ICRR 13410 Report Number : ICRR13410 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 12/07/2010 PROJ ID : P090689 Appraisal Actual Project Name : NWFP First US$M ): Project Costs (US$M): 90 90 Development Policy Credit Country : Pakistan Loan/ US$M): Loan /Credit (US$M): 90 90 Sector Board : PO Cofinancing (US$M): US$M ): Sector (s): Central government administration (47%) General education sector (21%) Health (15%) General industry and trade sector (12%) Agricultural extension and research (5%) Theme (s): Public expenditure financial management and procurement (23% - P) Health system performance (22% - P) Education for all (22% - P) Administrative and civil service reform (22% - P) Other financial and private sector development (11% - S) L/C Number : C4177 Board Approval Date : 06/01/2006 Partners involved : Closing Date : 06/30/2007 06/30/2007 Evaluator : Panel Reviewer : Group Manager : Group : Michael R. Lav Robert J. Anderson Chad Leechor IEGCR 2. Project Objectives and Components: a. Objectives: This operation was to have been the first of three annual DPCs to support development in Pakistan's Northwest Frontier Province. The series was terminated following the second DPC because of a deterioration of security in the province. The Program Document (PD) for the First Development Policy Credit in the series presents, in Section VI, the project objectives as supporting the government's program . The broad program supported by DPC I and the agreed prior actions focussed on the following : (a) Accelerating economic growth by establishing an effective and transparent enabling environment for private sector development both n the urban and rural economy; (b) Fiscal reforms to ensure fiscal stability and create fiscal space , adopt and follow a medium-term budget framework, enhance effectiveness and accountability of expenditures, and strengthen resource mobilization; (c) Reforms to accelerate human development and improve service delivery in key sectors (especially basic social services ), focusing on access to and quality of services; and (d) Government reforms in public financial management, procurement, civil service and administration of multi -tiered government (provincial/district/tehsi). The Development Credit Agreement (DCA) only refers to the program agreement, and so the PAD (section IV D, page 28) is used as the basis for the objectives to be evaluated in this ICR Review . b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components (or Key Conditions in the case of DPLs, as appropriate): In accordance with guidelines and, consistent with the ICR, this ICR review focuses on the entire DPC series . The main objectives of the DPC series (DPC I, II, and III) included: 1. Accelerating Human Development through increased access to health and education . The DPC series aimed to improve access, coverage and utilization of human development services, improving the quality of services, and to do so pursue management reform and strengthened governance in the sector, including promoting public - private partnerships, increasing public investment, and developing a sound monitoring and evaluation system . More specifically, concerning health, the government program sought to increase the antenatal care of pregnant women by health professionals and also increase the percentage of births attended by health care professionals, fully immunize all children aged 12-23 months, and maintain complete coverage of the population with access to TB Daily Observation Therapy Sessions (DOTS). Concerning education, the government committed to the distribution of free textbooks to targeted students, enhance the status and role of Parent Teacher Associations, and to increase the ratio of girls to boys in primary and secondary education, as well as the transition rate from primary to middle school of both boys and girls. 2. Fiscal and Expenditure Reforms including improved controls, incentives, allocation patterns, tax collection . The DPC series aimed to contain the FY05/06 fiscal deficit at the prior year level, and contain establishment cost at 3.6 percent of Provincial Gross Development Product (PGDP). To improve revenue performance, the Government committed to introduce a system of bonus payments linked to revenue collection performance, and to open tax facilitation centers with support from the private sector for the collection of selected taxes . Government also sought to increase the share of the NWFP budget spent on development from 31 percent in 2005 to at least 33 percent (for 2008), and increase Provincial tax revenue from 8 percent of provincial production in mid 2004 to 18 percent by 2008. Finally, Government sought to increase the pro -poor PRSP expenditure from the baseline of 38 percent for 2004-2005. 3. Strengthen Governance through improved transparency, procurement reform, computerization of human resources data management, and clarified lines of authority . The Government agreed to publish the FY2005 NWFP provincial budget in a format based on the new chart of accounts, prepare a road map for procurement reform to better align it with international best practice, develop and put into operation a computerized human resources management database, and remove inconsistencies in the designation of the appointing authority for different levels of officers and staff of the departments which had been devolved to the districts . 4. Promote Economic Growth through Private Sector Development with a greater role for private sector initiatives and reduced role of the state. The DPC series sought to support Government in its efforts to increase Provincial GDP growth rate from 4 percent in 2002 to the target of 7 percent for 2008 and increase the number of industrial estates under private management (handed over from the government ) from zero (out of 15) in 2005 to 18 (out of 18) in 2008. To do so, the Government agreed to establish the Investment Faciliation Council and the Investment Facilitation Committee, include representatives of the private sector in the management committees and appoint private sector individuals as chairman of technical and vocational training institutes, restructure the Sarhad Development Authority to include an investment facilitation center and name it as the secretariat to the Investment Facilitation Council and Investment Faciliation Committee, and reduce NWFP's shareholding in the Bank of Khyber to 65 percent. d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: The project cost was US$90 million, financed by an IDA credit in that amount . The project was approved on June 1, 2006, disbursed upon effectiveness on June 14, 2007, and closed on schedule June 30, 2007. 3. Relevance of Objectives & Design: The program objectives were highly relevant . They built on reforms supported by SAC I and SAC II (previously extended by the Bank to the Northwest Frontier Province ). The objectives were fully reflected in the policy areas addressed by the DPC series : human development, fiscal and expenditure reforms, governance, and private sector development. The program was grounded in the full national PRSP of 2003 and the Provincial Reform Program (PRP) 2001-2004, as well as the NWFP government's Reform Program - Phase I (2001-2006). However, DPC II was narrower in focus than DPC I, in response to a change in Bank guidelines which sought to limit the number of prior actions to 10 or fewer. As a result, previously proposed reforms in urban management and the agriculture and water sectors were dropped. In terms of the substance of the reforms, the four broad objectives for the DPC series were relevant given NWFP's relatively low education and health standards, its tight fiscal position and need for increased development expenditures, the need to improve management of government operations and the use of its human resources, and lagging economic growth with a relatively weak private sector development all pointed to is considered highly relevant since private sector growth needs to be the primary source of improving output and incomes in the province. The program's relevance was improved by its focus on "right-sized" reforms which could be achieved, rather than more global reforms which would have been more politically difficult to achieve . Finally, in terms of the province's needs today, the program remains highly relevant . The program design was highly relevant . Its detailed specification of objectives reflected the limitations of the government and implementing agencies . This assisted government in pursuit of its program, as opposed to a more general specification which would not have provided government with the supporting structure it needed . 4. Achievement of Objectives (Efficacy): All fifteen of the prior conditions were fully implemented . While many factors affect provincial domestic growth, it's worth noting that growth did accelerate from 4 percent in 2002 to 6.6 percent in 2006 and at mid 2007 (when DPC 2 was approved by the Board), stood at 6.3 percent . The target growth rate was 7 percent for 2008. While provincial growth rate data are not available, the national GDP growth rate was revised to 2.2 percent due to the poor economic situation, so the growth rate target for NWFP is very unlikely to have been met . The proportion of the NWFP budget spent on development increased from 31 percent in 2005 to 39 percent in 2009, thereby exceeding the target of 33 percent (which was for 2008). 1. Accelerating Human Development - Substantial Achievement. The DPC series focussed on specific improvements seen as key to the achievement of the Government's program to accelerate human development, and the detailed specification was instrumental in the success of the government program . Concerning education, one important indicator of overall success was the increase in the gross primary school enrollment ratio from 77 percent in 2002 to 83 percent in by the end of DPC I 2007, and 85 percent by the end of DPC 2, which achieved the target. Other indicators of success included the increase in the gross middle school enrollment ratio from 38 percent in 2002 to 52 percent in 2008, the increase in the ratio of girls to boys in primary and secondary education from the baseline for 2005 of 47 girls to 100 boys to, by end 2008, 60 girls to 100 boys, and the transition rate from primary to middle school for boys and girls from the baseline of 75 percent for boys and 67 percent for girls as of 2005 to, for 2007-8 of 80 percent for boys and 74 percent for girls, respectively . These achievements all met or surpassed targets . Concerning health, the antenatal coverage of pregnant women by health professionals increased from 34 percent in 2002 to 48 percent in 2008, the immunization rate for children increased from 54 percent in 2002 to 74 percent in 2008, and the percentage of the population with access to TB Daily Observation Therapy Sessions (DOTS) dropped slightly from 100 percent to 99 percent for 2007 (latest data available). Although the ambitious immunization target of 100 percent was not met, the other targets were met . 2. Fiscal and Expenditure Reforms - Substantial Achievement. The DPC series effectively supported government efforts to contain the deficit, improve expenditure patterns and tax collection, again, through a detailed specification of targets agreed to by the government . Thus, the Government contained FY 05/06 fiscal deficit to within 0.8 percent of PGDP, maintained the throw-forward ratio of development projects at or below the FY 2004-2005 level of 3.9 years, and contained establishment cost with 3.6 percent of PGDP. It introduced a system of bonus payments linked to revenue collection performance, and opened tax facilitation centers with support from the private sector for the collection of selected taxes . Finally, the share of the NWFP budget spent on development increase from 31 percent in 2005 to 39 percent in 2009, thereby exceeding the target of 33 percent (for 2008). 3. Strengthen Governance - Substantial Achievement. The DPC supported improved Government's business practices which included publication of the FY 2005 NWFP provincial budget in a format based on the new chart of accounts, developing and putting into operation a computerized human resources management database, and, importantly, removal of inconsistencies in the designation of the appointing authority for different levels of officers and staff of the departments which had been devolved to the districts . 4. Promote Economic Growth through Private Sector Development - Substantial Achievement. The DPC program specified key reforms which assisted in promoting growth, as indicated by the increase in the real provincial growth rate from 4 percent in 2002 to 6.6 percent in 2006, the latest year for which data were available . Key reforms in this program were an increase in the number of industrial estates under private management (handed over from the government) from zero (out of 15) in 2005 to 18 (out of 18) in 2007, the establishment of an Investment Facilitation Council and the Investment Facilitation Committee, and, to better focus programs of technical and vocational training institutes, including representatives of the private sector in their management committees . Finally, the Sarhad Development Authority was restructured to include an investment facilitation center and it became the secretariat to the Investment Facilitation Council and Investment Faciliation Committee . As a result of this restructuring it created management committees for industrial estates consisting of, and led by, private sector representatives . 5. Efficiency (not applicable to DPLs): ERR )/Financial Rate of Return (FRR) a. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal % % ICR estimate % % * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: The operation was highly relevant at appraisal and throughout the project's life . Operating through difficult political and security circumstances, the project achievements against targets appear to have been substantial . Because of restricted travel by Bank staff due to security concerns, the outcome of this project has a greater degree uncertainty than other Bank projects. For example, the number of displaced persons has, from time to time, been quite large and these kinds of dislocations may, unfortunately, pose risks in the future . While it was not possible to provide the full array of data normally provided in an ICR, this ICR makes thoughtful use of auxiliary data to buttress the analysis . Taken at face value, the data provided in the ICR point to substantial achievement of objectives, which, given the project's relevance, indicate an outcome rating of satisfactory . This satisfactory outcome rating is in contrast with the Moderately Unsatisfactory outcome rating assigned to the overall Bank assistance program to Pakistan in IEG's CASCR Review for FY 06-09, even though a number of areas addressed in that program overlap with the objectives covered by the DPC series for the NWFP . This difference in ratings occurs because the objectives of this DPC series in these overlapping areas were much more modest than those for overall assistance program for Pakistan, and directed to the specific needs of the NWFP in areas under the purview of the provincial government, though they were still relevant because of the NWFP's stage of development . a. Outcome Rating : Satisfactory 7. Rationale for Risk to Development Outcome Rating: The DPC sought to improve a number of institutions and the setting in which they operated, for example, by enhancing private sector participation in PTAs and in training and vocational institutes . It supported strengthened governance with key reforms. As noted in the ICR, the program has engendered more positive attitudes towards health and education which should bode well for both the sustainability of those reforms which have been implemented as well as the introduction of further reforms in the future . Nevertheless, there is high risk to the development outcome rating, simply because of the security situation in the Northwest Frontier Province, the difficulty of travel by Bank staff and other technical experts to the region, and the demands on the provincial government and the population which may be imposed from time to time by security considerations . The lack of some performance indicators only highlights this risk . a. Risk to Development Outcome Rating : High 8. Assessment of Bank Performance: The Bank formulated DPC I and II with due consideration for the experience gained during SAC I and II . Quality at entry appears to have been satisfactory, as was, under the circumstances, Bank supervision . The breadth and depth of performance indicators as proposed is an indication of good quality at entry, even if events that subsequently unfolded limited the extent in some cases to which these could actually be tracked . at-Entry :Satisfactory a. Ensuring Quality -at- b. Quality of Supervision :Satisfactory c. Overall Bank Performance :Satisfactory 9. Assessment of Borrower Performance: The Government implemented almost all of the program as it agreed, and the promised reforms were sustained through the program and afterwards . This, despite difficult circumstances regarding security . Given this adherence to the program, Government performance is rated Satisfactory . a. Government Performance :Satisfactory b. Implementing Agency Performance :Satisfactory c. Overall Borrower Performance :Satisfactory 10. M&E Design, Implementation, & Utilization: M&E design was of high quality, with attention paid to a large number of baseline indicators (although a few such as the lack of a poverty head count and pro -poor PRSP expenditures are concerning ), and good efforts by the government to keep track of these indicators . Utilization through project implementation appears to have remained high. a. M&E Quality Rating : High 11. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): There were no safeguard or fiduciary issues raised by this project, nor were there unintended positive or negative impacts. 12. Ratings : 12. ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Moderate High see section 7. Outcome : Bank Performance : Satisfactory Satisfactory Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate . 13. Lessons: The ICR contains an important lesson : Consideration should be given to allowing more than 10 prior conditions for DPCs. For example, if it is known that supervision will be difficult (due to, for example, security concerns ), both the Borrower and the Bank may see benefits in shifting some part of what would in other circumstances be implementation to prior conditions. The ICR also suggests that a large number of secondary conditions may be where circumstances suggest that implementation may be difficult. However, IEG recommends that in cases where government capacity suggests that implementation may be challenging, it may be useful to specify the proposed program and reforms in greater detail, including the monitoring and evaluation framework . However, care should be taken not to impose a large number of conditions. In addition, this review notes the synergy in having multi -sector reforms encompassed in one operation rather than distributed among several sector operations, especially with a government which has limited capacity . 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: Because the DPC series was interrupted after the second operation, 24 months was allowed for completion of the ICR. IEG recognizes that this was a difficult ICR to draft given the prohibition on travel to the project area, the lack of meetings with beneficiaries and government functionaries, other donors in local conditions, and so on . In these circumstances, the ICR does a credible job in putting together a coherent picture of the operation, gleaning supporting data to firm up the picture given by key performance indicators, and explaining the political as well as the economic environment in presenting the project's achievements . It therefore merits a rating of satisfactory . a.Quality of ICR Rating : Satisfactory