88075 Gilgit-Baltistan Consultations Report World Bank Group (WBG) Country Partnership Strategy (CPS) 2015-19 January 2014 Table of Contents A. Introduction / Background .................................................................................................................... 2 B. WBG Presentation: CPS 2015 Roadmap and Emerging Priorities......................................................... 3 C. Key Discussion Points and Feedback Received ..................................................................................... 4 C-I: Meeting with the Chief Secretary and Team ...................................................................................... 4 D. Follow up / Next Steps .......................................................................................................................... 6 Attachment: List of Persons Met 1 Gilgit Baltistan Consultations Islamabad, September 2013 – January 2014 World Bank Group (WBG) Country Partnership Strategy (CPS) 2015-19 A. INTRODUCTION / BACKGROUND 1. The CPS consultation meetings with the Government of GB were held during the months of September 2013{as part of the technical session co-chaired by the Economic Affairs Division (EAD)} and January 2014 chaired by the Chief Secretary in Gilgit-Baltistan House, Islamabad. The objective was to exchange views on the challenges and development priorities for the region that WBG could support under its new five-year strategy. Please see Annex I for list of participants in the consultations sessions. 2. Based on the feedback received at the meetings, key priorities for GB are emerging as: i. Economic integration; Connectivity and trade, regional linkages. ii. Hydropower development iii. Tourism promotion iv. Minerals development v. Education, health and nutrition vi. Private Sector Investment 3. Consultation sessions on GB were part of the process of engagement to identify priorities for WBG support for the new five-year country strategy for Pakistan. Several meetings have taken place to date, including strategic level discussions with the Prime Minister, Federal Ministers of Finance, Planning and Development, and Water and Power; meeting with the Economic Team including the Governor State Bank, as well as the Chief Ministers of the four provinces. For the federal government, AJK and GB counterparts, a technical level session was co-chaired by the Economic Affairs Division (EAD) where representatives from key ministries were invited. In addition, separate sessions were also held with representatives from the Government of AJK and GB respectively. For the provinces, meetings were held at the provincial capitals of Sindh, Punjab, Balochistan and KP with the provincial administration under the leadership of Chief Secretaries or Additional Chief Secretaries. A separate session was also organized with the FATA Secretariat in Peshawar. 4. In addition to the federal, provincial, and regional governments, the WBG has also reached out to a range of other stakeholders including parliamentarians and political leaders, academia, think tanks, media, civil society, youth groups and the private sector. Findings and outcome of these discussion sessions are being documented for record and shared with the participants. 5. As explained during the consultations process, while an effort will be made to take various views on board, some level of prioritization and trade-offs would have to be made as WBG would not be able to respond to all demands with its limited resources. We would need to exercise selectivity to seek visible impact and results. One important element of the WBG strategy would be to leverage the strengths of the private sector and other development partners to support the key priorities in Pakistan. The three institutions of the World Bank Group will work together to bring value to the clients in Pakistan. The WBG includes International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Multilateral Investment Guarantee Agency (MIGA). The IDA and IBRD work with the governments and provide concessional credits, grants, loans and knowledge support(analytical work and non-lending technical assistance). IFC 2 provides advice and commercial loans to the private sector, while MIGA provides political risk insurance guarantees for private investment in the country. B. WBG PRESENTATION: CPS 2015 ROADMAP AND EMERGING PRIORITIES 6. The WBG presentation focused on the process of CPS development, timeline and the emerging diagnostic of challenges and opportunities for Pakistan. Key areas of reforms priorities for the country, as highlighted during various consultations, were also shared. 7. The CPS preparation process includes two rounds of consultations with the federal and provincial governments and other stakeholders – the first one from July 2013 – January2014is for priority setting and the follow–up in February 2014 to validate the draft strategy. After EAD’s review of the final draft, the CPS would be presented to the WBG Board of Executive Directors in June 2014 and the implementation period of the CPS would start from July 1st, 2014. The implementation plan includes regular performance/portfolio reviews, an annual exercise of results assessment and learning reviews; a mid-term progress report (half-way into implementation), and a full program evaluation at the end of the CPS implementation period. This process allows for flexibility to review performance and results on an ongoing basis and make adjustments as necessary. 8. The priority setting process for the Country Partnership Strategy starts with preparing a Systematic Country Diagnostic (SCD), an assessment of challenges and opportunities, and disseminating it early in the process of consultations. Based on the emerging themes or priorities, the areas of focus are identified and are clearly linked with the outcomes. The implementation plan is prepared separately providing details of interventions and programs to achieve the intended outcomes. 9. The initial diagnostic suggests that there are both challenges and opportunities for Pakistan that together with the key global trends, are influencing and shaping up the development landscape of the country. And if addressed in a systematic way, it can unlock the great potential for economic revival and growth and can create a path to growth and poverty reduction that is inclusive, equitable and sustainable in terms of employment generation, livelihoods and human opportunity for all. 10. Looking at the key global trends, one finds that the Official Donor Assistance is shrinking and more and more, these limited resources are being used to crowd-in private capital. Technology and innovation are driving development solutions and interconnectivity, e.g. increasing use of smart phones for monitoring and transparency, BISP smart cards based payment system in Pakistan. Besides, citizen’s active engagement in development process is increasing, and climate change is driving development agendas in a major way. 11. Given this global context, Pakistan’s economic growth and development is challenged by scarcity of financial resource and heavy dependence on external financing, slow progress on MDGs, rapidly increasing population and growing urbanization vis-à-vis limited resources and infrastructure, manifesting itself to an extent in the energy crisis and water scarcity that we witness today. Recurring natural disasters and deteriorating law and order and security environment are also holding back development in Pakistan. On the positive side, the recent democratic political transition, a geographic location with potential regional linkages, natural resource base, the ongoing devolution process, and the increasing working-age young and female population, are some key opportunities for Pakistan that can contribute to the economic revival and growth in the country. It is important to recognize, however, that this cannot be done by the government and donors alone; private sector needs to be a partner in this process. And to facilitate private sector participation, improving investment climate and business environment remains the key. 3 12. In terms of key priorities for Pakistan, we have heard that job creation and employment generation remains an important goal for the country. There are several important ingredients to a successful job strategy but a central one is that it has to be private sector led for which conducive investment conditions are necessary. Another critical element is the human resource development. Pakistan would need an educated, skilled and healthy workforce for creating more and productive jobs and sustaining higher growth. 13. The Planning Minister, in the five-year plan for Pakistan, is focusing on indigenous / homegrown drivers for jobs and growth to minimize dependence on external factors. The initial set of priorities include raising own revenues for investments, improving investment climate for private sector, value chains for industry and agriculture products, and improving regional linkages for trade. The energy security, infrastructure upgrade, and building social capital remain key support areas for this agenda. 14. While human development is a central pillar of any job strategy, we have heard that on its own it remains a key priority and the government’s focus on infrastructure should not be at the expense of human development. This calls for continued investments in education and skills, health and nutrition, income support and microfinance. 15. The third theme that has come out as priority is that of governance and anti-corruption reforms. There is an increasing recognition that support to devolution / local governments, addressing weaknesses in the public service delivery mechanisms, and promoting transparency would be required for sustaining any development gains in Pakistan. C. KEY DISCUSSION POINTS AND FEEDBACK RECEIVED 16. The discussion at the consultation sessions was focused around the following five questions to the participants. Session-wise summary of feedback is provided below: i. Do you share similar diagnosis of the challenges, opportunities & priorities for Pakistan and GB? ii. What should be the top three reform priorities for WBG to support? In order to be selective, what should the Bank do more of and less of? iii. What could be some of the success indicators/ Results? e.g. number of jobs created, level of resources mobilized etc.? iv. What are the risks we need to mitigate in the strategy? v. How can we improve implementation? C-I: Meeting with the Chief Secretary and Senior Officials of GoGB 17. A consultation session with government representatives from Gilgit-Baltistan (GB) was held on January 7, 2014 at the GB House in Islamabad. The session was chaired by Chief Secretary Gilgit- Baltistan, Mr.Younus Dagha. The key areas highlighted for potential investment in GB included energy, transport and communication, education, health and nutrition, tourism, and the minerals sector. 18. The participants appreciated the WBG presentation on the CPS and said the issues highlighted were relevant to Pakistan’s context. The presentation made by the Chief Secretary and Senior Officials of the Gilgit- Baltistan shared similar challenges, opportunities priorities for the region. In particular, the immense hydropower potential in GB was discussed. The geo-strategic location of GB was also discussed with regards to potential connectivity and trade with China and Central Asia. The Prime- Minister’s Economic Corridor initiative will build on this potential and it includes plans to have Special 4 Economic Zones (SEZs) as well. GB government is focusing on improving transport and communication links to further this potential and is working on an alternative route to Karakorum Highway (KKH) to strengthen the connectivity. 19. In terms of constraints, the GB government highlighted lack of entrepreneurship and private sector investment in the region. The economy is heavily dependent on federal grants since local revenue generation is very low. Nurturing entrepreneurship is considered essential to help small businesses grow and create economic opportunities. Quality of education and health services are other major constraints. 20. Investment to unlock the immense hydropower potential in Gilgit Baltistan was highlighted as the most important priority. According to a survey quoted by the Chief Secretary, GB has the potential of about 40,000 MW from 220 sites identified in the region. However, the lack of connectivity to the national grid is proving to be the biggest hurdle, and a major bottleneck for attracting private sector investment. Private investment and support from federal government could help realize the potential and the power generated in GB can help solve the national energy crises. It was also said that the national grid connectivity needs to come before the construction of big dams for the region to be able to attract private sector investment. At the same time, improving access to the hydro sites is also an important element of the strategy. 21. For meeting GB’s internal energy needs, government is investing its own resources and building a regional grid to connect various power stations. Without this regional grid, load sharing is not taking place and the energy deficit areas are suffering from shortages. Also, with no access to natural gas, there is heavy reliance on wood due to which deforestation is taking place at a fast pace. Figures suggest that almost 60% of energy requirements in GB are fulfilled through wood. The priority is to provide alternative means of energy to address this issue to avoid adverse environmental impact. 22. The quality of education in GB was highlighted as a major constraint. There are distinct local needs in various districts; while Hunza has 90% female literacy, it is hardly 5% in Diamer. Health and nutrition indicators in GB are some of the worst in the country. The provision of quality education and healthcare services is especially difficult owing to the dispersed population living in isolated villages. It is also difficult to retain trained professionals and sustainability of public facilities remains a concern. Quality and reliability of data / figures is an issue and credible baselines are not available. 23. Tourism is a major opportunity in GB with potential profits higher than any other sector. Despite security concerns and limited tourism facilities, foreign tourists continue to visit GB for mountaineering. The major constraints are unreliable access and connectivity, lack of landing facility, limited hotel capacity, and limited private sector investment. Despite the 18th amendment whereby provinces are allowed to manage tourism, for GB the subject still remains with the federal government and looked after by the PTDC (Pakistan Tourism Development Corporation). 24. GB is rich in mineral resources including gemstones, metallic minerals and dimension stones/industrial rocks. However a geological survey has not been carried out due to lack of trained geologists. Unscientific methods of mining give rise to both environmental and safety concerns and also result in a loss of revenue. Undertaking a geological survey to confirm potential, developing a marketing mechanism for the minerals, and training of primarily small-scale cottage miners were identified as priorities. 25. Positioning GB for attracting private investment is essential for region’s development, particularly in energy, tourism and minerals development. WBG (particularly IFC) was asked to provide support and technical assistance in developing business and investment opportunities and facilitating partnerships with the private sector. Connectivity is essential for the private sector to operate and would 5 be a key element of government strategy for attracting investments. The GB economic report prepared with the support of the WBG provides a good start for this engagement. D. FOLLOW UP / NEXT STEPS 26. The WBG team thanked the participants for their active participation, contributions and sharing views on the challenges and priorities for GB. As mentioned before, the WBG has limited resources and may not be able to respond to all demands. We would however share the inputs at various forums and try to facilitate and leverage support for GB development priorities to the extent possible. 27. Next steps: the consultations report documenting the discussions being shared with everyone. Second round of consultations would take place in February 2014 and first draft of the WBG CPS document will be shared for validation and comments. The CPS will be finalized and presented to the WBG Board of Executive Directors in June 2014. CPS implementation will start from July 1, 2014. During implementation, effort will be made to share widely progress and results on a regular basis. Please follow us on Facebook (www.facebook.com/WorldBankPakistan) or the webpage (www.worldbank.org.pk) for providing feedback and regular updates/information on Pakistan Country Strategy and Program. We can also be reached at the following address: The World Bank 20-A Shahrah-e-Jamhuriat G-5/1, Islamabad Phone: (+92-51) 227-9641-6 Fax: (+92-51) 227-9648-9 E: mariamaltaf@worldbank.org E: islamabadoffice@worldbank.org Attachment: List of Persons Met 6 CPS Consultations with Government of Gilgit Baltistan Jan 7, 2014 S No Name Designation / Party 1. Mr. Mohammad Yunus Chief Secretary Dagha, 2. Mr. Ghulam Mehdi Secretary Water and Power 3. Mr. Akhtar Hussain Secretary Tourism 4. Mr. Nazeer Chief, Planning and Development Department 5. Mr. Anwar Ali Director, Minerals. 6. Mr. Haroon Arshad Economic Affairs Division 7. Saleh Muzaffar Economic Affairs Division 8. Ms. Uzma Basim Senior Operations officer, WB 9. Mr. Rachid Benmessaoud Country Director, WB 10. Ms. Shabana Khawar Senior Operations Officer, IFC 11. Ms. Sana Shahid Operations Analyst, WB 12. Ms. Huma Zafar Consultant, WB