country partnership strategy final review · 2020. 8. 13. · kmb – khushali microfinance bank...

Country Partnership Strategy Final Review

October 2019

Pakistan

2015–2019

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ABBREVIATIONS

ADB – Asian Development Bank

ANR – agriculture, natural resources, and rural development CAREC – Central Asia Regional Economic Cooperation COBP – country operations and business plan CPS – country partnership strategy DFID – Department for International Development of the United Kingdom DISCO – distribution company EIRR – economic internal rate of return FY – fiscal year GDP – gross domestic product GWh – gigawatt-hour Ha – hectare IMF – International Monetary Fund KF – Kashf Foundation

KMB – Khushali Microfinance Bank LNG – liquefied natural gas MFF – multitranche financing facility

MSMEs – micro, small, and medium-sized enterprises MW – megawatt

NEPRA – National Electric Power Regulatory Authority NHA – National Highway Authority NSO – nonsovereign operations NSUSC – North Sindh Urban Services Corporation Limited

NTDC – National Transmission and Dispatch Company O&M – operations and maintenance OCR – ordinary capital resources PBL – policy-based loan PCR – project completion report PDA – project design advance PMU – project management unit PPP – public–private partnership

PSE – public sector enterprise PSM – public sector management SAPE – sector assistance program evaluation SMEs – small and medium-sized enterprises SPDP – Social Protection Development Project TA – technical assistance T&D – transmission and distribution WUS – water supply and urban service

NOTE

In this report, “$” refers to United States dollars, unless otherwise indicated.

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CONTENTS

ABBREVIATIONS ........................................................................................................................... 2

EXECUTIVE SUMMARY ................................................................................................................. 4

I. INTRODUCTION ...................................................................................................................... 1

II. OVERALL AND SECTOR ASSESSMENTS ........................................................................... 2

A. Strategic Positioning ...................................................................................................... 2

B. Relevance ......................................................................................................................... 7

C. Effectiveness ................................................................................................................. 12

D. Efficiency........................................................................................................................ 16

F. Development Impacts ................................................................................................... 25

III. PERFORMANCE OF NONSOVEREIGN OPERATIONS ................................................. 28

IV. PERFORMANCE OF THE ASIAN DEVELOPMENT BANK ............................................ 33

V. PERFORMANCE OF THE BORROWER .......................................................................... 34

VI. KEY LESSONS AND RECOMMENDATIONS .................................................................. 35

Appendix 1: Sovereign Project Outcomes and Assessment of their Achievements .......... 39

Appendix 2: Projects, Loans and Grants Closing during 2015-2018 .................................... 59

Appendix 3: Implementation Progress of Ongoing Projects (End-June 2018) ............... Error!

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Appendix 5: Non-Sovereign Project Outcomes and Assessment of their Achievements .. 79

Appendix 6 Sector-Wise Planned and Implemented Lending Program ................................ 84

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EXECUTIVE SUMMARY

i. The Country Partnership Strategy (CPS) 2015–2019 of the Asian Development Bank (ADB) for Pakistan is aligned with the Government of Pakistan’s objective to promote higher, more inclusive, and sustainable growth as described in the government’s Vision 2025 and as guided by its Eleventh Five Year Plan (2013–2018). To achieve Pakistan’s goal of becoming an upper-middle-income country by 2025, Vision 2025 set a growth target of 7% per year by addressing energy and infrastructure shortages, water scarcity, inadequate human capital, and institutional problems. To achieve these objectives and ensure their relevance and continuity, ADB designed the CPS based on two pillars: (i) infrastructure development to improve economic connectivity and productivity for jobs and better access to basic public services; and (ii) institutional reforms to cover policy, regulatory, and administrative systems, as well as public financial management. The focused areas were selected in line with ADB’s comparative advantage and knowledge base, ensuring the relevance and continuity of ADB operations.

ii. The CPS has a sound results framework aligned to the government’s four broad and ambitious macroeconomic goals of economic growth, investment, employment, and poverty reduction. The results framework for each of the six selected sectors sets one goal and two indicators to monitor progress, with each sector objective expected to contribute toward achievement of the macroeconomic goals.

iii. The CPS indicated that overall resources available amounted to $5 billion during 2015–2019, of which about two-thirds (40%) was earmarked for energy and 24% for transport. Market-based ordinary capital resources (OCR) accounted for about two-thirds, while concessional financing accounted for one-third. At the end of 2018, financing for sovereign operations with closed projects during the CPS review period amounted to $3.87 billion, of which cumulative portfolio was allocated to the energy sector (39.0%); followed by transport (28.0%); public sector management (PSM) (16.0%); agriculture, natural resources, and rural development (ANR) (15.2%); and the water supply and urban service (WUS) (1.8%) sectors. Cumulative lending for sovereign and nonsovereign operations during the first four years of CPS (2015–2018) amounted to $7 billion, with 77% from OCR and 23% from the Asian Development Fund. In addition, ADB provided $28 million in technical assistance (TA) for capacity building of government institutions in sectors where ADB had major investments. TA funds were allocated mainly for energy (44%); transport (18%); and ANR (11%).

iv. Relevance. This final review rated ADB’s sovereign operations in Pakistan during the implementation of CPS, 2015–2019 highly relevant in terms of design and consistency with the government’s objectives, strategies, and priorities for each sector and with the thematic areas identified in the CPS. To anticipate the government’s growing business needs, the planned lending volume was deliberately overprogrammed in the beginning, which resulted in a lower total annual lending volume than planned. Beyond its lending products, ADB added a significant value through its strong performance in mobilizing grant resources to complement its loans and in delivering a substantial technical assistance program of knowledge products. ADB operations in the ANR, energy, transport, and PSM sectors are rated highly relevant considering the acute energy problem and infrastructure deficit in the country, while WUS is rated less than relevant.

v. Effectiveness. Overall, this review rates ADB’s sovereign operations effective on the borderline. ADB contributed significantly to achieving the main CPS outputs and outcomes. Completed and ongoing projects in sectors have achieved, or are likely to achieve, their main target outcomes. However, some broad macroeconomic targets were missed, and policy and institutional development fell short of meeting their targets mainly as a result of the uncertain political situation and exogenous factors beyond ADB’s control. Many outcome indicators

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listed in the CPS results framework and in the core sectors and thematic areas have been achieved. Sector operations for ANR, transport, and PSM were delivered effectively in accordance with the CPS results framework, whereas the energy and WUS sectors were assessed less than effective as majority of the projects either achieved only part of their targets or projects were canceled before achieving targets.

vi. Efficiency. This review rates ADB’s sovereign operations overall efficient. The average economic internal rate of return (EIRR) for completed projects at 21% is significantly above the 12% threshold for investment decisions. During CPS implementation, ADB and government counterparts collaborated to address critical project processing and implementation issues. A high EIRR was achieved through joint monitoring and regular portfolio reviews. Using new ADB instruments such as the project design advance (PDA) to the maximum advantage would have raised efficiency to a high rating. Transport projects are rated highly efficient, and the ANR and PSM projects are rated efficient. Many of ADB’s policy-based loans (PBLs) were prepared and delivered efficiently, and the overall supervision, monitoring, and implementation by ADB staff were adequate and satisfactory. The energy and WUS sectors are rated less than efficient. This CPS final review observed that the implementation risks related to capacity constraints and various procedural inefficiencies leading to high transaction costs resulted in start-up and implementation delays in ADB operations particularly in the energy sector. The longer lag time between the approval and functioning of some loans contributed to the less than efficient rating.

vii. Sustainability. This final review rates overall ADB sovereign operations likely sustainable. The transport sector is rated most likely sustainable; the ANR and PSM sectors are rated likely sustainable; and the energy and WUS are rated less than likely sustainable. These ratings are based on adequate financial sustainability, supportive government policies, and adequate risk mitigation measures. Giving the executing agency the authority to collect user charges, such as the road toll taxes by the National Highway Authority, has worked well. However, the progress of reforms to pass on some of the operations and maintenance (O&M) cost to users has been slow. Fiscal challenges may compress public sector development spending. Ongoing fiscal consolidation under the International Monetary Fund (IMF) program if implemented as planned should provide greater fiscal space for future development projects. Institutional reforms will address the challenges resulting from a limited O&M budget for infrastructure and help institute an appropriate system for collecting and utilizing user charges.

viii. Development Impact. This final review rates the overall development impact of ADB’s sovereign operations satisfactory. ADB operations contributed to the reasonable progress made toward achieving country development goals. Some projects missed targets due to some exogenous factors beyond the control of ADB such as exchange rate movements. The country operation objectives and goals were mostly met. The impact on crosscutting development themes was rated satisfactory. All sector operations are rated satisfactory except for WUS which was assessed less than satisfactory.

ix. Overall, ADB’s sovereign operations in Pakistan implemented under CPS, 2015–2019 is rated successful. ADB operations contributed to making the growth process more inclusive by increasing access to affordable power; improving supply and distribution of irrigation water; and enhancing the capacity of federal and provincial governments to deliver services more effectively and efficiently as well as initiating institutional reforms in many sectors (such as in irrigation, public sector enterprises [PSEs], disaster management, power, and others). Various TAs also provided substantial financial and technical support. However, the overall impacts of some institutional reforms undertaken during the last four years have yet to be realized. On the implementation side, ADB provided timely advice and served as an intermediary between agencies to resolve bottlenecks. ADB also managed client requests

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and complaints efficiently and in a timely manner.

x. This final review rates ADB’s nonsovereign operations implemented under CPS, 2015–2019 successful. Investment profitability is rated excellent, and development results, additionality, and ADB work quality are rated satisfactory. Nonsovereign operations have performed considerably better than sovereign operations due to the private sector’s relatively smaller size, and more focused and profit-driven efficiency. Pakistan is one of the largest recipients of ADB’s private sector development assistance with over $1 billion approved investments and loans (including cofinancing), of which energy projects account for about three-fourths of the total financing. Overall, ADB’s nonsovereign portfolio in Pakistan covers mainly two sectors of energy and finance and utilizes various financing instruments from equity investments to guarantees and loans. During the 4-year implementation period of the CPS 2015–2019, ADB approved five new nonsovereign operations of which four lending operations amounted to $181 million and one TA operation totaled $ 0.5 million.

xi. ADB coordinated well with other development partners in cofinancing and supporting policy reforms. Almost two-thirds of the TA funding was mobilized from a wide range of development partners. Greater delegation of supervision responsibilities to the Pakistan Resident Mission has contributed to a more responsive problem-solving dialogue and a closer relationship with implementing and executing agencies. The resident mission also played a significant role in preparing PBLs and engaging in policy dialogue. ADB must therefore consider giving the Pakistan Resident Mission an even greater role to increase efficiency and cost-effectiveness. The implementation capacity of government institutions has improved but gaps remain, requiring considerable and more systematic support. ADB’s nonlending operations were significantly effective in achieving their capacity-building objectives.

xii. Borrower’s performance is assessed to be satisfactory as the government has remained fully engaged in the CPS preparation and implementation. ADB and the government jointly conduct the regular Pakistan country portfolio review missions to review the implementation status of the ADB-financed portfolio. The government has mostly demonstrated strong commitment to and ownership of ADB-supported projects and has budgeted adequate counterpart funds for their implementation.

xiii. Key Lessons. The following key factors impacted ADB’s performance during the CPS, 2015–2019 implementation period:

a. Ambitious targets: The macroeconomic and some sector targets of the CPS were aligned to the government’s Vision 2025. Considering Pakistan’s challenging economic environment and historical performance, these targets were ambitious and optimistic.

b. Interactions with the government: The government’s organizational structure made ADB’s interaction with the government sometimes complicated. ADB’s interaction with the political leadership, the top administration tier of ministries and departments remained adequate, but ADB could have improved its consultation with mid-level administration staff as they possessed the technical know-how and were strongly involved in project implementation.

c. Effective use of the TA. The TA should have focused on delivering quality outputs, and not on quantity. Capacity building for the government would have been more effective if turnover of government staff was less frequent. The TAs should also focus on the areas where ADB is working on.

d. Due diligence: Despite the existence of a sound readiness filter, some projects continue to face start-up and implementation delays. The use of a readiness filter should be strengthened to overcome inherent inefficiencies in government procedures. Extensive efforts are spent working out the technical details during project preparation, but due diligence on political issues and institutional aspects (i.e., stakeholder analysis) could also

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be considered for complex projects. The country’s political system has been slow to adjust to some policy changes like user charges. ADB’s project team should be adequately informed about the political environment and institutional setting if these subtle issues cannot be incorporated in the project design.

e. Program lending support: Government ownership remains the essential ingredient for successful ADB operations. It is therefore critical to consider how government ownership and capacity on policy reforms can be maintained and enhanced further.

f. Cofinancing: To create synergy with other development partners, cofinancing has helped ADB to reduce transaction costs significantly due to efficiency gains from economies of scale. ADB has been successful in mobilizing cofinancing from other development partners for not only its loans but also for TA operations.

xiv. Recommendations.

a. ADB should build on the factors that have contributed to its success and continue to engage with government and other key stakeholders. since a significant portion of ADB’s portfolio implemented under CPS, 2015–2019 will carry over into the next CPS.

b. To maximize the outcome of ADB financing, policy and institutional reforms need to be “government-led and owned.” Given the large presence of external donors in Pakistan, it is important to circumvent the notion that reforms are part of a “donor-driven agenda.” ADB needs to better define measurable output and outcome indicators of institutional reforms.

c. ADB has developed productive partnerships in Pakistan, and it needs to stay engaged with the government to reduce start-up and implementation delays as a result of (i) the government’s streamlining of the project approval process; (ii) the reduction of rigidities in government procedures; and (iii) the fast tracking of the establishment and strengthening of project management units.

d. ADB should broaden the sector focus to include the social sectors to make ADB more relevant. The social sectors were a notable omission in CPS, 2015–2019.

e. ADB could strengthen its results tracking and monitoring framework for annual portfolio reviews to make tracking and monitoring systematic, comprehensive, and efficient.

f. ADB could undertake proactive portfolio management to cancel operations that are unlikely to be completed. Loan savings can be recycled for new projects.

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I. INTRODUCTION

1. Pakistan’s economy continues to exhibit episodes of growth characterized by “boom and bust” due to the lack of fundamental growth dynamics needed for sustainable economic development. The lower growth cycles (e.g., 3 to 4 years) are caused mainly by the significant savings and investment gap, low competitiveness, and limited productive capacity. As the domestic demand grows above the economic capacity, the economy builds up external and fiscal pressures that result in twin deficits, which ultimately cause balance of payment problems and overheating of the economy. During the implementation of the country partnership strategy (CPS), 2015–2019, the macroeconomic indicators demonstrated cyclical movements. Pakistan’s economy exhibited strong real gross domestic product (GDP) growth during the CPS implementation period, increasing from 4.1% in fiscal year (FY) 2015 (which ended on 30 June 2015) to 5.5% in FY2018. However, growth decelerated to 3.3% in FY2019. The deficit in the general government budget registered 4.3% of GDP in FY2015 and reached 8.9% in FY2019. The current account deficit marked 1.0% of GDP in FY2015 and climbed to 6.3% of GDP in FY2018, which then eased to 4.8% in FY2019. Fiscal and current account deficits totaled 13.7% of GDP in FY2019. As exports remained stagnant and revenue collection remained low, economic activity slowed down. Inflation inched up to 7.4% in FY2019 compared with the government’s target of 6.2%, on the back of contractionary fiscal and monetary policies to preserve macroeconomic stability.

2. To overcome the stagflation and twin deficits, the government will need to revive exports and consolidate the budget. The government’s actions of tightening monetary policy and allowing exchange rate flexibility are costly but necessary. Further monetary tightening, stronger fiscal discipline, and decisive efforts to contain the energy sector’s “circular debt” and public sector enterprises (PSEs) losses are needed to address the external and fiscal imbalances. The government will need to resume medium-term fiscal consolidation, accelerate reforms to enhance the tax base, address its distortionary system and administration, and resolve other structural issues, all critical to reinforcing the macroeconomic resilience needed to put Pakistan along a new trajectory of higher growth.

3. The Asian Development Bank (ADB) is a major development partner of Pakistan, the 38th largest economy in the world and second largest in South Asia. Pakistan is a founding member of ADB and since joining in 1966, it has received $32 billion in sovereign and nonsovereign loans (up to 31 December 2018) as well as a further $632 million for grant-financed and technical assistance (TA) projects. The energy sector received the highest share of resources at 28%; followed by transport at 17%; public sector management (PSM) at 14%; agriculture, natural resources, and rural development (ANR) at 14%; and finance at 11%. During the same period, Pakistan has received a total of $283 million in technical assistance.

4. Evolution of ADB Assistance in Pakistan. Over time, the size of ADB’s portfolio in Pakistan expanded significantly to accommodate the growing development and financing needs of the country. In line with the government’s wide-ranging requests, the ADB portfolio became broad and distributed to many sectors, which was seen as leading to significant operational inefficiencies. To streamline and rationalize the portfolio and achieve a more targeted and sharper focus, ADB performed a massive “spring cleaning” of its portfolio during 2007–2010. During this clean-up period, ADB canceled and restructured a number of projects and also implemented a “no extension” approach to delayed projects that had a low probability of success. Consequently, a large number of projects were closed, and the number of active loans declined from 80 in 2006 to 42 in 2009 and dropping further to 27 in 2012. As a result of the more targeted focus, the average size of ADB

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loans increased from $80 million in 2006 to $140 million in 2011, and a further $210 million in 2018.1

5. The CPS, 2009–2013 was closely aligned with the objectives and outcomes of the 2007–2010 “spring cleaning.” As a result, the focus of CPS, 2009–2013 on rural development, finance, and social sectors reduced significantly. In general, these sector programs tend to perform less than satisfactory. ADB’s weaker focus on social sectors was also a result of the availability of relatively inexpensive financing from bilateral development partners, particularly from the Department for International Development (DFID) of the United Kingdom. In addition to spring cleaning, energy, transport and irrigation started to dominate ADB’s assistance portfolio in Pakistan to accommodate the government’s growing demand for infrastructure. The energy, transport, PSM, and irrigation have since held significant portfolio shares. Throughout the period, the performance of ADB’s portfolio in Pakistan has been generally successful, with some operations performing better than others (in general, infrastructure operations have performed relatively better than the social sector).

6. This country partnership strategy final review (CPSFR) assesses the performance of ADB’s CPS for Pakistan from 2015 to 2019. It aims to contribute to the development of ADB’s next CPS for Pakistan for the 2020–2024 period. ADB’s operation during 2015–2019 was guided by the CPS, 2015–2019,2 which was implemented through a series of country operations business plans (COBPs).3 This final review covers all sovereign and private sector lending and nonlending operations that were ongoing and approved between 2015 and 2018. This final review follows the ADB 2015 guidelines for self-evaluation of the CPS,4 which cover five criteria: (i) relevance, (ii) effectiveness, (iii) efficiency, (iv) sustainability, and (v) development impacts. It also assesses the performance of ADB and the government.

II. OVERALL AND SECTOR ASSESSMENTS

A. Strategic Positioning

7. The assessment of strategic positioning considers how well the CPS 2015–2019 and its associated Country Operations and Business Plans (COBPs) guided ADB operations in Pakistan, relative to the country’s conditions and ADB policies. As such, the final review assessed the positioning relative to five sub-criteria: (i) relevance to the country context and government priorities, (ii) focus and alignment with ADB’s Strategy 2020,5 (iii) coordination with development partners, (iv) long-term continuity and the extent to which lessons learned from previous CPS reviews were incorporated, and (v) appropriateness of resource allocation based on the CPS results frameworks.

8. The CPS incorporated many of the recommendations of the country assistance program evaluation undertaken in 2013, which include the following: (i) giving ADB operations a greater energy and infrastructure focus; (ii) making social protection an important component of operations; (iii) helping tackle climate change issues by improving the country’s resilience to natural disasters, particularly through the capacity building for the Natural Disaster Management Authority; (iv) facilitating structural reforms through pragmatic sector initiatives; (v) expanding investments in urban and municipal services; and (vi) increasing private sector operations to complement the

1 Independent Evaluation Department. 2013. Country Assistance Program Evaluation. Manila. 2 ADB. 2015. Country Strategy and Program: Pakistan, 2015–2019. Manila. 3 ADB. (various years). Country Operations Business Plan: Pakistan, 2015–2017, 2016–2018, 2017–2018, and 2018–

2020. 4 Independent Evaluation Department. 2015. Guidelines for the Preparation of Country Partnership Strategy Final Review

Validation Report. Manila. 5 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020.

Manila.

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sovereign operations. Similarly, ADB made a conscious effort to better align with the government’s fundamental objective of fostering accelerated, more sustainable, and inclusive growth in Pakistan. ADB focused on improving the intra-country and regional connectivity, using indigenously produced energy, and improving the quality of government policy and governance to provide better public services and improve the people’s welfare.

9. The CPS identified two main pillars for ADB operations in Pakistan:

(i) Infrastructure development to help attract private investment, improve economic connectivity and productivity, create jobs, and provide access to markets and basic public services; and

(ii) Institutional reforms including those for improving policy, regulatory, and administrative systems as well as financial management.

10. Under the first pillar, the sector focus was on energy, transport, natural resource management, finance, and water supply and other urban services with emphasis on providing efficient, affordable, and environmentally clean energy; improving regional economic connectivity and integration; irrigation; and urban services. The second pillar focused on enhancing the performance of PSEs and capacity building for the federal and provincial governments. The CPS remained responsive to evolving country needs with some minor adjustments during its implementation. For example, while the CPS suggested to scale back ADB’s involvement in the education sector, the rising demand for secondary and tertiary education compelled ADB’s return to the sector at the latter term of CPS, 2015–2019. The case for ADB’s involvement in the health sector was similar.

11. Improving governance and capacity development, promoting gender equity, and developing the private sector were the crosscutting themes in a large number of ADB operations. Guided by the government’s Vision 2025, the CPS supported the government’s agenda of accelerating growth rate to sustain improvement in people’s welfare. The CPS was responsive to evolving country needs and made some minor adjustments during implementation. The need to increase ADB’s involvement in the social sectors as mentioned in the CPS was visible at the latter part of the CPS’s term as the education and health sector reflected the rising demand for secondary and tertiary education.

12. Governance and Management. The Pakistan government has a relatively large economic footprint as reflected in the sizeable share of the public sector in overall employment, the large number and size of PSE operations, and the cascading and excessive regulations of the multitiered government in many spheres of economic activity. However, the government’s limited capacity to manage these functions reflects in part the complex governance structure and fiscal constraints over the last 2 decades, and compounded by the frequent transfers of top-level decision makers and the insufficient number of staff in various institutions. A more comprehensive analysis and consideration of the political economy can help mitigate risks stemming from the country’s unique governance system.

13. Alignment with the Government’s Development Priorities. The CPS was well aligned with the national priorities as identified in the government’s Vision 2025, which aimed to balance human, social, and economic progress. Vision 2025 emphasized the achievement of a 7% growth by strengthening the country’s development foundation and enabling it to become an upper-middle-income country in 2025 by addressing energy shortages, water scarcity, inadequate human capital, and institutional problems. The Eleventh Five Year Plan, 2013–2018 was prepared to operationalize Vision 2025. Accordingly, the government allocated funding under the annual public sector

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development programs to improve economic connectivity and integration and undertake critical structural reforms to enhance macroeconomic performance.

14. ADB’s strategy and operations remained responsive to changes in government needs and priorities during CPS implementation. For example, to help the government address the large and growing energy supply shortages, ADB significantly increased its involvement in the power sector by providing a mix of conventional investment and policy-based lending to build the power sector infrastructure and address the policy deficiencies. Similarly, when the burden of the PSE sector’s financial losses became unbearable for the government, ADB stepped in to provide policy-based lending to support restructuring and better management and governance of PSEs.

15. Alignment with ADB’s Strategy 2020. The CPS was closely aligned with ADB’s Strategy 2020 and relevant sector strategies, particularly inclusive growth and regional connectivity. In terms of focus areas, the CPS supported five of the eight core areas of Strategy 2020: (i) infrastructure development, (ii) access to finance, (iii) regional connectivity and cooperation, (iv) agriculture, and (v) disaster management. Environmentally sustainable development remained a crosscutting theme. In terms of alignment with the Strategy 2020 drivers of change, the CPS clearly laid out a thematic focus on governance and capacity development, gender equity, private sector development, and knowledge solutions. The CPS approach for inclusive growth emphasized: (i) promoting energy sector development through the use of indigenous resources to overcome energy shortages in a more cost-effective and affordable manner; (ii) upgrading irrigation infrastructure to enhance agricultural productivity and food security; (iii) developing transport infrastructure to better connect people and markets; and (iv) strengthening urban infrastructure to make cities more livable. For environmentally sustainable growth, the CPS supported renewable energy and infrastructure improvements. Private sector development was promoted by improving the policy and institutional mechanisms for public–private partnerships (PPPs) and enhancing access to finance for underserved segments such as farmers and small and medium-sized enterprises (SMEs).

16. Focus and Selectivity. The scope of the CPS is broad enough to cover the wide spectrum of the country’s need for thematic and geographic coverage. To ensure the efficiency and success of ADB’s operations, the CPS rightly emphasized on sectors and areas in Pakistan in which ADB already had operations to benefit from its comparative advantage and economies of scale due to accumulated knowledge. This selectivity was crucial to ensure the efficiency and success of ADB operations. Under the CPS, ADB was to engage in six sectors—ANR, energy, finance, transport, WUS; and PSM—across all four provinces of Pakistan.

17. Coordination with Development Partners. The CPS supported strong coordination of ADB assistance with other development partners. Throughout the CPS period, ADB consulted extensively with other key development partners to synchronize programs, having them target almost every sector to present a united front on key policy and institutional reforms. ADB and the World Bank collaborated well to supplement each other’s efforts in enhancing the development impact of each other’s investments through appropriate sequencing and geographic distribution of operations and supporting policy reforms. ADB succeeded in obtaining cofinancing for ADB operations, especially from DFID, particularly in the transport and PSM sectors.

18. During the course of CPS, 2015–2019, ADB’s operations were well coordinated with the International Monetary Fund (IMF). It is imperative that ADB operations are linked with the conditionalities of the IMF’s stabilization program.6 Pakistan has again entered into the IMF’s 39-month extended fund facility worth $6 billion in July 2019 to address the low foreign exchange reserves, fiscal and external imbalances, and stagflation. The reforms supported by the extended

6 Alternatively, ADB would require a “letter of comfort” from the IMF to undertake a program operation.

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fund facility focus on restoring the macroeconomic resilience by achieving fiscal and debt consolidation while expanding social spending to include strengthening of the country’s weak revenue base, reducing quasi-fiscal losses in the energy sector, and ending the drain from loss-making public enterprises. Other structural reforms aim to strengthen the institutional and financial system and improve the business climate and competitiveness to help the country generate sustainable and balanced growth. In Pakistan, ADB and the IMF collaborate regularly on mutually relevant country assistance and policy issues. For example, both institutions have been working closely to improve the energy sector’s circular debt issues, strengthen governance, and enhance transparency, particularly for PSEs. In all these areas, both institutions have either taken a common stance or a mutually supportive position.

19. Continuity. ADB has been successful in maintaining continuity of its operations in Pakistan. Given Pakistan’s huge infrastructure needs, ADB’s involvement in assisting the government to upgrade and expand energy, transport, and irrigation infrastructure has spanned over decades. ADB currently holds the largest portfolio in Pakistan in all these sectors. Similarly, ADB has continued to provide capacity building for improving the governance system of government institutions. While support for strengthening PPPs in Pakistan is a relatively new area for ADB, it aligns well with the country’s needs and the government’s development strategy.

20. Diagnostic Underpinnings and Lessons Learned. The CPS and the COBPs were guided by the diagnosis of binding constraints on the growth potential of sectors and areas of involvement. Other analyses undertaken by ADB, the government, and other developmental partners supplemented the CPS and COBPs to develop synchronized and targeted interventions. Nonetheless, had ADB given sufficient consideration to the political economy aspects, especially on institutional or stakeholder analysis during due diligence, some of the operations challenges and cancellations could have been avoided.7

21. CPS Results Framework. The CPS included a sound results framework. On the overall macroeconomic objectives, the CPS results framework was aligned with the government’s Vision 2025 goals. ADB’s sector investments under the CPS were designed to support these macroeconomic goals. The results framework for each sector specified one goal and two indicators, which contributed to the achievement of the overall CPS goals. Achieving these goals depended on favorable domestic and external environment, which was generally beyond the control of ADB. Nonetheless, significant ADB investments were made in each of the six core sectors in addition to significant ADB contributions (Table 1), helping to achieve many targets.

22. Resource Allocation. The indicative resource availability for ADB sovereign operations in Pakistan between 2015 and 2019 amounted to $6,957.3 million, comprising $5,016 million of market-based ordinary capital resources (OCR) and $1,941.3 million of concessional OCR lending, respectively. ADB’s actual lending commitment to the country during the first 4 years (2015–2018) amounted to $5,863.2 million, comprising $4,831.6 million of OCR and $1,031.6 million concessional OCR lending. At the end of 2018, 39.0% of the cumulative portfolio was allocated to the energy sector; 28.0% to transport; 16.0% to PSM (16.0%); 15.2% to ANR, and 1.8% to the WUS sectors. Another $26.9 million was approved for technical assistance during 2015–2018, primarily to strengthen and build the capacity of the government, focusing on the sectors in which ADB had major investments such as in energy; transport; and ANR. During the same time, ADB generated a significant cofinancing amount of $37.1 million for ADB-administered technical assistance.

23. The country operations implemented under the CPS, 2015–2019 was strategically

7 For example, the challenges faced by the Sindh Cities Improvement Investment Program and the Enhancing Public–Private Partnerships in Punjab Project are the case in point. Similarly, the slow pace of institutional development in the irrigation sector continues to hamper the goal of passing on the operations and maintenance cost to farmers’ associations.

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positioned. The CPS gave consideration to the country context and had well-targeted sector and thematic priorities. The CPS operations were closely aligned with government’s development agenda and ADB’s Strategy 2020 priorities. The CPS was developed in close consultation with development partners and built on long-term continuity and comparative advantage to tackle the long-standing infrastructure development and institutional reform challenges. The CPS also considered the findings of earlier program evaluations. It made efforts to achieve an optimal balance between infrastructure investments and policy and institutional reforms as well as sector and geographic balance. However, the reduced emphasis on social sectors in the program narrowed the focus on the inclusiveness of Pakistan’s growth.

24. Overall Assessment. Table 1 summarizes the assessment results for the likely achievement of macroeconomic and sector goals. Except for the poverty goal,8 three macroeconomic goals were not met by 2019, and the performance of sectors was mixed.

Table 1: Country Partnership Strategy – Assessment of Results Framework

Indicator Assessment/Comments

Country Development Goals

GDP growth accelerates to at least 7% by 2019.

Unlikely to be achieved: GDP growth accelerated in 2016–2018 to reach 5.2%. However, with macroeconomic imbalances widening rapidly, the government’s stabilization measures slowed down economic growth to 3.3% in FY2019.

Investment rate rises to 20% of GDP by 2019. Unlikely to be achieved: Investment-to-GDP ratio increased to 15.1% in FY2018 before it fell to 13.8% of GDP in FY2019 due to stabilization measures.

The employment–population ratio increases to at least 55% by 2019.

Unlikely to be achieved: Employment rate is generally measured as a proportion of labor force and not population. Employment–population ratio was 48.9% in FY2018.a

Proportion of people living on less than $2 per day (2005 purchasing power parity) falls to, at most, 40% by 2019.

Likely to be achieved: Purchasing power parity index (at $1.9 per person per day) for Pakistan dropped to nearly half at 3.2% in 2018 from 6.1% in 2013 (base: 2010–2011 as revised by the World Bank).

Energy

Access to energy increased.

2011 baseline: 68.6% of the population 2018 target: 75%

Likely to be achieved: Access to energy increased to 99.1% in 2016 (World Bank latest data).

Load shedding reduced.

2013 baseline: 5,000 MW 2018 target: 0

Achieved. Despite a significant reduction in load shedding, electricity shortfall averaged to over 2,400 MW per month for the 3 months of high demand (July–September).

Transport

Share of households in Karachi with access to safe, reliable, and efficient mass-transit system increased.

2014 baseline: 0% 2018 target: 10%

Unlikely to Be Achieved: The indicator was based on the Karachi Mass Transit project coming on line. The project has been significantly delayed.

Indicator 2: Passenger traffic by road increased.

2011 baseline: 322.7 billion passenger-kilometers. Target: 2%–3% increase per annum over 2012–2018

Could not be assessed: Latest data are not available.

8 The base for the per capita income in purchasing power parity terms has been rebased from 2005 to 2011.

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Indicator Assessment/Comments

Agriculture, Natural Resources, and Rural Development

Annual cropping intensity of at least 140% maintained. Achieved: As per data reported by Ministry for Food Security, nationwide cropping intensity in 2017 was 154%.

Average annual production of main crops increased by 10% each by 2019.

2013 baseline:

Wheat = 3 tons/ha; Rice = 1.9 tons/ha; Sugarcane = 50 tons/ha; Cotton = 1.5 tons/ha; and Fodder = 21 tons/ha

Mixed results: Although crop yields in catchment areas of ADB projects may be different, at the national level, crop yields in 2017 were as follows:

Wheat = 2.9 tons/ha; Rice = 2.6 tons/ha; Sugarcane = 61.2 tons/ha; Cotton = 0.93 tons/ha; and Fodder = NA

Water and Other Urban Infrastructure and Services

Proportion of urban population with sustainable access to an improved drinking water source increased.


Uncertain but likely to be achieved: Access to improved water (tap, motorized pump, and hand pump) was only 86% in 2015 (latest available data), but may have improved subsequently.

Proportion of urban population with access to improved sanitation facility increased.


Uncertain but likely to be achieved: Access to improved sanitation (flush) was 73% in 2015 showing a slow progress.

Public Sector Management

Public debt-to-GDP ratio reduced.

2014 baseline: 64.3% 2018 target: 59%

Not achieved: The debt-to-GDP ratio in 2017–2018 was 67.2%, even higher than in 2013.

Average per capita consumption expenditure of BISP beneficiaries increased by 5% in 2018.

2012 baseline: PRs1,575

Achieved: According to BISP data, per capita consumption of beneficiaries increased by 12% in 2017.

Finance

Lending to private sector increased.

2013 baseline: 15% of GDP 2018 target: 23% of GDP

Unlikely to be achieved: As per SBP data, banking sector credit to private sector in 2017–2018 was PRs5,973 billion (17.3% of GDP).

Share of loans to SMEs increased.

2013 baseline: 6% of total bank sector loans 2018 target: 8% of total bank sector loans

Achieved: According to SBP Quarterly SME Finance Review (December 2017, Latest Data Available), the share of SME financing in private sector financing was 8.73%.

BISP = Benazir Income Support Program, FY = fiscal year (ending on 30 June), GDP = gross domestic product, ha =

hectare, MW = megawatt, SBP = State Bank of Pakistan, SMEs = small and medium- sized enterprises. a Pakistan Bureau of Statistics. Pakistan Employment Trends 2018. www.pbs.gov.pk.

Source: Asian Development Bank estimates.

B. Relevance

25. The assessment of the CSP operations’ relevance considers the extent to which ADB- financed projects, technical assistance, and knowledge products are aligned to the country’s development needs and ADB’s strategy. The assessment is based on the following two sub-criteria: (i) relevance to the key sectors and thematic issues identified in the CPS in terms of its consistency with the CPS and COBPs, including the justification for any misalignments; and (ii) the adequacy of technical or sector-specific aspects in project design.

26. Consistency with Country’s Development Needs. The country operations prepared and

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implemented under the CPS 2015–2019 aligned with the socioeconomic needs of Pakistan. The investment and policy-based operations were designed to mitigate some of the binding constraints on the country’s development. The CPS allocated large shares toward removing bottlenecks in the energy and transport sectors, consistent with the amount of financing and efforts required to reduce the impact of these constraints. Although the need for investment in social sectors continued to be high, ADB decided to reduce focus on education and health in view of unsatisfactory performance of past ADB operations. Nonetheless, large-scale bilateral grant funding from Pakistan’s development partners, such as DFID, reduced the need for ADB financing in the social sector.

27. Consistency between the Operations and the Strategy. ADB’s Pakistan country operations as delivered (Appendix 1, 2, 3, and 4), were broadly consistent with the sector and thematic priorities of the CPS. The CPS operation supported the pillars of the CPS—infrastructure development (Pillar 1) and institutional reforms (Pillar 2)—with considerably greater focus on Pillar 1.

28. To improve the capacity of government institutions, institutional reforms were initiated under sector operations. For example, ADB’s the Public Sector Enterprises Reform Program strived to improve efficiency in the functioning of PSEs, directly linking them to improvements in the overall organization and management of PSEs. Similarly, ADB projects for enhancing PPP investments in Punjab and Sindh required establishing sound institutional and regulatory mechanisms for promoting PPPs in both provinces. Governance and public management reforms were also introduced under policy-based lending and investment operations, particularly in the energy, irrigation, and disaster risk management sectors.

29. Various TA projects were implemented to foster capacity-building support for federal and provincial governments. Two projects supported regional cooperation in the Central Asia Regional Economic Cooperation (CAREC) region: one involving the development of a regional trade corridor and another on improvement of border management facilities at three important border posts on the eastern and western sides. Climate change issues were tackled under the clean energy project and the climate management components of other sector projects.

30. Volumes of planned versus actual assistance. ADB was able to deliver operations broadly as planned in the CPS, although some adjustments were made through the COBPs to better respond to the changing needs of the government.

31. To achieve the CPS’s goals, ADB resources were distributed among the selected core sectors based on the government’s needs and ADB’s comparative advantage. The COBPs prepared under the CPS, 2015–2019 indicated an average planned support of $2.0 billion annually over the 5-year period. However, start-up delays and the country’s evolving investment needs delivered a different actual operation in each of the 4 years (2015–2018) than planned. The loan commitment during the first 4 years of the CPS averaged $1.5 billion per year. Sector composition of ADB assistance geared heavily toward infrastructure sectors, with more than three-fourths of planned assistance allocated to the energy (43%), transport (27%), and ANR (9%) sectors, i.e., Pillar 1 of the CPS. A 12% allocation for the PSM sector was planned for independent policy and institutional reforms and developing the capacity of the government (i.e., Pillar 2 of the CPS). Since support for policy and institutional reforms was also provided through sector operations, especially in the ANR and energy sectors, the actual functional distribution of resources for Pillar 2 was higher than indicated above.

32. ADB’s nonlending support at $75.7 million during 2015–2018 exceeded the planned volume of $71.2 million under the CPS. ADB financed $28.2 million in nonlending support, while other donors financed $47.4 million for ADB’s country operation as opposed to the $39.3 million planned.

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33. Sector composition of nonlending support tilted heavily toward infrastructure sectors (i.e., energy, transport, and ANR). Cofinancing from development partners and other TA funds were utilized for preparation of key TA projects, including in areas of climate resilient ANR services, transport sector development, and for enabling PPPs.

34. Mobilizing cofinancing. During 2015–2018, ADB successfully mobilized cofinancing from other (mostly bilateral) donors to leverage financial support for ADB’s operation in Pakistan. Against ADB’s lending commitment of $6.9 billion, cofinancing amounted to $1.4 billion (20% of ADB financing). Of the total cofinancing received, 95% supported operations in the energy (60%) and transport (35%) sectors, while 4% was in the PSM sector. Similarly, additional donor funding complemented ADB’s TA resources. Against $23 million of ADB’s TA financing, other donors provided $47 million, of which 38% went to transport, 30% to PSM, and 11% to ANR to support the government’s project preparation. With increased emphasis on cofinancing and partnerships under Strategy 2030, ADB should enhance efforts to leverage its resources for operations in Pakistan, particularly for policy and institutional reforms as well as for knowledge and other institutional needs.

35. Operations Design. The design of ADB-financed operations is relevant to the CPS objectives set for each sector. The sector operations strongly focused on infrastructure development to help the government reduce the acute infrastructure gap. The operations design was based on well-proven methodologies in Pakistan and it utilized innovative but more risky solutions to the country’s problems.9 In addition, some of these programs, particularly in the energy, PSM, finance, and ANR sectors, also supported some high-priority policy and institution reforms. The nonlending support was employed as an instrument for building knowledge and technical capacity of the government, particularly in sectors and themes supported by ADB to ensure improved implementation of operations in Pakistan.

36. Rating. This final review rated the country operations implemented under the CPS, 2015–2019 highly relevant to the government’s objectives, strategies, and the priorities set in each sector as well as to the thematic areas identified in the CPS. Although total actual lending volume was lower than planned, it was mainly because of deliberate overprogramming of planned support to account for uncertainties in government priorities and implementation capacity. ADB added significant value over and above the financing it provided through strong performance in mobilizing grant resources to generate knowledge products and enhance the government’s capacity to complement the public sector loans.

Sector Assessments – Relevance

37. The relevance of the sector operation is evaluated in terms of its consistency with (i) country needs, including addressing the sector binding constraints; and (ii) ADB Strategy 2020.

38. ANR. The sector operation implemented under the CPS, 2015–2019 is rated highly relevant. The assessment was undertaken for the objective and design of the operation, including the mix of policy changes, institutional reforms, infrastructure development, and capacity building for the country’s government institutions, particularly those responsible for supporting public service delivery. For over a decade, ADB has been one of Pakistan’s largest development partners in the irrigation sector with major investment in upgrading infrastructure, particularly in Punjab. ADB investment in the sector between 2015 and 2018 totaled $1.7 billion, with sizeable present and future portfolios. ADB’s sector strategy was closely aligned with the objectives of the government’s Vision 2025, which targets minimization of losses in the water conveyance system and the strengthening of governance for more effective implementation of policies to maximize crop yields

9 The National Disaster Risk Management Fund is one such project, which attempts to address Pakistan’s perpetual lack of focus on overcoming risks of natural disasters.

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per unit of water. In addition, the sector strategy was fully aligned with ADB’s Strategy 2020, which cites agriculture as one of the eight core areas for ADB operations.

39. Most of the operation undertaken during the term of CPS, 2015–2019 aimed to improve the infrastructure and the associated institutional mechanisms to deliver irrigation water more effectively and efficiently. These investments focus on the country’s needs, tackle binding constraints, and are likely to improve the efficiency of not only the existing water delivery system but also the future upcoming water storage. It may be noted that new projects in the sector, such as the FATA Water Resources Development Project, Jalalpur Irrigation Project, Pehur High Level Canal Project, and Balochistan Water Resources Development Sector Project, are designed to take a holistic approach to enhance agricultural productivity through highly efficient water management interventions. Moreover, the operation proactively supported institutional interventions, which are highly likely to sustain investments in the water sector.

40. Energy. The sector operation is rated highly relevant under the CPS, 2015–2019 in terms of objectives and design. The energy sector has been the largest recipient of ADB support under the CPS period, with total commitments amounting to $6.2 billion and total disbursements of $2.9 billion. ADB provided this assistance through multiple modalities, including stand-alone projects, multitranche financing facility (MFF), policy-based loans (PBLs), results-based lending (RBL), and TA grants. Some of these operations were cofinanced by other development partners. The CPS investments were fully aligned with ADB Strategy 2020; the government’s sector strategy underpinned by the National Power Policy 2013;10 and the Integrated Energy Sector Recovery Report and Plan 2010,11 which was jointly endorsed by the government and development partners. These plans aimed to (i) augment sustainable, low-cost, and indigenous power generation capacity; (ii) promote energy efficiency and conservation; (iv) create a cutting-edge transmission network; (v) minimize inefficiencies in the power distribution system; (vi) reduce financial losses across the energy supply chain; and (vii) align the ministries involved in the energy sector and improve the governance of all related federal and provincial departments as well as regulators. The sector operation was designed to focus on power generation, strengthen transmission and distribution systems, institute sector reforms to reduce cost of generation, target system losses, promote efficiency, and address institutional and regulatory governance challenges.

41. PSM. The sector operation is rated highly relevant under CPS, 2015–2019. The relevance was high on meeting the government’s strategic objectives. The operation was fully aligned with the CPS objective and helped to address the country’s needs. PSM assistance focused largely on improving economic governance through institutional reforms. ADB assistance supported the improvement of the PSEs’ performance to reduce the fiscal burden of government subsidies as well as to prepare policies and strategies for initiating privatization. It also supported the strengthening of the PPP framework to help government involve the private sector in providing infrastructure to reduce the fiscal burden and increase efficiency. Finally, PSM projects supported the operations and expansion of the coverage of social safety nets to help the government achieve more inclusive growth and reduce income and non-income poverty, which were also in line with the government’s National Social Protection Strategy 2007.12 The Social Protection Development Program (SPDP) contributes toward achieving the targets of Sustainable Development Goal (SDG) 1 to eradicate extreme poverty, and SDG 5 to empower women, as the cash transfers are only paid

10 Government of Pakistan. 2013. National Power Policy 2013. Islamabad. See

http://www.ppib.gov.pk/National%20Power%20Policy%202013.pdf. 11 Energy Sector Task Force. 2010. Integrated Energy Sector Recovery Report and Plan 2010. Islamabad. See

https://www.adb.org/sites/default/files/publication/27488/energy-recovery-report-plan.pdf. 12 Government of Pakistan. 2007. National Social Protection Strategy. Islamabad.

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to women heads of the poor households.

42. Transport. The sector operation is rated highly relevant, both in terms of objectives and design. The sector received the second-highest allocations behind the energy sector with total ADB investment amounting to over $3.6 billion. In line with the CPS’s objectives, the transport operation focused mainly on expanding, rehabilitating, and upgrading road infrastructure at the national level, as well as in Sindh and Khyber Pakhtunkhwa. Many of the projects supported institutional reforms and/or institutional development, thereby covering all areas of sector development. Although the sector design and monitoring framework focused mostly on achieving the sector objectives “within Pakistan,” the COBPs prepared under the CPS expanded the coverage to also improve the economic connectivity with other countries in the region, particularly with CAREC countries. This enhanced the relevance of the sector operation, given the strategic geopolitical location of the country and very high economic cost of limited connectivity with other countries in the region. Similarly, while no direct investment has so far been made in improving the infrastructure and efficiency of Pakistan Railways, its policy and institutional framework was improved under the Pakistan Public Enterprise Reform Program. Most of these institutional reforms were focused on improving the financial management of Pakistan Railways to enhance its profitability.

43. The urban transport projects for Peshawar and Karachi that were approved during the CPS period were supported by the project design advance, and were able to put in place the institutional and legal framework, the detailed design, safeguards documentation and their implementation before the approval of the loans. This substantially improved the quality of the projects, their ownership and relevance, and eliminated start-up delays, and at the same time, reduced the downstream implementation risks. The lessons learned from the Sindh Cities Improvement Investment Program (SCIIP) were incorporated into the Punjab Intermediate Cities Improvement Investment Project (PICIIP) in the more flexible design of the project’s operational arrangement (service provider) to counter the likely political economy pressures and by taking a more progressive approach toward models of efficient service delivery. However, the PICIIP design which was otherwise relevant, still faced start-up delays related to planning and design issues, because unlike other projects in the sector, PICIIP was not supported by project design advance. Going forward, a project readiness facility worth $9 million was processed in 2019 for the Khyber Pakhtunkhwa Cities Improvement Project (KPCIP) and another facility for Punjab Livable Cities Project in the same year, to ensure higher level planning, readiness, and improved relevance of urban projects before ensuing investment loans were processed.

44. Water Supply and Urban Services. The sector operation is rated less than relevant under the CPS 2015–2019. The portfolio comprised six projects and/or programs with nine loans and one grant, of which only one project was approved in 2012 and completed in 2017 within the CPS period.13 Of the remaining five projects, two were approved at the end of 2017,14 and the remaining three were approved in 2019.15 The sector strategy was developed in line with the government’s Vision 2025 and its supporting Eleventh Five Year Plan, which aimed to tap the full economic potential of Pakistan’s cities by promoting economic connectivity through the development of modern infrastructure for creating innovative, smart, and green cities. The sector operation was also completely aligned with ADB’s Strategy 2020, with focus on the development of urban infrastructure.

13 Sindh Cities Improvement Investment Program (SCIIP), comprising two loans. 14 Punjab Intermediate Cities Improvement Investment Program and Peshawar Sustainable Bus Rapid Mass Transit Project. 15 Khyber Pakhtunkhwa Cities Improvement Project and Karachi Bus Rapid Transit Redline Project.

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45. The historic portfolio that was processed in the urban sector was based on feasibility studies. The conceptual designs and plans were relevant. However, due to the absence of detailed design and the political and safeguards complexities of the urban environment, these projects faced implementation issues.16 To improve the design relevance of the projects processed during the CPS period, a major effort was made to address the institutional, political, and planning complexities in the urban sector by introducing project design advance, and project readiness facilities at the preparation stages of new projects.17

C. Effectiveness

46. The effectiveness of the CPS was assessed by evaluating the extent to which the operations contributed to the attainment of sector targets set in the CPS results framework and to the achievement of overall CPS goals.

47. Achievement of Completed Project Outcomes. A total of 18 operations were completed between 2015 and 13 June 2019, with the project completion reports (PCRs) of some projects not prepared yet. Most of the available assessments, including the PCRs and the sector assistance program evaluation (SAPE), have rated these operations successful with many achieving, or even surpassing, their output and outcome targets. For example, the Punjab Irrigated Agriculture Investment Program was effective in attaining most of its targets, including the following: (i) improving the irrigation infrastructure to enhance the quantity, equity, and efficiency of irrigation water; and (ii) ensuring better operation and maintenance of improved irrigation infrastructure through the institutional arrangements. Similarly, the MFFs for the Power Transmission Enhancement and Distribution Enhancement Project achieved their targets of increased electricity supply and reduced power load shedding and transmission and distribution (T&D) losses. On the other hand, the effectiveness of some projects was limited as they could only achieve partial results due to the ambitious targets and the capacity issues in the National Transmission and Dispatch Company (NTDC) and distribution companies (DISCOs). The second MFFs for both transmission and distribution were approved during this CPS period. The transmission MFF replicated the previous MFF, whereas the second distribution MFF introduced the Advanced Metering Infrastructure (AMI) project in DISCOs. The AMI project was stalled for the first 4 years and only this year the procurement process was reinitiated, and the first contract is expected to be awarded by Q1 2020.

48. Effectiveness of Technical Assistance Support. Several major TA projects have been, or are likely to be, effective in achieving the desired outcomes. Many of these TA projects contributed, directly or indirectly, to ADB’s lending operations and therefore were effective in achieving their outcomes. TA projects largely focused on filling the knowledge and capacity gap of the implementing agencies associated with ADB’s lending operations. While most of these TA projects achieved their objectives, their performance assessment from a longer-term perspective indicates that sustaining capacity built from the TA projects remains a challenge.

49. Operation Loan Achievements. Three projects were canceled: (i) Renewable Energy Development Sector Investment Program – Tranche 2; (ii) Public Enterprise Reform Project (both as requested by the government); and (iii) Sindh Cities Improvement Investment Program – Tranche 2 due to the verdict of the Supreme Court of Pakistan declaring the involvement of the implementing agency in municipal matters as illegal. One policy-based operation in the portfolio, the Sustainable Energy Reform Program, has three subprograms, which makes the evaluation of effectiveness difficult, given that it requires almost all of their intended results to be considered as

16 SCIIP was the only project that started before the CPS period and faced these challenges. 17 This includes project design advance for the Peshawar and Karachi BRTs and the project readiness facility for the Khyber Pakhtunkhwa Cities improvement Project.

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prior actions. The sustainability of these results and/or their effectiveness in achieving the desired outcome remain an issue due to political implications. Hence, other than having an adequate design and appropriate phasing, these actions require the government’s taking full ownership for their implementation and sustainability, which can be challenging under an uncertain political environment. These operations had been effective in bringing in policy changes, which could have had significant positive impact on the performance of the power sector and PSEs. Nonetheless, to date, their impact on achieving the desired outcomes, including the financial sustainability of the power sector and the privatization of PSEs, has been very limited. The continued ownership of the government for both the policy reforms and their intended outcomes remains a fundamental requirement for future effectiveness of these actions, and therefore the operation.

50. Rating. The overall country operation implemented under the CPS, 2015–2019 is rated effective on the borderline. In broad terms, the main CPS outputs and outcomes have been achieved. Both completed and ongoing projects have achieved, or are likely to achieve, many of their targeted outcomes. Progress has been mixed as it is better in some areas than in others. On average, projects have performed better than policy-based or program loans in terms of achieving their targets. As PBLs focus on difficult institutional and structural reforms, implementation at times is politically challenging for the government.

51. Other closed projects for which PCRs have not yet been prepared have also been effective in delivering their intended outputs and outcomes. The Jalalpur Irrigation PDA, Public Sector Enterprises Reform Program (Subprogram 2), National Trade Corridor Highway Investment Program (Tranche 2), and National Trade Corridor Highway Investment Program (Tranche 3) have met their output and outcome goals and objectives. However, the Sindh Cities Improvement Investment Program (Tranche 2) did not deliver the planned outputs, while the Public Sector Enterprises Reform Project was canceled.

Sector Assessments – Effectiveness

52. ANR. The sector operation implemented under the CPS, 2015–2019 is rated effective. Majority of the operation’s infrastructure development and the output targets of institutional reforms were met. Nonetheless, a few closing projects were unable to complete the works anticipated at the start of these projects due to the implementing agency’s inability to manage the contracts, and due to continued weak capacity in other areas and slow pace of contracted civil works.

53. The outcome performance of the sector exceeded the target set for achieving annual cropping intensity of at least 140%. The cropping intensity in the Lower Bari Doab Canal command area of over 700,000 hectares (ha) jumped from 162% in 2006 to 172% in 2017. Similarly, the cropping intensity in the New Khanki command area of over 1.2 million ha increased from 142% in 2011 to 148% in 2016, while cropping intensity in the Pakpattan Canal command area of over 500,000 ha improved from 165% in 2012 to 174% in 2016. Against the target of a 10% increase in crop yields by 2019, available data indicate that changes in crop yields between 2012–2013 and 2017–2018 varied between -2.5% for cotton and 16.6% for maize to average at 7% for all major crops.

54. Of the seven indicated outcomes for completed projects—such as the Flood Emergency Reconstruction Project, Punjab Irrigated Agriculture Investment Program, and Jalalpur Irrigation PDA—four were achieved, one was partly achieved, one could not be assessed, and one was not achieved (see Appendix 1). The Flood Emergency Reconstruction Project was effective in delivering the critical hard infrastructure to restore livelihoods and provide flood-impacted regions access to markets. It also helped rebuild the affected assets to their original state, or even better. Similarly, the Punjab Irrigated Agriculture Investment Program was effective in improving the sustainability and delivery of water services and management.

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55. Energy. The sector operation implemented under the CPS, 2015–2019 is rated less than effective in achieving the expected sector outcomes. However, a large part of this portfolio was still in various stages of implementation and in some cases confronting issues which are temporary in nature. While the operation was able to increase power generation from indigenous fuel sources and partly lowering the production cost of electricity, some projects achieved partial targets. The energy efficiency and renewable energy MFFs were not implemented because the renewable energy projects could not be financed in politically sensitive and disputed northern areas of Pakistan (without no objection certificate from GoIndia) and in security challenged Khyber Pakhtunkhwa province. The energy efficiency MFF was canceled after the first tranche because of insufficient traction for energy efficiency and conservation by the government due to a prevalent generation crisis wherein all emphasis focused on eliminating load shedding and adding new generation and expansion of transmission and/or distribution. It is generally acknowledged globally that energy efficiency gains ground once greater technical and infrastructure deficits are under control.

56. The performance of the transmission and distribution projects was effective in achieving the intended outputs and outcomes. Under the Power Transmission Enhancement Investment Program, the transmission grid capacity increased from 87,835 gigawatt-hours (GWh) in 2010–2011 to 98,248 GWh in 2015–2016. The Power Distribution Enhancement Investment Program added 13,309 megavolt amperes (33% increase in distribution evacuation) and 2,203 kilometers (km) of 132-kilovolt transmission lines. Tranche 1 of the second power distribution project is under procurement.

57. The outcome of the Sustainable Energy Sector Reform Program Subprograms 1, 2, and 3 (SESRP) is not yet fully realized, with payment arrears remaining above the target due to the suspension of the government’s plan to privatize DISCOs and GENCOs through strategic sales following civil unrest. One of the most important achievements in regulatory change, supported by the program, was the approval in 2018 of the National Electric Power Regulatory Authority (NEPRA) Act Amendment. This amendment was initially proposed under the Accelerating Economic Transformation Program Subprogram 2 in 2009. The amendment enabled the government to apply tariff surcharges and allowed NEPRA to manage tariff appeals more efficiently. Other changes, such as the (i) restructuring of government ministries related to the sector including the creation of the Ministry of Energy, (ii) the separation of Central Power Purchase Agency Guarantee Limited from NTDC as an independent body, and (iii) the integration of the Alternative Energy Development Board and the Private Power and Infrastructure Board under the same corporate structure, may improve processes and reduce institutional inefficiencies and delays. The continuity of reforms initiated under SESRP is critical to improve the financial viability and inefficiencies of the sector.

58. PSM. The sector operation implemented under the CPS, 2015–2019 is rated effective. Most of the operations in the sector are ongoing. The present rating is based on the implementation of ongoing operations until June 2019 and the performance of the closed Public Sector Enterprise Reform Program, which was effective in achieving its targets.18 Reforms implemented under the PSE Reform Program through reduction in fiscal transfers to PSEs, corporate governance compliance, effective monitoring of PSEs, restructuring board of directors, and in extending the scope of corporate governance rules to all PSEs effectively contributed toward overall fiscal sustainability. The two ongoing PPP projects approved under the CPS are supporting resource mobilization from the private sector for infrastructure projects. The target of lower debt-to-GDP ratio was linked to the envisaged privatization program of the government. It is likely to be achieved as

18 These include enhanced financial transparency, better monitoring, improving corporate governance in PSEs, restructuring and reforming Pakistan Railways, approving policies by the Privatization Board to address labor issues, and the creation of a communication strategy to bring stakeholders on board.

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the government completes privatization of selected PSEs. The ongoing Social Protection Development Project is performing well and is assessed as delivering expected outputs and showing satisfactory implementation progress. It was effective in expanding the coverage of Pakistan’s cash transfer program by supporting enrollment and the financing of additional 0.85 million eligible beneficiary families.19 With monthly cash transfers to the targeted poor under the national cash transfer program increased to PRs 1,667 in 2018 from PRs 1,575 in 2012, showing a growth by 5.8% achieved the outcome target of increased consumption expenditure of beneficiaries.

59. Transport. The sector operation implemented under the CPS, 2015–2019 is rated effective. Although some critical projects are still ongoing, their progress in achieving the desired outputs have been good, inferring that these projects should contribute significantly toward achieving the CPS objective of higher and inclusive growth. The closed operations between 2015 and 2018 are rated effective in achieving their outputs. Consequently, they have facilitated successfully toward the achievement of the sector outcome of increased movement of people and goods within Pakistan in a more efficient, safe, and sustainable way. The National Highway Development Sector Investment Program Tranche 2 enabled the road users along the N50 and N65 to move more effectively and efficiently. The weighted average travel speed along N50 and N65 for freight traffic increased by 90% from 25 km/hour in 2013, as a result of the rehabilitation and upgrade of 225 km of N50 and N65. Under the National Trade Corridor Highway Investment Program Tranche 1, road traffic operation along the Faisalabad-Khanewal road have been assessed to be effective and efficient. Outputs under tranche 2 and tranche 3 of the program have been completed but performance has yet to be evaluated. Under tranche 2, the construction of a new 40 km long six-lane expressway between Hassan Abdal and Sarai Saleh, passing through the Punjab and Khyber Pakhtunkhwa provinces, has been successfully completed while under tranche 3, the construction of a new 19.1 km long six-lane expressway between Sarai Saleh and Havelian is under construction.

60. The only output completed under PICIIP, which started in April 2018, is the sector master planning of both cities included in the project scope, based on which the subprojects have been designed and implementation recently started. Although the CPS, 2015–2019 did not include any targets related to urban transport improvement in Peshawar, significant investments to support urban mobility has been made through bus and rapid transit projects during the CPS period, which are likely to achieve the intended outputs and the outcome related to safe, sustainable, and universal mobility for the 400,000 urban dwellers of Peshawar by the end of the CPS period in 2019.

61. Water Supply and Urban Services. The sector operation implemented under the CPS, 2015–2019 is rated less than effective. The sector outcome of the CPS was higher quality of life for urban residents, which was to be achieved through investments and reforms in water supply and sanitation services in the selected cities of Sindh and Punjab. The CPS set the following outcome indicators for the sector: (i) proportion of urban population with sustainable access to an improved drinking water source increased from 89% in 2013 to 92% by 2019; (ii) proportion of urban population with access to improved sanitation facility increased from 72% in 2013 to 80% in 2019; (iii) proportion of children under five suffering from diarrhea reduced to 8% by 2019 from 9% in 2013; and (iv) under-five mortality reduced to 72 per 1,000 live births in 2019 from 89 per 1,000 live

19 The original target of enrollment of 2.4 million new beneficiaries has not been met because the BISP decided to start a new poverty scorecard survey to identify beneficiaries on the basis of an updated database – the National Socio-Economic Registry or NSER. The national survey after the pilot in 15 districts in 2016–2017 has been rolled out in the country and is targeted to be completed by June 2020 when beneficiaries will be recertified and newly eligible beneficiaries enrolled in the program.

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births in 2013.

62. The active portfolio in the urban sector is quite young; tranche 2 of SCIIP is the only project that was completed during the CPS period, and that too was closed prematurely—with only 28% disbursement.20 The urban portfolio is in the early stages of implementation. The quantum of work undertaken under the five active projects in the portfolio is inadequate to make an objective assessment of the sector, as majority outputs and results have yet to be achieved. In terms of achievements, the limited investments under tranche 2 of SCIIP increased the raw water intake capacity to 40 million gallons per day and increased the solid waste collection capacity of the cities to 70% of the generated solid waste, which is well above the country sector output target of 55% solid waste collection.

D. Efficiency

63. To evaluate how efficiently ADB’s country operation under CPS, 2015–2019 was delivered, the assessment appraises (i) costs versus benefits, (ii) implementation and contract award and disbursement performance, and (iii) other measures that either contributed to or reduced efficiency.

64. Portfolio performance. During 2015–2018, sovereign operations in Pakistan expanded both in size and lending volume. Average annual lending (approvals) to Pakistan reached $1.45 billion despite the abnormally low approvals of $455 million in 2018—an election year. The total number of active projects increased from 26 to 34 and active loan and grant volume rose from $5.51 billion to $6.75 billion (Figure 1). Overall portfolio performance also kept improving until 2017, but in 2018 fell short of meeting contract award and disbursement targets. This underperformance was primarily due to the significant depreciation of the Pakistan rupee against the United States dollar and the executing agency’s slower decision-making in project implementation matters. The Pakistan rupee depreciated by 26% during January 2018 to December 2018, bringing in a lower value of actual project contract award and disbursement in dollar terms compared with the projected targets. The executing agency’s slow decision-making in implementation matters, particularly at the provincial level also contributed to lower contract award and disbursement performance, as the country entered into election mode with the interim government mainly mandated to hold 2018 national elections, and investment decisions were put on hold for about three months. In addition, post-elections the new government took some time for settling in.

Figure 1: Pakistan Portfolio Performance in 2015–2018

20 The SCIIP design did not fully account for the political economy complexities surrounding the urban sector in Sindh. Attempts to overcome this regressive politics through restructuring failed due to limited appetite for these changes within the political circles. Different interest groups choked project operations, and quality of services deteriorated to the point that the Supreme Court of Pakistan ordered its closure under a public interest litigation.

17

Source: Asian Development Bank estimates.

65. During 2015–2018, contract awards in ADB’s overall sovereign operation averaged about $900 million per annum, and disbursements including program loans averaged about $1.0 billion per annum. Despite the transition to the new government since August 2018 slowing down project implementation, the overall disbursement rate of Pakistan sovereign operations including the period of 2015–2019 has been on the rise (Figure 2), taking on average about 6 years to complete a project. In 2019, the projected contract awards and disbursements amount to about $640 million and $2.38 billion, respectively, while the committed loan amount including program loans are projected to reach $2.44 billion. In the same period, the number of active TA projects has increased from 23 in the beginning of 2015 to 39 by the end of 2018, and the value has also increased from $22 million to $68 million (including cofinancing of over $40 million from DFID for the Pakistan Economic Corridor Program).

Figure 2: Disbursement Ratio for Pakistan Portfolio in 2014–2019

ADB = Asian Development Bank, cofin = cofinancing, DB ratio = disbursement ratio, PAK = Pakistan, PBL = policy-based loan. Source: Asian Development Bank estimate.

66. On average, it took about 17.3 months to prepare a project in Pakistan (Table 2), higher than the 12 months standard time. The preparation time varies significantly across projects, with some projects taking even more than 2 years to prepare. The average preparation time for provincial projects was considerably higher than federal projects.

67. Average start-up time for projects and programs (i.e., time taken between project approval and effectiveness) was about 5 months, which is closely in line with expectations. The breakdown includes (i) approval and signing of projects (2.7 months), and (ii) project signing and effectiveness

14.1%

9.9%

20.2%19.0% 18.9%

13.7%

21.0% 19.0% 20.0%22.0% 21.0% 21.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2014 2015 2016 2017 2018 2019 Projected

DB ratio PAK excl PBL & cofin DB ratio ADB Linear (DB ratio PAK excl PBL & cofin)

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(2.3 months). However, there was high variation in start-up time, with some projects taking more than 10 to 12 months to sign.21

Table 2: Start-up and Implementation Delays in Pakistan Country Operation

Mean

Preparation

Time (months)a

Average Time (in months) Between

Approval and Signing and Original and Actual

Signing Effectiveness Closing Dateb

ANR 22.2 3.3 1.7 13.6

Energy 13.7 3.5 4.6 27.2

PSM 7.8 1.0 3.2 6.1

Transport 15.9 4.2 1.5 3.0

Water Supply and Urban Services 26.5 1.4 0.5 0.0

Overall 17.2 2.7 2.3 10.0

a Projects/programs with unavailable concept clearance date are not accounted for. b. Applies to closed projects or ongoing projects with closing date already extended.

ANR = agriculture, natural resource and rural development, PSM = public sector management. Source: Asian Development Bank estimate.

68. Project readiness. ADB measures project readiness against six key filters: (i) project design, (ii) procurement readiness, (iii) progress of environmental and social safeguards, (iv) government approvals, (v) establishment and staffing of project management units (PMUs), and (vi) availability of counterpart funds. Some projects came with high readiness. For example, the Peshawar Bus and Rapid Transit Project and the National Motorway M-4 Gojra–Shorkot–Khanewal Project benefited from high readiness and had the first contract awarded either before or immediately after the loan approval with fast implementation. On the other hand, some projects were not procurement ready at approval, and as a result, ADB and the government delayed the loan signing to avoid the commitment charges. The Second Power Distribution Enhancement Investment Program – Tranche 1 was substantially delayed because of late approval of PC-1 and rebidding after unilateral cancellation of ongoing procurement by the government.

69. Rigidity of government processes and procedures. One reason for delays in signing a project is rigid processes and government procedures in approving a project. Under government processes, every donor project, irrespective of size and location (i.e., provincial or federal), must be approved by the Executive Committee of the National Economic Council. However, the infrequent executive committee meetings, usually with an extensive agenda, often lead to postponed discussions at a future meeting, causing project approval delays. The efficiency of development projects is at times compromised due to stringent government procedures that are designed more to ensure propriety of investments (i.e., the money is spent according to government procedures) as opposed to maximize the value for money of these investments.

70. Implementation lags. Most projects have institutional development components, either built into the project or supported by an accompanying TA. These components are targeted to build the capacity of the government, particularly the implementing agencies and/or executing agencies to ensure smooth and timely implementation of projects. ADB has been working closely with the

21 These include the Second Power Distribution Enhancement Investment Program (12 months), Sindh Provincial Roads Project (10.8 months), CAREC Regional Improving Border Services Project (10.8 months), and Post Flood National Highways Rehabilitation Project (10.8 months).

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government and executing agencies to build systems for project and safeguards management, particularly on improving contract management, procurement, and financial management processes within the ministries and attached departments involved in ADB-supported projects. Nevertheless, the implementing agencies often acted slow in following ADB policies and guidelines when they differ from the government’s own procedures, particularly on procurement and safeguards related to implementation matters. The sustainability of the capacities created under ADB interventions remains a challenge as new projects continue to face delayed and weak implementation from time to time.

71. The success of ADB-supported projects depends heavily on the performance of project management units (PMUs). While many good officers at the federal and provincial levels could head PMUs effectively and efficiently to improve project implementation, the lack of a formal and effective mechanism for appointing project directors compounded by low salaries, among other factors, hampers project success. Further, weak project ownership and frequent staffing turnover have adversely affected implementation progress. In some projects, such as the Power Transmission Enhancement Investment Program – Tranche 1, frequent changes in the managing director of the NTDC have thus delayed project implementation decisions. Other projects experienced implementation delays due to inadequate support provided to implementing agencies in situations when implementing agencies were unfamiliar with the project delivery approach, such as the use of turnkey contracts in the Power Transmission Enhancement Investment Program – Tranche 2. The implementation consultants were appointed 3 years after project approval. Hence, having a dedicated and fully empowered project director to be responsible for and take ownership of each ADB-financed project is critical.

72. By the end of 2018, there were 34 ongoing operations in the country portfolio amounting to $6.75 billion, of which only 48% was committed, with 29% disbursement. Some ongoing projects facing implementation difficulties are either already delayed or likely to be delayed.22 The slow pace of implementation implies that some of the project results may not be achieved by the closing date or even by the extended closing date, with delayed achievement of results highly likely to erode some of the socioeconomic benefits expected from these operations.

73. Safeguards compliance. Majority of the projects in the Pakistan portfolio are compliant with respect to social safeguards requirements; however, submission of social safeguards monitoring reports tends to be delayed, and their quality have room for some improvements. Likewise, delay in compensation payments, resolution of certain grievances, and mobilization of safeguards consultants are still noted in some projects. Executing agencies/implementing agencies need to address these issues more effectively. Legal and administrative impediments beyond the control of the executing and implementing agencies continue to affect full disbursement of compensation. Staff changes and issues within the revenue departments affected the gathering of land record data, finalization of the list of displaced persons and assets, field measurements, valuation, and issuance of the required notifications for land acquisition. The staff and resources mobilized by the executing agencies/implementing agencies to support the activities of the revenue departments need to be sustained beyond the land award to conduct outreach activities with

22 Already delayed projects include the Power Distribution Enhancement Investment Program – Tranche 3; Jamshoro Power Generation Project; Social Protection Development Project; National Highways Network Development in Balochistan Project; Flood Emergency Reconstruction and Resilience Project; Supporting Public–Private Partnership Investments in Sindh Province; Access to Clean Energy Investment Program; Enhancing Public–Private Partnerships in Punjab; and Karachi Bus Rapid Transit PDA. Likely to be delayed projects include the Second Power Distribution Enhancement Investment Program – Tranche 1; Second Power Transmission Enhancement Investment Program – Tranche 2; CAREC Regional Improvement of Border Services Project; CAREC Corridor Development Investment Program – Tranche 1; and Peshawar Sustainable Bus Rapid Transit Corridor Project.

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affected people until the disbursement of compensation has been completed. ADB has received an increasing number of safeguards and non-safeguards-related complaints from the ongoing projects. Stronger and more effective grievance redress mechanisms in projects should be developed and maintained. ADB has conducted several training workshops on problem solving and grievance redress mechanism during 2015–2018, but demand for continued capacity-building activities remains high.

74. The country operation implemented under the CPS, 2015–2019 is rated efficient. The transaction costs of project operations are high because of complex procedures and inefficient systems. The average economic internal rate of return (EIRR) for completed projects was about 21%, which is significantly above the 12% investment hurdle rate.23 However, implementation delays eroded some of the rate of returns on operations.

Sectoral Assessments – Efficiency

75. ANR. The sector operation implemented under the CPS, 2015–2019 is rated efficient. There were nine loans closed between 2015 and 2018 with average EIRRs of 19.7% at the appraisal time and 23% at completion.24 The mix of modalities were efficiently applied to achieve the sector objectives. For example, stand-alone facilities were utilized in both Punjab and Khyber Pakhtunkhwa when the objective was to only improve infrastructure of a component of the operation. Grants and technical assistance were provided to meet the knowledge and capacity gaps of the executing agencies. This provided the government and ADB with opportunities to (i) assess the workability and effectiveness of various interventions, (ii) adopt a modular and targeted approach to development to overcome the under-capacity of executing agencies, (iii) effectively implement the policy and institutional reforms, and (iv) ensure timely completion of operations. The timeliness start-up time (i.e., between approval and effectiveness of the operation) for ANR projects took 5 months on average, but the timeliness varied across projects ranging between 1 and 9 months. This bodes well not only with the average time of other ADB operations in Pakistan.

76. ANR projects faced implementation delays with an average completion time of 2 years after the original closing dates. The time range for delays is wide between 4 months and 4 years. These delays demonstrate that implementation capacity of executing agencies in the irrigation sector continue to remain weak despite significant resources devoted by the government, ADB, and other development partners. Infrastructure development and sector reforms were coordinated well with other development partners, such as the World Bank, both in terms of their sequencing and division of responsibilities across sectors and geographic locations of operations. However, the linkage of key irrigation infrastructure development with on-farm water management including use of high efficiency irrigation systems need to be strengthened.25 Since Pakistan is a water-stressed country, investments will need to focus on enhancing water conservation capacity to make the delivery of irrigation water for higher crop yields more efficient. The evidence suggests that halving the water loss stemming from poor and inefficient water use can save water as much as provided by two large storage facilities. With innovations in other countries, especially in the People’s Republic of China, the capital cost of such systems has declined, and they might now be feasible in Pakistan.

23 ADB. 2003. Economic Analysis of Projects. Operations Manual. Manila. 24 MFF – Punjab Irrigated Agriculture Investment Program Subprojects 1 and 2; Punjab Irrigated Investment Program – Project 2; Punjab Irrigated Agriculture Investment Program – T3; and Punjab Irrigated Agriculture Investment Program – T4. 25 This was partly because under ADB’s Multitranche Fund Facility Project – 1, the high efficiency irrigation system was tested on a pilot basis and the result indicated that the system may not operate well if the operations and maintenance environment is not adequate. Also, the capital cost of the system and the inadequate development of supporting industry could be additional deterring factors.

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77. Energy. The sector operation under the CPS, 2015–2019 is rated less than efficient. The mix of subsector investments and the use of appropriate modalities to deliver the operation was optimal. The operation covered the entire power sector including conventional power generation, renewable energy, transmission and distribution, as well as reforms for improving the policy, institutional, and regulatory environment. During 2015–2018, eight projects were closed and four PCRs for MFF – Power Transmission Enhancement Investment Program (Tranche 1 and 2) and MFF – Power Distribution Enhancement Investment Program (Tranche 2 and 3) rated the projects efficient. The EIRRs for the transmission project (Tranche 1 and 2) improved significantly from 9% and 12%, respectively, at appraisal, to 21.5% and 13.5% at completion. The EIRRs for the distribution project (Tranche 2 and 3) were also high at 26.5% and 17.65%, respectively (compared with the economic opportunity cost of 12%). However, some projects (i.e., generation, transmission, and distribution) suffered from start-up and implementation delays mainly due to social and environmental safeguard issues (e.g., land acquisition and right of way) or in some cases due to delays in the government approval processes, which also extended closing dates for some projects.

78. PSM. The sector operation is rated efficient under the CPS 2015–2019. The most important feature of the sector operation was the crucial policy and institutional intervention for improving the efficiency and capacity building for the government. For example, the PSE Reform Program was designed as a budget support operation with careful selection and logical sequencing of critical policy actions over two subprograms. This not only provided the government with large, quick, and much-needed foreign exchange, but also reduced fiscal transfers to PSEs, creating fiscal space for other development needs. The program was instrumental in aligning the interests and incentives of various government ministries and agencies for productive implementation of policy and institutional reforms. ADB’s PBL operations were delivered on time; however, there are other ongoing projects in the sector. The project for supporting Public–Private Partnership Investments in Sindh Province faced start-up delays due to longer time taken for approval by the government, and amending the provincial PPP Act – a condition of the project. These conditions were, however, critical in creating a sustainable impact.

79. The Social Protection Development Project (SPDP) also helped to strengthen the financial management and internal controls of the Benazir Income Support Program to improve the efficiency of expenditures. The financing of the cash transfer component, which is 84% of the loan, has been utilized efficiently. Due to changes in the design of the component on poverty graduation program, which is 9% of the total loan size, the closing date has been pushed back by 3 years, to 30 June 2022.

80. Transport. The sector operation under the CPS, 2015–2019 is rated highly efficient. There were about seven loans closed between 2015 and 2018 with an average EIRR of 19.7%, which is significantly higher than the investment threshold of 12%. The ADB sector team made good use of available modalities such as the stand-alone and MFF facilities for infrastructure development while technical assistance was provided to expand the knowledge base and capacity of the implementing agencies. The average time taken between approval and effectiveness of projects was 6.6 months, but the actual time taken varied across projects. For instance, it was 0.9 months for the MFF – National Highway Development Sector Investment Program – Project 2, and 13.6 months for the National Highway Network Development in Balochistan Project. During 2005–2008, six projects achieved closure with an average closing delay of 5.8 months. Three projects closed on time while the MFF – National Highway Development Sector Investment Program – Project 2 experienced the highest closing delay of 17.3 months. The Peshawar Sustainable Bus Rapid Mass Transit Project (PSBRMTP) has already achieved more than 90% contract awards and disbursements within 50% of the project time; and the project is expected to complete well before time. An integrated approach based on the comparative advantage of each subsector could help

22

optimum efficiency of the transport system. For example, the surface transport system efficiency could have been considerably enhanced if road transport was used mainly for short- to medium-distance trips while railways catered to long trips and the bulk of the freight. The efficiency gains could have been further enhanced through stronger interventions for improving the efficiency of Pakistan Railways. Nonetheless, ADB investments in Pakistan adequately improved the efficiency of the road sector.

81. Water Supply and Urban Services. The sector operation under the CPS 2015–2019 is rated less than efficient. All urban sector projects during the CPS period were declared effective within 3 months of the loan signing date. The average time taken from approval to effectiveness was 3.5 months, with the minimum of 1.5 month for the Khyber Pakhtunkhwa Cities Improvement Project, and a maximum of 7.5 months for tranche 2 of SCIIP. There was no extension given in tranche 2 of the SCIIP although the project could disburse only 28% of the approved amount at closure. No extension is expected in any of the ongoing projects.

E. Sustainability

82. The assessment of sustainability considers the likelihood and risks to sustaining results over the long term. The review assessed sustainability relative to two sub-criteria covering (i) the commitment and financial capacity of the government and/or sector entities to provide adequate resources to meet the post-completion recurrent cost needs of these projects, including the will, policy, and capacity of the government and/or sector entities to meet (at least a part of) the recurrent cost through cost recovery; and (ii) government ownership of policy reforms.

83. Policy continuity. The focus of the public investment was largely on infrastructure development during the term of the previous government. With the smooth transfer of government in August 2018 after the general elections, Pakistan Tehreek-e-Insaf (PTI) assumed office in the federal government as well as in the largest province of Punjab, Khyber Pakhtunkhwa, and Balochistan, implying smooth federal–provincial relations. While the new government greatly emphasizes the social sectors including health and education, its focus on infrastructure remains albeit in areas such as housing and tourism. There has been no significant indication of a shift in government priorities, and policies related to development partners supported operations.

84. Recurrent Costs. The sustainability of operations can face challenges from governance/administrative issues in collection of user chargers that contribute toward operations and maintenance (O&M) financing of infrastructure projects. The institutional reforms initiated to pass on some of the O&M cost to the users, particularly in the irrigation sector, have progressed very slowly. On the other hand, providing the authority to the implementing agency to have the National Highway Authority (NHA) collect user charges through a road toll has worked well, generating revenues to fund a significant portion of the O&M cost. The new government is intending to undertake a thorough review on this to revisit some of the policy and institutional arrangements.

85. Policy Reform Ownership. During the CPS 2015–2019, ADB’s support for policy reform has been strategically sequenced to fulfill the government’s foreign exchange needs to meet the large external financial obligations. In this context, quick disbursements were rightly made through the policy-based loans to meet the government’s needs while also allowing ADB to resolve some of the pressing policy issues. This strategy has worked well for both the government and ADB, and significant policy changes were introduced.

86. Rating. The operation implemented under the CPS, 2015–2019 is rated likely sustainable. Even though ADB significantly contributed to sustainability, recurrent financing and cost-recovery arrangements in the key ADB-supported sectors have gradually become uncertain due to enhanced fiscal instability forcing the economy to move into a stabilization mode. As Pakistan

23

is currently implementing fiscal consolidation under the IMF program, meeting fiscal targets can compress the development budget, including capital and O&M expenditure. While the policy actions taken by the previous government might not be reversed, they could lose some of their effectiveness. As a result, sustainability may be compromised in the future.

Sector Assessments – Sustainability

87. ANR. The sector operation implemented under the CPS, 2015-2019 is rated likely sustainable. The sustainability of the infrastructure improvements achieved under the ADB sector operation hinges considerably on the effectiveness of the institutional reforms implemented to improve operation and maintenance of these structures. Over the past few years, the government has improved its system of determining the irrigation sector’s O&M needs to significantly enhance the O&M allocations. While some improvement in O&M allocations and their utilization has been observed, the abiana rates (i.e., water charges) have remained unchanged with declined recovery both in farmer organizations and the Provincial Irrigation Department-administered areas. This suggests that there is still room for institutional reforms. The government will need to continue providing O&M funds from the budget to meet the O&M needs. However, capital investments and O&M may come under pressure due to prevailing fiscal constraints. Nonetheless, the provincial governments have enough resources provided under the 7th NFC Award to meet the O&M needs of ANR sector operations, provided that the provincial governments accord it the priority it deserves. Despite the uncertainties on O&M allocations, the output and outcomes of the sector are likely to be sustained as no large-scale changes are expected in government policies in the sector. Moreover, the new government has recently formulated an action plan for uplifting agriculture, which prioritizes investments in the water sector including also to improve the efficiency of the irrigation system through technical and institutional reforms, which directly align with the focus area of ADB’s sovereign operations in the sector.

88. Energy. The sector operation implemented under the CPS, 2015–2019 is rated less than likely sustainable. ADB operations made some solid contributions to all areas of the power sector to likely enhance the system’s cost-effectiveness. The increased transmission capacity supports investment in new power generation capacity that is needed to reduce the demand–supply gap and load shedding. A strong and reliable transmission system with reduced technical losses is at the core of a sustainable power sector. The transmission and distribution MFFs are critical to evacuate newly added generation under the China–Pakistan Economic Corridor program. The operations supported a sustained increased transmission capacity and reduced losses that led to higher sales and revenues for DISCOs. Under transmission tranche 1, all subprojects have been commissioned to form integral components of Pakistan's transmission system. NTDC's income is based on a user charge with an estimated financial internal rate of return of 9.6%, which is higher than the estimated weighted average cost of capital of 5.5%, for it to be considered financially sustainable. Under tranche 2, all subprojects have also been commissioned. The PCR is confident that NTDC will repair or replace any project-installed equipment installed that fails in service. The financial internal rate of return is estimated at 10.3% while the EIRR is calculated at 13.9%, which is significantly higher than the 12% investment hurdle rate. Similarly, the performance of the distribution sector remained financially sound as the financial internal rate of return was higher than the weighted average cost of capital. The project has also resulted in increased 132/11 kilovolt (kV) transformer delivery capacity, reduction in T&D losses, and expansion in distribution network, resulting in improved grid connectivity with reduced electricity outages.

89. The policy-based lending has introduced some critical policy and institutional changes, which will enhance the sustainability of the sector in the future. However, based on the outputs and outcomes achieved by the closed operations during 2015–2018, sustainability of the reform-operation appears less than likely. Although the Sustainable Energy Sector Reform Program

24

introduced key policy and institutional changes, it is still unclear if such support has long-lasting effects, given the high political risk affecting the commercialization of the sector. In renewable energy, the sustainability of project outcomes is also uncertain despite the allocation of appropriate O&M. In energy efficiency, the government-subsidized compact fluorescent lights were discontinued after the Energy Efficiency Investment Program Tranche 1, due to the availability in the market of competitively priced light-emitting diodes. The results-based loan on access to clean energy supports the government programs in Punjab and Khyber Pakhtunkhwa provinces and is envisaged to be sustainable. ADB-supported generation capacity being implemented (coal-fired power plants, run-of-river hydropower, wind, and solar photovoltaic [PV]) will reduce the average generation cost. ADB’s contribution to adding new generation capacity has been satisfactory.

90. PSM. The sector operation implemented under the CPS, 2015–2019 is rated likely sustainable. Improving the functioning and financial health of PSEs through improvements in governance and public sector management continues to be a priority of the new government. The reforms implemented under the PSE Reform Program are being built upon by the government. The government is implementing a 39-month IMF program approved in July 2019, which includes structural policy measures to improve governance, transparency, and efficiency of PSEs. The enabling policy framework for privatization under the program will assist the government in facilitating preparations for the privatization of identified PSEs. Under the program, selected PSEs were restructured to improve the public financial management system. The program has improved financial transparency through public disclosure of the PSEs’ financial performance, as well as the government’s capacity to manage and monitor the performance of the board of directors of the PSEs. The Securities and Exchange Commission has been able to enforce effective measures in improving the compliance ratio of PSEs with the Public Sector Companies Corporate Governance Rules. The program also promoted private sector participation in the provision of public assets and services under a PPP approach. The program has helped the government to plan financing requirements and to develop a coherent, well-coordinated approach for managing adjustment costs (i.e., retirement funds) through joint support from development partners.

91. The Social Protection Development Project (SPDP) is considered sustainable. The new government has decided to increase budgetary allocation and announced a comprehensive social protection and poverty reduction policy under the title “Ehsaas.” The policy statement consolidates institutional measures, development and expansion of social safety nets, human development investments, and livelihood interventions. In response to the government’s request, ADB is currently processing additional financing of $200 million for the SPDP to continue the cash transfer program despite the difficult macro-economic situation and to further strengthen the financial management and policy research capacity of the Benazir Income Support Program.

92. Transport. The sector operation is rated most likely sustainable under the CPS 2015–2019. This is based on the assumption that the government policies continue. The NHA meets a large part of the road maintenance needs from tolls, while the federal government provides the remaining needs through its budget. The NHA generates a bulk of road sector maintenance funds at the federal level through toll levy, and the NHA has been given the authority to expand and increase these tolls based on their needs. However, large infrastructure investments in the sector under the China–Pakistan Economic Corridor would significantly increase the O&M needs of the sector. Coupled with the likely government expenditure squeeze, the NHA might be forced to rely more heavily on toll taxes for road infrastructure maintenance. While provincial governments should have the capacity to meet the O&M needs of the transport sector due to their higher share in the pool of divisible federal revenue, their support during such times of fiscal crunch remains to be seen. Any policy shift in the government’s focus on the transport sector can lead to less than optimal returns. In particular, the brunt of this squeeze, if any, may be borne by the development and O&M

25

expenditures.

93. For the PSBRMTP, staff and resources are in place for the special purpose vehicle for operating the bus services. The approved operational model of the PSBRMTP does not require any subsidy for operations, and the legal framework for regulation of bus services and the related regulator are also in place. Similar arrangements have been put in place for the Karachi Bus and Rapid Transit project approved in July 2019, and are being developed also for PICIIP and KPCIP. These improvements are expected to substantially improve sustainability of ongoing and future urban transport projects.

94. Water Supply and Urban Services. The sectoral operation implemented under the CPS 2015–2019 is rated less than likely sustainable. Due to the early stages of the existing urban portfolio, it is not possible to fully assess the sustainability of the sector investments at this stage. Learning from the experience of the SCIIP tranche 2, in which the investments were unsustainable due to institutional, political economy, and operational design issues, all five ongoing urban sector projects have adopted a new approach under which these risks are addressed before making the investments. In all ongoing and planned projects, priority investments are being based on approved land use and sector plans of the cities. The business and operation model of the planned investment, including the cost-recovery tariff is being developed and approved by the respective cities before priority investments are made. At the same time, the institutional and legal framework for the entities responsible for operations are being established up front to ensure availability of capable and fully empowered entities for sustainable operations of urban investments.

F. Development Impacts

95. The impact of ADB’s operation in Pakistan is assessed against three sub-criteria, including progress toward achieving (i) overall development goals, (ii) sector goals, and (iii) crosscutting thematic impacts. The assessment is focused on identifying progress toward achieving CPS goals along with highlighting areas in which ADB support has contributed positively toward the achievement of higher, more inclusive, and sustainable growth.26

96. ADB operations facilitated the achievement of reasonable progress toward achieving country development goals. However, the macroeconomic targets were missed due to the influence of several exogenous factors (i.e., outside ADB control) such as exchange rate movements, changes in demand and growth rates in national and international markets, the supply response by national producers to such changes, and changes in productivity and relative competitiveness, among others. It is difficult to disentangle the impact of ADB operations on the country development and economic performance from these factors. In addition, the full impact of investments undertaken during the CPS will not be materialized for another decade or so, as the projects initiated over the last 4 years would come to maturity. In this context, the focus of assessment is on identifying progress toward achieving CPS goals and highlighting areas where ADB support has contributed positively toward the achievement of higher, more inclusive, and sustainable growth.

97. The GDP growth accelerated from 4.1% in 2014–2015 to 5.5% in 2017–2018. Growth was accompanied by higher imports and higher public spending amid low tax revenue collection and weak exports, leading to higher twin deficits. Fiscal consolidation measures initiated by the government in 2018 to rein in fiscal and external imbalances significantly slowed down economic activity. As a result, GDP growth slowed down to 3.3% in 2019 which was lower than the growth target of 7% envisaged in Vision 2025. The investment rate improved during this period to 15.1% of GDP in FY2018 before it fell to 13.8% of GDP in FY2019. Similarly, total employment-to-

26 The CPS’s two pillars of infrastructural development and institutional reforms, and the areas of emphasis, i.e., provincial distribution of resources, gender equity, and regional integration, were all geared toward engendering inclusive growth.

26

population ratio was 48.9% in FY2018, again short of the target of 55%. However, Pakistan made significant progress on poverty reduction. Pakistan’s poverty headcount ratio at $1.90 a day (2011 purchasing power parity, % of population) dropped to nearly half at 3.2% in 2018 from 6.1% in 2013. Consumption-based income poverty in Pakistan declined over the last 5 years to 24.3% in 2015–2016. Recognizing the need to focus on social aspects of poverty, the government has adopted a multidimension poverty index for Pakistan, which indicates that 38.8% of the people are still poor with stark regional and urban–rural disparities.

98. ADB’s CPS, 2015–2019 increasingly focused on gender equity and mainstreaming, particularly in the transport, WUS, ANR, and PSM sectors, and projects implemented in these sectors are likely to have contributed toward narrowing gender gaps. The Social Protection Development Program directly contributed to the government’s national income support program for eligible female-headed poor households. Overall, there has been improvement in social indicators during this period as the gender gap narrowed in education, with literacy rates improving across primary and secondary levels, as well as gender differential in child immunization and maternal mortality ratios declining. The gender economic opportunities gap narrowed with a 0.7 percentage point decline in the unemployment rate of women from 9.2% in 2014–2015 to 8.5% in 2017–2018 compared with a 0.2-percentage point decline for males to 4.9%.27

99. Notwithstanding the macroeconomic challenges, ADB operations have made a positive contribution to making the growth process more inclusive by providing support for major policy and institutional reforms to build critical capacities and enhance knowledge adoption, as well as by financing strategic investment operations. More specifically, ADB facilitated the achievement of inclusive growth in Pakistan through (i) reforms to improve fiscal stability and financial viability of PSEs; (ii) private sector development by facilitating the provision of infrastructure to enhance economic connectivity within country and in the region; (iii) enhanced access to affordable energy; (iv) improving supply and distribution of irrigation water to end users, mostly small and poor farmers; and (v) supporting improvements in federal and provincial governments capacity for more effective and efficient service delivery including the capacity for mitigating the socioeconomic and fiscal vulnerabilities of the country and population from natural disasters.

100. Institutional reforms. ADB supported institutional reforms in many sectors including irrigation and power as well as for PSEs and disaster management through financial and technical support under various TA projects. A large part of this support is provided to those departments and agencies that are involved in implementing ADB operations through consultancy services to fill the capacity, skill, and knowledge gaps as well as to provide office equipment and facilities. However, the institutional capacity needs of government institutions are still large, and there are significant gaps to be addressed. Moreover, the long-term nature of these institutional reforms means that the overall impact has yet to be fully realized especially from various ongoing projects that were approved under the CPS, 2015–2019. With proper implementation and the government’s continued ownership, these reforms are likely to have a significant positive impact in improving the functioning of government institutions and reducing their fiscal drain on the budget.

101. Overall, the operation implemented under the CPS 2015–2019 is rated to have a satisfactory developmental impact. Although, the operation performed reasonably well in almost all other aspects of assessment, the development impact was subdued due to (i) insufficient support/allocations from supplementary investments for the projects, (ii) inadequate O&M resources devoted to ADB’s supported infrastructure, and (iii) less than desired progress on policy and institutional development reforms. In terms of operation objectives and goals, the achievements were mixed. Majority of the operations were effective in meeting the output targets, but the progress

27 Government of Pakistan, Pakistan Bureau of Statistics. 2018. Labour Force Survey 2017–2018. Islamabad.

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toward achieving the outcomes remained uncertain with benefits partially eroded due to the long implementation delays. In some cases, this was due to the insufficient significance given during the design stage of the projects to account for the complex political economy aspects. Despite achieving almost all desired policy changes through PBLs, their implementation and, consequently, their impact on achieving outcomes has remained limited. The notified policy actions are relevant enough that if implemented properly can lead to considerable positive outcomes. Similarly, the impact on crosscutting development themes was also rated less than successful, as uncertain political and economic conditions hampered the progress in achieving some important macroeconomic targets due to external factors outside ADB’s control.

Sectoral Assessments – Development Impacts

102. ANR. The sector operation is rated to have satisfactory impact. The majority of ADB interventions were targeted at improving the irrigation infrastructure in Punjab largely by supporting the rehabilitation and upgrade to secure reliable irrigation supplies. This improved supply of water helped to exceed the CPS target of maintaining cropping intensity at 140% by 14 percentage points. On the crops yield front, yields for rice and sugarcane crops increased significantly by 37% and 22%, respectively, in 2017, compared with the CPS target of 10% for 2019. While there was no significant increase in yields for wheat and cotton, it is to be noted that crop yields are influenced by multiple factors beyond the availability of water, such as soil fertility, climate, diseases or pests, and so forth. Moreover, a number of ADB operations are still ongoing and it is likely that the crop yields, including that of wheat and cotton, will register a sizeable increase in 2019 and beyond.

103. Energy. The sector operation is rated to have satisfactory impact under the CPS, 2015–2019. Being the largest and anchor development partner in the country’s energy sector, ADB added generation capacity by focusing on indigenous sources. The operation was also instrumental in reducing the generation cost. The transmission and distribution MFFs were instrumental in expanding, augmenting, and removing supply system constraints. The impact of policy and institutional reforms supported by the operation was yet to be seen during the term of the CPS but is expected to have a significant impact in the future.

104. PSM. The sector operation is rated to have satisfactory impact under the CPS, 2015–2019. Improving public sector governance and bringing about institutional reforms is a major endeavor, which requires a strong political will, more resources, and time to implement. The Public Sector Enterprises Reform Program (Subprograms 1 and 2) was expected to increase the PSEs’ financial viability and reduce net fiscal transfers to PSEs from the federal budget. The program supported the government in achieving and sustaining reform initiatives to enhance the performance of PSEs by improving their corporate governance and accountability, leading to reduced contingent liabilities. The program helped create the fiscal space for development expenditures by reducing fiscal transfers to PSEs under federal government subsidies and grants to half, from 0.9% of GDP in FY2015 to 0.4% of GDP in FY2018. ADB’s SPDP project has supported the strengthening of financial management and internal control systems of the Benazir Income Support Program, which is necessary to ensure adequate social protection impact of the substantial budgetary allocations being made to the income support program.

105. ADB also supported the establishment of the National Disaster and Risk Management Fund (NDRMF) in 2016, to mitigate the socioeconomic and fiscal impact of disasters. Despite some initial delays due to the innovative nature of the project, project implementation improved significantly after the NDRMF office was established and staff appointments were completed in 2018. The project was extended in 2019 for another 18 months in order to offset initial start-up delays. The reforms initiated in the sector under ADB operations have to be sustained, deepened, and broadened to bring a visible change in the sector. The operations will be sustainable when the

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Privatization Commission of Pakistan revives its momentum of the privatization process through better communication. For positive public sentiment, the government provides funding pension liabilities, and the envisaged corporatization of selected PSEs is completed.

106. Transport. The sector operation is rated to have a satisfactory impact, under the CPS, 2015–2019. The high transport cost and logistical inefficiencies have been major factors contributing to Pakistan’s poor trade performance. Despite financial sustainability of transport investments, the operation made significant contributions toward improving economic connectivity and efficiency of road transport in Pakistan both internally and externally to reduce time and cost of trade. The MFF for the National Trade Corridor Highway Investment Program has resulted in efficiency gains for road traffic operations along the National Trade Corridor. The project’s intended impact was to increase Punjab’s GDP from $36 billion in 2007 to $75 billion by 2018, which is highly likely to be met given that Punjab accounted for about 55% of Pakistan’s GDP estimated at $330 billion in 2017–2018. The project contributed to reduce travel time, vehicle operating cost, and road fatalities between Faisalabad–Khanewal and Hassanabdal–Havelian cities, facilitating economic growth in the regions. The substantially completed Peshawar Sustainable Bus Rapid Transit Corridor Project is already providing safe and affordable mobility to more than 400,000 residents of Peshawar.

107. Water Supply and Urban Services. The sector operation is rated as having less than satisfactory impact under the CPS, 2015–2019. The impact of the urban sector interventions cannot be assessed at the current stage of implementation, as five of the six urban projects that fall under the CPS period are ongoing. The only project (tranche 2 of SCIIP) that prematurely closed during the CPS period had limited impacts as only 28% of project costs were disbursed (para 4). Similarly, the ongoing investment projects in the urban sector will be completed between December 2021 to June 2024, and their impact can only be assessed some years after completion. However, considering the proactive approach being undertaken to address the planning, operational, and institutional challenges, it is expected that the urban investments will operate sustainably after completion and would have a positive impact on the urban residents’ quality of life.

III. PERFORMANCE OF NONSOVEREIGN OPERATIONS

108. ADB’s private sector operations in Pakistan began in 1983. Pakistan is one of the largest recipients of ADB’s private sector development assistance. As of 30 June 2019, cumulative approvals in 34 transactions amounted to $1.3 billion. Furthermore, there is an ongoing Trade Finance Program with an approved limit of $700 million, which fills market gaps by providing guarantees and loans through partner banks in support of trade. It is noted that there is currently a cap of $ 258 million on TFP due to prevailing market conditions.

109. The ongoing portfolio comprises (i) three domestic gas-based thermal independent power projects, (ii) three hydropower plants, (iii) six wind power projects, (iv) one solar power project, (v) a trade finance program, (vi) two finance sector projects, and (viii) an equity fund. During the CPS, 2015–2019, eight new nonsovereign operations were approved amounting to $225 million and one technical assistance (TA) operation totaling 0.5 million. These projects include (a) $65 million Gulpur Hydropower, (b) $30 million Engro LNG Terminal, (c) $75 million Triconboston Wind Power (three special-purpose vehicles), (d) $20 million Zorlu Solar, (e) $20 million Khushali Microfinance Bank (KMB), and(f) $15 million loan to the Kashf Foundation (KF). In addition, under ADB’s Trade Finance Program, agreements have been signed and credit lines have been established with 13 commercial banks in Pakistan to stimulate private sector investments and enhance trade activities.

110. Disbursements amounted to $194 million during the stipulated period. A sector-wise summary of the nonsovereign operations (NSO) portfolio is given in Table 3.

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Table 3: Summary of PSOD Portfolio for Pakistan, per Sector, 2015 to 2019 ($ million)

Approved (OCR) Disbursed a Energy Finance Total Energy Total

Count Volume Count Volume Count Volume Count Volume Count Volume

2015 2 $95 2 $95 2 $30 2 $30

2016 3 $75 1 $20 2 $95 3 $68 3 $68

2017 1 $20 1 $20 5 $60 5 $60

2018 4 $36 4 $36

2019 b 1 $15 1 $15

6 $190 2 $35 6 $225 14 $194 14 $194

OCR = ordinary capital resources. a Data as of 30 April 2019, based on the Controller b Partial data for the year, as of 17 July 2019. Source: Asian Development Bank estimates.

111. Overall, ADB’s nonsovereign portfolio in Pakistan has been limited to two sectors: energy and financial institutions. ADB has not been able to provide assistance and/or consider projects pertaining to transport, logistics, agriculture, urban water supply, solid waste, and minerals for lack of a local currency solution.

112. ADB’s nonsovereign operations have performed better than sovereign operations in terms of implementation timelines (especially energy projects) because of the relative efficiency of the private sector and the smaller-scale projects.

113. The key elements of ADB’s CPS, 2015–2019 were to (i) help promote energy sector development toward affordable, reliable, sustainable, and modern energy for all, with higher participation from the private sector; (ii) support financial institutions through the trade finance program; and (iii) improve financial inclusion by promoting lending to micro, small, and medium-sized enterprises (MSMEs). These elements were aimed at enhancing economic growth, job creation, and poverty alleviation. The promotion and success of the private sector is one of the government’s economic policy priorities. An increase in employment and wages and/or salaries through the creation of quality and well-paid jobs is the main socioeconomic development objective to achieve poverty eradication and income redistribution.

114. ADB rates the performance of NSOs using different criteria to sovereign lending. These focus on (i) development impact, (ii) investment profitability, (iii) ADB additionality, and (iv) ADB’s work quality. Under development impact, it assesses the contribution to ADB’s strategic objectives and private sector development; economic development and growth; and environmental, social, health, and safety performance. The detailed assessment of nonsovereign operations for the eight operations approved during 2015–2019 is given below.

115. Development Results. ADB’s nonsovereign operations implemented under the CPS, 2015–2019, in developmental aspects, are rated satisfactory. Both energy and the finance sector operations were consistent with ADB’s country and sector developmental strategies.

116. Energy. NSO projects in energy space augmented government policy objectives and contributed toward the following:

a. Diversification of fuel mix in the power sector toward projects utilizing domestic and renewable resources. The sector’s problems mainly emanate from having the wrong fuel mix, as the mix of the sector has been skewed in favor of imported fuel, which not only exposes the power sector to large variations in costs but also utilizes the country’s foreign reserves. ADB’s main focus has been to support projects based on renewables,

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hydropower, and indigenous fuel resources.

b. Energy security – by supporting Pakistan’s first liquefied natural gas (LNG) regasification infrastructure. Pakistan was faced with a depleting gas scenario with no ability to import a single gas molecule to the country. The LNG regasification project successfully demonstrated that gas could be imported to Pakistan and helped the country to ensure its energy security. LNG imports helped in reducing the gas demand supply gap of 2 billion cubic feet per day (on a curtailed demand basis). Furthermore, the project contributed to the development of an entire framework required for the LNG import ecosystem to function. The additional gas primarily went to the power sector, benefiting the sector as gas due to its chemical properties is priced cheaper than high-speed diesel (HSD)/furnace oil (FO) and is far more environmentally friendly. Actual savings would depend on the relative price differential between LNG and HSD/FO prices at a given point in time.

c. Reduction in the energy generation gap that peaked at 5 GW in 2014 - 2015, which has been a key constraining factor for growth. Although the impact on reducing energy shortages and improving the energy sector’s efficiency is small, it is durable and long-lasting. Pakistan energy needs are high and despite the recent slowdown in the economy, the energy demand is projected to grow at a healthy rate. While both the public and private sectors have undertaken significant investments in the power sector, there is no concern about the future viability of projects financed through ADB’s nonsovereign operations.

d. Lower carbon emissions with a focus on renewables and hydropower.

117. Finance Sector. Finance sector lending structures include (a) a trade facilitation program with cross border coverage facilities, and (b) (non-trade) lending to microfinance institutions including KMB and KF for onward lending to MSMEs.

118. Trade Finance Program. Under the program, approximately 1,981 cross-border trade transactions amounting to $5.6 billion ($1.6 billion for SMEs) were managed during the period (2015–2018). Given the challenging scenario, trade limits are currently capped at $258 million and restricted for shorter tenors (i.e., less than 1 year) by the Office of Risk Management. Despite restrictions on limits, ADB’s ability to support trade transactions is not impaired as ADB leverages risk distribution with partner institutions.

119. Lending for MSME Sectors. Lending objectives to KMB and KF are in sync with the government’s approved National Financial Inclusion Strategy 2015, which aims to improve access to finance for all the targeted sectors of nonsovereign projects including agriculture, SMEs, and export. Similarly, the State Bank of Pakistan has developed an action plan for incentivizing better access to finance for these sectors.

120. Since facilities to KMB and KF have not been disbursed to date, it will be premature to evaluate them against the results framework including their developmental impact. KMB has not yet drawn the loan because of the increased costs of hedging the US dollar loan due to volatility in dollar parity. The drawdown period of the loan has been extended so that KMB can draw down the loan, once there is stability in the foreign exchange market. ADB’s loan facility is complemented by technical assistance to KMB for training and improvement in risk management as well as investments in information technology infrastructure to support the diversification of KMB’s loan portfolio.

121. Environment, Social, Health, and Safety Performance. Apt measures were adopted to ensure that institutional capacity for obligors is adequate to manage social and environmental aspects on an ongoing basis with periodic monitoring.

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122. Investment Profitability. ADB’s nonsovereign operations implemented under the CPS, 2015–2019, from the investment returns perspective, are rated excellent. For NSO projects, pricing was on commercial basis and the economic and financial internal rates of return were higher than cost-recovery thresholds (cost of capital/social discount rate).

123. ADB Additionality. ADB’s nonsovereign operations implemented under the CPS, 2015–2019, in terms of additionality, are rated satisfactory. ADB’s participation acted as a catalyst for raising much-needed longer tenor financing in the energy sector. In addition, ADB’s presence helps reassure international and/or local project stakeholders that the government will continue to support energy projects in the long term.

124. Foreign banks continue to have scarce cross-border limits for trade transactions, given the appetite for country risk. In order to meet their return hurdles and create room for incremental transactions, they undertake risk defeasance structures with ADB and other institutions. Hence, ADB’s trade program enhances the foreign banks’ ability to undertake a higher volume of transactions.

125. ADB’s loans to KMB and KF will support the MSME sector not just in terms of increased lending but also in providing additional products that require longer tenor funding.

126. ADB Work Quality. For all projects, the screening, appraisal, structuring of operation, and monitoring/supervision process leading toward implementation was satisfactory. The energy sector projects have done relatively well in achieving project implementation timelines, partly due to the inherent nature of the operations and partially as an outcome of general conditions. For instance, the energy sector projects mainly involved the construction of electricity generation infrastructure to overcome the power shortages and therefore had an almost guaranteed demand. Implementation was more challenging for the finance sector mainly due to increase in hedging costs for KMB as a result of abnormal foreign exchange volatility.

127. Lessons Learned. A more concerted approach is required to achieve an efficient local currency solution for lending to financial institutions especially during high foreign exchange volatility. In this regard, this final review gives some suggestions in the next section.

a. Follow Up Actions and Recommendations: Below are few recommendations to help improve implementation and development impact especially for the finance sector:

b. Local Currency Funding Solutions: ADB’s ability to raise and lend in local currency can enhance the appetite for NSO loans—especially for targeting the SMEs and micro segments when the end customers’ needs are in local currency.

c. Regulatory: ADB may consider working at the government level to help reach consensus on the approach toward finding a local currency solution.

d. Greater risk appetite for cross-border coverage for local currency transactions: While the existing trade facilitation program is capped at $258 million, ADB may consider supporting a higher wallet of low-risk local currency confirmations for essential commodities. With the recent agreement for oil supply under a deferred payment basis by friendly countries (Saudi Arabia), a higher LC confirmation limit for essential commodities is required for the 1-year bucket.

e. Structured dollar funding solutions may be evaluated with a recourse to commercial banks, which may be more palatable from the risk perspective.

128. Overall Assessment. Overall, ADB’s NSO performance is rated satisfactory. Incremental disbursements during CPS, 2015–2019 have been mainly in the energy space, where

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performance against the results framework has been consistently strong. However, the finance sector projects have yet to be disbursed so it is premature to screen their performance. In the Trade Finance Program, ADB churns its exposure to optimize performance despite the caps. Hence, overall, we gave satisfactory ratings for development results, additionality, and work perspective. Investment profitability was marked excellent since the estimated return thresholds were met for all projects (Table 4).

129. As per process, all completed projects are to be reviewed as part of the project performance evaluation report and the extended annual reviews process (extended annual review reports). It is noted that the project performance evaluation reports and the extended annual review reports for projects implemented between 2015 and 2019 are under preparation and have not been completed to date. Hence, no benchmark ratings are available at this stage.

Table 4: Overall Rating of Nonsovereign Operations

Criteria Rating

Developmental Results Satisfactory

Investment Profitability Excellent

Additionality Satisfactory

Work Quality Satisfactory

Overall Assessment Satisfactory

Source: Asian Development Bank.

130. Overall, ADB operations (sovereign and nonsovereign) implemented under the CPS 2015–2019 are rated successful. At the sector level, the transport sector is highly successful, while the ANR and PSM sectors are successful. The energy sector is successful on the borderline. The WUS is less than successful.

Table 5: Overall Assessment

Sectors Relevance

(20%) Effectiveness

(20%) Efficiency

(20%) Sustainability

(20%) Impact (20%)

Overall Score

Sovereign Projects

Agriculture (15.2%) 3 2 2 2 2 2.2

Energy (39.0%) 3 1 1 1 2 1.6

Public Sector Management (16.0%)

3 2 2 2 2 2.2

Transport (28.0%) 3 2 3 3 2 2.6

Water Supply and Urban Services (1.8%)

1 1 1 1 1 1.0

Weighted Score (Sovereign Projects)

3.0 1.6 1.9 1.9 2.0 2.1

CPS Crosscutting Themes Inclusive Growth 3 2 2.5 Regional Integration 3 2 2.5 Transition to Market Economy 2 1 1.5

Weighted Score for Crosscutting Themes

2.7

1.7 2.2

Overall Weighted Score (Sovereign Operations)

2.8 1.6 1.9 1.9 1.8 2.1

Overall Rating (Sovereign Operations)

Highly Relevant

Effective on the

borderline Efficient Likely

Sustainable Satisfactory Successful

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Nonsovereign Operations Development Results

ADB Investment Profitability

ADB Work

Quality ADB

Additionality

Overall Score

Nonsovereign Operations (25%) 2 3 2 2 2.3

Overall Country Program Rating 2.1

Source: Asian Development Bank.

IV. PERFORMANCE OF THE ASIAN DEVELOPMENT BANK

131. This performance assessment is based on the sub-criteria covering (i) responsiveness to the country’s needs, (ii) acting as a catalyst for aid coordination and building government ownership, (iii) project supervision, (iv) delegation of responsibility to the Pakistan Resident Mission, and (v) value addition.

132. ADB’s performance under the CPS, 2015–2019 was satisfactory. ADB’s assistance was responsive to the country’s needs. In line with ADB’s Midterm Review of Strategy 2020, ADB operations under the CPS supported the government’s objective of achieving higher, more inclusive, and sustained growth to create productive employment opportunities and reduce poverty. ADB provided considerable support through the development of new knowledge products, facilitating policy dialogue and capacity building for key government institutions. However, while ADB provided financial support to all segments of the power sector, the necessary analytical backup appears to have been insufficient, leading to some gaps in due diligence of sector operations. In particular, a more comprehensive analysis was required for (i) developing the intended wholesale market by the Central Power Purchase Agency Guarantee Limited; (ii) building long-term planning capacity to better inform infrastructure investments; and (iii) improving the financial viability and efficiency of public sector entities by defining more effective policies and master plans toward reaching financial sustainability.

133. ADB coordinated well with other development partners both for seeking cofinancing and support for difficult policy reforms. Almost two-thirds of the funding for technical assistance during the CPS period was mobilized from a range of development partners including the Department for International Development of the United Kingdom (DFID), French Development Agency (AFD), the Republic of Korea, Knowledge Partnership Fund, Carbon Capture and Storage Fund, and Financial Sector Development Partnership Fund. Under the Turkmenistan–Afghanistan–Pakistan–India Natural Gas Pipeline Project Phase 3, ADB played an instrumental role as the project secretariat and helped in facilitating and balancing the interests of the parties through the organization of 14 ministerial-level steering committee meetings and 16 technical working group meetings.

134. Greater delegation of supervision responsibilities to the Pakistan Resident Mission has contributed to more effective and efficient handling of projects through closer dialogue with the implementing agency on removing bottlenecks to project implementation. The Pakistan Resident Mission also played a significant role in policy dialogue and preparation of PBLs. However, for achieving greater efficiency and cost-effectiveness of its Pakistan operations, ADB could have delegated more responsibility to the resident mission. Given the government’s weak implementation capacity, which requires considerable hand-holding and speedy decisions from development partners, giving the resident mission more authority and responsibility in resolving daily operational issues can lead to significant efficiency gains.

135. ADB operations could have been more persuasive in assisting the government to improve its polices by better leveraging loan assistance to influence difficult policy decisions. However, ADB helped to shape public programs by providing timely and demand-driven knowledge products. ADB also provided technical assistance to help improve the investment climate for the mineral sector on the request of both the federal and Balochistan governments. Similarly, the government also

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requested for ADB assistance in supporting the implementation of its national climate change policy, particularly to develop climate change mitigation and adaptation strategies through the development of technologies that can help reduce greenhouse gas emissions. Under the TA for Supporting Economic Corridor Development through Strategic Planning Frameworks, ADB is providing ongoing support and knowledge products to help Pakistan maximize the opportunities offered by the China–Pakistan Economic Corridor and the CAREC program. ADB has also been supporting the government to develop PPP frameworks at both the federal and provincial (Punjab and Sindh) levels to help the government tap into the private sector resources for funding of critical projects in need.

V. PERFORMANCE OF THE BORROWER

136. The government’s performance is assessed against the following sub-criteria: (i) participation in developing the CPS and key projects, (ii) adequacy and timeliness of the government in providing counterpart funding, and (iii) compliance with loan covenants and conditions.

137. The borrower’s overall performance is assessed to be satisfactory. The government has been an active participant in designing the CPS 2015–2019 and its implementation reviews. ADB and government have jointly conducted the Pakistan country portfolio review missions to review the implementation status of ADB-financed operations and their contributions to achieving overall development and sector-specific objectives and goals.

138. The government has mostly demonstrated strong commitment to and ownership of ADB-supported projects and has generally provided adequate counterpart financing with the exception of the Government of Sindh for the Sindh Cities Improvement Investment Program. The Sindh government has yet to make major decisions on the project, including the following: (i) restructuring of the North Sindh Urban Services Corporation Limited (NSUSC) and operational budget allocations; (ii) staffing of the NSUSC/project management unit; (iii) the tax issue related to contractors; (iv) land acquisition for subprojects; (v) counterpart payment; (vi) appointment of the NSUSC board of directors; (vii) reallocation of project costs; and (viii) revisions of the city’s water tariff. Recently, ADB received a complaint from the contractors and/or suppliers of the NSUSC about nonpayment of completed work. While ADB has cleared all received withdrawal applications, the Sindh government needs to clear all lawful and justifiable claims before winding up the NSUSC to avoid any reputational risks.

139. The release of counterpart funding was sometimes delayed. However, it did not have any material adverse impacts on the contractor’s cash flow. Moreover, the borrower did not comply with the loan covenant relating to the NHA’s cash development loan under the National Trade Highway Investment Program, but the Ministry of Finance has agreed in principle to convert the cash development loan into government equity or grant, for which the modalities are currently being developed.

140. In the Punjab Irrigated Agriculture Investment Program, the borrower demonstrated commitment to the success of the program in spite of time overruns, complex implementation arrangements, design changes, the force majeure situation at Khanki Barrage during construction, localized damaged at Suleimanki Barrage, repeated biddings, and slow construction progress. The project approval document was revised to incorporate changes in government approvals with the timely closure of loan accounts. The continuity of financing and implementation arrangements after the loan’s closure demonstrates the government’s commitment to complete the works. However, the reforms in the canal command area did not fully follow the design despite the government’s special assurance. The government also missed an opportunity to maximize its support to eligible

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farmers’ organizations through ADB financing due to the inability to fill vacant posts.

141. In the Emergency Reconstruction Project, the borrower complied with all its obligations under the loan agreement. The PCR noted that the NHA’s performance was only partly satisfactory because it did not use efficient processes in procurement and contract awards, given the emergency nature of the project. But it managed the land acquisition and resettlement plan efficiently. The PCR rated the performance of both implementing and executing agencies in Sindh highly satisfactory since they executed the irrigation and provincial roads components according to ADB guidelines. Of the total 63 loan covenants, 58 have been fully complied with while 4 were partly complied with. One loan covenant on post-completion audit was not done at the time of PCR preparation. Safeguard and fiduciary requirements were also complied with, though some delays were noted in providing the counterpart funding.

142. Some key challenges on the government side include the following: (i) limited understanding of ADB’s procurement guidelines and procedures; (ii) insufficient engagement of all stakeholders during processing causing project implementation delays; (iii) lack of understanding of national/provincial procurement rules applicable to projects funded by development partners; (iv) absence of a fully functional internal approval mechanism leading to inefficient procurement processes; and (v) frequent transfer and posting of key project (procurement) staff.

VI. KEY LESSONS AND RECOMMENDATIONS

143. The delivery of ADB operation under the CPS has built critical infrastructure, supported major policy and institutional reforms for capacity development of key implementing units, and provided knowledge solutions in important areas. Despite the many positive changes, however, not all initiatives in this regard have been met with an equal degree of success in achieving the desired results. For example, some operations, particularly in the energy sector, faced difficulties due to long implementation delays. Despite being instrumental in effecting the required policy change, the energy sector operation was unable to eradicate circular debt, which will likely continue to undermine the sector’s financial viability. While PSE reforms were designed and implemented to promote privatization of PSEs by improving their financial management and overall function, none of the PSEs were privatized. The objective of improving urban and municipal services in the intermediate cities of Sindh was not achieved mainly because of political issues.

144. Ambitious targets. The macroeconomic and some sector targets set for the CPS were ambitious, particularly in view of the challenging economic environment faced by the country, its governance structure, and past track record on implementation. Targets were based on the government’s aspiration as stated in Vision 2025. Over the last decade, Pakistan has been consistently experiencing significant economic and security problems, some of them stemming from the weak institutional and policy frameworks and the inability of the government to undertake the required reforms to address the fundamental structural issues, while some are an outcome of the geopolitical situation in the region. In view of these political and administrative constraints, it is apparent that the macroeconomic and some sector targets set by the CPS were beyond the capacity of the government to deliver. Moreover, setting overly ambitious targets seems to be driven by government and internal pressures within ADB than on evidence-based assessments.

145. Interactions with the government. Even though efforts were made to work with different levels of the government, ADB’s interaction with the government was sometimes complicated by the government’s organizational structure. Most ministries, departments, autonomous agencies, and public sector corporations involved in implementing many ADB-supported operations have a dual administrative structure, with a clear demarcation between the technical and administrative leadership. ADB’s interaction with the political leadership, the top tier of administration in these

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ministries and departments, remained adequate, but its consultation with mid-level administration could have been better, given their strong involvement in project implementation.

146. Effective use of the TA. The focus of the TA should be delivery of quality outputs, not quantity. Also, the TA should support one of the following outputs: (i) knowledge, (ii) capacity building, and (iii) transaction. Experience shows that building the government’s capacity through TA is particularly challenging, partly because of the high turnover of government staff. Hence, the TA should provide various support and solutions for how to deal with the government’s high turnover of staff. The TA should also focus on the areas on which ADB is working.

147. Institutional efficiency. Institutional efficiency is the cornerstones for the competitive economy. However, increasing institutional efficiency remains work in progress in Pakistan. Some efforts for institutional capacity building have been delayed, but it is too early to gauge the benefits from institutional capacity building for some projects. Efforts to improve institutional efficiency should be continued.

148. The enhanced government system and improved utilization of the capacity-building TA would lead to successful implementation of projects. The success of ADB-supported projects depends critically on the performance of PMUs, which in turn is heavily dependent on the quality of staff, particularly the project director, who are part of the PMU. There are good officers both at the federal and provincial levels who could be assigned as heads of the PMUs, but there is no formal mechanism for appointing project directors. Given that government officers are generally paid lower salaries compared with the private sector, and the appointment of a project director and other staff involves extra income in the form of a project allowance, the setup may create wrong incentives for the government. Appointments of unsuitable officers often create implementation problems down the line.

149. Readiness filter. Despite having a sound readiness filter, projects continue to face start-up delays, indicating that the use of the readiness filter is not at the required level, partially due to institutional incentives within ADB’s system which implicitly give greater importance to project approval than to successful project implementation. The use of the readiness filter should be strengthened to overcome inherent inefficiencies in the government’s procedures, yet it should strike the right balance with growing business demand as well. In the case of the PMUs, ADB should work with the government more closely to establish a formal system of appointing project staff, with the government creating a dedicated pool of officers who can staff PMUs.

150. Due diligence. Although extensive efforts and resources are spent during project preparation on working out the technical details, due diligence on political economy aspects, especially on institutional or stakeholder analysis, appears to fall considerably short, causing several operations to be less than successful or canceled. This is particularly true for operations which cut across the jurisdiction of different levels of government. The 18th Constitutional Amendment not only devolved almost all functions of joint (federal–provincial) responsibility to the provinces, it also gave a constitutional cover to local governments. However, the country’s political system has been slow to adjust to these changes, with politicians continuing to intervene in affairs of lower level governments, including projects implemented to cause significant political, administrative, and legal issues. Therefore, ADB’s project team should at least be aware of these political issues if these cannot be incorporated in the project design.

151. Program lending support. Government ownership remains the essential ingredient for the success of ADB operations. As such, developing ADB assistance based on government-led reforms and sector development programs remains a vital factor for achieving sector and country-level outcomes.

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152. Cofinancing. In order to create synergy with other development partners, cofinancing has helped ADB to reduce transaction costs significantly due to efficiency gains. ADB was successful in mobilizing cofinancing from other development partners for not only its loans but also for TA operations.

153. Recommendations. ADB should continue to build on the factors that have contributed to the success of its operations and continue to engage with the government and other stakeholders in removing the impediments to success. Maintaining strong continuity is largely assured, as a significant portion of the ADB portfolio implemented under the present CPS will be carried over to the next CPS. While leveraging ADB finances remains crucial for implementing policy and institutional reforms, these funds need to support government-led reforms to avoid the notion of promoting “donor-driven reform.” Building productive partnerships has been a strength of ADB operations in Pakistan, and ADB should continue to pursue such partnerships, despite the slow progress in the energy sector, where these partnerships have been most established.

154. Reducing Start-Up and Implementation Delays. The efficiency and effectiveness of operations could be enhanced by agreeing with the government on an agenda to reduce start-up and implementation delays. This could be done by

a. Streamlining the project approval process. Most start-up delays occur because of the government’s late approval of projects, which in turn affects the government’s project approval process. For example, the implementing agencies start preparing the PC-1, the fundamental project document of the government, only after, or just before, project approval by ADB, mainly because the PC-1 explicitly asks whether project financing has been secured. A slight change in this procedure can help implementing agencies to prepare the PC-1 along with ADB’s project preparation, and the PC-1 could be submitted for approval immediately after ADB’s approval of the projects.

b. Tackling rigidities in government procedures by making them more accommodating of new products and instruments. At the same time, the government’s concern for misuse of these instruments undermining public financial management could be addressed.

c. Fast tracking the establishment of PMUs. Federal and other provincial governments should be encouraged to adopt the Punjab model to finance establishment of PMUs early in the project preparation process with government expenses reimbursed through retroactive financing.

155. Proactive portfolio management. All projects should be closed in a timely fashion. On average, there is a 10-month gap between the original and actual closing date; this gap should be narrowed. In view of the relatively slow implementation pace of the operation, ADB may consider a careful review of the portfolio to identify the causes of slow implementation. After a careful assessment of its effect on the effectiveness of the overall operation, some projects should be canceled. Savings from the loan cancellation should be recycled for new projects.

156. Strengthening sustainability of the government’s PMU capacity. ADB should work with the government to improve performance and sustainability of the government’s PMU, including for project directors, procurement, and financial management staff. A formal system for appointing project directors and other project staff could be established. The government may wish to have a dedicated pool of officers who can staff PMUs. The selection from the pool could be based on the size and importance of the project and the qualification and experience of the officers. Since establishing such a formal mechanism would take time, ADB could suggest to the government that recommendations of the ADB project team be given considerable weight in the appointment of project staff.

157. Broadening sector focus in the country program. Social sectors were a notable omission

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from the present CPS and has diminished the logical basis of the CPS’s inclusive growth objective. With some sound analytical work already undertaken, ADB should reengage in social sector development, given that the new government has been emphasizing the importance of sector.

158. Results management. The present operation suffers from the absence of a monitoring framework to track the progress toward achieving the CPS’s goals. Therefore, such a framework should be developed to be utilized during the supervision and annual portfolio review missions. It can also help establish and track the link between project outputs and sector outcomes, particularly on the institutional reform front, in which there is a critical need to better define the measurable targets in terms of the output and outcome for better assessment and monitoring and to also provide a clear path for institutional development.

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Appendix 1: Sovereign Project Outcomes and Assessment of their Achievements

PROJECT NO PROJECT RATIONALE OUTCOME INDICATORS ASSESSMENT/PROGRESS

AGRICULTURE AND NATURAL RESOURCE (ANR) SECTOR Punjab Irrigated Agriculture Investment Program

Project No: 37231-013 Loan No. 2299, 2300, 2841, 2971 and 3351

Punjab Irrigated Agriculture Investment Program was approved in 2006 to finance $900 million in investments in Punjab’s irrigation infrastructure, with institutional reforms premised on eventual farmer management of the irrigation system for better irrigation water delivery. The project aimed to support economic growth, increase and improve the sustainability of water and land resources, management of water resources, and productivity of irrigated agriculture.

Punjab irrigated agriculture program areas receives a sustainably improved delivery of water services and management.

Water supplies available in all program’s distributary and minor canals throughout the year by 2017. Tail outlets deliver design water supply throughout the year by 2017. Rehabilitated barrages (Balloki, Suleimanki, Trimmu, Khanki and Panjnad) are operational by 2017 Farmers use improved on-farm water management practices by 2017

The outcome was broadly achieved. The water delivery of upgraded infrastructure was: 1. LBDC operated at maximum of 263 m3/s against design discharge of 278 m3/s (95%) in 2017; 2. Pakpattan Canal operated at maximum of 149 m3/s against design discharge of 156 m3/s (96%) in 2017. The program design proved to be challenging at implementation. The pace of development of the farmers’ organizations was slow. Rehabilitated and upgraded barrages are operational in 2018 and flood capacity was also increased. Field demonstration centers were established for 53 farmer organizations to demonstrate improved field channel layouts and alternate water application technologies

Jalalpur Irrigation Project Design Advance (PDA) Project No: 46528-003 Loan No. 6006

The project will provide irrigation from summer floods to 65,000 hectares and will increase agricultural production of rain fed areas in Jhelum and Khushab districts. ADB approved a project preparatory TA for the feasibility study of the project. The PDA will (i) carry out detailed topographic and geotechnical surveys; (ii) undertake detailed engineering design, drawings, and cost estimates; (iii) update environmental and social safeguards planning documents; (iv) prepare bidding documents and support the bidding process; (v) develop irrigation management structure; and (vi) help in processing of the ensuing loan

The PDA will result in a procurement-ready project and will enable the project to award contracts and start disbursements on or shortly after loan effectiveness.

The PDA will save around 2 years from the time of loan effectiveness to contractor mobilization during the initial phase of implementation.

Preparation of the main project was delayed. According to the Audited Project Financial Statements, the system of Internal Controls as laid down in the departmental procedures was not effectively implemented. In addition, Rs. 4 million of the allocated budget was not utilized in the financial year 2015-16 due to weak supervisory and financial controls. An extra loan of Rs. 127.6 million and interest on extra ADB loan of Rs. 2.4 million was obtained. Also, extra payment of commitment charges due to weak technical and financial controls. The audit report also highlighted unjustified expenditure due to Amendment in the contract agreement that resulted in consultants being assigned duties that were to be performed by PMU.

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The project also follows the priorities set in the CPS 2015–19.

Pakistan: Federally Administered Tribal Areas Water Resources Development Project Project No. 47021-002 Loan 3239-PAK OCR: US$ 42.97 million

FATA is one of the poorest and deprived regions in Pakistan. With a predominant rural population, which relies mainly on subsistence agriculture and livestock rearing for their livelihood. Only 8% of the total 2.7 million hectares area is cultivated, and 38% of the cultivated area is irrigated while remaining 62% is rain fed. By improving water resource management in FATA, the project impact will be increased farm incomes in the project area thereby reducing poverty and increasing household food security.

Improved agricultural productivity of selected watersheds and their associated natural resource base

By 2020:

Average crop intensity

increased as follows:

i) Bajaur 165% (2014

baseline 79%)

ii) Mohmand 155% (2014

baseline 97%)

iii) Khyber 152% (2014

baseline 57%)

By 2020:

Average crop yields are

improved as follows:

i) Wheat 2.46 t/ha (2014

baseline 1.371/ha)

ii) Maize 2.24 t/ha (2014

baseline 1.44 t/ha)

iii) Vegetables 7.96 t/ha

(2014 baseline 6.27 t/ha)

The project is ongoing but faced some implementation delays due weak project management and poor contract performance.

Pehur High Level Canal Extension Project Project No: 47024-004 Loan 3470-PAK: Ordinary capital resources US$ 86.41 million

The Comprehensive Development Strategy (CDS) 2010-2017 of Khyber Pakhtunkhwa government highlighted key issues in the IAWR sector. From water- supply side, these are (i) water scarcity and a lack of effort in water conservation; (ii) inequitable water supply distribution and low level of cost recovery, which has resulted in deferred maintenance; (iii) limited institutional capacity to manage irrigation systems; and (iv) limited funding availability. This proposed project will meet the priority development needs of the IAWR sector.

Increased agricultural production in the project areas.

By December2023:

a. Cropping intensities

increased to 151% (2014

baseline: 52%) in total project

area of over 8,727 hectares.

b. Crop yield increased by

222% (maize), 139%

(oilseeds), 145% (rapes and

mustard), and 166% (wheat)

(2014 baseline) in total

command area

The project adopts a holistic approach to resolving irrigation sector problems of Khyber Pakhtunkhwa province. The project is implementing well. Barring external influences, the project is likely to achieve its outcome targets.

Jalalpur Irrigation Project

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Project No: 46528-002 Loan 3599-PAK: OCR US$ 274.63 million

The project will create new non-perennial irrigation services for enhanced agricultural production on 79,750 haxtares in Pind Daden Khan and Khushab districts. The project will increase kharif crop intensity by 50%, improve crop yield and reduce land degradation. It will directly benefit over 200,000 rural people; mostly poor.

Irrigation water supplies and agricultural support services available in the project area.

By 2024:

a. Cropping intensity during

kharifb season increased to

90% in the project area of

68,263 ha (2008– 2014

average baseline: 13%)

b. Crop yield in the project

area during kharif season

increased by 141 % for

cotton, 12% for maize, 17%

for rice, 29% for tinda,c 45%

for sorghum, and 66% for

wheat (2008– 2014 baseline:

cotton 0.58 t/ha; maize 6.95

t/ha; rice 1.66 t/ha; tinda 7.56

t/ha; sorghum 7.95 t/ha;

wheat 1.66 t/ha during the

rabid season)

c. Coverage of topsoil with

high salinity reduced to

10,239 ha (2015 baseline:

20,478 ha)

The project became effective mid-April 2018, and project implementation has started. It is too early to assess the progress towards achievement of outcome.”

Pakistan: Trimmu and Panjnad Barrages Improvement Project Project Number 47235-001 Loan: 3159-PAK: OCR: US$ 50.00 million Loan 3160-PAK: COL: US$ 100.00 million

The irrigation infrastructure in Punjab has seriously deteriorated due to aging (much is nearly 100 years old) and deferred maintenance. The estimated cost of the deferred maintenance of the irrigation system is about $2 billion; the estimated cost to upgrade the system to modern standards is $3.5 billion. The barrages’ structural deterioration and increasing water leakage through the gates pose serious risks and unreliable irrigation service delivery to the tail ends of the canals. The project will rehabilitate and upgrade the Trimmu and Panjnad barrages on the Chenab

Safe Trimmu and Panjnad barrages will deliver reliable irrigation water supplies to their canals.

Trimmu barrage main irrigated area is maintained at 1.08 million ha in 2021 (2014 baseline: 1.08 million ha) Panjnad barrage main irrigated area is maintained at 0.66 million ha in 2021 (2014 baseline 0.66 million ha)

The project is progressing well and is likely to achieve the project outputs and outcome.

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River, which supply irrigation water to 1.74 million ha through six main canals.

Flood Emergency Reconstruction Project Project No: 44372-013 Loan No. 2742 & 2743

The government requested an emergency assistance loan for reconstruction of roads, flood embankments, canals and drains damaged by the floods in 2010. The project conformed with the priorities identified in the Damage and needs assessment (DNA) prepared by ADB and the World Bank. It was also consistent with ADB's strategy of providing emergency interventions to its developing member countries when affected by natural calamities.

Critical physical infrastructure to restore livelihoods and access to markets put in place. Assets are rebuilt back to their original standards or better.

By the end of 2018, traffic

volume of all type of vehicles

in 23 flood-affected districts is

equal or more than pre-flood

levels (baseline 2013/14)

By the end of 2018,

production of major crops in

Punjab equals or is more

than pre-flood levels

(baseline: 2013/14, in ‘000

tons: Wheat: 18,000 Sugarcane: 43,000 Cotton: 8,900)

Given the multi-sector emergency intervention in wake of natural disaster. The outcome was broadly achieved. Regarding the national highways component only 43.4% of the target was achieved as ADB's and NHA's institutional mechanisms were not suited to the procurement for planned medium and long-term rehabilitation of the affected sections of national highways. Interventions are not feasible under emergency mechanisms for large-scale contracts on operational national highways.

ENERGY (ENE) SECTOR Power Transmission Enhancement Investment Program - Tranche 1

Project No: 37192-023 Loan No: 2289 and 2290

The bulk of Pakistan’s power generation capacity comprises hydropower plants located in the north of the country and thermal power plants in the south. A 500-kilovolt (kV) transmission backbone running the length of the county connects this generation to the major load center located in the middle of this backbone around Faisalabad, Islamabad, and Lahore. As a result, there are always significant power flow requirements from the north or south to the center. The power system has insufficient capacity to meet growing demand for power. ADB approved upto $800 million in loans over 10-year period through a MFF to finance the development of

Reliable and quality power supplied, and service coverage extended

Full compliance with grid code and transmission license by 2009. 10.5 GWh of additional power annually supplied through the grid by 2011. Electricity outages to be reduced by 30% by 2011. Grid-connected customers to increase to 70% of the population by 2011.

Outcome was partly achieved. Power supplied through the transmission grid increased from 74,565 GWh in 2006-07 to 87,835 GWh in 2010-11 to 98,248 GWh in 2015-16. Load shedding was reduced but achievement fell short of the target. Project suffered from lack of ownership by the PMU. The implementation schedule and DMF targets were overly ambitious given the capacity of PMU and the problems faced by the sector.

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increased transmission system capacity through the implementation of a range of subprojects, each selected to overcome a specific transmission constraint

Power Transmission Enhancement Investment Program - Tranche 2 Project No. 37192-033 Loan No. 2396

The bulk of Pakistan’s power generation capacity comprises hydropower plants located in the north of the country and thermal power plants in the south. A 500-kilovolt (kV) transmission backbone running the length of the county connects this generation to the major load center located in the middle of this backbone around Faisalabad, Islamabad, and Lahore. As a result, there are always significant power flow requirements from the north or south to the center. The power system has insufficient capacity to meet growing demand for power. ADB approved upto $800 million in loans over 10-year period through a MFF to finance the development of increased transmission system capacity through the implementation of a range of subprojects, each selected to overcome a specific transmission constraint

Primary transmission systems rehabilitated, augmented, and expanded - system bottlenecks removed.

NTDC restructuring completed and operational and financial autonomy achieved by 2017. NTDC implements adequate project management and information systems by 2007.

The outcome was largely achieved. i) NTDC was established as an autonomous commercial entity. However, it missed an opportunity for capacity development by not utilizing available consultancy support funds in Loan 2290 for this purpose.

Power Transmission Enhancement Investment Program - Tranche 3 Project No. 37192-043 Loan No. 2846

The Government requested ADB to finance construction of a circuit of 500 kV transmission line of about 600 kilometer (km) and a new 500 kV Grid Substation at Moro, under Tranche 3. The subprojects will increase transmission capacity and improve efficiency and security of supply in Sindh and Punjab. The subprojects will evacuate the power generated from the

Enhanced efficiency of the overall power transmission system and adequate and reliable power supplied to a greater number of commercial, industrial and residential consumers.

SAPE did not provide individual ratings of the tranches under the first MFF. Overall, the support to the transmission subsector is rated effective.

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IPPs which are expected to be in commission by 2013-2015. These investments are consistent with the Government's strategy.

Power Transmission Enhancement Investment Program - Tranche 4 Project No. 37192-044 Loan No. 3203 and 8311

The power system needed the new subprojects to meet network demand, safety and security requirements, and to cater for additional generation capacity which was under construction and planned for future economic growth. Expanding and upgrading the transmission backbone would provide reliable and high-quality supply to meet increased demand from industrial, commercial, agricultural, and domestic customers.

Support to the MFF investment program objectives through an expanded and reliable 500 kV and 220 kV power transmission system.

.

Sustainable Energy Sector Reform Program - Subprogram 1, 2 and 3 Project No: Subprogram 1 - 47015-001, Subprogram 2 - 47015-002, Subprogram 3 - 47015-003 Loan No: 3126, 3321, 3322 and 3476

The program is aligned with the priorities of ADB’s CPS 2009–13, policy reforms and structural transformation in the energy sector. The energy sector is a barrier to economic growth, adequate job creation, and macroeconomic sustainability. The Program was intended to help the government with the short-term stabilization measures and start the long-term restructuring for a sustainable power sector.

Reliable, sustainable, and affordable energy system.

Private investment as a share of total investments in the power sector increased from 19% in 2012 to 23% by June 2018. Average power distribution and transmission system losses reduced from 21.86% in 2013 to 17.86% by June 2017 for all DISCOs and NTDC. Unaccounted for gas reduced from 11% in 2013 to 8% by June 2018.

The outcome was achieved but mainly as a result of CPEC-related private investments in power generation. Privatizing of selected DISCOs and GENCOs was tried but without any success, and ultimately abandoned. Some of the project target were not achieved to-date but could be achieved in future.

Renewable Energy Development Sector Investment Program - Project I Project No. 34339-023 Loan No.

2286 and

2287

Pakistan's MTDF sets out a strategic vision and investment program for the sector for the period 2005-2010. The main objective of this program is to support a projected 6-8% growth in GDP. Energy is essential to high and

Expansion of the electricity service area and improvements in the reliability and quality of supply.

SAPE rated the support to the overall renewable energy program as less than effective.

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inclusive growth. The NTDC has developed a nationwide transmission development program for 2005-2012, out of which several priority schemes have already been approved by the Government. ADB will support this program.

Increased utilization of clean and renewable energy sources. Enhanced capacity of the provincial governments and power utilities to identify and conduct feasibility study on potential renewable energy schemes. Improved technical capability in renewable energy and overall financial performance of the provincial power utilities.

Renewable Energy Development Sector Project No. 34339-033 Loan No. 2726

One of the aims of the program was to foster private sector investment in renewable energy. Despite efforts by the Government, private sector investment into this subsector has not been forthcoming, especially for technologies like wind power generation that is not yet proven in Pakistan. The Project, with focus on wind and other renewable energy projects, was to provide power supply to consumers in the region. The guarantee would help mobilize long-term debt and equity from investors needed to fund wind and other renewable energy power plants operated by IPPs, to add cumulative generating capacity of 150 MW to 250 MW.

Increased production and use of clean energy through renewable energy (RE) sources on a financially sustainable manner.

Relative to a 2005 baseline, increase gross energy output by 8% per year, or an amount sufficient to serve 600,000 new connections or 4.8 million domestic consumers equivalent at current consumption rates. The share of RE sources in energy mix to increase relative to the national power generation total from 0.9% in 2005 to 3.5% in 2015. Investment program IAs to maintain as far as possible debt-service coverage ratios of around 1.2, accounts receivable of no more than 3 months of billings, and debt equity ratio of 70:30.

The loan was cancelled after approval and the program discontinued. Tranche 2 was cancelled after three years of availability period, as the government decided not to pursue the project after it was approved due to limited market demand for government guaranteed loans.

Energy Efficiency Investment Program - Tranche 1 Project No: 42051-023 Loan 2552-PAK: OCR

The energy gap is now one of Pakistan's most serious binding constraints to growth and jobs. Energy efficiency represents the least-cost and quickest low-carbon solution to bridge

Energy-efficient and energy-productive Pakistan. A dynamic and integrated policy, institutional, legal,

Grid-connected customers receive uninterrupted and quality power supply from 2013.

The MFF on energy efficiency could only implement tranche 1. While it delivered all the intended energy saving light bulbs, some studies suggest that the increase consumption of electricity will offset the

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US$ 30.00 million Loan 2553-PAK: COL US$ 20.00 million Loan 8246-PAK: Agence Française de Développement US$ 25.00 million

the energy gap and is now a strategic priority for the Government. Pakistan's total energy savings potential, through the application of clean and efficient technology, is estimated at 11.16 million tons of oil equivalent. Since FY 2007, tariffs increased by an average of 20% and will continue doing so until reaching cost-recovery by FY 2011. As tariffs increase, so does awareness of energy efficiency and incentives to acquire new, less energy-consuming technology.

and regulatory framework for energy efficiency established. Clean technology market transformed

Households average energy bill cut by 25% from 2010. Clean technology investments increase by 20% per year starting in 2010. Energy bills lowered by 30% for businesses from 2011 Improved financial and operating performance of sector utilities from 2011. Commercial ESCO businesses established by 2011

intended savings. Overall, SAPE rates the overall energy efficiency subsector as less than effective.

Pakistan: Power Distribution Enhancement Investment Program - Tranche 2 Project No:38456-033 Loan 2727-PAK: OCR: US$ 172.30 million

Electricity customers in Pakistan continue to suffer from prolonged outages. High growth in electricity demand is putting the existing infrastructure under severe stress. Power generation gap remains to be the core problem. Power transmission and distribution system bottlenecks continue to be part of the problem. The project will rehabilitate and strengthen the power distribution system to ensure uninterrupted and affordable power supply.

Power distribution systems rehabilitated, augmented and expanded

Nationwide distribution of

network losses reduced from

18.9% in 2013 to 11% in

2024.

Revenue collection increased

in the targeted DISCOs from

89.6% in 2013 to 95% in

2024.

Load shedding (power

blackouts) eliminated in the

targeted regions of DISCOs

from year 2024 onward (2013

baseline: up to 12 hours a

day in urban areas and 18-20

hours a day in rural areas)

Augmentation, expansion, conversion works are still on-going and more kilometers of distribution networks will be added to the system by end-2018

Pakistan: Power Distribution Enhancement Investment Program - Tranche 3 Project No. 38456-034 Loan 2972-PAK: OCR:

The project is urgently needed to further alleviate the power distribution system bottlenecks and to reduce prolonged outages and load shedding

Power distribution systems rehabilitated, augmented and expanded

Nationwide distribution of

network losses reduced from

18.9% in 2013 to 11% in

2024.

Revenue collection increased

Construction works for rehabilitation, conversion, augmentation, and extensions including addition of new transmission lines and grid station is ongoing and will be completed by 30 June 2018

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US$ 245.00 million.

in the targeted DISCOs from

89.6% in 2013 to 95% in

2024.

Load shedding (power

blackouts) eliminated in the

targeted regions of DISCOs

from year 2024 onward (2013

baseline: up to 12 hours a

day in urban areas and 18-20

hours a day in rural areas)

Pakistan: Jamshoro Power Generation Project No: 47094-001 Loan 3090-PAK: OCR: US$ 690.00 million Loan 3091-PAK: OCR: US$ 30.00 million Loan 3092-PAK: OCR: US$ 30.00 million Loan: Jamshoro Power Generation Project OCR: US$ 150.00 million Loan: Jamshoro Power Generation Project OCR: US$ 70.00 million

Pakistan is exploring options to reduce electricity shortages and the cost of supplying power to the consumers. The shift from natural gas to imported fuel oil for power generation has resulted in a sizeable increase in power generation costs and exacerbated the existing financial shortfall, both within the sector and the national economy. The government therefore aims to increase coal-based power generation while decreasing expensive fuel oil generation. The project will convert the existing fuel generation units of Jamshoro Power plant.

Increasing cost effectiveness and affordability of electricity through a more efficient fuel mix for power generation.

Additional 4,468 GWh per

annum of power generated

from coal by 2019 (baseline:

89,238 GWh in 2010)

Share of HFO in the power

generation mix decreased to

30% by 2019 (baseline: 34%,

August 2012)

Share of clean coal in the

power generation mix

increased to 3% by 2019

(baseline: 0.14% installed,

August 2012) NEPRA energy purchase price for Jamshoro TPS reduced by 30% by 2019 (baseline: $0.212/kWh, June 2012)

While the project has achieved quite a few of its civil works targets, it is already behind schedule. To-date only 63% of project amount has been committed and only 7% disbursed. While the project will achieve its output and outcome targets, but with significant delays, reducing the economic returns from the project.

Pakistan: Second Power Distribution Enhancement Investment Program - Tranche 1 Project Number 47190-003 Loan 3328-PAK:

Pakistan has a very inefficient power supply system with technical loses being the highest in the region. The project aims at: (i) reducing distribution

Higher economic and cost efficiency of the power system through increase in electricity revenues in the

Nationwide distribution of network losses reduced from 18.9% in 2013 to 11% in 2024.

Smart Meters and communication equipment has been installed and is functional. Data management system has been implemented and operational. Yet the project faces some implementation

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OCR US$ 380.00 million Loan 3329-PAK: COL US$ 20.00 million.

losses and improving revenue collection, (ii) enhancing load control and load management, (iii) providing automated consumption data collection of all customers, and (iv) modernizing the electricity metering and billing system. The investment program will provide funds for metering, communication and billing systems including installation and supporting infrastructure

targeted regions of Islamabad and Lahore Electric Supply Companies.

Revenue collection increased in the targeted DISCOs from 89.6% in 2013 to 95% in 2024. Load shedding (power blackouts) eliminated in the targeted regions of DISCOs from year 2024 onward (2013 baseline: up to 12 hours a day in urban areas and 18–20 hours a day in rural areas)

difficulties. For example, bids for an important contract were supposed to be opened on 11 Jan 2018 for IESCO, however the government has unilaterally cancelled the tender 3 days before bid opening, giving no reason for this cancelation.

Second Power Transmission Enhancement Investment Program - Tranche 1 Project Number: 48078-003 Loan 3419-PAK: OCR: US$ 115.00 million Loan 3420-PAK: 1 OCR: US$ 10.00 million

A reliable and sustainable energy sector is essential to the economic growth and wellbeing of Pakistan. Load shedding has become common and severe, leading to civil strife and factory closures. Over one-third of the population does not have access to grid electricity which lessens opportunities for inclusive growth. The objective of the proposed multi tranche financing facility (MFF) is to improve Pakistan's power transmission infrastructure and management by construction of new transmission lines, extension and augmentation of existing substations, and installation of shunt reactor and replacement of protection equipment at 11 grid stations.

(i) Transmission infrastructure and management improved, and (ii) energy market transparency and efficiency improved.

1.2 GW of additional peak power supplied (metered) through the grid by 2026 (2015 baseline: 22.9 GW) Transmission losses reduced to less than 2.5% in 2026 (2013 baseline: 2.9%) Full compliance with NEPRA Performance Standards Transmission Rules, 2005 by 2026 NTDC’s annual performance evaluation report d. Full compliance with the Transmission License and Grid Code by 2026

The project has made good progress towards achieving its targets. About 141 km transmission line are under construction and to be completed in December 2018. Bids of ADB-100 (extension at Sahiwal substations) is under evaluation. The contract award is expected by end-2018.

Pakistan: Access to Clean Energy Investment Program Project Number: 49056-002 Loan 3476-PAK: OCR: US$ 325.00 million AFD Loan: US$ 78.60 million

The project aims to provide access to electricity to poor and remote rural areas outside the national grid. The proposed program is in line with ADB's midterm review of Strategy 2020, which emphasizes inclusive economic growth, infrastructure development, and engagement in middle-income countries. It is also aligned with ADB's Country Partnership Strategy 2015 -

Access to sustainable and more reliable electricity services increased, particularly for vulnerable communities in Khyber Pakhtunkhwa and Punjab

By 2021, access to electricity is provided to an additional 240,000 households and 2.6 million students in unelectrified and poorly electrified areas. (DLI 1) (2016 baseline: 0) In previously electrified areas, the number of targeted

This ongoing project is implementing well and is likely to achieve its outcome. In Khyber Pakhtunkhwa: 250 mini microhydel power plants have been physically completed. Of this, 196 are operational under an interim arrangement with contractor. However, work on solarization of schools has not been initiated. Punjab has signed contracts for solarization of 7,500 schools and on energy audit of 70 buildings,

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TA 9247-PAK: US$ 750,000

2019 for Pakistan, where energy is defined as one of six sectors for ADB cooperation. The provision of energy to poorer and remote rural areas outside the national grid is a priority in ADB's Energy Policy 2009.

schools and PHFs affected by load shedding is reduced to zero by 2021. (2016 baseline: 13,000 schools, 1,900 PHFs)

though activities are yet to commence for the solarization of public health facilities.

PUBLIC SECTOR MANAGEMENT (PSM) AND FINANCESECTOR Public Sector Enterprises Reform Project

Project No: 48031-001 Loan No: 3214

The project will finance TA for PSE reforms, primarily in the form of consulting services. This assistance is aligned with the interim country partnership strategy for Pakistan and is included in the COBP 2014–16. The COBP also includes two programmatic assistance loans to help address the adjustment costs of PSE reforms, one of which—the Sustainable Energy Sector Reform Program (SESRP)—has already been approved. The project will contribute to the implementation of these two programmatic assistance loans by providing the government with technical inputs and capacity to monitor the reforms.

Successful privatization and restructuring of selected PSEs.

Government divested from at least 4 fiscally costly PSEs by 2019. Effective restructuring of at least 3 fiscally costly PSEs by 2019. Rules for all privatization transactions during 2015– 19 made publicly available at least 2 months before each tender announcement is published.

Loan 3214 was cancelled without any disbursements, based on a request by the Government of Pakistan. While the government was successful in some cases, it needed to revise its strategy for some of the larger transactions, owing to market conditions. Moreover, after Loan 3214 was signed, large grant funds from other development partners also became available, therefore, funds from Loan 3214 were no longer needed by the government.

Public Sector Enterprises Reform Program (Subprogram 2) Project No: 48065-003 Loan No: 3538

Subprogram 2 is part of the 2017 pipeline in the ADB COBP, 2017–2019 for Pakistan. It will provide critical help to the government to address the significant policy challenges and adjustment costs of this agenda. Subprogram 2 will facilitate the creation of fiscal space for critical development expenditures. It also complements ADB’s PPP initiatives in Pakistan and the Railways Investment Program, which is under preparation.

PSE performance improved. Annual net profit of PSEs improved by 20% by FY2018 (FY2014 baseline: PRs. 199 billion). Dividend income from federal PSEs improved by at least 20% by FY2018 (FY2015 baseline: PRs. 83 billion).

No data were available to assess the improvement of PSEs’ performance.

Supporting Public-Private Partnership Investments in Sindh Province Project No: 46538-002

To close the infrastructure demand-supply the government of Sindh began reforms to facilitate the use of PPP

Fiscally-responsible private sector participation and

By FY2022:

a. Private investment in

provincial infrastructure and

The loan became effective by end-March 2018 and implementation is on track. It is too early to assess the likely achievement of project outcome.

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Grant: 0518-PAK: US$ 19.23 million Loan 3469-PAK: OCR US$ 100.00 million TA 9239-PAK: UK Grant US$ 4.75 million

investments by promulgating the Sindh PPP Act 2010. A PPP Policy Board, led by the Chief Minister, was established to approve PPPs and other necessary institutions were also setup. So far Sindh has funded five PPP investments and has a pipeline of 36 potential PP projects, with an estimated cost of PRs 240 billion. Yet the government capacity to manage these investments is limited. The project will build necessary government capacity.

investment in infrastructure increased in Sindh.

service projects increased to

10% (FY2016 baseline:

Percentage of PPP projects

in ADP 6%).

b. A contingent liability

assessment and risk

management plan included in

100% of project proposals

submitted to the PPP Policy

Board (2014 baseline: 0) c. Weighted average of VGF utilization with respect to project cost for PPP project portfolio decreased to 75% (2014 baseline: 96%).

However, the uncertain political environment in the province do pose some risk to achieving the targets .

Enhancing Public-Private Partnerships in Punjab Project Project No: 49128-002 Grant 0562-PAK: DIFD US$ 19.62 million Loan 3636-PAK: OCR US$ 100.00 million TA 9469-PAK: UK Grant US$ 4.01 million

The Government of Punjab’s budgetary resources fall significantly short to infrastructure funding needs. To bridge the financing gap, the government has established legal and institutional framework to facilitate PPP investments. The ADB loan will be used to fund a dedicated viability gap fund (VGF) window that will be managed by the Planning and Development Department (PDD).

Viable PPP projects that offer value-for-money increased.

By 2023: Private investment through PPPs for the provision of provincial infrastructure and service projects increased to 10% of the annual development program (2015–2016 Baseline: percentage of PPP projects in annual development program 6.3%)

The project became effective in May 2018 and to date the implementation is on track.

Pakistan: Social Protection Development Project

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Project Number: 45233-001

Loan 3049-PAK:

COL: US$ 430.00 million

The project will support the Government of Pakistan's national social safety net program, the Benazir Income Support Program (BISP). The project will enable the expansion of the cash transfer program (paid to the female head of targeted poor families) by registering an additional 2.4 million eligible families and financing the first few quarters of their cash transfers.

Increased resilience of female BISP beneficiaries and their families

a. Average per capita

consumption expenditure of

beneficiaries increased

Baseline: PRs1,575 = 100 in

2012, target: 105 in 2018

b. Beneficiaries with health

insurance using health

services for catastrophic

health event increased

Baseline: 0.39% in 2012,

midterm: 0.97%, target:

1.37% in 2018

c. Skilled employment rate of

trained beneficiaries in pilot

districts within 3 months of

training increased Baseline:

34% in 2012, midterm: 37%,

target: 42% in 2018, of which

at least 35% are women

The project has implemented well. However, is facing some minor difficulties as the government has stopped new enrollments in the program and had canceled two graduation programs which were supported by ADB. However, the enrollments are expected to resume after the new government has decided on its way forward on social safety nets the government is planning to pilot several new graduation programs before deciding on one (or more) for implementation.

National Disaster Risk Management Fund Project Number: 50316-001 Grant 0519-PAK: Government of Australia: US$ 3.36 million Loan 3473-PAK: OCR: US$ 75.00 million Loan 3474-PAK: COL: US$ 121.8 million TA 9246-PAK: US$ 1.00 million

Despite repeat confrontations with natural disasters, Pakistan has not formulated any strategy for reducing the risk emanating from such disasters, leading to substantial economic and social losses and high cost of reconstruction when such a calamity occurs. The Project will provide financial and technical support to the National Disaster Risk Management Fund, The Fund is established as a government-owned non-bank financial intermediary with a corporate structure to reduce the socio-economic and fiscal vulnerability of the country and its population to natural hazards by prioritizing and financing investments in disaster risk reduction and preparedness that have high economic benefits, taking into account climate

Increased and sustainable institutional and physical capacity to reduce the socio-economic and fiscal impacts of natural disasters and climate change

At least 3 million people who are highly vulnerable to the negative impacts of multiple natural hazards as of 2016 are safe and have become more resilient against the direct and indirect impacts of multiple natural hazards by 2021. (2016 Baseline: to be established during the national MHVRA)

The Project encountered startup delays of over 18 months in appointment of staff, office establishment, hiring of consultants and finalization of procedures and documentation for grant proposal award and evaluation. To mitigate these delays the loan closing date has been extended until 30 November 2021. The project is on track now and likely to achieve its outcome. By August 2019, the project has achieved cumulative contract award amounting to $106.1 million, and cumulative disbursement of $132.2 million representing 53% and 66% of the net loan and grant amount of $200.2 million. The SDC Grant 0639-PAK for $1.5 million was declared effective on 28 June 2019.

52


Grant 0639-PAK: SDC: $1.5 million

change, as well as disaster risks and their impacts.

TRANSPORT (TRA) SECTOR i. National Trade Corridor Highway Investment Program (Tranche 1)

Project Number: 40075-023 Loan No: 2400 and 2401

The project was responsive to national road development plans and consistent with ADB's CPS 2009-13 for Pakistan and the transport sector road map. In Vision 2030, the government planned to enhance connectivity and trade facilitation through the National Trade Corridor Improvement Program to improve logistics, a constraint to lifting on competitiveness and diversifying exports, and contribute to raising the ratio of trade to GDP from 30% to 60%. This program was a core component of the improvement program.

Efficiency gain for road traffic operation along Faisalabad-Khanewal

Faisalabad-Gojra daily traffic to reach 4,000 vehicles per day by 2018. Reduced average travel time from Faisalabad to Khanewal from 2 hours in 2006 to 1 hour. Reduced transport cost for freight from 7% of total cost in 2006 to 5%. Deficit on road maintenance cost reduced from 40% in 2006 to 30%. Accident rate in Punjab to be reduced from 5 to 3 per 100,000.

The project is completed and opened to traffic. Faisalabad–Gojra daily traffic vehicles is expected to achieve after 1 year of complete opening and operation of the remaining 2 sections under Loan 3300-PAK: Gojra– Shorkot Section (Section-II) and Loan 3395-PAK: Shorkot–Khanewal Section (Section-III). Section-II under Loan 3300-PAK and Section-IIIA (Shorkot–Dinpur) under Loan 3395-PAK has been completed and opened to traffic. Section-IIIB (Dinpur–Shamkot/Khanewal) under Loan 3395-PAK is expected to complete by August 2019.

ii. National Trade Corridor Highway Investment Program (Tranche 2) Project Number: 40075-033 Loan No: 3121 and Grant No. 0434

Subprogram 2 is part of the 2017 pipeline in the ADB COBP, 2017–2019 for Pakistan. It will provide critical help to the government to address the significant policy challenges and adjustment costs of this agenda. Subprogram 2 will facilitate the creation of fiscal space for critical development expenditures. It also complements ADB’s PPP initiatives in Pakistan and the Railways Investment Program, which is under preparation.

Improved regional network for movement of goods and people along E35 expressway.

Achieved. Project Physically completed and opened to traffic on 27 December 2017.

iii. National Trade Corridor Highway Investment Program (Tranche 3)

53


Project Number: 40075-043 Loan No: 3197 and Grant No. 0435

The Project 3 (E35: Hasanabdal-Havellian Expressway Package-3) is part of the National Trade Corridor and the Central Asia Regional Economic Cooperation (CAREC) Corridor 5. E-35 connects the existing Islamabad - Peshawar Motorway M1 near Hasanabadal to Havelian near Abbotabad. It will improve regional connectivity through improving linkages with the neighboring countries and developing inter-provincial linkages to improve sub-regional connectivity.

Improved regional network for the movement of goods and people along E35 expressway.

6km out of total 19.1km has physically been completed and opened to traffic on 27 December 2017. The project outcome will be achieved after 1 year of complete opening and operation of the remaining section which is expected to complete by August 2019.

iv. Pakistan: Sindh Provincial Road Improvement Project Project No: 46377-002 Loan 3305-PAK: OCR: US$ 197.85 million

Given its wide geographic coverage of the road network, each province needs to plan, prioritize, and develop its overall road network with a systematic approach over next years. Of the four provinces, Sindh is selected as the first province with ADB's help to prepare and adopt a strategic plan in road network improvement given its size of road network, availability of maintenance fund, volume of GDP, and condition of the road network.

Key sections of provincial highway network in Sindh improved

Percentage of road condition rated above good increased to 70% by 2020 (2014 baseline: less than 50%)

After some startup delays which caused the project to become effective almost one year from being approves, the project is implementing adequately and is likely to achieve project outcome.

v. Central Asia Regional Economic Cooperation Corridor Development Investment Program Project No: 48404-002 Loan: OCR US$ 800.00 million

Pakistan's accession to the CAREC will enable sub-regions in Asia and Europe to be virtually integrated and seamlessly connected from East Asia through South Asia and Central Asia to Europe. The project will enhance regional connectivity and trade in the Central Asia Regional Economic Cooperation (CAREC) Corridors in Pakistan by improving the efficiency for road traffic along the CAREC Corridors

Efficiency for road traffic along the CAREC Corridors improved

By 2027:

a. Average daily vehicle-km

of project roads increased to

6.62 million (2016 baseline:

4.26 million) b. Average travel time on project roads reduced to 7.0 hours (2016 baseline: 9.8 hours)

The project is in early stages of implementation with contracting process underway. It is too early to assess the likely achievement of project outcome.

vi. Central Asia Regional Economic Cooperation Regional Improving Border Services Project Project Number: 46378-002

Pakistan is strategically located to connect South Asia to Central Asia and further to Caucasus countries and Europe and provides the landlocked

Reduced cross-border processing time for goods and cargo in Chaman, Torkham, and Wagha.

i.Border point facilities certified as compliant to internationally accepted standards at Chaman,

Project implementation and administration actions are at early stages. However, the impact of project will depend critically on improved security and political relations between the countries concerned.

54


Loan 3344-PAK:

OCR: US$ 150.00 million

Loan 3345-PAK:

OCL: US$ 100.00 million

Central Asia countries with access to sea ports. With this strategic location, Pakistan has a large potential to play a role of a regional transport hub. Government's national trade corridor improvement program realized this potential and highlights the importance of regional connectivity through improving linkages with the neighboring countries. Further, the three-year strategic trade policy framework announced in January 2013 identified regional trade as the most important element. The Pakistan Vision 2025 recognizes its potential to serve as a hub and corridor of regional trade and help integrate these regions into an interconnected market and sets the goal of making the country a hub of regional trade and commerce.

Torkham, and Wagha by 2021

ii.PLPA established with transparent governance structure and clear vision and mandate statement by 2021

iii.Professionally qualified border point agencies and officials appointed by 2021

vii. Pakistan: National Highway Network Development in Baluchistan Project Project No: 47281-001 Loan 3134-PAK:


Grant 0451-PAK:

DFID:US$ 72.40 million.

Despite the large potential as a transport hub, Balochistan’s socio-economic development has been adversely impacted by poor security and political instability and the poor state of its transport infrastructure. The project will rehabilitate 79 km of the existing two-lane road of Zhob - Mughal Kot (N50) and 128 km of the existing two-lane road of Qila Saifullah -Waghum Rud (N70) in Balochistan

Reduced transport cost from Balochistan to the political and industrial centers of the country.

By 2018, the travel time reduced to 28 hours from Quetta to Islamabad (from 33 hours in 2013), 25 hours from Quetta to Peshawar (from 30 hours in 2013), and 22 hours from Quetta to Multan (from 28 hours in 2013)

The project has substantially been completed. Final completion is expected within the revised loan closing date. The project would contribute in reducing the travel time between Quetta to Islamabad, Peshawar and Multan respectively.

viii. Motorway M–4 Gojra-Shorkot Section Project

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Project Number: 48402-001 Grant 0440-PAK: DIFD: US$ 92.00 million Loan 3300-PAK: OCR: US$ 178.00 million.

Much of the Pakistan’s 12,500 kilometers of national highway network was built before the 1950s. About 75% of it consists of two-lane undivided roads of 6 7 meters (m) in width. With a growing economy and traffic, the highway network is getting increasingly stressed and inefficient. The proposed project will construct a 62-kilometer (km) four-lane, access-controlled motorway connecting Gojra and Shorkot in Punjab Province, and improve the institutional capacity of the National Highway Authority (NHA), particularly for managing safeguards and contracts. The project will facilitate north south connectivity, improve quality and efficiency of road transport services, and promote inclusive economic growth.

An efficient and safer transport corridor between Islamabad, Faisalabad, and Multan that enhances connectivity between the various parts of the country.

By 2020

Average daily vehicle

kilometers reach 1 million in

the first full year of operation

for M-4 Faisalabad-Multan

(2015 baseline: 0)

Average travel time from

Islamabad to Multan reduced

to 6.5 hours, from 8.5 hours

in 2015

Fatality rate per 100 million

vehicle kilometers traveled

maintained at no more than

the national highway average

(2015 baseline: estimated

14.4)

The project is completed and opened to traffic. Project outcome is expected to be achieved after 1 year of complete opening and operation of the remaining sections under Loan 3395-PAK: Shorkot–Khanewal Section (Section-III). 11 km expressway connecting Sarai Saleh and Havelian (balance works of Loan 3197-PAK) under implementation and expected to complete by August 2019.

ix. Pakistan: National Motorway M-4 Gojra-Shorkot-Khanewal Section Project - Additional Financing Project Number: 48402-002 Grant 0482-PAK:

DIFD: US$ 34.00 million

Loan 3395-PAK:


Loan 8308-PAK:

AIIB: US$ 100.00 million

The additional financing will support an increase in the scope of the current project by constructing a 64- kilometer (km) four-lane, access-controlled motorway connecting Shorkot and Khanewal in Punjab Province, which is the last missing section of the national motorway M-4 to be constructed. The project will facilitate north-south connectivity, improve quality and efficiency of road transport services, and promote inclusive economic growth.

An efficient and safer transport corridor between Islamabad, Faisalabad, and Multan that enhances connectivity between the various parts of the country

By 2020

Average daily vehicle

kilometers reach 1 million in

the first full year of operation

for M-4 Faisalabad-Multan

(2015 baseline: 0)

Average travel time from

Islamabad to Multan reduced

to 6.5 hours, from 8.5 hours

in 2015

Fatality rate per 100 million

vehicle kilometers traveled

maintained at no more than

the national highway average

(2015 baseline: estimated

14.4)

Section-IIIA (Shorkot-Dinpur Section) has been completed and opened to traffic. The project outcome is expected to achieve after 1 year of complete opening and operation of the remaining sections under Loan 3300-PAK: Gojra Shorkot Section and Loan 3395-PAK: Shorkot-Khanewal Section. Section-II under Loan 3300-PAK and Section-IIIA (Shorkot-Dinpur) under Loan 3395-PAK has been completed and opened to traffic. Section-IIIB (Dinpur - Shamkot/Khanewal) under Loan 3395-PAK is expected to complete by August 2019.

56


x. Pakistan: Flood Emergency Reconstruction and Resilience Project Project Number 49038-001 Loan 3264-PAK:

OCR: US$ 218.04 million TA 8912-PAK: US$ 2.00 million.

A late and concentrated monsoon, coupled with high flows in Pakistan's eastern rivers resulted in flooding in the northern regions of Pakistan, Punjab and Sindh provinces in September 2014. The flood affected 44 districts across the country. Nearly 110,000 houses were partially damaged or destroyed, over 1.1 million acres of agricultural land and 250,000 farmers were affected. The project will contribute to the economic and social recovery of flood-affected areas in Punjab Province.

Restoration and reconstruction of critical public and social infrastructure to multi hazard resilience standards.

By the end of 2018, traffic volume of all type of vehicles in 23 flood-affected districts is equal or more than pre-flood levels (baseline 2013/14) By the end of 2018, production of major crops in Punjab equals or is more than pre-flood levels (baseline: 2013/14, in ‘000 tons: Wheat: 18,000 Sugarcane: 43,000 Cotton: 8,900)

The Project is progressing well and is expected to complete before the loan closing date except for one Bridge contract in Kotli district. The Government of AJK has agreed to finance the balance work after the loan closing date to execute using its own resources

xi. Pakistan: Post-Flood National Highways Rehabilitation Project Project Number: 49191-001 Loan 3378-PAK: OCR: US$ 196.90 million

The proposed rehabilitation project includes 212 km of damaged highway sections and 33 damaged bridges located on the national highway network of Pakistan. It will restore critical physical infrastructure to sustain livelihoods and access to markets, as well as build post disaster traffic management capacity in the National Highway Authority (NHA). The project will contribute to the economic recovery of 2010 flood affected areas in Khyber Pakhtunkhwa, Punjab, and Sindh provinces. Project Rationale and Linkage to Country/Regional Strategy.

Efficient and safe movement of traffic on the national highways and efficient management of traffic restoration during emergencies.

By the end of 2021,

designated traffic speeds are

maintained along the

proposed sections of the

national highways.

(2015 baseline:

N-15: 20-30 km per hour;

N-50: 20-30 km per hour;

N-55: 30-40 km per hour; and

N-95: 20-30 km per hour) By the end of 2020, NHA’s disaster management capacity is strengthened for post-disaster traffic restoration (including traffic management and emergency procurement)

Procurement of civil works contracts completed, and civil work is ongoing. Project outcome likely to be achieved.

WATER AND OTHER URBAN SERVICES (WUS) SECTOR Sindh Cities Improvement Investment Program - Tranche 1

Project No: 37220-023 Loan No: 2499

The project was aligned with ADB's overall strategy to PAK, particularly its strategy for the urban sector, which emphasized urban sector interventions focusing on institutional reform and

Increased quality, reliability, and coverage of water supply, wastewater, and SWM services in participating towns.

By 2018, increase in per capita monthly income from an estimated PRs 1,446 in 2008.

The outcome was partly achieved. At the time of closing of tranche 1, population served by household water connections was around 30%. The low coverage rate may result in part from massive urbanization following the 2010 floods, particularly

57


investments to improve municipal service delivery.

Percentage of children under 5 years old suffering from diarrhea in last 30 days reduced from 19% in urban areas of Sindh (excluding Karachi and Hyderabad) in FY2005 to <10% by 2018.

in Sukkur. At completion, treated water was supplied only to Khairpur city - Sukkur and Rohri received partially treated water. At present, out of 5,596 households connected to six DNI zones, 3,411 households in four DNI zones are receiving potable water for 10-12 hours per day.

Sindh Cities Improvement Investment Program - Tranche 2 Project No: 37220-033 Loan No: 2975 and 2976

The project was aligned with ADB's overall strategy to Pakistan, particularly its strategy for the urban sector, which emphasized urban sector interventions focusing on institutional reform and investments to improve municipal service delivery.

Increased quality, reliability, and coverage of water supply, wastewater, and solid waste management services in participating towns.

By 2018, increase in per capita monthly income from an estimated PRs 1,446 in 2008. Percentage of children under 5 years old suffering from diarrhea in last 30 days reduced from 19% in urban areas of Sindh (excluding Karachi and Hyderabad) in FY2005 to <10% by 2018.

The outcome was not achieved. The Project closed as per original schedule. However, the project outcomes were not achieved because the project could not deliver the planned outputs. The Project has historically been facing many implementation challenges. The issues mainly stemmed out of (i) lack of political commitment to implement the project as originally designed, (ii) lack of ownership of the Project within the Sindh bureaucracy, (iii) too much politicization of Board of Directors (BOD) of the NSUSC - the implementation agency of the Project, (iii) NSUSC's inability to deal with its negative image within the policy makers and general public, (iv) lack of professionalism and corporate culture within the NSUSC, and (v) lack of effective leadership skills within the NSUSC's management.

Pakistan: Karachi Bus Rapid Transit Project Design Advance Project Number: 47279-003 Loan 6008-PAK:


The project will contribute to developing a sustainable urban transport system in Karachi through the delivery of a bus rapid transit (BRT) corridor, focusing on accessibility and people's mobility needs. It will aim at organizing the urban growth and public space along the selected corridor through integration of land-use and transport planning (transit-oriented development), making the city more pleasant to live in, providing a holistic solution for integrated urban mobility, and bearing a demonstration value as no modern mass transit system exists in Karachi yet.

PDA’s outcomes are the same as that of the actual project

Outcome indicators are also the same as the actual project

Project was significantly delayed mainly because government procedures are not designed to make efficient use of PDA instrument.

Pakistan: Peshawar Sustainable Bus Rapid Transit Corridor Project Design Advance

58


Project Number: 48289-003

Loan 6009-PAK:


The project will contribute to developing a sustainable urban transport system (UTS) in Peshawar through the delivery of a bus rapid transit (BRT) corridor, focusing on accessibility and people's mobility needs. It will aim at organizing the urban growth and public space along the selected corridor through a transit-oriented urban development strategy integrating land-use, making the city more livable, providing a holistic solution for integrated urban mobility, and bearing a demonstration effect as no modern mass-transit system exists in the city yet.

PDA’s outcomes are the same as that of the actual project

Outcome indicators are also the same as the actual project

The immediate outcome of the project achieved and a project towards achievement of ultimate objective is already under implementation.

Pakistan: Peshawar Sustainable Bus Rapid Transit Corridor Project Project Number: 48289-002 Loan 3543-PAK:


Loan 8336-PAK:

ADF: US$ 150.00 million

Loan: European Investment Bank: US$ 75.00 million

The proposed project will help develop a sustainable urban transport system in Peshawar by delivering the city's first integrated BRT corridor, directly benefiting 0.5 million people.

Quality of public transport in Peshawar improved, benefiting a population of half a million

By 2021:

Modern BRT buses operating

at a maximum 5-minute

headway over a network 80

km in length (2017 baseline:

0)

BRT daily ridership reaches

480,000 passengers, of whom

20% are women (2017

baseline: 607,000 daily

passengers of informal public

transport, of whom 15% are

women)

Annual GHG emissions (CO2,

methane, nitrous oxide, and

halocarbons) reduced by

31,000 metric tons due to

public transport vehicles’

modernization (2017 baseline:

tbd)

After some early delays the project implementation is progressing well. Design of the whole 26 km corridor completed based on Gold standard. 3 major civil Activities, and Issues) works contracts awarded, and construction works progressing at full speed. The project is expected to achieve its outcome.

59

Appendix 2: Projects, Loans and Grants Closing during 2015-2018

Project

No.

Loan Number

Name Sector

Closing Date Approval

Date Effectivity

Date Originally Approved

Actual

Fund Type

Amount ($ mill.)

44372-013 2742-PAK-01 Flood Emergency Reconstruction Project WUS 30-Mar-11 26-May-11 30-Sep-14 8-Aug-16 OCR 293.6 2742-PAK-02 Flood Emergency Reconstruction Project WUS 30-Mar-11 26-May-11 30-Sep-14 8-Aug-16 OCR 164.9 2743-PAK Flood Emergency Reconstruction Project WUS 30-Mar-11 26-May-11 30-Sep-14 15-Apr-15 ADF 41.0

37231-023 2299-PAK MFF-Punjab Irrigated Agriculture Investment Program Subproject 1 ANR 18-Dec-06 24-Aug-07 30-Sep-13 5-Jan-18 OCR 205.6 2300-PAK MFF-Punjab Irrigated Agriculture Investment Program Subproject 2 ANR 18-Dec-06 24-Aug-07 30-Sep-13 21-Sep-17 COL 10.1

37231-033 2841-PAK Punjab Irrigated Investment Program - Project 2 ANR 22-Dec-11 17-Feb-12 31-Dec-16 8-May-18 COL 270.0 37231-043 2971-PAK Punjab Irrigated Agriculture Investment Program - T3 ANR 13-Dec-12 06-Jun-13 31-Mar-17 30-Sep-17 OCR 73.0 37231-044 3351-PAK Punjab Irrigated Agriculture Investment Program - T4 ANR 08-Dec-15 11-Jan-16 30-Jun-17 30-Sep-17 OCR 26.6 46528-003 6006-PAK Jalalpur Irrigation PDA ANR 1 -Feb-16 11-Mar-16 15-Dec-17 31-May-18 OCR 5.0 37192-033 2396-PAK MFF-Power Transmission Enhancement Investment Program Project 2 ENE 17-Dec-07 17-Apr-09 31-Dec-13 22-Aug-16 OCR 156.8 37192-043 2846-PAK Power Transmission Enhancement Investment Program - T3 ENE 22-Dec-11 21-Feb-12 30-Jun-16 30-Oct-17 OCR 164.1 37192-044 3203-PAK Power Transmission Enhancement Investment Program - T4 ENE 03-Dec-14 06-Mar-15 31-Dec-16 30-Oct-17 OCR 52.6 47015-001 3126-PAK Sustainable Energy Development Reform Program - Subprogram 1 ENE 24-Apr-14 28-Apr-14 30-Jun-15 03-Jun-15 ADF 399.2

47015-002 3321-PAK Sustainable Energy Development Reform Program - Subprogram 2 ENE 20-Nov-15 27-Nov-15 30-Jun-16 30-Jun-16 OCR 100.0 3322-PAK Sustainable Energy Sector Reform Program - Subprogram 2 ENE 20-Nov-15 27-Nov-15 30-Jun-16 30-Jun-16 ADF 294.0

34339-023 2286-PAK Renewable Energy Development Sector Investment Program - Project 1 ENE 13-Dec-06 29-Nov-07 30-Jun-12 7-Jun-18 OCR 113.1 2287-PAK Renewable Energy Development Sector Investment Program - Project 1 ENE 13-Dec 06 29-Nov-07 30-Jun-12 7-Jun-18 COL 3.0

34339-033 2726-PAK' Renewable Energy Development Sector Investment Program - T2 ENE 13-Dec-10 27-Jul-10 OCR 200.0 42051-023 2552-PAK MFF-Energy Efficiency Investment Program - Tranche 1 ENE 22-Sep-09 30-Aug-10 31 -Jul-12 05-May-15 OCR 27.0 37220-023 2499-PAK MFF - Sindh Cities Improvement Investment Program - Project 1 WUS 19-Dec-08 06-Mar-09 31-Dec-12 31-Mar-16 ADF 37.0

37220-033 2975-PAK Sindh Cities Improvement Investment Program - T2 WUS 18-Dec-12 30-Jul-13 31-Aug-17 31-May-18 OCR 9.3 2976-PAK Sindh Cities Improvement Investment Program - T2 WUS 18-Dec-12 31-Jul-13 31-Aug-17 31-May-18 COL 23.4

38031-001 3214-PAK Public Sector Enterprise Reform (TA Loan) PSM 04-Dec-14 17-Ap r-15 30-Jun-20 19-Jul-17 COL 18.0

48065-002 3398-PAK Public Sector Enterprises Reform Program (Subprogram 1) PSM 28-Jun-16 29-Jun-16 30-Jun-17 30-Jun-17 OCR 200.0 3399-PAK Public Sector Enterprises Reform Program (Subprogram 1) PSM 28-Jun-16 29-Jun-16 30-Jun-17 30-Jun-17 100.0

48065-003 3538-PAK Public Sector Enterprise Reform Program (Subprogram 2) PSM 22-Jun-17 22-Jun-17 30-Jun-18 30-Jun-18 COL 300.0

40075-023 2400-PAK MFF-National Trade Corridor Highway Investment Program - Project 1 TRA 17-Dec-07 22-Dec-08 30-Jun-14 01-Aug-15 OCR 126.4 2401-PAK MFF-National Trade Corridor Highway Investment Program - Project 1 TRA 17-Dec-07 22-Dec-08 30-Jun-14 01-Aug-15 10.0

40075-033 0434-PAK National Trade Corridor Highway Investment Program - T2 TRA 31-Jul-15 23-Sep-15 17-Dec-17 17-Dec-17 DPECP 82.4 3121-PAK National Trade Corridor Highway Investment Program - T2 TRA 1-Apr-14 11-Nov-14 10-Dec-17 10-Dec-17 OCR 67.6

40075-043 0435-PAK National Trade Corridor Highway Investment Program - T3 TRA 31-Jul-15 8-Oct-15 17-Dec-17 17-Dec-17 DPECP 39.2 3197-PAK National Trade Corridor Highway Investment Program - T3 TRA 25-Nov-14 10-Aug-15 10-Dec-17 10-Dec-17 OCR 51.0

37559-043 2540-PAK MFF-National Highway Development Sector Investment Program-Project 2

TRA 26-Aug-09 21-Sep-09 31-Dec-13 03-Jun-15 OCR 210.5

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Appendix 3: Implementation Progress of Ongoing Projects (End-August 2019)

Project Name Sector Approval

Date

Original Closing

Date

Amount ($ million)

Percent Committed by August

2019

Percent Disbursed By August

2019 46528-002 Jalalpur Irrigation Project ANR 24-Nov-17 30-Jun-24 274.6 14% 44% 46528-003 Jalalpur Irrigation PDA ANR 1-Feb-16 31-May-18 5.0 42% 22% 47021-002 FATA Water Resources Development Project ANR 15-Dec-14 30-Sep-20 40.2 45% 61% 47024-004 Pehur High Level Canal Extension ANR 24-Nov-16 30-Jun-23 86.4 96% 128% 47235-001 Trimmu and Panjnad Barrages Improvement Project ANR 22-Sep-14 31-Mar-21 140.0 87% 88% 48098-002 Balochistan Water Resources Development Project ANR 31.Aug.18 30.Jun.24 102.0 95% 0% 48098-002 Piloting High-Value Agriculture in Balochistan ANR 31.Aug.18 31.Mar.24 3.0 0% 0% 37192-044 Power Transmission Enhancement Investment Program T4 ENE 29-Sep-16 01-Aug-20 82.5 87% 87% 47094-001 Jamshoro Power Generation Project ENE 9-Dec-13 31-Mar-19 970 98% 78% 47190-003 Second Power Distribution Enhancement Investment Program – T1 ENE 25-Nov-15 30-Jun-19 400 0% 100% 48078-003 Second Power Transmission Enhancement Investment Program – T1 ENE 31-Aug-16 31-Dec-20 80.8 87% 61% 48078-004 Second Power Transmission Enhancement Investment Program – T2 ENE 29.Sep.17 31.Dec.22 260.0 55% 56% 48078-005 Second Power Transmission Enhancement Investment Program – T3 ENE 28.Jun.18 31.Dec.23 284.0 0% 7% 49056-002 Access to Clean Energy Investment Program ENE 25-Nov-16 31-Dec-21 404.3 65% 68% 46538-002 Supporting Public-Private Partnership Investments in Sindh Province PSM 24-Nov-16 31-Dec-22 119.3 9% 37% 49128-002 Enhancing Public-Private Partnerships in Punjab PSM 15.Dec.17 30.Jun.23 119.0 0% 0% 48031-001 Public Sector Enterprise Reforms Project PSM 4-Dec-14 30-Jun-20 20.0 0% 0% 45233-001 Social Protection Development Project PSM 22-Oct-13 30-Jun-19 430.0 88% 97% 50316-001 National Disaster Risk Management Fund FIN 23-Nov-16 17-May-20 200.0 123% 136% 50316-002 National Disaster Risk Management Fund (Additional Financing) FIN 18.Jan.19 17.May.20 1.5 12% 0% 40075-033 National Trade Corridor Highway Investment Program - Tranche 2 TRA 31-Jul-15 17-Dec-17 200.0 71% 43% 40075-043 National Trade Corridor Highway Investment Program - Tranche 3 TRA 31-Jul-15 17-Dec-17 127.0 57% 37% 46377-002 Sindh Provincial Road Improvement Project TRA 12-Oct-15 30-Jun-20 197.8 78% 92% 46378-002 CAREC Regional Improving Border Services Project TRA 04-Dec-15 30-Jun-22 150.0 94% 33% 48404-003 CAREC Development Investment Program-Tranche 1 TRA 28.Sep.17 31.Dec.22 180.0 38% 8% 47281-001 National Highway Network Development in Balochistan Project TRA 3-Nov-15 31-Dec-18 195.0 84% 80% 48402-001 National Motorway M-4 Gojra- Shorkot Section Project TRA 30-Sep-15 31-May-20 270.0 89% 87%

48402-002 National Motorway M-4 Gojra-Shorkot-Khanewal Section Project (Additional Financing) TRA 10-Jun-16 31-Mar-20

234.0 100% 123%

49038-001 Flood Emergency Reconstruction and Resilience Project TRA 30-Jun-15 30-Dec-18 193.0 94% 85% 49191-001 Post-Flood National Highways Rehabilitation Project TRA 29-Mar-16 31-Mar-21 196.9 80% 61% 48289-002 Peshawar Sustainable Bus Rapid Transit Corridor Project TRA 30.Jun.17 31.Dec.21 335.0 93% 98% 47360-002 Khyber Pakhtunkhwa Provincial Roads Improvement Project TRA 28-Nov-17 30-Jun-23 140.0 69% 46%

47360-003 Khyber Pakhtunkhwa Provincial Roads Improvement Project (Additional Financing) TRA 07-Dec-18 30-Jun-24

75.0 100% 0%

46526-007 Punjab Intermediate Cities Improvement Investment Project WUS 19-Sep-17 30-Jun-24 200.0 3% 49% 37220-033 Sindh Cities Improvement Investment Program - Tranche 2 WUS 8-Dec-12 31-Aug-17 99.1 27% 23% 47279-003 Karachi Bus Rapid Transit PDA WUS 29-Sep-16 30-Oct-18 9.7 92% 63% 48289-002 Peshawar Sustainable Bus Rapid Transit Corridor Project WUS 30-Jun-17 31-Dec-21 560.0 28% 11% 51036-003 Khyber Pakhtunkhwa Cities Improvement Project - Project Readiness Financing WUS 15.Mar.19 28.Aug.24 9.0 81% 0% 48289-003 Peshawar Sustainable Bus Rapid Transit Corridor Project PDA WUS 23-Nov-16 1-Jan-19 10.0 94.0% 0%

Total 7,301.8 93% 101%

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TA Name

Type

Approval Closing Amount Percent Percent No. Date Date ($ '000') Committed Disbursed

7795 Capacity Building for the Flood Emergency Reconstruction Project CDTA 30-Mar-11 30-Sep-15 4,000 81% 66% 8097 Tele Taleem Project PPTA 21-Jun-12 31-Mar-15 1,100 95% 93% 8309 Capacity Building for Enhanced Safeguards Management CDTA 10-Dec-12 6-Dec-14 550 95% 93% 8406 Provincial Road Improvement Project PPTA 18-Jul-13 30-Sep-15 700 98% 52% 8410 Power Distribution Enhancement Investment Program 2 KSTA 29-Jul-13 25-Jul-18 1,500 69% 69% 8443 Support For Efficient Structuring of PPP In Punjab & Sindh Provinces SPATA 5-Sep-13 31-Mar-15 225 95% 93% 8488 Khyber Pakhtunkhwa Water Resources Sector (Supplementary) PPTA 24-Oct-13 31-Oct-16 1,200 117% 103% 8531 Karachi Bus Rapid Transit Project PPTA 6-Dec-13 30-Nov-16 825 95% 95% 8578 Punjab Basmati Rice Value Chain TRTA 13-Dec-13 31-Dec-18 1,000 85% 71% 8648 Determining the Potential for Carbon Capture and Storage TRTA 14-May14 31-Mar-18 1,000 41% 34% 8683 Punjab Intermediate Cities Improvement Investment Program (Supplementary) KSTA 10-Jul-14 31-Oct-18 1,300 98% 84% 8735 Improved Investment Climate for Mineral Sector Development in Pakistan PATA 16-Sep-14 30-Sep-15 225 91% 48% 8772 Strengthening the Central Power Purchasing Agency TRTA 3-Dec-14 31-Dec-18 1,500 100% 87% 8795 Peshawar Sustainable Bus Rapid Transit Corridor Project KSTA 15-Dec-14 31-Jul-18 1,500 100% 97% 8796 Public Sector Enterprises Reform Program KSTA 15-Dec-14 31-Dec-18 500 82% 79% 8800 Balochistan Water Resources Development Project (Supplementary) KSTA 15-Dec-14 31-Dec-18 1,170 97% 85% 8818 Power Transmission Enhancement Investment Program II (Supplementary) KSTA 16-Dec-14 31-Dec-18 2,100 97% 87% 8832 Prioritizing Interventions for Financial Sector Development in Pakistan TRTA 15-Dec-14 30-Sep-18 225 97% 91% 8862 Implementation Support for the Rural Financial Inclusion Facility CDTA 28-Nov-14 31-Dec-18 225 95% 93% 8912 Capacity Building of Institutions Handling Disasters TRTA 30-Jun-15 30-Dec-18 2,000 71% 52% 8914 Central Asia Regional Economic Cooperation Corridor Development Investment Program

(Supplementary) KSTA 30-Jun-15 30-Sep-18 1,700 89% 86%

8990 Enabling Economic Corridors through Sustainable Transport Sector Development TRTA 17-Nov-15 Mar-20 15,406 57% 18% 9047 Access to Clean Energy Investment Project KSTA 15-Dec-15 30-Oct-18 1,500 97% 92% 9094 Scoping Potential Economic Corridors in Pakistan TRTA 16-Mar-16 31-Dec-17 215 91% 84% 9153 Central Asia Regional Economic Cooperation Railway Connectivity Investment Program KSTA 10-Aug-16 31-Aug-18 1,000 4% 4% 9185 Hydropower Development Investment Program (Supplementary) KSTA 29-Sep-16 31-Dec-18 2,450 97% 16% 9194 Khyber Pakhtunkhwa Provincial Roads Improvement Project KSTA 30-Sep-16 31-Mar-19 1,000 83% 68% 9207 Education Sector Assessment TRTA 14-Oct-16 31-Dec-18 225 95% 90% 9223 Provincial Strategy for Inclusive and Sustainable Urban Growth TRTA 7-Nov-16 31-Dec-18 2,400 46% 13% 9239 Enhancing Public-Private Partnerships in Pakistan (Provincial Support) TRTA 24-Nov-16 30-Jun-22 4,751 18% 10% 9246 National Disaster Risk Management Fund TRTA 23-Nov-16 1-Dec-19 1,000 54% 13% 9247 Access to Clean Energy Investment Program TRTA 25-Nov-16 1-Dec-21 750 0% 0% 9255 Institutional Transformation of the Punjab Irrigation Department to a Water Resources Department TRTA 5-Dec-16 31-Dec-19 2,500 40% 0% 9343 Third Party Monitoring for Federally Administered Tribal Areas Water TRTA 11-Jul-17 30-Sep-20 225 93% 8% 9357 Update on Energy Sector Plan (Supplementary) TRTA 21-Aug-17 31-Mar-19 800 45% 29% 9392 Preparing Health Sector Assessment TRTA 27-Sep-17 31-Dec-18 225 89% 53% 9400 Khyber Pakhtunkhwa Intermediate Cities Improvement Project KSTA 5-Oct-17 31-Dec-18 225 82% 22% 9410 Sindh Secondary Education Improvement Project KSTA 27-Oct-17 Dec-19 1,000 52% 19% 9411 Integrated Information and Communications Technology Development Project KSTA 30-Oct-17 31-Jul-18 1,600 0% 0% 9442 Khyber Pakhtunkhwa Water Resources Development Project KSTA 6-Dec-17 23-Mar-20 1,200 0% 0% 9458 Greater Thai Canal Irrigation Investment Program KSTA 11-Dec-17 30-Sep-19 1,400 0% 0% 9463 Revitalizing the Ecosystem of Ravi River Basin TRTA 12-Dec-17 30-Sep-19 1,210 0% 0% 9465 Punjab Intermediate Cities Improvement Investment (Phase 2) KSTA 15-Dec-17 10-Jul-19 225 0% 0% 9467 Strengthening the Federal Public-Private Partnership Framework and Enabling TRTA 13-Dec-17 31-Dec-20 3,266 1% 1% 9469 Enhancing Public-Private Partnerships in Punjab TRTA 15-Dec-17 31-Dec-22 4,009 5% 1% 9488 Supporting Economic Corridor Development through Strategic Planning Frameworks TRTA 15-Dec-17 30-Jun-20 2,418 6% 2%

Total 75,545 54% 35%

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Appendix 4: Performance Assessment of Closed/Completed Technical Assistance Projects, 2015-2019

Project Strategic Justification Outcome and Output Indicators Status Issues

Sector: Agriculture, Natural Resources and Rural Development

Project Name: Jalalpur Irrigation Project Under Project/Loan No: 46528-001 TA No. 8404 Approval date: 18 Jul 2013 Effectiveness Date: 22 Aug 2013 Actual Closing Date: 31 Dec 2015 TACR Date: N/A TACR Rating: N/A

The PPTA is necessary to undertake due diligence in technical, safeguards, economic and financial, and poverty and social areas. The PPTA is included in COBP for 2013. The PPTA will be provided through a consulting firm and international organization (IO) supported by nongovernment organization (NGO).

Outputs i) TA consultants’ final report which will include due diligence to meet ADB's requirements for (a) technical aspects; (b) safeguards; and (c) economic and financial viability and governance related issues. ii) Engineering design and project’s PC-1. iii) Processing the ensuing loan.

The PDS provides no update on the status of TA implementation.

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Project Name: Improved Investment Climate for Mineral Sector Development in Pakistan Under Project/Loan No: 48275-001 TA No. 8735 Approval date: 16 Sep 2014 Effectiveness Date: 16 Sep 2014 Actual Closing Date: 30 Sep 2015 TACR Date: Sep 2016 TACR Rating: Successful

In May 2014 the Government of Pakistan and the provincial Government of Balochistan requested ADB to provide small-scale policy and advisory technical assistance (S-PATA) to help improve the investment climate for the mineral sector with a focus on Balochistan. The S-PATA was designed to help manage and address (i) issues relating to mining leases and mine development in Balochistan, with a view to guide government in resolving ongoing and avoiding future disputes in large scale mining transactions; and (ii) other immediate barriers to attracting investment into the mineral sector in Pakistan. The TACR rated the project relevant.

Impact Improved climate for foreign and domestic investment into the mineral sector in Pakistan with a focus on Balochistan. Outcome Identification of measures that will improve rules on mining investment, licensing and revenue sharing. Outputs i) Government capacity to manage and address issues relating to mining leases and mine development. ii) Improved and more transparent licensing process. iii) Transparent resource revenue management.

Achieved. Assessment and evaluation of current legal, institutional and revenue management framework and comparison with international best practices were accomplished. The TACR rated the project effective. i) Achieved. The inception report, containing an overview of Pakistan's minerals sector, existing legal and regulatory framework as well as licensing in Balochistan and existing revenue management was well prepared. The final report has the potential to establish the legal, financial, technical and overall foundation for a viable large-scale mining sector in Pakistan. ii) Achieved. Licensing and revenue sharing measures were identified and effectively communicated to the government. iii) Achieved. The TACR rated the project efficient. The TACR rated the project sustainable.

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Project Name: Capacity Building for the Flood Emergency Reconstruction Project Approval Date: 30 March 2011 Approval Date: 30 March 2011 Effectiveness Date: 15 Apr 2011 Effectiveness Date: 15 Apr 2011 Actual Closing Date: 30 Sep 2015

The TA will finance 20 person-months of international consultants and 600 person-months of national consultants. The services will help the implementing agencies during the first 6 months of the project (ahead of the project management consultant engagement).

Outputs Help key governance functions (monitoring, reporting and evaluation, coordination, bidding document preparation, contracting modalities, contract management arrangements, internal and external communications). Put in place fiduciary arrangements comprising sound financial management, information system and audit functions. Support environmental and social safeguards, including assistance for developing resettlement, environmental, gender plans, and their implementation and monitoring.

The CDTA was instrumental in completing the awarded works contracts within the project completion period.

Of the $4.00 million approved for the CDTA, $2.68 million was used. 48 national consultants and 7 resource persons were recruited for 705 person-months. Two international consultants were recruited for 147 person-days. The TA scope changed twice. A minor change was made in October 2011 to prepare another DNA following a new round of flooding. The major change in March 2015 was needed to prepare an emergency loan as a consequence of 2014 floods.12 Both activities were completed successfully.

Sector: Energy Project Name: Jamshoro Power Generation Project Under Project/Loan No: 47094-002 TA No. 8371 Approval date: 27 May 2013

Bulk of the project preparatory work had been completed under ADB Loan 2553 - PAK: Energy Efficiency Investment Program Tranche 1 including the preparation of the draft EIA, land acquisition and resettlement plan, and feasibility study. The PPTA is envisaged to finance only the environmental, technical, and procurement experts needed to undertake

Impact The enhancement of the energy supply in Pakistan. Outcome The completion of project due diligence. Outputs i) Preparation of an EIA. ii) Preparation of technical due diligence reports. iii) Contracting strategy and bidding documents.

No project documentation available on website.

No TACR available.

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Effectiveness Date: 27 May 2013 Actual Closing Date: 31 Dec 2015 TACR Date: N/A TACR Rating: N/A

the final project preparatory work.

iv) Field visits to Jamshoro project site and Lahore.

Project Name: Power Distribution Enhancement Investment Program 2 Under Project/Loan No: 47190-001 TA No. 8410 Approval date: 29 Jul 2013 Effectiveness Date: 19 Aug 2013 Actual Closing Date: 25 Jul 2018 Actual Closing Date: 25 Jul 2018 TACR Date: N/A

The PPTA will undertake necessary due diligence for preparing the MFF and tranche 1 and assist the pre-implementation works. The PPTA is necessary because: (i) the Investment Program is urgently needed in Pakistan, (ii) while the Government has a plan to invest in the program, there is a need to prepare a feasibility study to process the investment program and loan for Tranche 1 and (iii) expertise of competent consultants is needed to prepare the Investment Program considering its technical complexity and scale. ADB is the only development partner with significant presence in the distribution subsector. The MFF has been structured in line with the government's Power Distribution Sector Road Map for 2008–2017, which supports a more efficient power system, high-quality power supply, greater geographic coverage, and greater availability and access to affordable electricity.

Impact Outputs i) Draft sector assessment report with updated sector road map. ii) Draft feasibility study report. iii) Draft bidding documents. iv) Economic analysis. v) Financial analysis. vi) Financial management assessment. vii) Financial projections. viii) Social and poverty assessment report. ix) Summary poverty reduction and social strategy report. xiv) FAM xv) Final bidding document. xvi) Training need assessment. xvii) AMI Training Module. xviii) Training of at least 50 staff .

TAR and website does not outline the specific impact and outcome of the TA.

No TACR undertaken.

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Project Name: Turkmenistan-Afghanistan-Pakistan-India Natural Gas Pipeline Project, Phase 3 Under Project/Loan No: 44463-013 TA No. 8083 Approval date: 24 May 2012 Effectiveness Date: 24 May 2012 Actual Closing Date: 30 Jun 2017 TACR Date: Mar 2018 TACR Rating: Successful Sectors: Energy and Industry & Trade

The Turkmenistan–Afghanistan–Pakistan–India Natural Gas Pipeline Project (TAPI) aims to export up to 33 billion cubic meters of natural gas per year through a proposed pipeline, approximately 1,800-kilometer long, from Turkmenistan to Afghanistan, Pakistan, and India. Estimated at $7.6 billion, the Project will be operated by a special purpose consortium company (SPCC) to be led by a commercial entity. ADB, the Project’s secretariat, apart from having organized 14 ministerial-level steering committee meetings and 16 technical working group meetings, has also financed several feasibility studies and drafting of agreements. The Parties again requested ADB to continue as secretariat in phase 3 for the SPCC consortium lead selection, establishing the SPCC, and finalizing operational agreements related to the GSPA. ADB approved a Research and Development Technical Assistance to continue its role in the facilitation of discussions at both TWG and SC levels for GSPA-related agreements. The TA was to be implemented in 2 stages, with the first stage to finance organization of roadshows in four strategic locations in Asia, Europe, and

Impact Enhanced energy trading between Turkmenistan, Afghanistan, Pakistan, and India. Outcome Establishment and engagement of a natural gas pipeline consortium under a public–private partnership. Outputs i) Signing of Operations Agreement in July 2014. ii) SC’s endorsement of State Concern (“Turkmengaz”) as consortium lead during the 22nd SC meeting in Ashgabat in August 2015. iii) The Parties agreement on the shareholding percentages. iv) Signing of an investment agreement in April 2016. v) Preparation of network code. vi) Signing of host government agreements. vii) Project Investment Market Study Report detailing the requirements of prospective project developers, financiers, and insurers.

Given the TA's role in establishing the project company and signing most of the target agreements, the TACR rated the TA effective. i) Achieved. ii) Achieved. iii) Achieved. Agreement was on Turkmengaz – 85%, Afghan Gas enterprise – 5%, Inter State Gas Systems (Pvt) Ltd – 5% and GAIL (India) Ltd – 5%. iv) Achieved. v) Not achieved. Moved to phase 4 of the project. vi) Not achieved. Moved to phase 4 of the project. vii) The TACR does not mention the status of this output. For holding timely roadshows and meetings the TACR rated the TA efficient.

TA was planned to be carried out for 25 months but was extended thrice for a total of 60 months. Persistent delays and changes in technical designs have raised TAPI's projected cost. While there have been signs of Project progress recently, it coincided with the emergence of alternative gas producers that may compete with Turkmenistan and a declining trend in energy demand globally. Hence, it can be inferred that time is of the essence in any energy development project on which validity of initial assumptions should be continuously updated from which project feasibility should be assessed.

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North America. Subject to the successful completion of stage 1, the second stage would finance the finalization of GSPA-related agreements. Given the TA's role in facilitating at the negotiations and balancing the Parties’ interests, the TACR rated the TA relevant.

Project Name: Determining the Potential for Carbon Capture and Storage Under Project/Loan No: 47277-001 TA No. 8648 Approval date: 14 May 2014 Effectiveness Date: 9 Jun 2014 Actual Closing Date: 31 Mar 2018 TACR Date: N/A TACR Rating: N/A Sectors: Energy and Industry & Trade

Pakistan’s carbon emissions have doubled since 1990 largely due to the country’s growing energy demand. The Government is committed to lowering its current emissions and has requested the assistance of ADB to support the implementation of its national climate change policy, particularly in mitigating climate change through development of technologies that help reduce GHG emissions. The capacity development TA is not included in the COBP 2014–16 for Pakistan. In February 2013, Pakistan launched its first National Climate Change Policy, which underscores the need to develop low-carbon technologies—including carbon capture and storage (CCS). The TA will support the implementation of the national climate change policy , particularly mitigation of climate change impacts through development of technologies that help reduce GHG emissions.

Impact CCS road map implemented. i) Installed capacity of carbon capture and storage grows to 600 MW by 2025. ii) GHG emissions reduced due to installed CCS capacity of 600 MW by 2025 amounting to 3.13 million tCO2e (or 10% of Pakistan’s GHG emissions baseline as of 2012). iii) Number of CCS-ready facilities grows to 3 by 2025. Outcome Improved capacity in planning and management of demonstration projects. i) At least one large-scale CCS demonstration plant committed for development by 2015. ii) Government staff trained to plan and manage demonstration projects increases by 15 in 2015. Outputs 1.Scoping analysis on the potential for CCS undertaken. i) A CCS road map endorsed by the cabinet by 2015. 2. Knowledge dissemination program for CCS undertaken. i) A knowledge product describing key requirements of CCS readiness developed

It is too early to assess the impact. Individual Experts engaged and mobilized. Consultation with Executing Agency and other stakeholders ongoing. 1. A scoping study was prepared in March 2016. i) Achieved. Initial findings were presented to stakeholders at the knowledge exchange workshop

A TACR for the project has not been undertaken.

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and disseminated to key stakeholders by 2015. ii) 20 government staff knowledgeable on CCS through workshops and study tours by 2015. 3.Road map for CCS demonstration with priority demonstration projects identified. i) Up to three prefeasibility study reports, including analysis of possible financing mechanisms such as CDM and other carbon financing prepared in 2014.

held in Melbourne in April 2016. The CCS readiness assessment draft will be available to discussion at the stakeholders' workshop in October 2017. ii) Achieved. Two study tours has been organized for relevant Pakistan Government officials and preparation is ongoing for (i) TA CCS final report, (ii) country study on CCS including case study for the Jamshoro project, and (iii) video documentary of the study tour on CCS demonstrations with expert interviews will be the main knowledge product. A preliminary roadmap for storage is under preparation, which will be discussed at two individual workshops in Islamabad.

Sector: Finance Project Name: Under Project/Loan No: 47290-001 TA No. 8628 Approval date: 31 Mar 2014 Effectiveness Date Actual Closing Date: 31 August 2015 TACR Date: June 2016

The TA was developed to enhance the understanding and capacity of public financing institutions, including National Development Finance Institutions in Asia-Pacific to design investment strategies for low-carbon, climate resilient infrastructure and technology projects.

Impact Increased willingness on the part of public financial institutions to invest in low- carbon, climate resilient infrastructure and technology in the Asia and the Pacific region supported by international climate finance. Outcome Enhanced capacity of public financial institutions in DMCs to devise investment strategies for low-carbon, climate resilient infrastructure and technology that could be supported through international climate finance mechanisms and the private sector.

The output has been finalized into a summary report containing a synthesis of the training materials developed for the workshop, the proceedings of the workshop, research done by consultants, and the survey results extracted from the database.

More time than anticipated had to be spent on the survey generated under Output 1 in order to improve the response rate. The TA had savings of $54,162, mainly from unused seminar and consultant budget.

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TACR Rating: Successful

Outputs Extended information basis on ongoing climate investment by public financial institutions. Heightened awareness on the challenges, opportunities, and global best practice for public financial institutions seeking to scale up climate finance investment.

The TA supported the organization of a workshop which provided an overview of the current developments in international climate finance and showcased the experience of NDFIs in Asia and Latin America that are successfully accessing sources of finance to support investment in low-carbon, climate resilient infrastructure. The workshop also featured sessions with representatives from the Green Climate Fund (GCF), who outlined access modalities for NDFIs. In pre- and post-workshop surveys, which assessed the effectiveness of the workshop in equipping participants with new skills and information on climate finance, the majority of participants (65%) stated their learning expectations were highly fulfilled while the rest (35%) were moderately fulfilled.

Of the 70 respondent banks in the survey conducted under output 1, only 16 completed the survey.

Sector: Health Project Name: Social Protection Development Project Under Project/Loan No: 45233-003 TA No. 8337 Approval date: 11 Mar 2013 Effectiveness Date: 22 Mar 2013

The TA is required to assist in the design of the proposed Social Protection Development Project. This TA will be used to prepare the necessary assessments, assist with all necessary due diligence tasks, and to develop detailed project activities. In addition, in view of emerging fiscal pressures in Pakistan, there might be a need for ADB to be prepared to step up its assistance to BISP and in that way ring-fence the benefits to the extreme poor from

Impact Outcome Outputs i) Survey report of BISP’s operations. ii) Project design to roll out the registration for the cash transfer program to remaining eligible beneficiaries. iii) Project design(s) to introduce and roll out (a) vocational training, (b) health insurance, and/or (c) CCT for health program providing access to immunization and micronutrients for children and pregnant women.

According to Project Staff, the TA was cancelled mid-way without achieving any outputs.

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Actual Closing Date: 30 Nov 2016 TACR Date: N/A TACR Rating: N/A

eventual macroeconomic disruptions.

iv) Project design for interventions to improve BISP administration. v) Preparation for a possible programmatic engagement.

Sector: Industry and Trade Project Name: Scoping Potential Economic Corridors in Pakistan Under Project/Loan No: 49452-001 TA No. 9094 Approval date: 16 Mar 2016 Effectiveness Date: 16 Mar 2016 Actual Closing Date: 31 Dec 2017 TACR Date: Aug 2018 TACR Rating: Successful

Economic Corridor Development (ECD) to promote inclusive development and raise living standards is a key priority of the federal and provincial governments in Pakistan. This is reflected in the bilateral China-Pakistan Economic Corridor (CPEC), the corridor projects under the Central Asian Economic Cooperation (CAREC), and the development of special economic zones (SEZs), transport systems and urban development services. In line with the government priorities, ADB approved a small-scale TA to provide the basis for initial assessment of viable economic corridors in Pakistan. The TA was part of the Pakistan Economic Corridors Program (PECP). The PECP was approved in June 2015 to support the government’s strategy to strengthen regional connectivity and trade, accelerate economic growth, and create jobs that covered (i) investment in transport, (ii) investment and TA to promote PPPs, and (iii) TAs to support transport sector policy, planning, and asset management and ECD planning.

Impact Economic corridors developed to enhance trade, regional connectivity, growth and job creation. Outcome Potential ECD selected for detailed assessment and planning under the subsequent larger TA (KSTA 9488 approved in January 2018). Outputs i) Reports on five thematic aspects of ECD considering (a) economics of ECD to maximize comparative and competitive advantages; (b) institutions and regulations for enabling environment; (c) multi-dimensional poverty and inclusiveness; (d) empirical analysis to consider district disparity; and (e) role of diaspora to tap Pakistan’s global talents and resources.

Achieved. The TA contributed positively to the ongoing discussions on the potential opportunities of ECD in Pakistan, by highlighting critical dimensions for effective ECD planning and prioritization. Given the total cost and set of outputs produced, the TACR rated the TA effective. i) Achieved. The five key thematic reports generated laid the foundation for developing ECD framework in Pakistan considering economic perspectives, institutional and legal environment, inclusiveness, and tapping the human and financial resources to support ECD.

During the implementation, DFID internal policy revisions resulted in reallocation of resources. ADB and DFID had to revise the funding schedule based on the new DFID funding option. This delay contributed to the shift in the TA expected completion date from August 2016 to June 2017. Meantime, new details emerged about investments under CPEC in energy, transport and industrial development. The final TA completion date was extended to 31 December 2017 to widen its coverage and to make it more relevant to the new realities. Consultants originally identified were no longer available to work under the revised timeline. Recruitment of new consultants was time consuming

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The TA is aligned with ADB's CPS 2015-19 for Pakistan and is included in the ADB's COBP 2016-18. The TA is complementary to ADB's ongoing support to Pakistan for infrastructure and institutional development, including in energy, agriculture, urban services, and, as noted above, in transport and PPPs. Considering the take ups from the government and other stakeholders, the TACR rated the TA highly relevant.

due to the dearth of relevant experts in the specific field and the mismatch between consultants’ established remuneration rates and the ADB’s rates for their respective levels.

Name: Regional Improving Border Services Project Under Project/Loan No: 46378-001 TA No.8405 Approval date: 18 Jul 2013 Effectiveness Date: 12 Aug 2013 Actual Closing Date: 30 Sep 2015 TACR Date: N/A TACR Rating: N/A

The TA is in preparation for an ensuring loan. The project will modernize border point infrastructure of a selected border crossing point (either Torkham at the Afghanistan border or Wagha at the Indian border) to help it meet the demand for quality border crossing services.

Impact Outcome Outputs A modernized border crossing point that meets users' demand of quality border crossing services and is ready to develop into an integrated and coordinated border management regime such as the single window system. i) Develop an investment project bankable by ADB loan. ii) Conduct due diligence for technical, economic, financial, social, and environmental viability of the project.

i) The consultant team for Phase 1 (developing a border cross point migration plan and designing the ensuring loan) submitted the Final Report in July 2014. The consulting firm for Phase 2 submitted the Final Report in July 2015. ii) A steering committee for Land Acquisition Resettlement Assessment has been created to facilitate and conduct social and poverty analysis of the Project's land acquisition and resettlement

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iii) Assist the EA in developing required documentation for country resource allocation including PC-1 for submission to the Planning Commission.

plans for Phase 2 (conducting technical, economic, financial, social and environmental due diligence) is ongoing.

Sector: Public Sector Management Project Name: Support for Efficient Structuring of Public-Private Partnership in Punjab and Sindh Provinces Under Project/Loan No: 47223-001 TA No. 8443 Approval date: 5 Sep 2013 Effectiveness Date: 5 Sep 2013 Actual Closing Date: 31 Mar 2015

The TA focused on improving the viability of PPP projects in Punjab and Sindh provinces by strengthening their fiscal risk management frameworks and credit enhancement mechanisms. It was strategically targeted to ensure fiscally responsible PPP portfolios by building the fiscal risk identification, appraisal, and management capacity of Government of Sindh and Government of Punjab. Changes made during implementation were minor and remained relevant to the TA’s objective.

Impact The application of risk management systems and risk-offsetting mechanisms across all PPP transactions in Sindh and Punjab by 2016. Outcome The availability of effective risk management systems and risk-offsetting mechanisms in Punjab and Sindh. Outputs (i) Risk management toolkits finalized and adopted in Punjab and Sindh.

Not achieved. Not achieved. The TACR rated the TA less than effective. i) Partially achieved. According to the TACR, the key activities underpinning this output—drafting risk management frameworks, model/standardized risk

The TA was approved and declared effective in September 2013. However, due to changes in counterpart staff in the federal, Punjab, and Sindh governments, TA effectivity was delayed which in turn delayed the recruitment of consultants. TA implementation commenced in January 2014 (three months after being declared effective) and was completed in March 2015 (eleven

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TACR Date: Jun 2016 TCR Rating: partly successful Sector: PSM, Transport and Water and other Urban Infrastructure and Services

The TACR rated the TA relevant.

(ii) Credit enhancement instruments that are applicable for PPP transactions in Sindh and Punjab identified. (iii) Technical capacity developed to identify, appraise, and manage fiscal and environmental risks in PPPs in Sindh and Punjab.

assessment templates, and risk management manuals; developing a project review mechanism with public sector comparators and risk sharing reference combinations for pilot sectors; and drafting guidelines for risk identification and assessments comprising risk identification, risk assessment, allocation of risks, risk management and mitigation measures—were not completed. However, the Project Data Sheet notes that risk management toolkits have been finalized and adopted in Punjab and Sindh. ii) Achieved. Credit enhancement instruments applicable to PPP transactions were identified and briefing sessions for policy makers on these mechanisms were conducted. iii) Not achieved, according to the TACR. However, the Project Data Sheet notes that capacity development activities have been completed. Efficiency The TA used more international person-months (4.8 compared to the original 3.5) and more national person-months (9.0 compared to the original 5.0) but did not achieve its outcome. The TA was extended by 11 months to enable the consultants to deliver their outputs but the outputs were completed partially. TA funds utilization was 88 percent.

months from the original expected completion date). Risk-mitigation measures should be in place for implementation arrangements as well as to avoid delays resulting from changes in counterpart staff in government. Adequate monitoring of activities, outputs, and outcome is needed to ensure that they are completed and on time to be of use for downstream (lending) projects they may be helping to prepare.

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The TACR rated the TA less than efficient.

Name: Economic Analysis for Gender and Development Under Project/Loan No: 47363-001 TA No. 8620 Approval date: 14 Feb 2014 Effectiveness Date: 14 Feb 2014 Actual Closing Date: 31 Mar 2016 TACR Date: Jul 2016 TACR Rating: Highly successful

The Ministry of Gender Equality and Family of the Republic of Korea requested the ADB to provide support for quantifying the cost of gender inequality in terms of foregone output growth to support their policy formulation. ADB has prepared the TA in close consultation with the Government of Korea and the ADB Gender Equity Community of Practice (CoP). The TA supported analysis of the: (i) macro-level aggregated impact of gender inequality on economic growth; and (ii) micro-level gender issues.

Impact Improved economic analysis of gender inequality issues and related opportunity costs in the People’s Republic of China, India, Indonesia, the Republic of Korea, and Pakistan, for gender policies and strategies. Outcome Outputs Gender inequality measured and analyzed. Analysis of opportunity or foregone costs of gender inequality and priority gender issues. Sharing knowledge on economic analysis for gender development

Achieved. Achieved. The outcomes have offered several materials (exceeded the target) aimed at strengthening the gender discourse on economic analysis methodologies for gender and development and were published. i) and ii) Achieved. A number of reports were generated and background papers were prepared. Three ADB Working Paper publications came out of this TA: (i) A Model of Gender Inequality and Economic Growth, (ii) Impact of Gender Inequality on the Republic of Korea’s Long-Term Economic Growth: An Application of the Theoretical Model of Gender Inequality and Economic Growth, and (iii) Female Labor Force Participation in Asia: Indonesia Country Study. Two other reports: (i) Asia Synthesis Report on Female Labor Force Participation, and (ii) Female Labor Force Participation: Pakistan Country Study was found to be more suitable to be published as policy briefs in 2016. iii) Achieved. Research results were presented at an International

A minor change in scope of the TA was approved for reallocation of fund to increase workshop/conference cost by $20,000 and add TOR for editor as part of national consultants. The estimated 27% undisbursed fund was mainly due to the change of venue for the final workshop (from ROK to ADB Manila) and the unutilized travel budget from consultants.

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Workshop in Bangkok, Thailand that was held on 20–22 May 2015. Blogs based on the background papers and reports were also prepared for wider dissemination of the research.

Sector: Transport

Name: National Trade Corridor Highway Investment Program Under Project/Loan No: 40075-013 TA No: 7008 Approval Date: Effectiveness Date: Actual Closing Date: TARC Date: TARC Rating:

To develop an NTC highway business plan for the pilot section of the Peshawar–Khanewal (M1-E4) motorways and expressways and to enhance the economic and financial sustainability of the roads.

Impact Trade growth. Outcome A more efficient NTC highway network. Identify industries that would be attracted to particular areas along the road in line with existing spatial plans (if any) and in consultation with the private sector. Draft recommendations for government action to attract priority sectors.

Project staff did not comment on the status of the TA outputs.

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Project Name: Provincial Road Improvement Project Under Project/Loan No: 46377-001 TA No. 8406 Approval date: 18 Jul 2013 Effectiveness Date: 12 Aug 2013 Actual Closing Date: 30 Sep 2015 TACR Date: N/A TACR Rating: N/A

The Project is required to help Work and Services Department (WSD) prepare a mutually agreeable project suitable for ADB financing. The proposed project will help provincial road network improvement to enhance connectivity between provincial transport centers and cities with local markets and communities, provide much-needed access to education and health facilities, and contribute to poverty reduction by creation of jobs and employment opportunities.

Impact Outcome Outputs i) Medium-term road maintenance plan. ii) Feasibility study report. iii) Bidding document and preliminary design. iv) Institutional Development Plan. v) Training needs outline. vi) Road Safety Improvement Framework. vii) Results Framework.

Project staff did not comment on the status of the TA outputs.

TACR for TA8406 was not conducted as this TA is a project preparation TA whose output is a processed project Sindh Provincial Road Improvement Project which was approved in Oct 2015.

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Project Name: Karachi Bus Rapid Transit Project Under Project/Loan No: 47279-001 TA No. 8531 Approval date: 6 Dec 2013 Effectiveness Date: 26 Feb 2014 Actual Closing Date: 30 Nov 2016 TACR Date: N/A TACR Rating: N/A

The Government of Sindh requested ADB to help improve the urban transport system (UTS) of Karachi and provide technical and financial support to implement a bus rapid transit (BRT) corridor and strengthen institutions and organizations managing the urban transport sector. The PPTA will build on feasibility studies for priority BRT corridors undertaken by JICA for the Green and Red lines and the government for the Yellow line, and on advance preparation activities undertaken under an ADB Cluster TA.

Impact Outcome Outputs i) Policy reform framework and support to on-going institutional and organizational development in the urban transport sector in Sindh, such as establishing the Sindh Mass Transit Company (SMTC) and progressively setting up the Sindh Mass Transit Coordination Authority (SMTCA). ii) Optimized preliminary design and updated cost estimates, including drawings at sufficient level of details. iii) Assessment of opportunity to integrate intercity bus depots and off-street parking components in the project scope. iv) Full due diligence for the selected BRT line and associated infrastructures. v) Detailed TOR of consulting services under the PDA and loan. vi) PPP assessment to identify viable PPP options, leading to transaction advisory services to assist the government. vii) Final project financing plan. viii) Indicative implementation schedule. ix) Procurement strategy and plan. xi) Parking strategy, street vendors' policy and other traffic rules along the corridor. xii) Urban development strategy along the corridor, following the transit-oriented development concept.

According to project staff, all outputs have been successfully completed.

A TACR has not yet been conducted.

Project Name: Peshawar Sustainable Bus Rapid Transit Corridor Project Under Project/Loan No: 48289-001

The Government of Khyber Pakhtunkhwa requested the ADB to help improve Peshawar’s UTS and provide technical and financial support to implement a BRT corridor and strengthen institutions managing the UTS. The PPTA

Impact Sustainable, low carbon, and climate resilient urban transport system in Peshawar (for overall project). Outcome Improved quality of public transport along corridor 2 in Peshawar (for overall project).

According to project staff, all outputs have been successfully completed.

A TACR has not yet been conducted.

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TA No. 8795 Approval date: 15 Dec 2014 Effectiveness Date: 27 Jan 2015 Actual Closing Date: 31 Jul 2018 TACR Date: N/A TACR Rating: N/A

will build on (i) Peshawar Urban Transport Pre-Feasibility Study recently undertaken by Cities Development Initiative for Asia (CDIA), and (ii) advance preparation activities undertaken under a government-financed TA. The project is consistent with the Government's Vision 2025, Framework for Economic Growth (2011), National Climate Change Policy; supports priorities set out in Khyber Pakhtunkhwa Comprehensive Development Strategy 2010-17; and is aligned with the interim country partnership and Sustainable Transport Initiative of the ADB.

Outputs Implement recommendations regarding the urban transport policy reform framework and institutional and organizational developments, such as establishing Peshawar Urban Mobility Authority - PUMA to regulate, plan, and coordinate Peshawar’s UTS; and a Company (Peshawar BRT Company - PBRTC) to implement and later manage BRT operations. Produce conceptual plans for BRT and non-motorized transport (NMT) networks Undertake preliminary design and cost estimates of BRT and corridor 2 restructuration. Assess the opportunity to integrate intercity bus depots and off-street parking components in the project scope. Conduct full due diligence for the BRT corridor and associated infrastructures. Undertake a PPP assessment, leading to transaction advisory services. Produce a BRT operations financial model and initiate an industry transition process. Draft a project implementation roadmap. Develop a parking strategy, a street vendors’ policy and other traffic management rules along the corridor. Develop a transit-oriented urban development strategy along the corridor.

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Appendix 5: Non-Sovereign Project Outcomes and Assessment of their Achievements


Gulpur Hydropower Project Project No.: 47929-1 Loan No. 3523 OCR $ 65 million

Reduce country’s energy shortage and cost efficiency of energy through private sector investment. I) ADB’s past record in supporting the country’s first two hydro independent power producers; ii) the relatively large project debt requirement, and (iii) local banks’ current reluctance to provide long-term limited recourse project finance (caused by asset–liability mismatch concerns)

Increased supply of cleaner hydropower from indigenous energy resources

Peak power shortages will be reduced to at least 15% of generation capability by 2025 (FY2012 baseline: 50%) Hydropower accounts for at least 45% of installed capacity by 2027 (FY2013 baseline: 29%) Installed private sector power generation capacity from renewable resources increased to 10% by 2025 (FY2012 baseline: <1%

The project is ongoing and the construction work is progressing well. There are presently no indications why the project would not meet is targets.

Engro Fast-Track Liquefied Natural Gas Regasification Project Project No. 48307-001 Loan No. 3247 OCR $ 30 million

With few near-term solutions to address the compounding energy deficit, this project is one of the fast-track investments for Pakistan to improve its energy security measures

Commercially viable, regasified LNG supply to the power sector in Pakistan provided

Supply of natural gas increases from 1,500 billion standard cubic feet per annum in 2014 to 4,275 billion standard cubic feet per annum in 2030 Increase of natural gas in country energy mix from 31 million tons of oil equivalent in 2013 to 116 million tons of oil equivalent in 2030

The project is ongoing. It achieved its COD on target and is currently functioning well. There have been some minor bureaucratic delays on the side of the government which were eventually resolved. The project is likely to achieve its targets.

New Bong Escape Hydro Power Project

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Project No. 38928-014 Loan No. 2198 OCR $ 37.3 million

The Project was developed under the Government’s Hydel Policy 1995 to provide a cost effective solution to energy needs of people of Azad Jummu and Kashmir through private sector investment.

To ensure continued and reliable availability of electricity in Pakistan, in an optimal manner, to meet rising electricity demand

Installation of 4 x 20 MW turbines plus powerhouse, intake, headrace, substation, and interconnection with NTDC 132 kV transmission line Electricity generation that meets power purchase agreement requirements

The Project is fully operational. Since commercial operations which started in March 2013, it has generated electricity at a monthly average rate of 36,473 MWh. As such, the project is meeting its development objectives.

Patrind Hydropower Project Project No. 4914-014 Loan No. 2792 OCR 97 million

The project will encourage private sector participation to alleviate a severe power shortage (estimated at over 4,200 megawatts peak deficit) that is adversely impacting the country’s economic growth and poverty reduction efforts.

Production of lower-cost, carbon efficient power through generation of 147 MW run-of-the-river hydroelectric power

Project dispatches an estimated average annual production of 632.6 GWh Annual greenhouse gas emissions savings of 280,000 tons of CO2/year The net average tariff/kWh from the project is lower than for plants running on imported fuel from 2015 to 2045.

The project is among the first two private sector hydro power projects in Pakistan. Since starting its commercial operations in November 2017, it has continued to function well. It is achieving its development objectives.

Zorlu Energi Power Project Project No. 43937-014 Loan No. 2704 OCR $ 36.8 million

The project will contribute to developing Pakistan’s first private wind farm, thereby setting the precedent and framework for other wind projects to follow

Provide higher volume of low carbon energy to Pakistani consumers

150 MW–175 MW of wind energy projects reach financial close in Pakistan by 2012 Private power generation in Pakistan increases from 32% in 2010 to 40% by 2012

Since achieving commercial operations date (25 July 2013), the project has been operating adequately. The plant continues to produce electricity above expectations. ZEPL continues to exceed key financial targets in project’s. Revenue and EBITDA were 28% and 32% respectively higher than projections.

Foundation Wind Energy Projects I & II

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Project No. 45905-014 Loan No. 7348-01 7348-02 OCR $ 33.43 million 33.18 million

The projects will help alleviate Pakistan’s severe power shortage, will foster confidence among potential investors and lenders and promote further private sector investment in renewable energy and power in Pakistan.

Production of low cost, carbon-efficient power from wind energy

Peak power shortages reduced by 11% by 2020 (FY2011 baseline: 22%) The share of private sector power generation capacity in Pakistan increases to 50% of total generation by 2020 (FY2011 baseline: corresponds to 39% of the total generation)

FWE I achieved financial close on 23 July 2013 and first disbursement under Islamic Development Bank's tranche was released on 23 August 2013. FWE II has already fully mobilized. Both projects have achieved their respective CODs (FEW-I in January 2015 and FEW-II in October 2014). Both projects are function well and are likely to achieve their development objectives.

Triconboston Wind Power Project Project No. 50200-001 Loan No. 3448 OCR $ 66 million

The project contributes to low carbon solution to Pakistan’s energy problem. ADB financing was important because: (i) ADB’s record of supporting the country’s first three wind-based IPPs—Zorlu Enerji Power Project and Foundation Energy I and II Projects;4 (ii) the large long-tenor project debt requirement; and (iii) the project’s need for foreign financing, given that the majority of costs will be dollar denominated.

Supply of renewable energy from wind sources increased

By 2020 a. 520 gigawatt-hours generated annually (2016 baseline: Not applicable) b. 380,000 tons of carbon dioxide avoided annually (2016 baseline: Not applicable) c. At least 35 full-time equivalent local jobs created during operations (2016 baseline: Not applicable)

ADB's loan agreement was signed 10 April 2017, and Financial Close was subsequently achieved. Project achieved COD on 14 Sep 2018. It is likely to achieve its development objectives.

Uch-II Power Project Project No. 43903-014 Loan No. 2722-001 2722-002 OCR $ 50 million $ 37.16 million

Increased investments by the private sector in power generation projects in Pakistan

Production of low-cost electricity

Peak shortages and energy outages reduced by 11% by 2020 Private power generation increases to 50% by 2020

Commercial operations started on 4 April 2014 and since then the project has been successfully operating. The development objectives are likely to be achieved.

Karachi Electric Supply Corporation Ltd. (KESC) Post-Privatization Rehabilitation, Upgrade and Expansion

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Project No. 40943-014 Loan No. 2329 7254 OCR $ 125 million OCR PKR 2,443.25 million

Electricity consumers in Karachi, Pakistan’s biggest city, have been suffering due to weak capacity and inefficiency of KESC operations. ADB’s energy sector strategy designates the following as two of the most important among several operational priorities: (i) reducing poverty by, among others, creating energy infrastructure for sustainable economic growth; and (ii) promoting private sector involvement by restructuring the energy sector and creating an enabling environment for private investors. In particular, the strategy strongly encourages ADB interventions to increase private sector participation in the energy sector to take advantage of higher operating efficiencies that private operators can achieve and to meet the large capital requirements

Higher proportion of efficient technology for thermal power generation in KESC’s supply mix Reduction in use of older and less efficient generation units Reduction of air emissions and greenhouse gases Higher efficiency in KESC’s T&D network

The input/output ratio of energy (fuel) to electricity consumed in Karachi declines Average cost of electricity generated by KESC is reduced to below $0.090/kWh by 2012 Technical losses fall to 11% by 2009

The two new combined cycle thermal power stations (220MW Korangi CCPP and 560MW Bin Qasim II) are fully operational, and have improved K-Electric''s generation fleet efficiency. About 1,010 MW of new capacity is on line, which provides lower cost and more reliable power to Karachi residents. System improvements and loss reduction initiatives have reduced the average T&D losses of K-Electric Collections, especially from residential and industrial consumers, increased. Ten new grids have been energized, 62 kilometers of new transmission lines have been laid out, and 189 kilometers of existing transmission lines have been rehabilitated. K-Electric continues to add more grid stations at strategic locations and expand/rehabilitate its transmission and distribution networks. The development objectives of the project are being met.

Daharki Power Project Project No. 41903-014 Loan No. 7265 7265 OCR $ 2.75 million $ 44 million

Pakistan faces an acute shortage of power. In addition, private investment in the power sector is hampered e.g. by concerns over investment returns and previous Government attempts to reduce tariffs agreed with independent power producers (IPPs). As a result, scarce indigenous fuel resources that could be used for power generation are lying idle, and much needed increases in generation capacity are delayed. The Project will play an important part in addressing these issues, both in its own right and as an example for others.

Pakistan’s power consumers receive additional lower-cost power, generated from local, otherwise unusable, gas, with adequate returns generated for the Project’s investors

Reducing the gap between demand for, and supply of electricity. Improving cost efficiency and environmental impact of electricity generation through improved fuel mix

The project is meeting its development objects.

Narrowing the Electricity Demand-Supply Gap has already been lowered by 5 percent. Promotion of efficient management of natural resources too has been met through the commissioning of a combined cycle, low-BTU gas-fired plant with its own assured domestic gas supply. Lower generation cost due to reduced transportation costs because of the plant's proximity to the fuel source

SMETEF- Pakistan Export Finance Guarantee (PEFG)

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Project No. 34909-014 Loan No. 7166 Equity $ 2 million

ADB's investment in PEFGA was made to help in the overall development of Pakistan's export sector. PEFGA goal was to help cover pre-shipment performance risks and issue bankable collateral to SME exporters

Private sector expansion and institutional impact Contributes to new competition for SME businesses among local banks (including new product and service offerings, local currency products)

Contributes to an increased private sector share and role in the economy, and to sustainable jobs Contributes to expanded SME lending Contributes to institutional change by improving supply and access generally to formal credit and banking service to SMEs Contributes to the growth of viable financial institutions and financial market development

The project’s development impact is rated unsatisfactory; as are business success, contribution to economic development, and investment profitability Since starting its commercial operations, PEFGA was not able to meet its targets. It incurred losses annually. By mid-2004, it had accumulated losses of PRs20.6 million. In a bid to reverse PEFGA’s situation ADB commissioned and funded a diagnostic study. The study recommended that PEFGA secure government support since most export credit agencies (ECAs) are either government owned or have significant government support, given their developmental role in a nation’s economy. After several unsuccessful attempts to obtain government support, PEFGA’s board decided that the best option was to liquidate the company. All employees were terminated and a liquidator was hired to oversee the liquidation process and to resolve or settle outstanding legal cases.

JS Private Equity Fund

Project No. 40936-014 Loan No. 5257 Other $ 20 million

An important tool for Pakistan needs to help its businesses develop quickly and in a sustainable manner is private equity funding, as it is an essential ingredient for helping small- and medium-sized enterprises (SMEs) strengthen corporate governance, improve environmental and social standards, develop their business models to boost exports (thus strengthening the country’s balance of payments), and expand their operations to create jobs for people in the community (thus helping to reduce poverty).

Catalyze the development of private equity fund management in Pakistan Develop and increase the long-term finance for SMEs Introduce diversify in financial services Promote the adoption of good corporate governance, and good social risk management practices among Pakistani SMEs

Improved subproject economic performance Stronger local entrepreneurship Contribution to widening the access to finance of small- and medium-sized enterprises Provision of value-added services, enhancing the viability of small- and medium-sized enterprises Contribution to widening infrastructure companies' access to finance

JSPEF’s contributions to private sector development are rated less than satisfactory. While JSPEF was successful in raising commitments of $158 million (by final close in December 2007), It was not able to invest a meaningful amount of its total committed capital. This limited its overall development impact and contributions toward the development of local financial markets. There were also limited demonstration effects arising from any of the investments made by the JSPEF.

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Appendix 6 Sector-Wise Planned and Implemented Lending Program

2015 Plan Actual

% Change No Total No Total Water 4 315 3 250 -21% Education 0 0 0 0 -- Energy 3 385 3 815 112% Finance 0 0 0 0 -- Health 0 0 0 0 -- ICT 1 10 1 10 0% Public Sector 3 250 1 50 -80% Transport 6 670 6 927 38% Urban 2 40 0 0 -100% Total 19 1,670 14 2,052 23%

2016 Plan Actual

% Change No Total No Total Water 3 105 2 95 -10% Education 0 0 0 0 -- Energy 4 800 3 450 -44% Finance 0 10 0 200 1900% Health 0 0 0 0 -- ICT 1 0 0 0 -- Public Sector 2 200 2 400 100% Transport 6 657 4 317 -52% Urban 1 10 0 0 -100% Total 17 1,782 11 1,462 -18%

2017 Plan Actual

% Change No Total No Total Water 3 205 1 90 -56% Education 0 0 0 0 -- Energy 4 1,000 4 885 -12% Finance 0 0 0 0 -- Health 0 0 0 0 -- ICT 1 200 0 0 -100% Public Sector 2 400 2 400 0% Transport 7 1,070 3 682 -36% Urban 1 200 1 200 0% Total 18 3,075 11 2,257 -27%

2018 Plan Actual

% Change No Total No Total Water 4 440 4 414 -6% Education 1 150 1 75 -50% Energy 4 1,050 2 540 -49% Finance 1 60 -- Health 1 200 --

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ICT 0 0 -- Public Sector 2 500 2 500 0% Transport 4 874 4 1,055 21% Urban 2 18 1 9 -50% Total 19 3,292 14 2,593 -21%

2019 Plan Actual

% Change No Total No Total Water 3 450 Education 1 100 Energy 4 700 Finance 3 700 Health 1 60 ICT 1 200 Public Sector 1 300 Transport 4 730 Urban 2 158 Total 20 3,398

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