process Outline
Reports & Formats
Module 2 Environmental
Assessment Process
Environmental Laws &
Regulations
EIA process
Identification of
Environmental Impacts
Impact identification
Methods
Identification Mitigation
Measures
Formulation of
Environmental
Management Plan
Implementation and
Monitoring Institutional
Mechanism
Module 3 Social
Assessment Process
R&R policies and
procedures
National & Provincial
requirements
Land Acquisition
process
Identification of APs
Social Entitlement
Frameworks
Social Assessment
RAP Techniques
1½ day
(1st , 2nd and 3rd
year of the PCGIP)
Commissioners & DCO
of the potential city
governments
Engineering/Public
Health personnel from the
implementing city
governments and city
entities
Engineering personnel
from city governments
and city entities /
consultants.
Program -3 Module 1– Water Module 2– Solid waste Module 3– Roads, Traffic 1½ days (every Open Forum
86
Program Contents Duration Schedule Participants
Workshop on
Sectoral
Environmental and
Social Assessment
supply, sewerage and
sanitation
ESMF Concept
Regulatory
Requirements-E&S
Priority Issues
EA/SA Process Outline
Identification of
Environmental Impacts
Identification Mitigation
Measures
Formulation of
Environmental
Management Plan
Implementation and
Monitoring
Social Entitlement
Frameworks
Social Assessment
RAP Techniques
Case Studies
management
ESMF Concept
Regulatory Requirements-
E&S Priority Issues
EA/SA Process Outline
Identification of
Environmental Impacts
Identification Mitigation
Measures
Formulation of
Environmental
Management Plan
Implementation and
Monitoring
Social Entitlement
Frameworks
Social Assessment
RAP Techniques
Case Studies
and Transportation
ESMF Concept
Regulatory
Requirements-E&S
Priority Issues
EA/SA Process Outline
Identification of
Environmental Impacts
Identification Mitigation
Measures
Formulation of
Environmental
Management Plan
Implementation and
Monitoring
Social Entitlement
Frameworks
Social Assessment
RAP Techniques
Case Studies
alternate year)
(Introduction will be
common to all and
participants will be
split according to
their respective
sectors)
Feed back and comments
from the Participants.
Commissioners & DCO
of the potential city
governments
Engineering/Public
Health personnel from the
implementing city
governments and city
entities
Engineering personnel
from city governments
and city entities /
consultants.
Program - 4 Experience Sharing
Module – Experiences and Best Practices
Experiences on implementation of E&S in implemented schemes.
Best Practices followed in E&S
Site visits to schemes / project sites.
2 day
(1st , 2nd and 3rd
year of the
Commissioners & DCO
of the potential city
governments
Engineering/Public
Health personnel from the
implementing city
governments and city
entities and those in the
implementing process
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ESMF Reporting and Documentation
106. CPU Level: The Safeguards Specialists will maintain complete record of ESMF
implementation at the City level. This will include:
Environmental and social screening record for each scheme
ESMPs and their approvals,
EIAs and their approval,
Complete record of environmental and social monitoring (filled checklists, laboratory
analyses, and photographs),
Record of ESMF trainings conducted at the City level.
107. In addition, each Safeguards Specialist will be responsible for preparing ESMF quarterly
progress reports for the respective City. These reports will include information on
prepared/approved ESMPs during the reporting period, a summary of monitoring records, a
summary of the training record, and a summary of any outstanding issues.
108. USPMSU Level: The Safeguards Coordinator will maintain record of the overall ESMF
implementation for the entire Project. This will include:
Quarterly reports prepared by Safeguard specialists
Report of third party validations conducted for overall ESMF implementation
ESMF trainings conducted at the USPMSU level.
109. The Safeguards Coordinator will be responsible for preparing the ESMF progress reports
for the entire Project on a six-monthly basis. These reports will essentially be prepared on the
basis of the quarterly reports prepared by the individual city governments through their
Safeguards Specialists.
110. Application of ESMF for Government-Financed Schemes: As stated at the outset, the
GoPunjab through the present ESMF seeks to integrate environmental and social considerations
in the cities‘ overall planning, service delivery, and development processes. Towards this end,
the environmental and social management procedure will not only be applicable to the schemes
to be implemented under the Project, it will also be gradually adopted for all service delivery
functions in the large cities, by the end of the Project. This will thus ensure integration of
environmental management aspects in the cities‘ entire urban planning and development process.
111. The following framework is devised for achieving complete compliance of the
environmental and social management procedure for all the schemes/functions of the city
governments by the end of Project:
By the end of first year of Project: 10 % government-financed schemes to follow the
environmental and social management procedure.
By the end of second year of Project: 30 % government-financed schemes to follow
the environmental and social management procedure.
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By the end of third year of Project: 60 % government-financed schemes to follow the
environmental and social management procedure.
By the end of fourth year of Project: 100 % government-financed schemes to follow
the environmental and social management procedure.
112. The quarterly progress reports prepared by Safeguards Specialists and six-monthly
reports prepared by the Safeguards Coordinator will include implementation status of the above
framework. The third party validations will assess progress on this aspect also.
113. Summary of Roles and Responsibilities for ESMF Implementation: Summary of roles
and responsibilities of various persons/entities for ESMF implementation is provided in Table
3.10 below:
Table 3.10: Roles and Responsibilities for ESMF implementation Safeguards Coordinator
(Urban Sector Planning and
Management Services Unit)
Safeguards Specialists
(City Governments) DO (Environment)
Capacity building at USPMSU
and City level for effective
ESMF implementation.
Environmental and social screening of all
schemes under the Project;
Environmental and social government-
financed schemes per framework defined
in Section 6.6.
Documentation for screening.
Review of environmental and
social screening.
Liaison and coordination with
city governments and Safeguards
Specialists for ESMF
implementation.
Preparing ESMPs for each Project scheme
with E2 category;
Preparing ESMPs for each government-
financed scheme with E2 category per
framework defined in Section 6.6.
Provide technical and
regulatory support and
guidance;
Review and clearance of
ESMPs.
Monitoring implementation of
framework defined in
Section 6.6.
Conducting EIAs of each Project scheme
with E1 category (through outsourcing);
Conducting EIAs of each government-
financed scheme with E1 category per
framework defined in Section 6.6 (through
outsourcing).
Coordinate with Punjab EPA
for EIA clearance.
Reviewing ESMF QPRs
prepared by Safeguards
Specialists
Ensuring that ESMP/EIA is included in the
respective scheme‘s scope of work,
bidding documents and contracts; and
ESMP/EIA implementation cost is
included in respective scheme cost.
Preparing ESMF six-monthly
reports on the basis of ESMF
quarterly progress reports and
other reports.
Conducing monitoring to ensure effective
implementation of ESMP/EIA during
scheme implementation.
Provide technical and
regulatory support and
guidance.
Conducting (through
outsourcing) annual third party
validation for all the schemes
undertaken in the large cities.
Preparing monitoring reports; ESMF
quarterly reports.
Review of monitoring reports.
Liaison with outside
agencies/entities including WB.
Coordinate with Safeguards Coordinator
for ESMF trainings at the City level.
Any other activity assigned by
USPMSU.
Any other activity assigned by Safeguards
Coordinator or city government.
89
114. Component 3 may have certain environmental issues associated with activities that may
be financed under the component, should it be triggered. As a condition for disbursement under
Component 3, the implementing agency will carry out a screening of the activities included in
the CER Implementation Plan for any potential environmental and social impacts. Furthermore,
any safeguards instruments required under the ESMF will be prepared, submitted to the World
Bank for review and approval, and thereafter adopted and locally disclosed by implementing
agency prior to disbursements under Component 3. Should this screening require a modification
of the Environmental Assessment categorization of the Project and / or the triggering of any of
the Bank's safeguards policies, a restructuring will be carried out to record these changes and
make applicable the attendant requirements.
115. Furthermore, in case Component 3 is triggered, safeguard aspects of project activities
would be in line with the ESMF. The ESMF provides guidelines on the implementing agency‘s
responsibilities for integrating and managing environmental and social safeguards aspects into
the investment design and implementation. This document would guide the implementing agency
in undertaking a rapid environmental assessment for the potential activities under this
component. In addition the ESMF will also specify the social assessment requirements of project
implementation. Should this component be triggered, the implementing agency will be assisted
to apply this framework to address any social impacts in post disaster recovery and
reconstruction programs, including temporary and preventive resettlement
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Annex 4: Operational Risk Assessment Framework (ORAF)
PAKISTAN: Punjab Cities Governance Improvement Project
Project Development Objective(s)
To support the Province of Punjab‘s cities in strengthening systems for improved planning, resource management, and accountability, and to improve
the Province of Punjab‘s capacity to respond promptly and effectively to an Eligible Crisis or Emergency.
PDO Level Results
Indicators:
1. Percentage of development and asset maintenance expenditure of the city and city entities which are spent according
to the three-year rolling development and asset management plan (DAMP)(%)
2. Percentage of service area population having an institutionalized mechanism available at city service delivery entities
for providing feedback and grievance redress.
1. Project Stakeholder Risks Rating Moderate
Description :
Borrower Risks : A potential change in government at the provincial level results in re-
prioritization in government agenda. Urban reforms may not remain a
government priority, negatively affecting ownership of the project
and relationship with the Bank.
Internal reforms within a number of institutions may result in reform
fatigue particularly during the process of restructuring of
management and adapting to newly developed procedures and
processes.
Beneficiary Risks :
The project, primarily focusing on institutional reforms, may not be
perceived by secondary beneficiaries (communities in the 5 targeted
cities) as having delivered a set of tangible results during and / or at
the completion of the project. Such beneficiaries may not have access
to project reports, financial statements, audit observations etc.
Risk Management (Borrower Risks):
- Regular consultations with the leadership at the provincial and city government
level to ensure that urban reforms continue to remain a priority for the
government.
- The government‘s commitment and ownership of the project is demonstrated
through the successful implementation of prior actions, particularly the
achievement of first year DLIs at the project effectiveness stage, as well as
issuance of Letter of Sector Policy.
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
Risk Management (Beneficiary Risks):
- Operationalization of citizen feedback mechanism at both provincial and city
levels, including regular public stakeholder consultations and citizens survey to
capture beneficiary views. Reports detailing progress of sub-projects, audit
observations, financial statements of city governments amongst others, will be
publicly disclosed.
- An effective communications strategy to be developed aiming to ensure adequate
dissemination of information about project objectives and the envisaged
improvements in urban governance systems, to residents and communities in the
participating cities. This communication campaign will prove vital in particular
91
towards ensuring that the residents of the cities benefitting from the project are
informed about, and are able to make full use of greater access to information
and strengthened grievance redressal system.
- Resp: Client | Stage: Imp | Due Date : Status: Not yet Due
2. Implementing Agency Risks (including fiduciary)
2.1. Capacity Rating: High
Description: Limited capacities in the city governments to implement city level
programs and ability to handle larger investment portfolios on
account of weak systems arising from fragmented mandates,
procedural deficiencies, and lack of accountability.
Unfamiliarity with the Bank‘s processes, particularly fiduciary and
safeguards requirements at the provincial and city government level
may negatively affect quality of deliverables.
Risk Management :
- The highly-satisfactory performance of the implementing agency (USPMSU)
leading up to the project, including the achievement of all first-year DLIs, is
demonstrative of the existence of essential capacity at the provincial (PPU) level.
- The project directly aims to strengthen the existing systems and procedures at the
city level. For this purpose city government‘s capacity building needs to be
assessed during appraisal and adequate funds and modalities worked out for
meeting these needs through project funds.
- Upfront preparation of a comprehensive operational manual by USPMSU,
covering all aspects of project management, assigning specific roles and
responsibilities for project implementation.
- The linkage between disbursement of funds and satisfactory achievement of
DLIs incentivizes the cities to address capacity gaps and deliver results.
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
2.2. Governance Rating: High
Description:
The implementation arrangements involve different tiers of
government and multiple institutions spanning across five cities,
which may lead to weak oversight, imbalanced performance and
could pose governance challenges.
Risk Management:
- The project will put in place sound implementation arrangements at both the
provincial (PPU) and city (CPU) level, with effective monitoring and evaluation,
and coordination mechanisms. A high-level steering committee will provide
guidance and direction to the overall project.
- Province to sign as part of the project negotiations (prior actions), a letter of
sector policy detailing legislative and regulatory requirements.
- City government to sign Memorandum of Partnership during the project
negotiations.
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
3. Project Risks
3.1. Design Rating: Substantial
Description:
Scope:
Risk Management (Scope) :
The USPMSU and the Directorate General M&E at Punjab will coordinate and monitor
progress in all 5 cities, particularly in relation to the achievement of DLIs. CPUs will be
92
The project is spread over 5 cities, across the geographic span of
Punjab, and the sheer scale of the project may pose a risk.
Complexity of Reforms:
The project design relies on the government to undertake
institutional reforms which are untested both within the province and
the country. The institutional change may be unacceptable to
relevant stakeholders.
set-up in each city to establish the communication flow between the cities and the
USPMSU.
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
Risk Management (Complexity of Reforms) :
- Implementation of institutional realignment measures as proposed under the
project through a gradual and sequenced programmatic operation
- Incentivizing cities to meet program objectives through DLI based
disbursements.
- Cultivating champions of change at various levels and ensuring the continued
involvement of such players for a longer program period
- Ensuring the necessary legal protection of the proposed institutional realignment
reforms
- Keeping the political leadership abreast of all planned institutional reforms
throughout the program period, and cultivating/educating demand for these
reforms at various levels
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
3.2. Social & Environmental Rating: Moderate
Description:
Capacity constraints exist regarding integration of environmental
and social safeguards in the Urban Planning process, which may
translate into inadequate implementation of safeguards during
project life.
Risk Management (Environmental and Social Safeguards) :
Institutional capacity will be built through the project to undertake social actions related
to DLIs. Dedicated staff at the USPMSU will provide hands-on training to the city
governments to implement the Environment and Social Management Framework
(ESMF).
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
3.3. Program & Donor Rating: Low
Description:
Overlap and Conflicting Programs: Potential overlap may exist
between the project‘s components and other donor-funded programs
in the urban sector in the 5 targeted cities. The project DLIs may
potentially come into conflict with other donor-funded TA programs
/ interventions.
Risk Management (Overlap and Conflicting Programs) :
Active engagement with other donors / agencies for increased coordination and
communication at the project implementation stage and during the project life. Mapping
of multi-sectoral donor activities to identify overlaps and potential conflicting activities.
- Resp: Bank | Stage: Prep | Due Date : | Status: Not yet Due
3.4. Implementation & Sustainability Rating: Substantial
93
Description:
Uncertainty regarding the sustainability of institutional performance
achieved under the project, beyond the project life poses a risk. The
Provincial government and city governments may not remain
incentivized to make further progress towards urban reform and
improved service delivery, once the project achieves full
disbursements.
Risk Management :
- The fact that the GoPunjab has achieved the first step in its Urban Reforms
Agenda demonstrates its commitment towards sustainable urban development
reforms. The project represents the second step in GoPunjab‘s agenda, which
includes (i) improving the planning process; (ii) introducing capital investment
and asset management planning across the urban space; (iii) consolidating fiscal
transfers and enhancing resource mobilization at the local level; and (iv)
strengthening the accountability of urban institutions. Based on these policy and
governance improvements, GoPunjab will then tackle service delivery in the
third stage of its urban strategy.
- Resp: Client | Stage: Prep | Due Date : | Status: Not yet Due
5. Project Team Proposed Rating Before Review
5.1. Preparation Risk Rating: High 5.2 Implementation Risk Rating: High
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Annex 5: Implementation Support Plan
PAKISTAN: Punjab Cities Governance Improvement Project
Strategy and Approach for Implementation Support
1. The strategic approach for the implementation support has two objectives: (i) to monitor
the implementation of the risk mitigation defined in the ORAF and provide the technical advice
necessary to facilitate achieving the PDO; and (ii) to monitor implementation progress on the
project and to contribute to the quality of the capacity building of the five large cities of Punjab
and associated implementing agencies by providing best practices and benchmarks.
Procurement. Implementation support will include: (i) support to enable cities to
implement provincial procedures for procurement, allowing for competitive bidding,
public disclosure of results and audits of procurement practices; (ii) support to ensure
adherence to guidelines on financial management and procurement will be applicable
to the EEP; (iii) the framework for addressing social and environmental safeguards
will be applicable to all activities included in the EEP; (iv) review of the Procurement
Plan and procurement performance; and (v) provide training and guidance on
Procurement to the implementing agencies, e.g. CDGs, WASAs, DAs, etc.
Financial Management. (i) During supervision the team will review the financial
management reports as the basis for fund disbursements. In addition, the team will
review the audit reports and on the basis of these suggest appropriate remedies or
clarifications to the implementing agencies. The team will also work with the
USPMSU, Planning & Development Department and the City Program Unit (CPU) to
assist in improving coordination among the implementing entities (CDGs,WASAs,
DAs) in areas of financial management (accounting, reporting, and auditing).
Environmental and Social Safeguards. The Bank team will supervise the
implementation of the Environment and Social Management Framework (ESMF) by
the implementing entities and monitor the progress in execution of the planning
process that is inclusive of marginalized communities.
Monitoring and Evaluation. During the implementation review, the Bank team will
review the results monitoring framework and the implementation of the risk
mitigations identified in the ORAF.
Implementation Support Plan
2. Most of the Bank team members will be based in the Pakistan country office to ensure
timely, efficient and effective implementation support to the client. Formal supervision and field
visit will be carried out semi-annually (with the exception of the first year after project
effectiveness where regular short missions will be fielded to ensure smooth project kick-off).
Fiduciary requirements and inputs. Through TA the project will support
strengthening of systems and staff capacities at the USPMSU, Planning &
Development Department and the City Program Unit (CPU) in core functional areas
of physical planning, financial management, revenue mobilization, procurement, e-
governance, performance monitoring and local planning and budgeting. This will
95
enable these staff to better guide the implementing agencies in all systems building
reforms supported under the project. In particular, the Bank‘s financial management,
procurement, environment, operations and safeguards staff will work very closely
with the implementing agencies to ensure compliance in the EEPs.
3. The main focus of the implementation support is summarized below:
Time Focus Skills Needed Resource Estimate Partner
Role First twelve
months Procurement review of the
bidding documents Procurement Specialist 4 SWs N/A
Procurement Training Procurement Specialist 1 SW
FM training and supervision FM Specialist 2 SWs
Project supervision
coordination Urban Specialist 8 SWs
Task Team Leadership TTL 8 SWs
12-48
months Financial Management,
disbursement and reporting FM Specialist Urban Specialist
2 SWs 8 SWs
N/A
Procurement monitoring Procurement Specialist 2 SWs
Environment/Social
monitoring Environment Specialist Social Specialist Urban Specialist
2 SWs 2 SWs 8 SWs
Task Team Leadership TTL 8 SWs N.B: SW – Staff Week; N/A—Not Applicable.
4. Staff Skills Mix Required
Skills Needed Number of Staff Weeks Number of Trips Task Team Leader 8 SWs annually 2-3 Procurement 2 SWs annually Field trips required Financial Management Specialist 2 SWs annually Field trips required Environment Specialist 2 SWs annually Field trips required Social Specialist 2 SWs annually Field trips required Urban Specialist 8 SWs annually Field trips required
96
Annex 6: Team Composition
PAKISTAN: Punjab Cities Governance Improvement Project
Name Title Unit
Raja Rehan Arshad Lead Disaster Risk Management Specialist GFDRR
Shahnaz Arshad Senior Urban Specialist SASDU
Uzma Sadaf Senior Procurement Specialist SARPS
Hasan Saqib Senior Financial Management Specialist SARFM
Javaid Afzal Senior Environment Specialist SASDI
Chaohua Zhang Lead Social Development Specialist SASDS
Sameena Dost Senior Counsel LEGES
Chau-Ching Shen Senior Finance Officer CTRLN
Abdu Muwonge Economist SASDU
Zhiyu Jerry Chen Urban Economist SASDU
Shabir Ahmad Senior Program Assistant SASDO
Lilian MacArthur Program Assistant SASDO
Shahnaz Meraj Program Assistant SASDO
Richard L. Clifford Consultant SASDU
Mihaly Kopanyi Consultant WBIUR
Suhaib Rasheed Consultant SASDU
Ahsan Tehsin Consultant SASDU
Sohaib Athar Consultant SASDU
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Annex 7: Fiscal, Economic, and Financial Analysis
PAKISTAN: Punjab Cities Governance Improvement Project
Introduction
1. The project objective is ―to support Punjab cities in strengthening systems for improved
planning, resource mobilization, expenditure management, and accountability‖. The achievement
of the development objective will position the provincial government and capacitate the cities to
improve delivery of municipal services in the medium to long term on a more sustainable basis.
Economic Analysis
2. The economic analysis provides the justification for project intervention in the five large
cities of Punjab. The operation will invest in deferred stock maintenance rather than expansion of
new infrastructure. This focus will enable the cities and associated entities to improve
efficiencies in service delivery and in addition, allow for savings in scarce resources to be
channeled on other city development priorities rather than expansion of new infrastructure. In
addition, cities‘ will establish or improve monitoring databases, which will enable tracking unit
costs of investments supported by the operation. In turn, during the course of implementation,
cities‘ and the associated entities will be provided technical support through the project to enable
them select investments based on cost-benefit analysis.
3. Evidence from international experience supports the project‘s interventions to improve
the capabilities of conducting cost-benefit analysis at the city level. A review of case studies of
similar projects, particularly in China, Ghana, India, Indonesia, Tanzania, and Zimbabwe, shows
that more frequent use of cost-benefit or cost-effectiveness analysis enabled cities‘ officials to
select the best investments and achieve outcomes efficiently. A key ingredient in this process is
establishment of strong monitoring and evaluation (M& E) systems so that there is a focus on
achieving results. In addition, strong M&E systems helped reduce the expenses of cost-benefit
analysis by providing data needed to estimate required rates of return for alternative investments.
At present, M & E systems are weak and thus, inhibit the ability of cities‘ to undertake cost-
benefit analysis to inform investment decision making. Establishing M&E systems will allow
city authorities to generate much need data on unit costs of investments and keeping track of the
benefits.
4. In the absence of government intervention, the immediate implication is that the current
stock of infrastructure and cities‘ systems and processes will continue to deteriorate.
Concurrently, the operational costs will continue to increase as existing stock of assets will
consume more energy as opposed to well maintained assets. In other words, the option of doing
nothing at the moment is probably much more costly to the Government of Punjab (GoPunjab)
when compared to the possible benefits that likely to accrue from investing US$ 150 million
under this project. The benefits include better managed cities with the potential to generate
greater efficiencies in service delivery, saving scarce resources for alternative investment
priorities by the provincial government, and improved cities‘ finances.
98
Fiscal Analysis of City District Governments
5. This section analyzes the fiscal situation of the five cities of Lahore, Faisalabad,
Rawalpindi, Gujranwala, and Multan and the associated entities (that is, development authorities
and water utilities). This section focuses on the revenue side of the City District Governments
(CDGs) and the associated entities over the past few years. It analyzes the trends in transfers,
own source revenues (and in particular, property taxes), user charges and other forms of receipts.
Transfers include the Provincial Finance Award (PFC), the Octroi Grant, the supplementary
grants for development and non-development. Based on available collected budget data the PFC
constitutes the largest source of transfers to all cities, and development authorities.36
6. Table 1 below shows selected budget receipt aggregates for the five city district
governments in FY 2010/11 in Punjab. Lahore and Faisalabad lead in the amount of receipts
followed by Gujranwala. In Lahore and Faisalabad, transfers from the provincial government,
constitute 33 percent and 25 percent respectively of their total receipts. In terms of own source
revenues (OSR), of the estimated Rs. 1502 million from all the five cities, Lahore, Faisalabad
and Rawalpindi shares were 53 percent, 19 percent and 10 percent respectively. Multan and
Gujranwala receive the least amount in terms of transfers, and in addition, generate the lowest in
terms of OSR.
Table 7.1: Punjab. Budget Receipt Aggregates for Five City District Governments in FY 2010/11
Receipts in Rs Million Percentage of the total
Lahore
Faisalaba
d
Rawalpin
di
Gujranw
ala Multan Total
Laho
re
Faisalab
ad
Rawalpin
di
Gujranw
ala
Multa
n
Total Receipts 14,183.8 10,829.6 5,849.7 5,994.3 5,850.5 42,707.9 33% 25% 14% 14% 14%
Transfers from Provincial
Government 13,388.0 10,537.0 5,699.0 5,905.6 5,675.5 41,205.1 32% 26% 14% 14% 14%
Of which:
Share of PFC 10,022.0 9,174.0 4,963.0 5,315.0 5,229.0 34,703.0 29% 26% 14% 15% 15%
Share of Octroi Grant 1,561.0 850.0 291.0 361.0 446.5 3,509.5 44% 24% 8% 10% 13%
Current Year 1,452.0 787.0 291.0 334.0 412.0 3,276.0 44% 24% 9% 10% 13%
Arrears 109.0 63.0 0.0 27.0 34.5 233.5 47% 27% 0% 12% 15%
Supplementary Grants
Development 1,676.0
407.0 180.8 0.0 2,263.8 74% 0% 18% 8% 0%
Supplementary Grants
Non-Development 129.0 513.0 38.0 48.8 0.0 728.8 18% 70% 5% 7% 0%
Own-Source Revenue 795.8 292.6 150.7 88.7 175.0 1,502.8 53% 19% 10% 6% 12%
Taxes 0.0 2.9 20.0 0.0 14.0 36.9 0% 8% 54% 0% 38%
Share of UIPT 0.0
0.0 11.9 11.9 0% 0% 0% 0% 100%
Fees and Fines 654.4 184.8 100.0 72.2
1,011.4 65% 18% 10% 7% 0%
Source: computed using Budget estimate data.
7. In Lahore CDG transfers from the province contribute between 91.5 percent and 95.8
percent of the total receipts. Most of the transfers are in the form of the PFC award—up to the
tune of between 70 percent and 74 percent. Less than 20 percent of the transfers are in the form
of the Octroi. Both the supplementary grants on development and non-development combined
comprise less than 15 percent. Receivables from province for various heads carry less than 5
percent. Own source revenue is very low (less than 5 percent). Property taxes constitute less than
one percent. However, fees and fines are a significant source of revenue for Lahore CDG.
36
This analysis deals with Lahore water and sanitation authority (WASA) separately in the next section. All other WASAs are not included in
this analysis.
99
Particularly from general bus stands, commercialization fees of roads mainly, parking stand fees
and sanitation fees. In Faisalabad CDG, transfers constitute a significant source of receipts—
over 97 percent as evidenced by the data from the last 3 years. The PFC award constitutes close
to 90 percent and the octroi grant about 8 percent of the total transfers. Own source revenue is a
small percentage of the total receipts—with Urban Immovable Property Tax (UIPT) constituting
less than 3 percent. Fees and fines are a significant source of revenue—constituting over 60
percent of the total OSR. The main sources of fees and fines are advertisement,
commercialization fee, and general bus stand fees. All the other sources combined constitute less
than 3 percent of the total OSR. In Rawalpindi CDG, a major source of receipts is in the form of
provincial transfers (over 97 percent of total receipts). The PFC award is the major source of
provincial transfers. The octroi grant is a minor source of transfers. Supplementary grants (for
development and non- development) and receivables from the GoPunjab all together covered
below 8 percent in 2010/11. Own source revenue is a minor source of income for Rawalpindi
CDG (less than 3 percent per annum over the last three years). Most of the OSR is in the form of
fines and fees and very minimal is generated from property taxes.
8. In Gujranwala CDG, transfers constitute roughly about 98.8 percent of total receipts.
Most of the transfers are in the form of the PFC, ranging from 72 to 89 percent in the last three
fiscal years. The share of the octroi is small, ranging from 5 to 6 percent in the last three fiscal
years. Between 2009/10 and 2010/11, revised budget estimates showed that both supplementary
development grants and non-development grants hovered between 4 percent and 17 percent.
Revised estimates suggest that OSR is very low—less than 2 percent per annum. UIPT is not a
major source of OSR. Fees and fines constitute about 82 percent of total receipts, with the major
sources being general bus stand fees, and advertisement. In Multan CDG, total receipts were
budgeted at Rs. 6474 million in 2011/12, Rs. 5850 million in 2010/11, Rs. 6122.5 million and
Rs. 6337 million in 2008/09. Overall, transfers from the provincial government constitute
around 97 percent. Most of the transfers come in the form of PFC awards. The Octroi grant is a
minor source of the grant. Similarly, OSR is a minor source of income to Multan CDG. Most of
the OSR is generated from the UIPT, local rates on land interest assessable and the tax on
vehicle. The main sources of income in fees and fines are advertisement and general bus stands.
Development Authorities (DAs)37
9. In Lahore Development Authority, transfers from the province dropped in FY 2010/11
compared to FY 2008/09—2009/10. In terms of contribution to total receipts, transfers were not
a major source in 2010/11, although they constituted about 28 percent in 2008/09—2009/10. The
authorities‘ major source of receipts is OSR contributing over 72 percent. The share of UIPT is
less than 14 percent in 2010/11. Fees and fines are a significant source of OSR for LDA—in
2010/11 contributing about 61 percent of the total OSR. However, revised estimates in the
previous two years show less than 40 percent contribution by OSR. Commercialization fees are
the major source of OSR. In 2010/11 it contributed about 67 percent of OSR. Transfer fees of
residential plots in DA housing schemes, extension of building period fees in DA housing
schemes are the other minor sources of fees and fines. Estate development contributes about 20
percent of the OSR. Land sales are another significant source of revenues for the DAs. In
2010/11, land sales were budgeted to grow by 19 percent, while in the previous two years the
37 Data is not available for Gujranwala CDG
100
revised estimates suggest an increase of more than 75 percent. In Faisalabad Development
Authority (FDA), provincial transfers constituted about 58.2 percent of total budgeted receipts in
2010/11. However, actual transfers to the FDA were about 47 percent of the total receipts in
2009/10. Most of the transfers come in the form of the Annual Development Plan (ADP). The
second most important source of transfers is classified as ―transfers for other development
packages‖. OSR are a major source of income for the FDA—contributing almost 53 percent of
the total receipts. Of the OSR, fees and fines contribute more to FDA‘s incomes than do UIPT
taxes. The major sources of fees and fines are departmental charges, transfer fees of residential
plots in DA housing schemes, and other forms of fines, fees and penalties.
10. In Gujranwala DA (GDA), transfers are a major source of income—corresponding to at
least 70 percent per annum according to revised budget estimates. Most of the transfers come in
the form of the ADP followed by the development packages. OSR is another major source of
income for the GDA with close to 20 percent of total revised budget receipts. However, UIPT is
not a major source of income to the GDA. Fees and fines are another source of income,
particularly the transfer fees of residential plots in DA housing schemes, departmental charges
and plan submission fees in DA housing schemes. With respect to estate development, the sale of
houses, shops and other buildings is the major source of income. The GDA also collects income
on electricity charges on rented properties, profit on investment and PLS accounts and CDRs
received from contractors. In Multan DA, OSR is the major source of income between more than
half of the total contribution to the DA‘s receipts. Transfers are the second major source of
income (hovering between 22 percent and 49 percent). Transfers for other development packages
are the main source of the transfers. Fees and fines, particularly from commercialization fees,
penalties, transfer fees of residential plots in DA housing schemes, and departmental charges—
are other minor sources of income to the DA.
Overall summary, fiscal aggregates
11. Table 2a shows selected fiscal aggregate indicators of the City District Governments of
the five large cities of Punjab. The largest percentage of receipts to cities is in the form of
transfers. In all five cities but Lahore, over 95 percent of total receipts come in the form of
transfers from provincial or federal government. Most of the transfers come in the form of the
PFC award. Own source receipts constitute a small portion of total receipts, with the lowest in
Gujranwala (with about 1 percent of total receipts). In Lahore, own source receipts constitute
about 6 percent of the total receipts and in Faisalabad; OSR constitutes about 2 percent of the
total receipts. Licenses, fees and fines are a key source of OSR for the CDGs. Property taxes are
a minor source of revenue, yet the potential is high to contribute to the overall finances of the
cities.
101
Table 7.2a: Selected Fiscal Aggregates of the CDGs of the Five Large Cities of Punjab –
Multi-year Averages
Lahore Faisalabad Rawalpindi Gujranwala Multan
Transfers as a percentage of total receipts 94% 98% 97% 99% 98% Own-source Receipts as percentage of
Total Receipts 6% 2% 3% 1% 2%
PFC as a percentage of total transfers 74% 88% 82% 80% 71%
Octroi as a percentage of total transfers 13% 9% 5% 6% 7% Taxes as percentage of Own-source
Receipts 0% 2% 13% 0% 7% Licenses, fees and fines as percentage of
Own-source Receipts 82% 68% 66% 82% 66% User Charges as percentage of Own-
source Receipts 1% 2% 0% 0% 0% Other Receipts as percentage of own-
source revenue 11% 29% 21% 18% 27% Source: Computed from City District Budget data, Government of Punjab
*Computations based on available actual/realized budget data for the period 2007/8—2010/11
12. Table 2b shows selected fiscal aggregate indicators of the WASAs of the five large cities
of Punjab. A large percentage of receipts to WASAs are in the form of transfers, ranging from
38 percent in Rawalpindi to 83 percent in Gujranwala. WASAs do not get transfers from the PFC
award so most of these receipts are tied grants for development projects. Own source receipts
constitute the second major chunk of total receipts, ranging from 17 percent in Gujranwala to 62
percent in Rawalpindi. These own-source receipts primarily include two components: share of
UIPT (collected on their behalf by the provincial government and then transferred annually) and
user charges for water and sewage. User charges constitute over 60 percent of own-source
receipts in all cities except Gujranwala, where they are 27 percent only. In that city, taxes have
formed a larger chunk of own-source receipts at 59 percent. In general, however, taxes (primarily
property tax share) are a low share of own-source receipt, with the number in Lahore being 17
percent.
Table 7.2b: Selected Fiscal Aggregates of the WASAs of the Five Large Cities of Punjab –
Multi-year Averages
Lahore Faisalabad Rawalpindi Gujranwala Multan
Transfers as a percentage of total receipts 51% 75% 38% 83% 82%
Own-source receipts as percentage of total
receipts
49% 25% 62% 17% 18%
Taxes as percentage of own-source receipts 17% 22% 29% 59% 28%
User charges as percentage of own-source
receipts
76% 71% 61% 27% 62%
Source: Computed from WASA Budget data, Government of Punjab
*computations based on available actual/realized budget data for the period 2007/8—2010/11
13. A recent report on property taxation in Punjab shows that the UIPT provides for only a
small amount of revenues because of unclear local government fiscal incentives, an unreliable
information base, a high level of reliefs and exemptions, a low level of motivation and expertise,
102
and insufficient capacity in the UIPT administration. The project will seek to tackle the
impediments that result in inefficient collection of the property taxes in the five cities of Punjab
(without changing the tax rates).
Potential impact of operation on UIPT
14. Revenues from property taxation allow city governments in Punjab to pay for
maintenance of key infrastructure and to provide basic services to the citizens. One of core
objectives of the Government is to improve own source revenue (OSR) through improving tax
policy and administration. The commitment to restructure the UIPT system culminated in
drafting the new Punjab Urban Immovable Property Tax Law in May 2008. One of the main
goals of the medium-term policy framework of the Government on the UIPT is to extend the
coverage of the UIPT. More recently, the Government with the support of the World Bank has
developed a blue print and action for reform of the property tax system. The action plan for
reform seeks to improve incentives in the intergovernmental fiscal system, expand the tax base
and to make tax administration more effective.38
15. Among the key assumptions of this blue print are to widen the tax base (e.g. by
incorporating those areas that are currently not taxed and to broaden the tax base by
implementing the proposals of the draft UIPT legislation).39
The new draft proposes redefinition
of the rating area in accordance with the PLGO; redefinition of immovable property, redefinition
of a liable person; indexation and elasticity of tax rates, as levying authority; valuation issues
(e.g. preparation of a 3 year valuation lists; creation of a valuation table for each rating area);
review of exemptions; administrative changes including the introduction of an assessing
authority, a billing authority and a levying authority.
16. The USPMSU embarked upon a massive computerization process of all properties in
Punjab. A new Geographic Information Systems (GIS)-based property tax register will be
available in 2012. The proposed Punjab large cities project will contribute to operationalization
of the register. The analysis below shows projections for the potential increases in UIPT based
on the assumption that every five years the actual collection of taxes would double. As shown in
Figure 1 there is a huge gap between the actual collection of property taxes and the potential.
17. Through this project technical assistance will be provided to enhance the documentation
of the properties. This will simplify the process of rolling out the GIS-based property tax system.
Three scenarios are developed to predict the potential gains in form of property tax collection
assuming no changes happen in the existing tax rate regime. For simplicity, we first estimate the
average growth rate in property tax collection over a 5 year period. The data show that the lowest
average growth rate was about 2.14 percent corresponding to fiscal years (especially 2001/02 and
2004/05) when actual property tax collection declined compared to the previous fiscal years.
This is assumed the worst case scenario. The second case scenario corresponds with an average
38 Institute of Revenue Rating and Valuation (2009), ―Property Tax Decentralization Program: Scope Evaluation Report‖, Draft,
April 2009. 39 Caveat of the analysis: There are other factors outside the scope of the proposed Punjab Large cities‘ project that may constrain
increasing UIPT as stipulated in following analysis. These constraints may include the organizational obstacles (e.g. insufficient
staff capacity) that may impede the Excise and Taxation Department to better administer UIPT.
103
growth rate of about 7 percent. The third and most optimistic scenario is when an average growth
rate of 15 percent is applied.
Figure 7.1: Punjab Province. Actual and Potential Property Tax Collection (in Rupees),
1993/94—2009/10
Source: Based on data from Government of Punjab.
18. Applying each of the three scenarios simulations are carried out of the potential effects on
property taxes if the GoPunjab was able to ensure better monitoring of the UIPT. The base
scenario is that tax rates do not change and that there is no documentation, and hence better
monitoring of property taxes. Existing analysis predicts that better monitoring can increase
property taxes by about 15 percent per annum. To allow for error in this prediction, we look at
three scenarios—a low case scenario in which only 5% increase, a medium case of 15%, and the
20% increase in property taxes. Table 3 below summarizes the three scenarios. In the worst
case scenario, property taxes can increase by between US$ 10 million and US$ 41 million and in
an optimistic scenario it is possible to generate between US$ 37 million and US$ 147 million
over the life of the project.
Table 7.3: Illustration of Potential Scenarios of Property Tax Increases through Improved
Documentation (in US$ million)
Year Worst case scenario Medium case scenario Third case scenario
5% 15% 20% 5% 15% 20% 5% 15% 20%
2009/10 1.86 5.57 7.43 1.86 5.57 7.43 1.86 5.57 7.43
2010/11 1.89 5.68 7.58 1.99 5.96 7.95 2.32 6.97 9.29
2011/12 1.93 5.80 7.73 2.13 6.38 8.51 2.90 8.71 11.61
2012/13 1.97 5.91 7.88 2.28 6.83 9.10 3.63 10.88 14.51
2013/14 2.01 6.03 8.04 2.43 7.30 9.74 4.53 13.60 18.14
2014/15 2.05 6.15 8.20 2.61 7.82 10.42 5.67 17.00 22.67
2015/16 2.09 6.28 8.37 2.79 8.36 11.15 7.09 21.26 28.34
0 1000 2000 3000 4000 5000
1993/94
1995/96
1997/98
1999/00
2001/02
2003/04
2005/06
2007/08
2009/10
expected collection (potential) actual collection
104
Year Worst case scenario Medium case scenario Third case scenario
2016/17 2.13 6.40 8.53 2.98 8.95 11.93 8.86 26.57 35.43
Est.
increase 10.26 30.77 41.03 13.09 39.26 52.34 36.85 110.56 147.42
Source: Computations using actual property data of the province.
19. Some of the project benefits are possible to quantify and others are difficult to do so. This
analysis attempts to quantify, where feasible, some of the potential benefits. Among the expected
quantifiable benefits due to improving the systems of city governance in Punjab is increased
property tax revenues. As shown above, under different scenarios property tax revenues are
likely to increase when the project supports enhancements of the GIS based property tax
system.40
Given the nature of the project there are numerous other benefits that are difficult to
quantify (for example, responsiveness of city governments to citizen‘s demands. To arrive at
estimates of the potential net present values and internal rates of return that maybe associated
with the project investments, estimates of the DLI costs shown below in Table 7.4 are applied to
the potential property tax revenue benefits captured in the Table 3 above.
Table 7.4: Estimated DLI costs (US$ million)
Estimated Costs US$ Million
Boundary Alignment 3.53
Public Disclosure and Access to Information 2.37
Accountability 0.77
Resource Planning 14.76
Procurement 0.29
Intergovernmental Finance System 0.11
Revenue Enhancement 0.44
Rollout of the Property tax system 3.50
Other O& M related investments 4.23
20. The benefits that arise from GoPunjab being able to generate more revenues from
property taxes include possible investments in basic infrastructure in cities, improved
maintenance of assets, and enhanced service provision. The benefits from such investments can
generate significant benefits that we claim can exceed the estimated costs on the DLIs shown
above. Other potential benefits could arise from improvements in procurement practices. Cities
will be able to better manage and allocate their resources, and as a result, access and quality of
basic services will be improved.
Financial Analysis of the Potential Impact of the Project on Utility (ies’) Operational
Efficiency: The Case of WASA, Lahore.
21. At present, the total number of water supply connections in Lahore is 610,000. Of these,
about 95 percent (some 577,000) are household connections and 5 percent being commercial
40
A limitation of this analysis is that it is difficult to entirely attribute improvements in the property tax
administration to the project. In addition, there may be costs associated with the increases in taxes, especially if the
gains from the tax reforms are not redistributed to benefit those that need the basic public services, especially the
urban poor.
105
connections. The total number of metered connections is 107,000. The total number of ‗virtually‘
metered connections is 379,000. Seventy thousand meters have been purchased and are gradually
being installed in the virtually metered areas. The average duration of water supply in the city is
18 hours in the summer and 14 hours in the winter season. This analysis uses the example of
Lahore Water and Sanitation Agency (WASA) to demonstrate the potential impact of the PLC
operation on the ability to maintain existing infrastructure of water supply and sanitation. There
is scope for the water utilities to lower operational costs (e.g. high electricity costs partly due to
running obsolete water equipment).The WASAs in the five cities of Punjab can improve service
delivery to their customers by addressing operational inefficiencies associated with breakdowns
of water supply and sanitation equipment. This analysis is based on financial statements of
Lahore WASA. Every fiscal year (running from July 1st to June 30
th) Lahore WASA prepares
financial statements (including balance sheet (B/S), profit and loss statement (P/L), and cash
flow sheet (C/S)) for water and waste water.
22. Lahore WASA has a potential to increase its water revenue, if (i) there are more water
meters to allow for better understanding of the water consumed; (ii) better management of water
utility ledgers; and (iii) better communication between customers and WASA, and (iv)
improvements in the computerized water billing system, among others. An analysis of Lahore
Balance sheet shows that of the total assets, roughly 60 percent are fixed assets and 9 percent are
long term investment assets. In terms of current assets, the largest item is consumers‘ receivables
at about 56 percent of all current assets. Creditors accrued and other liabilities constitute about
82 percent of the current liabilities. Long term loans constitute about 82 percent of the long term
liabilities. The accumulated consumer receivables (recoverable from defaulters) were about 1645
million rupees in 2008/9. Most of the receivable was attributed to domestic households (about 85
percent) followed by commercial—about 10 percent and government organizations—5 percent.
One of the options that Lahore WASA can effectively use to tackle the issue of escalating
consumer receivables is the installation of meters of all consumers. In 2004, water and
wastewater tariffs were revised. As a result, operating and non-operating revenues increased.
However, the increase was temporary as expenses rose due to increases in electricity and fuel
prices (roughly by about 43 percent of total cost), increase in repair costs of vehicles, tube-wells
and sewage pumps, and pay raise of payroll (roughly 30 percent of total cost) as of 2008. The
increases in electricity costs are attributed to two main factors, (i) the increase in electricity
tariffs and (ii) old equipment that consume more energy.
23. Table 7.5 below shows the non-development expenditures over 2007/8 and 2008/9.
Increase in power and energy prices and increases in repair and maintenance costs constituted
about 64 percent of the total non-development expenditures. Between 2007/8 and 2008/9 power
and energy prices and repair and maintenance costs increased by 20 percent and 14 percent
respectively. WASA receives subsidies so as to be able to meet some of the O & M costs.
106
Table 7.5: Lahore WASA. Non-development expenditures (Rs. Million), 2007/8—2008/9
Non-development
expenditure 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Power and Energy 1175.2 1411.2 1694.593 2034.896 2443.537 2934.241 3523.486 4231.0609 5080.7294 6101.0256
Actual Actual forecast forecast forecast forecast forecast forecast forecast forecast
Payroll and burden 860.8 1015.5 1219.43 1464.312 1758.37 2111.48 2535.501 3044.6729 3656.0946 4390.3001
Repair and
maintenance 577 663.5 796.742 956.7412 1148.871 1379.584 1656.627 1989.3062 2388.7925 2868.5023
Total expenditures 2707.1 3196.2 3838.051 4608.796 5534.32 6645.705 7980.275 9582.8493 11507.247 13818.097
Source: Lahore WASA
*WASAs sustain the incremental O&M
24. During the project preparation it was mentioned that one of the key constraints faced by
Lahore WASA is that of breakdown of capital assets and the lack of adequate resources for
preventive maintenance. Assume Lahore receives an allocation of US$ 10 million from city
governments (attributable to improvements due to the project), which translates into an
additional US$ 2 million per year for expenditure on operations and maintenance. What does this
mean in terms of the financial analysis of Lahore WASA? In this analysis, we forecast the future
Lahore WASA balance sheet using average percentage changes in all aggregates over the period
2003/4—2007/8. We then project the future values under the assumption that the situation in past
(on average) will prevail in the future. Table 7.6 below shows the forecast balance sheet. Lahore
WASA may have 8 percent to 15 percent more resources to expend on O&M of water and waste
water equipment. However, based on the estimates in Table 7.6, it is important to acknowledge
that the contribution toward WASAs is likely to be too low to create significant impact in
improving the financial situation. Nevertheless, the project will aim at enhancing systems for
better management of water utilities.
107
Table 7.6: Lahore WASA. Balance sheet (2003/4—2007/8), forecasts (2008/9—2016/17)
Description 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Fixed assets 4629.15 4820.78 4956.51 5120.2 5283.89 5461.622 5645.332 5835.222 6031.499 6234.377 6444.081 6660.837 6884.885 7116.469
Fixed assets CWIP 213.32 166.43 450.91 569.71 688.51 711.6691 735.6072 760.3505 785.9261 812.362 839.687 867.9312 897.1254 927.3017
State held for capital expense 17.12 15.41 22.82 25.67 28.51 29.46898 30.46021 31.48479 32.54383 33.63849 34.76998 35.93952 37.1484 38.39795
Advance for acquisition for land 29.49 26.19 30.14 30.47 30.8 31.83601 32.90686 34.01373 35.15784 36.34043 37.5628 38.82628 40.13226 41.48217
sub-total 4889.08 5028.81 5460.38 5746.05 6031.71 6234.596 6444.306 6661.071 6885.126 7116.718 7356.1 7603.534 7859.291 8123.651
Long term Investment 477.07 502.46 897.03 1367.62 646.15 667.8843 690.3496 713.5706 737.5727 762.3821 788.026 814.5325 841.9306 870.2502
Long term loan to employees 10.75 11.03 42.64 55.11 67.58 69.85316 72.20278 74.63143 77.14178 79.73656 82.41863 85.19091 88.05644 91.01835
long term security deposit 14.79 15.37 15.02 15.14 15.26 15.77329 16.30385 16.85226 17.41911 18.00503 18.61066 19.23666 19.88371 20.55253
deferred expenditure 3.69 4.34 3.91 4.02 4.13 4.268919 4.412511 4.560933 4.714347 4.872921 5.036829 5.206251 5.381371 5.562382
sub-total 506.3 533.2 958.6 1441.89 733.12 757.7796 783.2687 809.6152 836.8479 864.9966 894.0921 924.1663 955.2521 987.3835
current assets
stores and spare 15.4 14.72 22.48 26.02 29.57 30.56463 31.59272 32.65539 33.75381 34.88917 36.06272 37.27575 38.52958 39.82558
consumers receivables 1078.03 1378.68 1361.76 1503.63 1645.5 1700.849 1758.06 1817.195 1878.319 1941.499 2006.805 2074.307 2144.079 2216.199
current portion of long term
investments 1.85 67.97 - - -
loans and advances to employees 6.95 4.55 - - -
Pre-payment and other receivables 146.26 283.88 148.79 150.06 151.33 156.4202 161.6817 167.1201 172.7414 178.5519 184.5577 190.7656 197.1823 203.8148
Bank Balances 459.01 101.01 1052.69 2190.63 1571.07 1623.915 1678.538 1734.999 1793.358 1853.68 1916.032 1980.481 2047.097 2115.954
sub-total 1707.5 1850.81 2585.72 3870.34 3397.47 3511.749 3629.872 3751.969 3878.172 4008.621 4143.457 4282.829 4426.888 4575.794
Total 7102.88 7412.82 9004.7 11058.28 10162.3 10504.12 10857.45 11222.65 11600.15 11990.34 12393.65 12810.53 13241.43 13686.83
Liabilities
Capital contribution 1319.56 1332.47 2879.96 4258.5 4862.5 5026.058 5195.117 5369.863 5550.487 5737.186 5930.165 6129.636 6335.816 6548.931
accumulated loss -5004.21 -5538.27 -6203.21 -6874.74 -7810.62 -8073.34 -8344.9 -8625.6 -8915.73 -9215.63 -9525.61 -9846.02 -10177.2 -10519.5
sub-total -3684.65 -4205.8 -3323.25 -2616.24 -2948.12 -3047.28 -3149.78 -3255.73 -3365.24 -3478.44 -3595.44 -3716.38 -3841.39 -3970.6
grant 319.41 285.77 875.37 1982.77 1371.17 1417.291 1464.964 1514.241 1565.175 1617.822 1672.24 1728.488 1786.628 1846.724
deferred credit 380.33 512.78 385.41 387.96 390.5 403.6351 417.212 431.2456 445.7512 460.7447 476.2426 492.2618 508.8198 525.9347
sub-total -2984.91 -3407.25 -2062.47 -245.51 -1186.45 -1226.36 -1267.61 -1310.25 -1354.32 -1399.87 -1446.96 -1495.63 -1545.94 -1597.94
long term liabilities
0 0 0 0 0 0 0 0 0
long term loans 3569.66 3373.67 5436.78 5513.07 5589.36 5777.367 5971.698 6172.565 6380.189 6594.797 6816.623 7045.911 7282.911 7527.883
employees benefits 992.89 877.16 992.88 992.88 992.88 1026.277 1060.798 1096.479 1133.361 1171.483 1210.888 1251.618 1293.718 1337.234
consumers and plumbers deposits 20.6 21.11 21.62 22.13 22.65 23.41187 24.19936 25.01335 25.85471 26.72437 27.62329 28.55244 29.51285 30.50556
sub-total 4583.15 4271.94 6451.28 6528.08 6604.89 6827.056 7056.695 7294.058 7539.405 7793.004 8055.134 8326.081 8606.142 8895.623
current liabilities
0 0 0 0 0 0 0 0 0
current portion of long term loans 1714.53 1930.58
0 0 0 0 0 0 0 0 0
DWIP 15.24 64.43 509.52 503.56 306.95 317.2747 327.9468 338.9778 350.3798 362.1654 374.3474 386.9392 399.9545 413.4076
creditors accrued and other liabilities 3774.85 4553.12 4106.37 4272.14 4437.9 4587.176 4741.473 4900.959 5065.811 5236.207 5412.335 5594.388 5782.564 5977.069
sub-total 5504.62 6548.13 4615.89 4775.7 4744.85 4904.45 5069.419 5239.937 5416.191 5598.373 5786.683 5981.327 6182.518 6390.477
overall total 7102.88 7412.82 9004.7 11058.28 10162.3 10504.12 10857.45 11222.65 11600.15 11990.34 12393.65 12810.53 13241.43 13686.83
Source: Computations using Lahore WASA data
108
Annex 8: City Expenditure Review of Five Large Cities in Punjab Province
PAKISTAN: Punjab Cities Governance Improvement Project
1. This section analyzes the fiscal situation of the five cities of Lahore, Faisalabad,
Rawalpindi, Gujranwala, and Multan in Punjab Province, including the expenditure review as
well as analysis of funds of flow. For the purpose of the analysis, City District Governments
(CDGs), Development Authorities (DAs) and Water and Sanitation Authorities (WASAs) are all
included in the analysis for each city. Actual revenue and expenditure number are used in the
analysis for the past three years.
2. This specific section focuses on the expenditure side of the five cities, including City
District Governments (CDGs), Development Authorities (DAs), and WASAs. For the purpose of
the analysis, urban and municipal service related expenditures refer to the expenditures occurred
at these departments/entities: (1) Works and Services Department under CDGs, (2) Municipal
Services Department under CDGs, (3) DAs, and (4) WASAs.
3. For the past three years, total expenditures for the five cities combined have outpaced
total revenues (including transfers and OSR) (see Figure 1). This is also true for most cities in
most of the recent three years, except Multan, whose revenues for the past two years were above
its local expenditures41
(see Table 1 and Figure 2).
Figure 8.1: Comparison of Total Revenue and Total Expenditure for Five Cities 2008- 2011
Source: Computed using city budget books.
41
City deficit is not analyzed because there is no available data on starting and ending balances of city budgets. The
analysis focuses on the flow of funds, revenues, and expenditures.
109
Table 8.1: City-District Wide Expenditures for Five Cities, 2008-2011 (Million USD) Lahore Faisalabad Rawalpindi Multan Gujranwala Total 5 Cities
201
0-
11
200
9-
10
200
8-
09
201
0-
11
200
9-
10
200
8-
09
201
0-
11
200
9-
10
200
8-
09
201
0-
11
200
9-
10
200
8-
09
201
0-
11
200
9-
10
200
8-
09
201
0-
11
200
9-
10
200
8-
09
Total Receipts 254.84
218.44
215.17
172.99
121.51
140.47
80.93
78.39
81.82
105.54
117.44
105.79
83.13
75.45
77.61
697.43
611.23
620.86
Total
Expenditure
274
.72
264
.49
235
.76
203
.12
151
.49
136
.11
101
.58
88.
53
80.
93
111
.93
107
.50
85.
25
106
.89
108
.62
98.
66
798
.24
720
.64
636
.71
Current Expenditure
205.41
173.13
142.01
133.90
109.46
91.08
83.54
68.34
59.36
79.70
63.03
52.19
84.01
72.43
61.87
586.55
486.39
406.51
Capital /
Development Expenditure
69.
31
91.
36
93.
75
69.
22
42.
02
45.
03
18.
05
20.
19
21.
56
32.
23
44.
48
33.
06
22.
89
36.
20
36.
79
211
.69
234
.24
230
.20
Note: This includes City District-wide expenditure in the following three entities: City District Governments, WASAs
and Development Authorities.
Figure 8.2: Comparison of Total Revenue and Total Expenditure for Each City, 2008- 2011
Source: computed using city budget books.
4. The five cities have spent more on current expenditures than on development/capital
expenditures for the past three years. In 2010-2011, five cities combined spent US $586 million
on current expenditures and US$ 211 million on development budgets. (see Figure 3) Within the
current expenditures, employee related expenses (salary and allowances) take the biggest share
($446 million) (see Table 2).
110
Figure 8.3: Comparison of Current Expenditure v.s. Capital/Development Expenditure for Five Cities,
2008-2011
Source: computed using city budget books.
Table 8.2: Detailed City District-Wide Expenditure, All 5 Cities, 2010-11
All figures in USD Million CDG DA WASA Total 5 Cities
Current Expenditure 488.83 21.16 76.56 586.55
of which:
Employee related expenses 407.19 12.39 26.67 446.25
Non-employee related expenses 81.64 8.77 49.89 140.31
Current Expenditure on Urban/Municipal Service Delivery Functions* 82.36 21.16 76.56 180.08
of which:
Employee related expenses 43.49 12.39 26.67 82.54
Non-employee related expenses 38.88 8.77 49.89 97.54
Development Expenditure on Urban/Municipal Service Delivery Functions* 41.22 64.38 67.81 173.42
Total Expenditure on Urban/Municipal Service Delivery Functions* 123.59 85.54 144.37 353.50
Expenditure on Urban/Municipal Service Delivery Functions as % of Total
Expenditure 22% 100% 100% 44%
Source: computed using city budget books.
5. Municipal service delivery related expenditures contribute to a substantial portion of total
expenditures. The five cities spent $353 million in 2010-2011 on municipal service related
expenditures, among which $180 million was on current expenditures and $173 million was on
development/capital expenditures. Figure 4 shows that Lahore spent nearly 60% of its total
expenditures on municipal service related, such as water and sanitation and roads. While
WASAs and DAs spend all of their expenditures on municipal service related activities, CDGs
spend averagely 22% of their expenditures on municipal service, mainly being from Works and
Services Department and Municipal Service Department. Specific numbers range from 12% to
31% cross the cities.
111
Figure 8.4: Comparison of Total City Expenditure on Municipal Service Delivery, 2010-2011
Source: computed using city budget books.
6. Salaries and Allowances of employees take a large share under the city current
expenditures. 46 percent of total current expenditures related with municipal service for five
cities are paid to the city employees as salaries and allowances (see Figure 5 and Figure 7).
Among the non-salary current expenditures on municipal service activities, two biggest
expenditure items are: electricity for operations; and repair and maintenance of machinery,
equipment, buildings and roads. In 2010-2011, for five cities combined, these two items
contribute 36% and 34% respectively of total non-salary current expenditures (see Figure 6).
Electricity expenditure mainly comes from WASAs and has become a substantial expenditure
item for most WASAs—Lahore WASA spent nearly $24 million on electricity bills in 2010-
2011 (see Figure 7).
7. Expenditure on Repair & Maintenance (R&M) varies a lot across cities. Multan spent
1.4% of its total expenditure on R&M in 2009-10 and Lahore spent 6.5% of its total expenditure
on R&M in 2009-10. (see Table 3)
112
Figure 8.5: City-Wide Current Expenditure on Municipal Service Delivery, Combined Five Cities,
2010-2011
Source: computed using city budget books.
Table 8.3: City Expenditure on Repair & Maintenance, All 5 Cities, 2008-2011(million USD)
Lahore Faisalabad Rawalpindi Multan Gujranwala
2010
-11
2009
-10
2008
-09
2010
-11
2009
-10
2008
-09
2010
-11
2009
-10
2008
-09
2010
-11
2009
-10
2008
-09
2010
-11
2009
-10
2008
-09
Total
Expendit
ure
274.7
2
264.4
9
235.7
6
203.1
2
151.4
9
136.1
1
101.5
8 88.53 80.93
111.9
3
107.5
0 85.25
106.8
9
108.6
2 98.66
Repair &
Maintena
nce Exp 16.49 17.22 12.49 8.68 5.90 5.29 2.78 3.61 2.41 2.00 1.54 1.26 3.68 2.84 4.10
Share of
R&M
Exp 6.0% 6.5% 5.3% 4.3% 3.9% 3.9% 2.7% 4.1% 3.0% 1.8% 1.4% 1.5% 3.4% 2.6% 4.2%
Source: computed using city budget books.
8. Flow of Funds: In the Punjab province, five districts have been notified as City
Districts, which are headed by City District Governments (CDGs). The area under their
jurisdiction includes the built-up urban area (the ‗large city‘) as well as surrounding rural areas
or other smaller, urban areas in the same district. Besides CDGs, these five districts also have
Development Authorities and Water and Sanitation Authorities (WASAs). Finally, all City
Districts have a number of Town Municipal Administrations (TMAs) that provide certain
municipal services. However, these TMAs are not part of this project.
113
Figure 8.6: City-Wide Non-Salary Current Expenditure on Municipal Service Delivery, Combined Five
Cities, 2010-2011
Source: computed using city budget books.
Figure 8.7: Comparative City-wide Current Expenditure on Municipal Service Delivery, 2010-11
Source: computed using city budget books.
114
9. There are significant inter-governmental fiscal transfers within the city entities. These
fiscal transfers include one-time arbitrary subsidies and grants, vertical grants for development
and recurrent expenditures, formula-based allocations of tax revenue collected on behalf of city
entities, and formula-based allocations of provincial funds for budget support of city entities.
10. At the apex of city entities sits the City District Government. Sources of revenue for the
CDG are as follows:
Provincial Finance Commission (PFC) Award: a formula-based allocation for each
District from the Provincial Allocable Fund based primarily on the population of each
district. This is a predictable, regular source of funding for CDGs and is often its
largest single item of receipts.
Own-Source Revenue: this primarily includes varies kinds of self-collected taxes;
fees, fines and rates (advertisement fees, commercialization fees, license fees on
trades, parking and bus stand fees etc); and other miscellaneous items such as rents
from property, income from any investments etc.
Vertical grants from Provincial or Federal governments: these grants are arbitrary,
and can vary significantly each year. They can be for recurrent (salaries, operations
and maintenance etc.) as well as capital / ‘development‘ expenditures. Often, these
are tied to special projects and initiatives run by the federal or provincial
governments. As such, CDGs have limited freedom to utilize them for their own
purposes, and can thus not be planned for in a reasonable manner.
11. For Water and Sanitation Authorities (WASAs), the following sources of revenue and
fiscal transfers exist:
Share of Urban Immovable Property Tax (UIPT): a formula-based allocation for each
District WASA from the net collections of Urban Immovable Property Tax, which is
collected by the Provincial Excise and Taxation Department. This is a predictable,
regular source of funding for WASAs. Not all DAs in the province receive a UIPT
share.
Collection of user charges: this primarily includes user charges (fees) for water and
sewage service delivery. This includes both metered as well as bulk sales. Besides
this, WASAs also have other miscellaneous own-source revenues such as rents from
property, income from any investments etc.
Vertical grants from Provincial, Federal or District governments: these grants are
arbitrary, and can vary significantly each year. They can be for recurrent (salaries,
operations and maintenance etc.) as well as capital / ‘development‘ expenditures.
Often, these are tied to special projects and initiatives run by the federal or provincial
governments. As such, WASAs have limited freedom to utilize them for their own
purposes, and can thus not be planned for in a reasonable manner. Sometimes, various
levels of government subsidize unpaid electricity bills for WASA by transferring
money directly for this payment.
115
Deposit Works: transfer of funds to WASA by various government entities/agencies
for certain public works to be performed on their behalf. These are tied to the specific
works for which they are transferred. These are, again, arbitrary and not predictable.
12. For Development Authorities (DAs), the following sources of revenue and fiscal transfers
exist:
Share of Urban Immovable Property Tax (UIPT): a formula-based allocation for each
District WASA from the net collections of Urban Immovable Property Tax, which is
collected by the Provincial Excise and Taxation Department. This is a predictable,
regular source of funding for DAs.
Revenue from Estate Development: a unique function of Development Authorities is
to develop residential and commercial properties for sale to the general public.
Proceeds from auctions and sales of such properties constitute this head. Besides this,
DAs also have other miscellaneous own-source revenues such as rents from property,
income from any investments etc.
Vertical grants from Provincial, Federal or District governments: these grants are
arbitrary, and can vary significantly each year. They can be for recurrent (salaries,
operations and maintenance etc.) as well as capital / ‘development‘ expenditures.
Often, these are tied to special projects and initiatives run by the federal or provincial
governments. As such, DAs have limited freedom to utilize them for their own
purposes, and can thus not be planned for in a reasonable manner.
Deposit Works: transfer of funds to DA by various government entities/agencies for
certain public works to be performed on their behalf. These are tied to the specific
works for which they are transferred. These are, again, arbitrary and not predictable.