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Distribution: Restricted EB 2001/72/R March 2001 Original: English Agenda Item 9(b)(iii) English

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Distribution: Restricted EB 2001/72/R March 2001 Original: English genda Item 9(b)(iii) English IFD Executive Board Seventy-Second Session Rome, pril 2001 REPORT ND RECOMMENDTION OF THE PRESIDENT
Distribution: Restricted EB 2001/72/R March 2001 Original: English genda Item 9(b)(iii) English IFD Executive Board Seventy-Second Session Rome, pril 2001 REPORT ND RECOMMENDTION OF THE PRESIDENT TO THE EXECUTIVE BORD ON PROPOSED LON TO THE ISLMIC REPUBLIC OF PKISTN FOR THE NORTH-WEST FRONTIER PROVINCE BRNI RE DEVELOPMENT PROJECT Document #: Library: DMS Due to resource constraints and environmental concerns, IFD documents are produced in limited quantities. Delegates are kindly requested to bring their documents to meetings and to limit requests for additional copies. TBLE OF CONTENTS CURRENCY EQUIVLENTS WEIGHTS ND MESURES BBREVITIONS ND CRONYMS MP OF THE PROJECT RE LON SUMMRY PROJECT BRIEF iii iii iii iv v vi PRT I THE ECONOMY, SECTORL CONTEXT ND IFD STRTEGY 1. The Economy and gricultural Sector 1 B. Lessons Learned from Previous IFD Experience 2 C. IFD s Strategy for Collaboration with Pakistan 2 PRT II THE PROJECT 4. Project rea and Target Group 4 B. Objectives and Scope 5 C. Components 5 D. Costs and Financing 7 E. Procurement, Disbursement, ccounts and udit 10 F. Organization and Management 10 G. Economic Justification 11 H. Risks 12 I. Environmental Impact 12 J. Innovative Features 12 PRT III LEGL INSTRUMENTS ND UTHORITY 12 PRT IV RECOMMENDTION 13 NNEX SUMMRY OF IMPORTNT SUPPLEMENTRY SSURNCES INCLUDED IN THE NEGOTITED LON GREEMENT 15 i PPENDIXES I. COUNTRY DT 1 II. PREVIOUS IFD LONS IN PKISTN 2 III. LOGICL FRMEWORK 3 IV. IMPLEMENTTION RRNGEMENTS 6 V. COSTS ND FINNCING 11 VI. ECONOMIC ND FINNCIL NLYSES 13 ii CURRENCY EQUIVLENTS Currency Unit = Pakistani rupee (PKR) USD 1.00 = PKR PKR 1.00 = USD WEIGHTS ND MESURES 1 kilogram (kg) = pounds (lb) kg = 1 metric tonne (t) 1 kilometre (km) = 0.62 miles (mi) 1 metre (m) = 1.09 yards (yd) 1 square metre (m 2 ) = square feet (ft 2 ) 1 acre (ac) = ha 1 hectare (ha) = 2.47 acres BBREVITIONS ND CRONYMS sdb BME DIU DPC MCOs MVSP NGO NWFP O&M PFIs PLU PRB SDU VOs WCOs WOs sian Development Bank Benefit Monitoring and Evaluation District Implementation Unit District Project Coordinator Men s Community Organizations Mansehra Village Support Project Non-Governmental Organization North-West Frontier Province Operation & Maintenance Participating Financial Institutions Project Liaison Unit Project Review Board Special Development Unit Village Organizations Women s Community Organizations Women s Organizations GOVERNMENT OF THE ISLMIC REPUBLIC OF PKISTN Fiscal Year 1 July 30 June iii MP OF THE PROJECT RE Pakistan: North-West Frontier Province Source: sian Development Bank The designations employed and the presentation of the material in this map do not imply the expression of any opinion whatsoever on the part of IFD concerning the delimitation of the frontiers or boundaries, or the authorities thereof. iv ISLMIC REPUBLIC OF PKISTN NORTH-WEST FRONTIER PROVINCE BRNI RE DEVELOPMENT PROJECT LON SUMMRY INITITING INSTITUTION: BORROWER: EXECUTING GENCY: TOTL PROJECT COST: MOUNT OF IFD LON: TERMS OF IFD LON: COFINNCIERS: MOUNT OF COFINNCING: TERMS OF COFINNCING: CONTRIBUTION OF BORROWER: CONTRIBUTION OF BENEFICIRIES: PPRISING INSTITUTION: COOPERTING INSTITUTION: sian Development Bank (sdb) Islamic Republic of Pakistan Planning, Environment and Development Department of the Government of North- West Frontier Province USD million SDR million (equivalent to approximately USD million) 40 years, including a grace period of ten years, with a service charge of three fourths of one per cent (0.75%) per annum sdb Participating Financial Institutions (PFIs) sdb: SDR million (equivalent to approximately USD million) PFIs: USD 1.21 million 32 years, including a grace period of eight years, with an interest charge of one per cent (1%) per annum during the grace period and one and a half per cent (1.5%) thereafter USD million USD million sdb/ifd sdb v PROJECT BRIEF Who are the beneficiaries? The project will target about households, with special emphasis on women. These are mainly small farmers, landless farm labourers, tenants/sharecroppers and those engaged in rural off-farm occupations. Most of the households live in poor conditions with frequent crop failures due to unreliable climatic conditions. The rapid rural appraisal (RR) and participatory community workshops identified with the target group their priority needs. In general, the poorer villages or communities are small and remote; they have a low average farm size and an above-average number of landless; and their physical and social infrastructure is poorly developed. Why are they poor? The project area s climatic conditions has made it extremely difficult to open the area, increase agricultural productivity, generate employment and improve the living conditions of the population. griculture is characterized by low input/low output and is de facto a subsistence activity. The principal causes of poverty in the area are the limited agricultural base and the uncertain and inadequate rainfall in the south leading to frequent crop failure or yield depression. This, combined with predominantly small and fragmented farms, weak agricultural services and a shortage of inputs and credit facilities, has further trapped the population in a poverty circle. This situation has resulted in increasing migration to generate income, with a corollary of reduced labour availability to increase productivity and additional burdens on women who shoulder the major share of agriculture work. Illiteracy is widespread, particularly among girls, since sending children to school is a double burden on poor families, requiring an outlay of funds, while reducing labour availability. What will the project do for them? The project will: (i) reduce poverty in remote areas of the North- West Frontier Province (NWFP), particularly among smallholders and landless; (ii) improve the status of women by targeting them in a culturally acceptable manner and increase employment opportunities for the rural people; and (iii) improve the living conditions of the rural population and reduce the burden on women through, for example, investment in drinking water supply and basic infrastructure. Project services will be provided through community organizations to be established/strengthened using local non-governmental organizations (NGOs). The project will directly benefit about households (or 7% of the total households in the project area) as a result of crop intensification, improved irrigation and on-farm water management, and improved animal health. In addition, a much larger number of households will benefit from the overall improvement of agricultural services, applied research, water supply and microenterprise and income-generating activities. Beneficiaries, including women, will derive advantages from water-supply development, health and education improvements, training and the creation of income-generating activities. The involvement of newly elected local governments will have a positive impact on good governance, increase the beneficiaries ownership of project investments and improve targeting, implementation and sustainability of the investments. How will the beneficiaries participate in the project? The project has been formulated following extensive beneficiary consultations and taking into account the positive experience of the IFDsupported projects in the country, particularly the Mansehra Village Support Project (MVSP). Consultations included a participatory rural assessment, a gender analysis with women s participation and participatory village workshops with the participation of local government, the private sector and NGOs. The project s design was further validated during appraisal in consultation with the beneficiaries at village level. The project will operate through extensive community mobilization and will include the formation of women s organizations (WOs) and village organizations (VOs), which will then serve as the entry point for line agencies and other service providers enabling them to contact villagers and enter into partnerships for development. ll project technical and social services will be provided according to the needs of the beneficiaries to ensure the services appropriateness, effectiveness and sustainability. dequate training will be provided to project staff, beneficiaries and women. vi REPORT ND RECOMMENDTION OF THE PRESIDENT OF IFD TO THE EXECUTIVE BORD ON PROPOSED LON TO THE ISLMIC REPUBLIC OF PKISTN FOR THE NORTH-WEST FRONTIER PROVINCE BRNI RE DEVELOPMENT PROJECT I submit the following Report and Recommendation on a proposed loan to the Islamic Republic of Pakistan for SDR million (equivalent to approximately USD million) on highly concessional terms to help finance the North-West Frontier Province (NWFP) Barani rea Development Project. The loan will have a term of 40 years, including a grace period of ten years, with a service charge of three fourths of one per cent (0.75%) per annum. It will be administered by the sian Development Bank (sdb) as IFD s cooperating institution. PRT I - THE ECONOMY, SECTORL CONTEXT ND IFD STRTEGY 1. The Economy and gricultural Sector 1. Pakistan covers an area of about km 2. Its population is estimated at 139 million and is increasing by 2.6% per annum. The growth of gross domestic product (GDP) in 1996/97 was only about 3.1%. lmost a third of the country lives in poverty, gauged either by income or caloric intake. 2 The incidence of poverty increased through the 1990s, and the situation has recently deteriorated further due to a slowdown in economic growth and a decline in new official development assistance. Economic growth in 1999 was 3.1%, with the fiscal deficit registering 5.9%. Private capital flows have also greatly diminished, reflecting reduced foreign investor confidence. The Government is taking measures to address the fiscal and current account deficits. To rebuild confidence, it has presented a four-pillar programme consisting of poverty reduction, improved governance, enhanced tax collection and decentralization. 2. Rural areas account for 67% of Pakistan s population and contain more than half of the country s poor. In rural areas, agriculture is the main source of employment and income. lthough declining as a share of the national economy, agriculture still contributes 70% to foreign exchange earnings, generates about 50% of employment and makes up 25% of GDP. Crop production accounts for 60% of the agricultural GDP, the livestock subsector for about 30%, and forestry and fisheries for 10%. The average agriculture growth rate has been low, just keeping pace with the population increase. Main constraints include imperfections in land markets and land distribution, irrigation inefficiencies, the deterioration of land quality, an inadequate rural transport network and restricted access to credit by smallholders. Farmers in rainfed areas are at a significant disadvantage compared to those in irrigated areas in terms of vulnerability to weather and a general lack of access. The protracted drought that Pakistan is currently experiencing has had an especially negative impact in rainfed areas. 1 2 See ppendix I for additional information. Pakistan ranks 138 th out of 174 countries in the 1998 United Nations Development Programme (UNDP) Human Development Index. 1 B. Lessons Learned from Previous IFD Experience 3. Project design incorporates lessons from IFD, sdb and other donor-supported projects and from non-governmental organization (NGO) activities. While it has not been easy to push for a gender-sensitive approach, many ongoing IFD-funded projects are learning to work out locally acceptable ways of mainstreaming gender issues as mentioned above. Overall, many previous projects can be considered generally successful as they achieved an improved standard of living in the rural areas served, despite a few implementation issues and lower disbursement due to the continuing weakness of the Pakistani rupee. Project experience has shown that a participatory, demand-driven approach carried out in a non-confrontational, non-exclusive and culturally sensitive manner is very effective in reaching the target group and the poorer villages, including women. To ensure proper targeting of beneficiaries and their commitment to the project, flexible implementation and decentralized management are required. ccessibility to credit is the sine qua non for introducing new thinking and approaches to improve the productivity of the poor, and the design of a good delivery and recovery system is important to ensure the sustainability of credit. The success of credit depends on the mobilization of the poor s limited savings, the involvement of communities in the credit process and its linking to the formal financial system. The participation of women in the identification and prioritization of their own needs must be ensured through strong sensitization programmes for both men and women, the involvement of suitable grass-roots NGOs and the recruitment of qualified women staff. C. IFD s Strategy for Collaboration with Pakistan Pakistan s Policy for Poverty Eradication 4. Despite some improvement in social infrastructure, especially in gender indicators, Pakistan still lags behind average sian countries in population growth, infant mortality, school enrolment and adult literacy. To tackle the poverty issue, the Government is encouraging private-sector participation, and it is improving the management of natural resources and the environment through the strengthening of agriculture, infrastructure and the social sectors. Major initiatives in the social sector include investments in human resource development (education, health and sanitation). The Government has initiated several new measures relating to poverty and development in the past year. It launched the National Poverty lleviation Programme (March 2000) to stimulate employment and provide basic infrastructure and essential services to rural and low-income urban areas. To contribute to a working agreement with the International Monetary Fund (IMF), the Government submitted an interim poverty reduction strategy paper that stresses broad-based economic growth and the development of human resources as a key means to reduce poverty. It is also formulating an sdbsupported microfinance bank. Finally, to ensure efficiency and good governance, the Government has started decentralizing administrative powers and resources from federal and provincial governments to district and sub-district governments. Elections of local officials are expected to be completed by mid-year. Special provisions have been made to ensure the proper representation of women and disadvantaged groups in these local bodies. IFD s Strategy in Pakistan 5. Donor support. In addition to IFD and sdb support in NWFP, several multilateral and bilateral donors have supported rural development efforts. These include the Social ction Programme II (supported by World Bank, sdb, the United Kingdom, The Netherlands, Japan, and the European Union), and the World Bank-supported On-farm Water Management (OFWM) Project IV. In addition, the World Bank supports a rural development programme of national scope, the Pakistan Poverty lleviation Fund, which channels resources to communities through NGOs; and in NWFP it is financing the Community Infrastructure Project (basic infrastructure for urban areas and rural towns). 2 6. IFD has supported 17 projects in Pakistan, with wide geographical and activity coverage and with increasing beneficiary participation and NGO involvement. IFD s strategy was sharpened following the 1995 country portfolio evaluation and other specific studies and evaluations, which comprehensively reviewed all IFD-supported projects and drew a number of lessons that have since been taken into account in project design and implementation. Projects have paid considerable attention to community organization, considered the pillar of all demand-driven development. 7. IFD s project strategy comprises the following thrusts: (i) continuing to sharpen the focus of IFD s activities on the rural poor, especially small farmers, tenants, the landless and women; (ii) focusing activities in poor rural areas, with an emphasis on semi-arid, mountainous and environmentally sensitive areas; (iii) promoting the regular evolution of a participatory community development approach with support to grass-roots and local community-based organizations to empower them while using NGOs as conduits to promote them; (iv) focusing project activities on improving women s conditions directly, through the provision of targeted services such as water supply, nutrition, health and education, and indirectly through sensitization, training and pressure on community leaders, members of jirgay (assemblies of tribal elders) and the male population to involve women in decision-making for the selection and prioritization of project-supported schemes; (v) focusing poverty alleviation activities on three broad categories, i.e. farm, non-farm and infrastructure; and (vi) emphasizing credit for income-generating activities for the poor, in particular for rural women, and the involvement of an institutional credit delivery system for microenterprise establishment. Project Rationale 8. NWFP has large areas of poor settlements where livelihood is largely dependent on unreliable rainfed agriculture. Infrastructure is limited; service delivery outreach is weak; health and education indicators are poor; and virtually no indigenous organizations exist to mobilize villagers or advocate for a better life. Women s situation is hard and burdensome. However, resources and opportunities exist such as improved and affordable technologies to enhance the productivity of crop and livestock systems. Community forestry and range resources can be better managed to meet local needs. Simple designs for small-scale rural infrastructure are available at a reasonable cost and have been successfully demonstrated in a similar environment. Opportunities to avoid the high cost of indebtedness and to gain access to new livelihood resources could be tapped through microfinancing. These and other practical approaches are largely used by service providers, but an effective means to link rural communities with line agencies, research institutes, NGOs and participating financial institutions (PFIs) is lacking. 9. Participatory, demand-driven service delivery has proved its efficiency in mobilizing the rural poor under the IFD-supported Mansehra Village Support Project (MVSP). Suitable NGOs exist and are interested in facilitating rural development through group sensitization and the formation and promotion of the image and the standing of women. Participatory rural assessment and participatory community workshops undertaken during formulation have furthered understanding of the target group s priority needs, which include: provision of drinking water supply; better access to agricultural extension, technology and inputs (quality inputs and improved genetic seed and stock); dependable roads and access to outside resources; alternative livelihood opportunities; affordable credit; meeting of household fuel requirements; basic social services; and village infrastructure. flexible project to address the dynamic needs of the rural population, as identified and prioritized by them with the full participation of women, is the most appropriate way to alleviate poverty in these hard, isolated and remote areas and could become a participatory service-delivery model for the newly evolving local governments. 3 PRT II - THE PROJECT. Project rea and Target Group 10. Project area. The project area covers km 2, comprising some households (about 5.6 million people) and includes the districts of bbottabad, Bannu, Batagram, Haripur, Karak, Kohat, Kohistan, Lakki, Mansehra, and the federal agency of Orakzai. The area has large tracts of disadvantaged rainfed settlements, with low productivity and limited employ
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