Document o f The World Bank Report No: T7664-PK TECHNICAL ANNEX FOR A PROPOSED CREDIT INTHE AMOUNT OF SDR281.8 MILLION (US$400 MILLIONEQUIVALENT) TO THE ISLAMIC REPUBLIC OF PAKISTAN FORAN EARTHQUAKE EMERGENCY RECOVERY CREDIT December 5,2005 Energy and Infrastructure Unit South Asia RegionalOffice This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS Currency Unit = Pakistan Rupees (PKR) PKR 59.7 = US$1(November 2005) FISCALYEAR:July 1-June 30 ABBREVIATIONSAND ACRONYMS ADB Asian Development Bank LIB Limited InternationalBidding ADP Annual Development Plans M&E Monitoring and Evaluation AGP Auditor General o f Pakistan MIS Management Information System AJK Azad Jammu and Kashmir MOH Ministry o f Health ARI Acute Respiratory Infection NADRA NationalDatabase and Registration Authority BHUs Basic Health Units NCB National Competitive Bidding C&W Communication and Works NGOs Non-Governmental Organizations CAU Construction Advisory Unit NHA NationalHighway Authority CCB Citizen Community Board NWFP North West Frontier Province CFAA Country Financial Accountability Assessment PEC Pakistan Engineering Council CMU Concrete Masonry Unit PHC Primary Health Care CQS Consultant's Qualification Selection PHED Public Health Engineering Department CSIA Continuous Social Impact Assessment PIFRA Project to Improve Financial Reporting and DADA District Area Development Agency Auditing DE0 District Education Officers PIHS Pakistan Integrated Household Survey DFID Department for InternationalDevelopment PMU Project Management Unit DOE Department o f Education POS Partner Organizations DRUs District Reconstruction Units PPAF Pakistan Poverty Alleviation Fund ECOP Environmental Codes o f Practices PPRA Public Procurement Regulatory Authority EIAs Environmental Impact Assessments PWD Public Works Department EMG Emergency Management Group QBS Quality Based Selection EPA Environmental Protection Agency QCBS Quality and Cost Based Selection ERC EmergencyRecovery Credit RA Reconstruction Agency ERP Earthquake Recovery Program RCC Reinforced Cement Concrete ERRA Earthquake Reconstruction and Rehabilitation RFPS Request for Proposals Authority R P S Resettlement Plans ESSAF Environmental and Social Screening SA Social Assessment and Assessment Framework SIA Social Impact Assessment FBS Fixed Budget SMEDA Small and Medium Enterprise Dev. Authority FHA Frontier Highway Authority sss Single Source Selection FMRs FinancialMonitoring Reports TMA TehsilMunicipal Administration GDP Gross Domestic Product UN UnitedNations GOP Government o f Pakistan UNDAC UnitedNations Disaster Assessment and IBRD InternationalBank for Reconstruction and Coordination Development UNDP UnitedNations Development Programme ICB InternationalCompetitive Bidding UNESCO UnitedNations Education, Scientific and IDA InternationalDevelopment Association Cultural Organization JBIC Japan Bank for International Cooperation UNFPA UnitedNations PopulationFund JICA Japan InternationalCooperation Agency UNICEF UnitedNation Children's Fund LGRDD Local Government and Rural Development USAID UnitedStates Agency for International Deptartment Development LCS Least Cost Selection WAPDA Water and Power Development Authority LHW Lady Health Workers WFP World Food Programme Vice President : Prafkl Pate1 CountryDirector/Program Coordinator : JohnW. WallRobert L.Floyd Sector Director/Sector Manager : Yusupha B. Crookes/ Sonia H a m m a m Task Team LeaderlAnchor : ChristophPuschandRaja RehanArshadThomas Buckley This emergency project was prepared inparallel with a Preliminary Damage and Needs Assessment which was carried outjointly with the Asian Development Bank (ADB). TABLE OF CONTENTS PartI. Background..................................................................................................... 1 Part I1. Donor ResponseandAssistance...................................................................... 2 Part I11. WorldBankResponseStrategy....................................................................... 3 Part IV. Project Objectives ........................................................................................... 4 PartV. ProjectDescriptionandComponents.............................................................. 4 Part VI. SafeguardandFiduciaryPolicies.................................................................. 10 Part VI1. DisbursementConditions andOther covenants ............................................ 11 APPENDICES Appendix I: Housing......................................................................................................... 12 Appendix 11: LivelihoodSupport........................................................................................ 21 Appendix 111: ImportFinancing........................................................................................... 29 Appendix IV: CapacityBuilding.......................................................................................... 38 Appendix V: Social Protection........................................................................................... 42 Appendix VI: Health............................................................................................................ 44 Appendix VII: Education....................................................................................................... 49 Appendix VIII: Roads,Water Supply, andInfrastructure ...................................................... 53 Appendix E: Agriculture.................................................................................................... 57 Appendix X: Environmentaland Social ScreeningandAssessmentFramework.,.............63 Appendix XI: Procurement .................................................................................................. 69 Appendix XII: FinancialManagement andDisbursement.................................................... 75 Appendix XIII: StatementofLoans andCredits..................................................................... 85 Appendix XIV: Pakistanat a Glance...................................................................................... 86 Appendix XV: Map................................................................................................................ 88 FOROFFIcI[AEUSEONLY This document has a restricted distribution and may be usedby recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization. TECHNICAL ANNJZX FORTHE PROPOSED EARTHQUAKEEMERGENCYRECOVERYCREDIT TO THE ISLAMIC REPUBLICOFPAKISTAN PARTI.BACKGROUND 1. Overview. On October 8, 2005, at 850 PST, a magnitude 7.6 earthquake occurred in Pakistan, Afghanistan and India. The earthquake epicenter was located 100 lulometers north-northeast o f Islamabad, along a fault associated with the Indian subcontinent moving northward at a rate o f about 40 mdyr and colliding with the Eurasian continent. Tremors were felt across a wide swath o f South Asia, fi-om central Afghanistan to western Bangladesh. More than 1,000 aftershocks were recorded in the India-Pakistan Kashmir region, ranging fi-om magnitude 5.0 to 6.0. 2. The 2005 earthquake i s arguably the most debilitating natural disaster in Palustan's history. Pakistan-administered Kashmir, lmown as Azad Jammu and Kashmir' (AJK), and the eastern Districts o f the North West Frontier Province (NWFP) bore the full force o f the earthquake in terms o f number o f lives lost, injuries sustained, and destruction o f infrastructure and economic assets. In at least three Districts in AJK and five in NWFP, public and private housing, social service delivery, governance structures, commerce and communications have been either damaged or destroyed. 3. The overall loss of public and private assets (direct damage at book value) in the eight most affected districts i s estimated at Rs. 135.2 billion (US$2.3 billion), and the resulting loss in income (indirect loss) i s estimated at Rs. 34.2 billion (US$576 million). The level o f direct damage i s higher in AJK than in NWFP; for AJK, it amounts to Rs. 76.4 billion (US$1.3 billion) and for NWFP, Rs. 56.4 billion. Private housing, with damage calculated at Rs. 61.2 billion (US$1.03 billion), suffered the most extensive damage, followed by the transport, education, and agriculture and livestock sectors. The impact o f the earthquake on Pakistan's official GDP (which excludes GDP from AJK) i s expected to be relatively small, on the order of 0.4 percent. The fiscal deficit o f the Government o f Pakistan (GOP), however, will be more severely affected. Inthe absence o fany offsetting revenue increases and expenditure reductions, fiscal deficits duringFY06-OX could increase by as much as 0.6 to one percent o f GDP per year. 4. According to Government o f Pakistan figures, as o f November 3, approximately 73,000 people had died and more than 70,000 hadbeen severely injured or disabled. Over 2.8 millionpersons have been left without shelter, and it i s estimated that about 2.3 million persons are without adequate food. The earthquake destroyed about 203,600 units o f housing and damaged another 197,000. O f the total housing stock, 84 percent was damaged or destroyed inAJK and 36 percent was damaged or destroyed inNWFP. Terrain in affected areas o f both NWFP and AJK i s highly diversified and includes densely populated as well as rugged mountainous areas comprised o f small scattered rural settlements. Official estimates o f death and damage therefore remain conservative as more isolated communities inthe earthquake affected region remain inaccessible, which foreshadows an increase inofficial figures as these areas are reached. 5. Inaddition to the enormous humantoll, the earthquake and its aftermathwill pose a large cost to Palustan. The overall cost associated with the earthquake i s estimated at approximately USS5.2 billion, which includes estimated costs for relief, livelihood support for victims, and reconstruction. The cost o f reconstruction o f lost assets and restoration o f services i s estimated to be Rs. 208.1 billion (US$3.5 'h a d Jammu and Kashnir (AX) i s the Pakistan-administered portion of an area over which India and Pakistan have been in dispute since 1947. Inproviding this fmancing IDA does not intend to make any judgment as to the legal or other status o f any disputedterritories or to prejudice the final determination o fthe parties' claims. billion). A substantial portion o f this total relates to housing reconstruction, which will cost an estimated Rs. 92 billion (US$1.6 billion). 6. Vulnerable groups, living in inaccessible mountain areas with lower levels o f income and service provision as compared to the national average, have borne the brunt o f the earthquake's impact. Women and children made up a large share o f the victims, as many women were caught in houses when the earthquake struck, and the collapse o f school buildings resulted in the deaths o f many children. Due to difficulties inaccess, many victims were not rescued or treated intime, and succumbed to their injuries. A large number o f injured victims will be permanently disabled due to spinal cord injuries, severe head injuries and injuries to limbs, resulting in a highproportion o f amputations. As i s typically the case with natural disasters, the poorest and most vulnerable victims--especially unattended children, the disabled, and the socially marginalized such as lone elderly or single parents-will need external support to recover. They are now struggling to rebuild their lives after losing not only family members and loved ones, but also their homes, assets, and livelihoods. The high death toll and the sheer magnitude o f devastation inaffected areas have all considerably traumatized those who were affected. PART n.DONORRESPONSEANDASSISTANCE 7. When the GOP requested international assistance, the international community was quick to respond and assistance started arriving within days o f the earthquake. The World Bank announced a package o f financing o f US$475 million within weeks o f the earthquake. The United Nations immediately deployed its Disaster Assessment and Coordination ( W A C ) Team to provide technical assistance to assess the scale o f the disaster and help manage the international response. The United Nations Development Programme (UNDP) i s helping coordinate relief efforts at both national and local levels. Other UN specialized agencies such as United Nations Children's Fund (UNICEF), the World Food Programme (WFP), and the United Nations Population Fund (UNFPA) have also provided emergency relief assistance. 8. The UN launched a flash appeal of USS550 million for immediate relief assistance to Pakistan. The Secretary-General o f the United Nations hosted a Ministerial-level international donor conference in Geneva, on October 26, 2005 to seek support for the short term relief assistance requirements. On November 19, 2005, more than eighty-five delegations, representing multilateral, governmental and international non-governmental organizations, convened in Islamabad to pledge financial and in-kind support to the Government o f Pakistan's reconstruction and rehabilitation program. The Secretary- General o f the United Nations participated in the conference and reinforced the global initiative to mobilize and boostresources for the medium to longer term reconstructionandrehabilitationprogram. 9. The Islamabad conference provided delegates with an opportunity to review and discuss the joint Asian Development Bank and World Bank Preliminary Damage and Needs Assessment as well as the Government's strategy o f `Building Back Better,' an effort to improve upon pre-existing systems and institutions. At the close o f the one day conference, the Government o f Pakistan had secured US$5.9 billion in pledges, ranging from US$300,000 to US$1 billion. Of the total amount pledged, approximately US$2 billion was ingrant support while US$ 3.9 billion was inthe form o f concessional or soft loans. 10. The pledged assistance spanned a broad range o f sectors. Larger donors such as the Asian Development Bank, World Bank, International Monetary Fund, Islamic Development Bank, Japan, Saudi Arabia, and U S A pledged support to the social sectors, infrastructure, communications, agriculture and livelihoods. Other major contributors including China, Iran, Turkey, EU, UK, France, UAE,Kuwait and Germany pledged support to areas as diverse as education, health, housing, agriculture, private sector development, livelihoods, communications and infrastructure. Major donors have also assured assistance for the most vulnerable groups, including women, children and persons disabled by the earthquake, and 2 efforts to improve the capacity o f institutions charged with championing and implementing the reconstructionand rehabilitation agenda. PART III.WORLDBANKRESPONSE STRATEGY 11. At the request o fthe GOP, a mission ledby the Asian Development Bank (ADB) and the World Bank conducted a preliminary damage and needs assessmenta2 The objective o f this joint mission- which took place from October 24 -November 12,2005-was to estimate the damage and reconstruction costs o f the earthquake, in cooperation with the two agencies and in coordination with the Government, development partners, civil society, and other stakeholders. Inparallel, the team was asked to assess the emerging needs of the affected communities to be reflected in the medium to longer term reconstruction and recovery phases following the initial relief efforts. Thus the assessment aimed to provide decision- makers and stakeholders with a quantitative basis on which to design a comprehensive reconstruction strategy and to request assistance. The assessment process was also coordinated with the agencies o f the UnitedNations (UN),international organizations, andbi-lateral donor organizations. 12. The Bank i s playing a key role in helping the Government o f Pakistan deal with the immediate consequences o f the disaster and inassisting inlonger term reconstructionand rehabilitation efforts while helping to safeguard implementation o f the ongoing poverty reductionprogram. The Bank has pledged to provide financing commensurate with need in the context o f the results o f the Damage and Needs Assessment and in coordination with the efforts o f other development partners. The Bank has already approved an initial response o f US$475 million, consisting o f US$440 million o f additional financing for ongoing operations and US$35 million o f reallocation o f funds within existing projects3. Of this amount, US$200 million was provided as budget support to help meet immediate financing needs. The additional financing and restructuring will support restoration o f vital economic and social infrastructure, including roads, highways, health and education facilities, village level infrastructure, water and sanitation, and housing. 13. To further support the emergency recovery and reconstruction effort, IDA proposes to make available US$400 million through an Emergency Recovery Credit (ERC) for support over a three year period. The Government o f Pakistan's program o f earthquake-related reconstruction i s by definition multi-sectoral and includes, among others, housing reconstruction, livelihood support, import financing, and capacity building. As detailed below, IDA would provide support to activities in these areas, in addition to making funds available for any financing gaps identified in other sectors, including social protection, health, education, agriculture, and roads, water supply and other infrastructure. 14. Mitigation and Preparedness for Future Natural Hazards. The ERC focuses on Pakistan's urgent recovery needs after the earthquake. By building local capacities through its decentralized implementation strategy and technical assistance components, and by improving the technical standards for housing, it will improve the preparedness and reduce the vulnerability o f communities inPakistan to future natural disasters, such as earthquakes. Given its social and economic vulnerability to natural disasters, it i s essential that Pakistan strengthen its approach to hazard risk management. Inaddition, the capacity building component supports Pakistan's efforts to develop a strategic approach to hazard risk management based on five key pillars: risk identification, risk reduction, capacity building, emergency preparedness, and risk transfer mechanisms, to achieve a sustainable recovery program and build in- country capacity for hazard riskmanagement. Pakistan 2005 Earthquake: Preliminary Damage and Needs Assessment, IDMSecM2005-0588, November 18, 2005. Pakistan: WorldBank's Response to the Earthquake Emergency (SecM2005-0533[IDASecM2005-0517]), October 19,2005 andPakistan: Earthquake Restructuring and Additional Financing, R2005-0242,November21, 2005. 3 PARTIV. PROJECTOBJECTIVES 15. The project objectives are to support the efforts o f the Government o f Pakistan to: (i) Reduce the immediate suffering resulting from the effects o f the earthquake and restore livelihoods destroyed by the earthquake; (ii) Restore basic services to the affected populationandrebuild public infrastructure; and (iii) Start the recovery and reconstruction process. PART v. PROJECT DESCRIPTION COMPONENTS AND 16. The following paragraphs describe areas o f support that are in urgent need o f financing. More details on each o f these areas may be found in the Appendices to this report. However, the indicated amounts at this stage are notional, and the financing available for different sectors i s changing constantly. As a development partner, IDA stands ready to be flexible about the areas o f needthat we finance, since our primary concern i s that the overall needs should be met, and met on the most favorable terms possible. IDA resources would therefore be available to address any o f the needs described in the A D B W o r l d Bank joint Damage and Needs Assessment. The notional allocation among the proposed project components outlined below will be reviewed regularly and adjusted in order to direct resources to the highest priority activity based on need and availability o f financing. While it i s anticipated that the recovery and reconstruction needs for social protection, health, education, agriculture, and roads, water, and infrastructure will mostly be financed by other development partners, IDA funds would be used, as outlinedunder Contingency Arrangements below, iffinancing gaps are identified. 17. The ERC would be premised on the need to rebuild houses, restore livelihoods through income transfers to the most affected households, finance critical imports, and augment capacity. The proposed activities complement those financed through the additional financing for ongoing projects provided under the initial response package. Proposed assistance to the agriculture, road and water sectors would complement this and support the resumption o f livelihoods in the most remote and poorest earthquake- affecteddistricts. Furthermore, the revival o f the public health and education systems would complement the main project objectives o f improved livelihoods and poverty alleviation in earthquake-affected areas, and special efforts would be made to protect the most vulnerable populations. The likely sub-components for these activities are discussed inmore detail below. Housing(US$220 million) 18. This component will support the Government's homeowner-driven housing reconstruction program that was recently launched. The program i s guided by a set o f principles, including the promotion o f hazard-resistant construction standards and design; rebuilding o f houses in-situ;ensuring o f owner-driven rebuilding with technical assistance, training, and supervision; utilization o f easily accessible materials and familiar methods in rebuilding; limited relocation o f settlements only when necessary; application o f limited and strategic urban re-planning; offering o f a uniform assistance package that i s not compensation-based; coordination o f multiple reconstruction initiatives and standards for equity; and the linking o f housing to livelihoods and infrastructure rehabilitation. 19. IDA financing for the housing sector would be provided for: (a) housinggrants for reconstruction o f destroyed homes with new seismic resistant core units and the restoration and strengthening o f damaged homes to seismically acceptable standards, with eligibility determinedby a detailed Damage and Eligibility Survey; and (b) technical assistance and capacity building to support the Earthquake Reconstruction and Rehabilitation Authority (ERRA) and provincial and local governments in overall project management, reporting, monitoring and evaluation, and compliance with the social and 4 environmental framework, development o f a grievance redressal mechanism, and other activities. Through the housing component, IDA financing will fund the reconstruction and restoration o f approximately 87,000 units, which represents 20-25 percent o f the total housing reconstruction needs. Use o f IDA resources for housing reconstruction cash grants requires a waiver to OP 12.00 (Disbursement). Management has granted this waiver. Use o f IDA resources for housing reconstruction cash grants requires a waiver to OP 12.00 (Disbursement). Management has granted this waiver. 20. Reconstruction Grants o f Rs. 175,000 per unit will be disbursed in four tranches, while Restoration and Strengthening Grants o f Rs. 75,000 per unit will be disbursed in one tranche. The reconstruction and restoration activities will be owner-driven, with households utilizing their own labor, hiring trained craftsmen, and receiving technical assistance. Disbursements will be made subject to verification o f progress and compliance with seismic-resistant standards. Livelihood Support (vS$SS million) 21. The strategy for livelihood support i s geared towards the dual objectives o f protecting the most vulnerable households in the short-term through the provision o f cash grants, and rejuvenating economic activity by reviving small businesses andreplacing assets lost inagriculture and livestock. The livelihood component will support this strategy by providing cash grants for the neediest households. Provided monthly in a fixed amount, the grants can be implemented quickly to effectively protect vulnerable populations. They also afford recipient households flexibility to satisfy their needs, while helping to regenerate local economies in affected areas through the creation o f purchasing power. Commencement of grant provision i s expected inmidto late January 2006, by which time the immediate relief operations and the movement o f populationto relief camps and temporary shelters are expected to stabilize, and will continue for a period o f six months. The viability o f other forms o f livelihood support, such as microfinance and grants for micro-entrepreneurs and cash for work, will be assessed over time through appropriate pilot programs. A waiver to OP 12.00 (disbursements) and OP 8.50 (Emergency Recovery Assistance) i s required to allow use o f IDA for cash grants including livelihood support. Management has granted this waiver. 22. The cash grant program will consist o f monthly grants o f Rs. 3,000 per household - an amount that i s considered sufficient to achieve minimum basic needs, taking into account the continuing availability o f some food relief. Eligibility will be extended to households that have experienced damage to their primary housing unit, shop or business, have suffered the death o f an adult householdmember, or who have lost major livestock. Preference will be given to eligible households with a highproportion o f dependents, such as the disabled, elderly, children, and injured. The total cost for the program i s estimated at $85 million for a target population o f around 250,000 households, assuming a 13 percent overhead cost for implementation and monitoring. 23. Given the urgent need to initiate the program, households eligible for the first round o f payments will be identified using existing information collected in affected areas by governments, after assessing the quality and coverage o f such information. Final lists o f eligible households for the first payment will be determined by Union Council level committees through open community meetings. A comprehensive database o f affected households will be developed by end-January, which will be used to refine the eligibility list for the first payment and distribute subsequent payments. The grants will be issued by the Revenue Department and delivered through a combination o f banks and post offices, depending on what i s easily accessible in specific areas, using government issued identity cards to verify identities and domicile. 24. The implementation of the program will be coordinated at the district level, with active participation o f the revenue officials below district level and Union Councils. A Union Council level committee will facilitate community driven identification o f eligible households. Grievances and appeals 5 will be handled by district level officials. Provincial and federal governments will provide policy guidance and overall coordination, and will monitor the progress in implementation. Reconstruction Agencies (RAs) inNWFP and AJK will assist each government in carrying out the above functions. The program will also be subject to regular monitoring and financial audit after eachroundo fpayment. ImportFinancing(US$S5 million) 25. Due to rapidly increasing imports, Pakistan's balance o f payment had been under considerable pressure even before the earthquake. Reconstruction and rehabilitation o f earthquake affected areas are likely to create an additional demand for imports o f fuel, steel, cement and other related commodities and services, which are estimated at around US$1billion during the next two and a half years. This, in the absence o f additional donor financing, will lead to further deterioration in the country's balance o f payment and a further reduction inofficial foreign exchange reserves. 26. The Government has requested that a portion o f the proposed Credit should be used for quick- disbursing assistance to partially finance the imports o f items required for reconstruction and rehabilitation activities. Since the Asian Development Bank (ADB) i s also providing quick-disbursing assistance, this component will extend US$85 million in quick-disbursing assistance which will be used only to finance imports identified as necessary for an effective recovery program. These imports will help in early recovery o f the affected areas by keeping the supplies and prices o f these commodities at adequate and appropriate levels. The Government, World Bank and ADB have agreed on a Positive List of permissible imports for financing under the quick-disbursing component o f the ERC. 27. This component will reimburse funds (up to the extent o f the size o f the component) on the basis o f expenditures incurredby the Government on reconstruction-related imports, which will be determined on the basis o f import Bills o f Entry, and will provide foreign exchange for private sector imports. As such, this component might also retroactively finance a part o f the bill o f these commodities which have been imported into the country between October 8, 2005 and the date o f signing o f the DCA for this operation. Agreed procedures set out in Appendix XI and XI1will govern the procurements from this component o f the ERC. The funds from this component will be disbursed to finance eligible imports on the basis o fquarterly Financial MonitoringReports as indicatedinthe FMand Disbursement Appendix. Capacity Building(US$lO million) 28. It is essentialthat existing implementation capacity o f the Government o f Pakistanbe augmented to meet the heightened demand o f the reconstructionand recovery effort and to ensure that the quality o f implementation i s maintained. Moreover, the magnitude o f current disaster calls for major capacity enhancement o f institutions and systems to manage and minimize the adverse impacts o f such disasters in the future. This component intends to expand the current capabilities at all IeveIs o f government- ERRA, NWFP/AJK ReconstructionAgencies, District ReconstructionUnits (DRUs), provincial/district line agencies and departments-across all sectors to effectively plan, implement, and supervise reconstruction activities across all sectors and levels. 29. The activities financed under the component include: (i)provision of human resources and consultancy inputs at the federal, provincial, and district levels; (ii) continuous social impact assessments and third party evaluations; (iii) design and delivery o f training programs on financial management and streamlined implementation processes; (iv) the provision of information technology connectivity and the establishment and/or improvement o f management information systems (MIS); (v) facilities upgrade, including infrastructure, office supplies andneeded vehicles; and, developing a communications strategy. 30. Furthermore, given its social and economic vulnerability to natural disasters, it i s essential that Pakistan improves its approach to hazard risk management, and shifts focus from emergency response to 6 disaster prevention, through a comprehensive hazard risk management approach. The capacity building program in this regard will support the following key pillars: (i) disaster risk assessment; (ii)seismic safety o f buildings; (iii) emergency preparedness andresponse; and (iv) catastrophe risk financing. ContingencyArrangements 31. Iffinancing gaps are identified, IDA fundswould be usedto support additional sectors, including social protection, health, education, agriculture, and roads, water supply, and other infiastructure. The following activities would be eligible for IDA financing. Social Protection 32. The earthquake has devastated one o f the poorest and most vulnerable areas o f the country, leaving many people injured, disabled, traumatized, orphaned, and unemployed. This component targets key vulnerable groups, namely unattended children and orphans, the physically disabled, persons suffering from trauma, and the temporarily unemployed. 33. Under this component, services that might be provided to vulnerable groups include: (1) community-based psycho-social support (trauma counseling), medical and social rehabilitation services, and building social awareness o f disability; (2) placement and follow-up care for orphans and unattended children; and (3) temporary employment for vulnerable groups. Health 34. This component would aim to restore equitable access to a better performing health care delivery system for the population living in the earthquake affected districts. The earthquake caused significant damage to the health sector, resulting ina complete breakdown o f the health system and a total disruption o fprimary and secondary health care service provision inthe affecteddistricts. There i s an urgent needto revitalizeprimary and secondary care service provision to the affectedpopulation, including the displaced population, to reduce vulnerabilities and saves lives while the system i s revitalized and reconstructed. The needs o f the health sector for the short to medium are substantial, but there i s strong commitment from development partners to finance these needs. 35. The main activities include: a) the revitalization o f primary health care services and the provision o f secondary care services during the transition period, including contracting NGOs to manage primary health care services; b) the reconstruction and re-equipment o f partially or fully damaged health institutions with a focus on civil hospitals, rural health centers and basic health units; and c) technical assistance to strengthen management, planning, and monitoring o f the recovery effort, including sentinel surveillance inAJK and NWFP. 36. The lead agency for the implementation o f the proposed components will be the Department o f Health o f the Government o f AJK and the Provincial and District Departments o f Health in NWFP. Technical support will be provided by RAs/DRUs for ensuring seismic resistant construction and will include the provision o f policy guidelines to the Departments o f Health. Education 37. This component would address the most urgent requirement for providing transitional access to safe educational services at all levels. The development objective i s to restore equitable access to higher quality education through improved design o f physical learning spaces, social and physical access, teacher development, and capacity development of the district education offices for improved service delivery. Financing would be provided for consultancy services to improve the design o f physical 7 learning spaces, the provision o f technical advice for community construction, the monitoring o f educational outcomes, student and staff counseling, teacher training, provision o f books and reading materials, purpose built krniture, and civil works. 38. Decentralizedimplementation arrangements would be sought, emphasizing effective coordination and monitoring and a greater role for the lowest tiers o f government, the private sector and civil society. A federal Government-level body such as ERRA would supervise the reconstruction efforts and provide overall policy guidance. The education departments at provincial and district levels would play a leading role inthe planning and monitoring o f recovery and reconstructiono f the education system. In addition, communities would assist inthe construction of primary and middle school buildings. Roads, Water Supply and other Infrastructure 39. This component would complement the World Bank's four ongoing projects4, which have been recently restructured to provide additional earthquake emergency financing by covering any existing financing gaps in overall infrastructure needs. Eligible sub-sectors under the component include: (i) provincial highways and roads; (ii) district roads; (iii) sub-district and community roaddearthen paths; (iv) water supply & sanitation; (v) public buildings across different sectors such as education, health, works & services, and water supply & sanitation; and (vi) community infrastructure such as community buildings,irrigation channels, etc. 40. Implementation o f the infrastructure component would generally be based, and build, upon the subproject identification, implementation, institutional, procurement, financial management and social/environmental safeguards arrangements established as part o f the implementation arrangements agreed with the Government. Agriculture 41. This component would rebuild agriculture and rural livelihoods through selected quick impact activities to help farmers revive their crop and livestock production systems and restore some o f the most essential agriculture support services. Financing might be provided for: (a) the provision o f seeds, fertilizer and tools for the Kharif 2006 season; provision o f animal feed and shelter for livestock; restocking o f feed and fodder supplies; and, repair and rehabilitation of essential communal infrastructure, particularly irrigation and field terraces; (b) material, equipment and facilities; repair of nurseries and planting material for fruit and timber trees; and repair and reconstruction o f buildings for research and immediate office needs; and (c) the strengthening o f existing coordination, monitoring and evaluation mechanisms at all levels o f implementation. 42. The reconstruction andrecovery strategy for the agriculture sector requires that the affectees who have relocated outside the affected area be encouraged to return to their normal abode and resume a largely pre-earthquake style o f life. The strategy should focus on immediate support to affectees to plant wheat crop by providing support including tools and implements, seed, fertilizer, critical repairs to irrigation structures, and assistance inbuilding shelters to salvage remaining livestock inventory. Inthe medium term, support would be needed for replanting fruit trees, rebuilding terraces, replenishing livestock inventory, rehabilitating productive infrastructure, and reconstructing laboratories and offices for extension and research and for agriculture, livestock, and irrigation departments. Four emergency additional financing and reallocation projects have been approved, and include additional financing of: (a) the Highways Rehabilitation; (b) Second Poverty Alleviation Fund; (c) the AJK Community Infrastructure and Services project; and (c) the restructuring of the NWFP On-Farm Water Management and Second Community Infrastructure projects. 8 services for specific components would be performed by these professional bodies in close coordination with relevant line departments and local governments. At the district level, District Reconstruction Units (DRUs) would be established to support the preparation o f plans and implementation o f small contracts, incoordinationwith district governments, district-level line agencies andPartner Organizations (POs). PART VI. SAFEGUARD AND FIDUCIARY POLICIES I.EnvironmentalandSocialSafeguards 45. An Environmental and Social Screening and Assessment Framework (ESSAF; the "Framework") has been prepared to undertake environmental impact assessments (EIAs) for all rehabilitation and reconstruction activities and ensure that adverse environmental and social impacts are minimized, and appropriate mitigation measures are included in sub-project design. The Framework will assess the institutional capacity to undertake environmental and social assessments, the Government's system for review and approval o f EIAs, and the capacity to monitor the implementation o f environmental mitigation and social safeguard measures. 46. The principles governing social and environmental management will be applied according to the Framework and are applicable to all activities financed by IDA, including: (i) key policy principles for social and environmental management; (ii)tools to screen sub-projects for significant social/ environmental impacts and mitigate such impacts; (iii) procedures to ensure that these principles and tools are appropriately applied; and (iv) guidelines for capacity buildingand monitoring. The Framework will be operationalized through the proposed implementation, capacity building, and monitoring arrangements o f the project. 47. Sub-projects will be screened to ensure that the environmental and social risks are adequately addressed through the application o f standardized guidelines and codes o f practice. The emergency nature o f the proposed relief and reconstruction operations and the related need to provide immediate assistance i s recognized. At the same time, the Framework will ensure due diligence in managing potential environmental and social risks. Investments which are subject to Bank safeguard policies on Projects on International Waterways (OP/BP 7.50) and Safety o f Dams (OP/BP 4.37) are not eligible under the ERC. 48. The application o f all social safeguards to specific cases will be informed by the initial Social Assessment (SA) which will also serve as a baseline. A continuous social impact assessment (CSIA) will facilitate the articulation o f community perceptions, grievances and feedback vis-a-vis identification o f beneficiaries for the housing and livelihood components and the mobilization o f resources. The CSIA will help monitor the social dimensions o f the program and flag potential risks. Through direct interaction with beneficiary communities it will carry out an independent evaluation o f program implementation and distribution o f program benefits. The CSIA will monitor the impact o f the program and help to initiate necessary mitigation measures. 11.Procurement andFinancialManagement 49. In both the preparation and implementation of this program, it will be ensured that proper management and fiduciary arrangements are in place. Bank experts have been closely working with the implementing agencies to develop procurement and financial management arrangements. For more details on these arrangements, see Appendix XI: Procurement and Appendix XII: Financial Management and Disbursements. 10 PARTWI. DISBURSEMENT CONDITIONS AND OTHER COVENANTS 50. Conditions for Disbursements a) No disbursements shall be made for cash grants for livelihood support unless GOP has furnished to IDA evidence o f Acceptable Assistance Criteria. b) No disbursements shall be made for housing grants unless GOP has adopted technical guidelines and a training program satisfactory to IDA, and has appointed a program manager to handle the implementation o fthe housing component. 51. Dated Covenants a) GOP shall no later then four (4) months after effectiveness o fthe FinancingAgreement adopt an Operations Manual satisfactory to IDA. b) GOP shall no later than sixty (60) days after effectiveness o f the Financing Agreement appoint financial management, accounting and procurement staff in such numbers and qualifications as mutually agreed between GOP and IDA. c) GOP shall prepare a Procurement Plan comprising: (i) respect to activities already with identified to be financed under the Project, the procurement methods and thresholds for such activities, no later than sixty (60) days after the Effectiveness Date; and (ii) with respect to activities yet to be identified, the procurement methods and thresholds for such activities, no later than sixty (60) days after the date on which such activities are approved to be financed bythe Association. 11 APPENDIXI:HOUSING A. Overviewof Damage 1. The October 8, 2005 earthquake left an estimated 2.8 million people in need o f shelter at the onset o f a harsh winter, in a rural, difficult to access, terrain. GOP census data indicates that about 787,000 housingunitswere inthe affected area, and that these were predominantlyrural. 2. In the affected areas, per the Preliminary Damage and Needs Assessment Report, 203,579 housing units were completely destroyed in AJK and NWFP, while 196,574 were damaged to various degrees. These include 116,572 and 88,368 respectively inAJK and 87,007 and 108,205 respectively in NWFP, and represent 84% o f the total housing stock inthe affected districts o f AJK, and 36% o f NWFP (Table 1). Table 1: SummarybyProvinceof Total, DestroyedandDamagedHousingUnits District YO Urban Units Destroyed D AJK Affected Districts Muzaffarabad 12 123,679 69,943 28,278 98,221 79 Bagh 5 59,623 33,806 21,208 55,014 92 Poonch 11 61,678 12,823 38,882 51,705 84 AJK Total 10 244,980 116,572 88,368 204,940 84 NWFP Affected Districts Shangla 0 67,003 15,661 10,821 26,482 40 Mansehra 14 203,109 31,323 43,282 14,605 37 Kohistan 0 74,087 4,350 18,395 22,745 31 Abbottabad 19 153,819 6,961 27,05 1 34,012 22 Batamam 0 44,585 28,712 8,657 37,369 84 NWF'P Total 11 542,603 87,007 108,206 195,213 36 AJK +NWFP 10 787,583 203,579 196,575 400,154 51 3. The typical home inthe affected areas houses 6-7 persons, i s 400 sq. ft. and consists o f one or two main rooms, a veranda and a bath and kitchen which may not be attached. A Katcha (non-permanent) house will typically have mud or stone rubble walls with a flat mud roof supported on pole beams. A Pucca (permanent) house will have stone rubble or fired brick masonry walls with sand cement mortar and a low pitched sheet metal or reinforced concrete (RCC) flat slab roof. More recently, hollow cavity concrete masonry unit (CMU) block i s being used for walls. Virtually none o f the housing in affected areas has seismic considerations in design. Compounding this i s the generally poor quality o f construction and maintenance. B. Critical Issues 4. There are several critical issues affecting the housingreconstructioneffort: (a) Appropriate institutional arrangementsfor housing reconstruction: The housingreconstruction activity will be spread over a vast area o f topographically difficult terrain. Moreover, the scale o f the reconstruction activity will be unprecedented. Under the normal pre-quake conditions, it i s estimated that a total o f approximately 6,500 pucca housing units were constructed every year in the eight effected districts. If the estimated 400,000 affected units are to be reconstructedrestored over the next three years, this would translate into at least a 10-fold 12 increase inthe annualpucca housing construction activity in the affected districts. It would also require building to significantly higher construction standards. The credible administration and monitoring o f such a gigantic task will be a major challenge. Beneficiary identification: A detailed housing damage assessment and social verification i s urgently needed to provide a credible basis for compensating affectedhouseholds. Identifying hazardous sites and suitable alternates for relocation: Preliminary evidence suggests that some sites in the affected areas are not suitable for rebuilding in-situ due to vulnerability to seismic, soil, or landslide hazards. The prompt identification o f such areas on transparent technical grounds i s critical, along with identification o f suitable alternative sites for relocation o f affected households. This will depend on availability o f land, and will need to consider accessibility to infrastructure, sources o f livelihood, and social services. Inculcating seismically acceptable designs and construction practices: As some rebuilding activity has already commenced in view o f the approaching winter, there i s an urgent need to provide guidance on seismic resistant designs andconstructionpractices. Settlement and documentation of land claims whereproperty records have been lost: Loss o f land records can be a significant source o f social risk associated with housing recovery. Initial assessments suggest that none o f the District Revenue Offices in the eight affected districts has been damaged to the extent that land records cannot be salvaged intact. They will, however, need to be retrieved quickly, before the winter rains and snows cause their complete deterioration. Where records have been lost and are not retrievable even through backups, other community- based evidence mechanisms will need to be deployed for re-mapping o f parcel boundaries; certification o f redefined boundaries; landlordtenant claims; previously unregistered land; allocation o f community land; identification o frightfulheirs; and claims o f informal settlers. Over-exploitation of building materials: A key environmental risk i s the threat o f over- exploitation o f natural buildingmaterials including timber and stone, which may be conveniently located but serve vital environmental functions such as slope stabilization and soil protection. Strict policing o f a highly dispersed owner-driven process would be difficult. Transparency and accountability in reconstruction: Grant eligibility, reconstructionplans, and implementation modes and procedures, will have to be as widely publicized and disseminated as possible. The absence o f such transparency will affect the success o f all reconstruction efforts. Ofparticular concern are the listing o f beneficiaries, arrangements for and actual disbursement o f reconstructionassistance, andthe monitoring o f progress and quality inreconstruction. Inaccessibility and Vulnerability: Affectees residing inrelatively inaccessible areas or belonging to socially disadvantaged groups will be at a risk o f being left out and not benefiting from the compensation packages. A concerted effort will be needed to mitigate this risk. Housing Reconstruction Strategy The proposed housing reconstruction strategy i s based on key principles derived from international post-disaster reconstructionexperience and consideration o f the Pakistani context. Principle 1: Promote hazard-resistant construction standards and designs. The collapse o f approximately 200,000 buildings, predominantly housing, was due largely to the lack o f any seismic consideration in their design and their poor quality o f construction and 13 maintenance. Reconstruction o f affected areas should emphasize seismic safety and improvedconstruction quality. Principle2: Rebuild in-situ. Most households should be allowed to rebuild on their original plot o f land. This in-situapproach minimizes both resistance o f the population at attempts at relocation, as well as demands on GOP to sustain livelihoods in new locations and to buildnewphysical and social infrastructure. It also reduces demands on, and costs to, the GOP to identify and acquire land andresolve issues o f land ownership and availability Principle3: Ensure rebuilding is owner-driven. Homeowners should be in charge o f rebuilding o f their own homes. This will however require technical assistance, supervision, and comprehensive training programs to ensure quality o f construction. Principle4: Rebuild with familiar methods and easily accessible materials. To be sustainable, promotion o f hazard resistant standards and designs must relate to use o f readily available materials, familiar modes o f construction, and cultural preferences indesign. Principle5: Relocate settlements only when necessary. Relocation o f some settlements might be inevitable. These should be limited to circumstances where the risks o f exposure or contributory effects to hazards remain very high due to topography, soil conditions, and other environmental and risk factors. Principle6: Ensure urban re-planning is limited and strategic: Such attempts should not be city-wide but instead focus on pockets o f strategic urban areas. Principle7: Offer uniform assistance package that is not compensation-based. Compensating households proportionate to the replacement value o f their loss would increase the GOP's liability significantly and encourage litigation. Principle8: Coordinate multiple reconstruction initiatives and standardsfor equity. It i s crucial that the GOP coordinates multiple reconstruction initiatives to ensure full spatial coverage and reduce the risks o f beneficiary double counting or any affected household being missed. Principle9: Link housing to livelihoods and infrastructure rehabilitation. The sustainability o f housing solutions offered by the GOP will be largely determined by complementary efforts to restore livelihoods and rehabilitate physical and social infrastructure. D. ProposedProgramComponents 6. The Government o f Palustan (GOP) has already established a housing assistance program whereby every household with a destroyed house will be given a Rs. 175,000 compensation grant. Its first tranche o f Rs. 25,000 i s currently being disbursed in the affected districts, and i s meant to cover immediate shelter needs o f the affected families. The remaining funds are to be disbursed in three more tranches for reconstruction o f permanent housing. The ERC will support the GOP's efforts through the proposed program components which include: (a) cash grants for homeowner-driven housing reconstruction and restoration; and (b) technical assistance and capacity building. As implementation begins, resources can be reallocated among these sub-components based on their level o f implementation efficiency and changing demand. 14 Table 2: HousingReconstructionProgram(US$ millions) a. Reconstruction ofPermanentHousing 784.91 170.93 (266,331 units) 60.00" 662.68 * Restoration & Strengtheningof 147.77 39.07 PermanentHousing(109,68 1units) b. TA and CapacityBuilding 30.00 10.00 15.00 , 5.00 *TOTAL 962.68 220.00 75.00 667.68 Representsboth Reconstruction and Restoration Costs 7. The reconstructioncosts are estimated at US$784.91 million, based on a grant o f Rs. 175,000 per replacement house, consisting o f a core unit o f 250 sq. ft. and built to seismically acceptable structural standards. The restoration and strengthening costs are estimated to be US$147.77 million, based on a grant o f Rs. 75,000 per damaged unit. The number o f housing units to be reconstructed or restored i s based on the number of units destroyed or damaged respectively, as assessedby the Preliminary Damage and Needs Assessment. However, it has been assumed that for damaged katcha units, approximately 85% would have suffered structural damage beyond repair and have thus been added to the number o f units to be reconstructed. It i s also assumed that 15% of the damagedpucca houses would require minor repair not eligible for compensation, and have thus been excluded fiom the total number o f units to be restored. (i) CashGrants for HousingReconstructionandRestoration(US$210 million) 8. This sub-component will provide grants for reconstruction or restoration o f affected housing units. The grants would finance: (a) replacement of a destroyed house with a new seismic resistant core unit o f 250 sq.ft. covered area, or (b) restoration and strengthening o f a damaged house to seismically acceptable standards. 9. The rebuilding would be owner-driven - a mode well suited to the mainly rural affectees. The grants would be releasedintranches, linkedto stages o f construction and adoption o f seismically resistant standards. Inthis scheme, households will be able to utilize their own labor, hire trained craftsmen, and receive technical assistance from a reputable partner organizatioflG0 to reconstruct or rehabilitate their houses. 10. The eligibility criteria for these cash grants would be: (i)allpucca houses with structural damage beyond economic repair or structurally damaged katcha houses will be eligible for a Rs. 175,000 Reconstruction Grant; (ii)all pucca houses with repairable structural damage will be eligible for a Rs.75,000 Restoration and Strengthening Grant. Housing units with non-structural damage will not be eligible for any compensation. ERRA i s currently launching a detailed Damage and Eligibility Survey which will categorize housing units in the affected areas by the extent o f damage and develop lists for each. Households who: (i) are deemed eligible; and (ii) confirmed to be owners or residents who have are agreement with owner to rebuild house, will benefit from the above Housing Grants. Owners will be eligible for a limit o f one grant. The final list o f beneficiaries will be determined by local verification process. The Reconstruction Grant will be disbursed infour tranches: (i) Rs. 25,000 i s currently provided by the Government to affectedhouseholds to address their temporary shelter needs. Materials purchased through this grant can be reused for the permanent reconstruction; (ii) Rs. 75,000 as a mobilization grant; (iii) 25,000 atcompletionuptoplinthlevel; and(iv)Rs.50,000 atcompletionofwalls; however, Rs. further technical inspection would follow after the completion o f the roof. The Restoration and Strengthening Grant will be disbursed in one tranche. Disbursement o f grants will be subject to 15 verification o f progress and compliance with seismic-resistant standards. Funds will be channeled through the Bank branches at the local/community levels. 11. Use o f IDA resources for housing reconstruction cash grants requires a waiver to OP 12.00 (Disbursement). Under OP12.00, a waiver i s required for cash payments where there i s no direct link to goods, works and services that are made available to beneficiaries under identifiable contracts following appropriate procurement procedures. The choice o f cash transfers i s justified on various grounds. Experience in other disaster recovery situations has shown that cash grants for basic housing assistance i s well-suited to facilitating recovery in general and housing reconstructioninparticular. Grants for owner- driven rebuilding are responsive to individual preferences and maximize household ownership while reducing the administrative burden on the federal and local governments. Inaddition, cash grants address the needs o f those who may be unable to participate in alternate safety net programs like public works or those not equipped to use other foms o f livelihood support like credit and inputs at this stage. Grants also serve to infuse spending power in communities which will in turn revive economic activity in affected areas. Therefore Managementhas granted a waiver o f OP 12.00 to permit the use o f cash grants for housing reconstruction. 12. Structural design standards needed to fully meet the requirements o f modem EQ design codes will be issued by ERRA. These codes will follow internationally accepted guidelines for low-cost EQ resistant housing construction5 that are intended to prevent system collapse and control the level o f damage produced by seismic excitations. To minimize future risks to life and limb, these solutions will generally be based on thinner walls, lighter roofing and well connected structural systems, and exclude the use o f `katcha-type' construction (earthen houses, random rubble masonry, brickwork in clay/mud mortar, etc) that i s highlyvulnerable to collapse. 13. Reconstructed housing units will be located on firm ground and generally consist of: (a) burnt brick, dressed coursed stone, or concrete block masonry foundations and walls set in cementllime mortar and suitably reinforced with horizontal RCC bands at plinth, lintel, and roof levels, and vertical reinforcement at wall comers and openings; or (b) appropriately detailed reinforced concrete frame structures with masonry infill walls. Roofing will comprise GI sheets with supporting timbedsteel framing, or RCC slabs. 14. The ERC funding for the Housing Component will fund the reconstruction and restoration o f approximately 87,000 units, which represent between 20 and 25% o f the total housing reconstruction needs, IDA funds will be geographically targeted to selected tehsils in the affected districts. Their selection will be based on their having relatively poorer segments o f the population, and being completely rural, and will be done inconsultation with the Government. All eligible housing units ina selected tehsil will be covered. The total funds provided under the ERC will be equally divided between NWFP and AJK. (ii)TechnicalAssistanceandCapacityBuilding(US$lO million) 15. Project Management Support: This sub-component will support E m , and the provincial and local government levels in overall project management, coordination, reporting, monitoring and evaluation, and compliance with the social and environmental framework through project management consultants. It will also support ERRA in coordinating the multiple housing reconstruction initiatives underway, albeit localized, to ensure equitable coverage o f all the affected households, and implementation o f consistent seismically acceptable constructionstandards. Guidelines for Earthquake Resistant Non-Engineered Construction 1986 - by the International Association of Earthquake Engineering, Japan. 16 16. Damage and Eligibility Assessment Survey: The Survey will be conducted to: (a) categorize the level o f damage to each housing unit; and (b) establish lists o f eligible beneficiaries. The sub-component will cover the costs o f administering the survey in the affected districts, as well as training the survey teams in assessment techniques and criteria so that these are applied uniformly. The teams would comprise a minimum o f three persons - a local government representative, a social organizer, and an engineer. Approximately 700,000 housing units in the eight affected districts will need to be surveyed over two to three months. Between 700 and 1,000 teams will be hired and trained over about one month (assuming each team covers an average o f twelve units per day). The component will cover the costs o f developing the survey instrument, as well as administering the survey. The instrument will be designed and initial training of the teams will be done by specialized consultants, with overall administration by ERRA. 17. Hazard Risk Mapping: Funds are considered to prepare a Hazard RiskMapping study covering site investigations and testing to identify areas susceptible to future natural disasters including earthquakes, landslides, and erosiodsettlement. ERRA will engage a specialist consultant team o f seismologists and geotechnical engineers to prepare detailed hazard risk maps for the affected areas that include (a) micro-zoning for seismic risk; and (b) clearly identified sites that are highly vulnerable to landslides andor soil or foundation failures. Initial results are expected to be available by the start o f the construction season (MarcWApril) to guide the housing reconstructionhestoration effort, including the need for special foundationtreatments or localized re-sitting where appropriate. 18. Development of Hazard-Resistant Housing Solutions: ERRA will engage a team o f housing consultants6to prepare a range o f EQresistant housing solutions, based on a standard core unit,to cater to diverse needs (climatic conditions, local material availability, community preferences, etc.). The consultants will follow internationally accepted guidelines for low-cost EQresistant housing construction, while also drawing on the lessons learned from building performance during the October 2005 Earthquake. The consultants' outputs will include construction drawings, bills o f quantities, fabrication drawings, material schedules and illustrated constructionmanuals for each type o f wall and roof system. The consultants will also develop technical guidelines and sketches for structural restoration and strengthening o f typical building systems that have been damaged in the affected areas. The housing consultants will conduct workshops to educate key technical staff and master-trainers o f Partner Organization about the essential considerations involved in constructing EQresistant housing units; and collaborate with the POs in developing appropriate training material for site engineers, craftsmen, fabricators and affected owners. The consultants will also assist in presenting the EQ resistant housing solutions intwo dissemination workshops to get broader consensus and ownership. 19. Implementation Support through Partner Organizations: In view o f the extensive outreach needed for the credible administrationand monitoring o f the challengingtask o f housingreconstruction, it i s clear that existing public sector institutional capacity will require considerable reinforcement. Since capacity buildingrequires time, while the reconstruction activity cannot wait indefinitely, this component will assist inenhancing the public sector's delivery capacity through partnerships with reputable Partner Organizations/NGOs. 20. The partner organizations o f the PakistanPoverty Alleviation Fund (PPAF) are already operating in over 3000 communities in 174 o f the 210 union councils and in 6 of the 8 EQ affected districts and have successfully delivered substantial physical infrastructure and services.' The government proposes to build on this success by inducting such organizations to support the implementation o f the owner driven housing reconstruction program. Reputable POs will be engaged by NWFP and AJK using screening Comprising structural engineers, archtects and planners. 7 Valued at over USD 80 million. 17 criteria broadly similar to those used by the PPAF.' POs will be asked to augment their technical capacity to appropriate levels for effective support to the Housing assistance program. Only one PO will be designated to work on housing reconstruction in each affected union. The POs will be charged with: (i) providing guidance to affected communities in implementing the owner driven housing reconstruction program, including a comprehensive briefing on its key elements prior to release o f the advance payment; (ii) engineersandcraftsmen;(iii) training overseeing reconstructiodrestoration activities to assure quality and EQ resistant construction; and (iv) ensuring compliance with social and environmental riskmitigating measures. 21. Skill Training: Delivery o f the proposed housing reconstructionhehabilitationprogram over a 3-year period will involve an approximate ten-fold increase in pre-earthquake pucca housing activity in the affected districts, and a two-fold overall increase in this activity in NWP and AJK. It i s roughly estimated that the following size o f skilled and unskilledworkforce will be needed annuallyg: Table 2: Reconstruction Workforce Requirements Skill Numbers 1. Site Engineers 150 2. Supervisorslsurveyors 150 3. Masons 40,000 4. Steel Fabricators(fixedfitters) 700 5. CarpenterdSheetRooffixers 13,000 6. Plumbers 2,500 7. Electricians 2,000 8. Painters 1,000 Total skilled 59,500 9. Semi-Skilled/Unskilled 80,000 22. Given the general increase in construction activity across the country over the past year, at best about 20% o f this need will be met by the slulled construction workforce resident inthe affected areas or coming in from outside. This group will need to be provided limited training inEQresistant construction practices. The remaining 80% o f the required workforce will have to be trained from scratch as part o f the program. 23. This training will be impartedbyPOsintwo stages. The first stage will involve skilled craftsmen inkey trades (mainly masons, steel fabricators and sheet roof fixers), who will be: (i) about the briefed overall construction requirements for the core unit; and (ii) provided short, focused training in EQ resistant construction, and a general refresher on good construction practices. This will be done by PO senior technical staff and master-trainers, using a mix o f visual training material and on-site practical demonstrations. Following this training, these craftsmen will be `accredited' by the PO for the Housing program. 24. For the second stage, the POs will launch a craftsman training program in each affected district. Trainees will be registered and attached to accredited slulled artisans under an apprenticeship program that will involve on-the-job training spanning one complete construction cycle or at least 3 months. During this period the trainees will be provided a stipend, and at the end o f this period they will be `accredited' to operate independently and to train others. The pool o f slulled construction workers will thus be gradually built up (broadly over the course of the first year), until the housing demand in the affected areas i s fully met. Using advisory assistancefromPPAF, ifrequired. These numbersare for the entire Housing reconstruction program (not only ERC finding). 18 25. Facilitating the Building Materials Market: In view of the unprecedented scale of reconstructionactivity inthe affected regions, the Government will needto facilitate the smooth supply o f building materials in the required quantities. This sub-component would further support the government's efforts through establishing direct links with the private sector at the national and local levels to assist the flow and purchase o f building materials, particularly by rural committees and other community-based organizations. 26. Proactive measures will be undertaken at various levels, to ensure that the planned 10-fold increase inpucca housing construction activity i s not constrained by buildingmaterial shortages, and that inputprices canbemaintainedat reasonable levels: i. ERRAandtheprovinceswillwidelypublicizethemulti-yearhousingreconstructionprogramand corresponding aggregate annual demand for building materials particularly cement, steel, CGI Sheets, etc.", and identify net import needs so that domestic material manufacturers as well as traderdimporters can gear up to meet this increased demand intime. ii. Localgovernmentswillprovidesuitablesitesforsettingupoflocalbuildingmaterialmarkets,to supply affected owners. iii. POsactiveinmicro-creditinitiativeswillbeencouragedtoprovideentrepreneurshiptrainingand fundingto locals inthe affected areas to set up shop inthe above material markets; and technical training in production o f prefabricated housing elements such as: formwork; pre-cut and shaped reinforcement bars; door frames and shutters; window units; structural steel roof framing members, etc. 27. Information Dissemination: The widespread and timely dissemination o f information on the full range o f assistance options, their eligibility criteria, and the means o f accessing them will be crucial to the efficient implementation o f the program. Moreover, effective information dissemination would also be needed on seismically acceptable construction solutions, alternative materials, methods o f constructions, material availability and pricing variations. 28. Following the completion o f the Damage Assessment surveys, the list o f home owners eligible for reconstruction or restoration grants will be determined. ERRA and the POs will communicate this information to the respective communitieshouseholds, including detailed guidance on how to access these grants, and a comprehensive briefing on the key elements o f the owner driven housing reconstruction strategy. Widespread public education programs on the risks posed by practices such as clearing o f rubble into river courses would be required, together with measures to ensure adequate supply of suitably sourced materials. An effective information, education, and communication strategy will thus be developed by a communications firmwith requisite experience. 29. Land Acquisition and Development: Households living in areas that are identified to be dangerous by the Hazard Risk Mapping survey will be assisted in relocating to new sites. If needed, funds will be made available for (i) consultations with identified households on their preferences for relocation; and (ii) acquisition and development o f alternate sites for their resettlement. 30. Grievance Redressal Mechanism: This sub-component will include the establishment o f a formal and transparent gnevance redressal mechanism at the union, district, and program levels, to expedite resolution o f complaints by and grievances o f affected families concerning, for example, the delayed release o f financial assistance and erroneous housing damage assessment. It will also be needed loInitial estimates indicate the following annual material requirements: Cement: 200,000 tons; Steel: 40,000 tons; CGI Sheets: 25 million sq. ft. These numbers are for the entire Housing reconstruction program (not only ERC finding). 19 for settlement o f land disputes and documentation o f land claims. It will also finance the costs o f salvaging land records, as well as costs o f re-establishing claims for which all documentation has been lost, usingcommunity and other sources o f mediation. (iii) OtherIssuesto beAddressed 31, Ownership/TitZe: The government will eventually be investing about US$ one billion under the proposed housing reconstruction program to help affected households replace destroyed and damaged housing with a significantly improved housing stock. This presents a unique opportunity to let rural households, that have historically been left out o f the formal credit market for lack o f tangible collateral, to leverage these assets to access credithank loans in future, provided house ownership i s formally documented through legal title, particularly for properties where landtitle i s not indispute. E. Key PerformanceIndicators,MonitoringandEvaluationArrangements 32. Monitoring o f the reconstruction and restoration o f housing units and its impact would be done through several mechanisms, including a continuous social impact assessment, technical progress reports of the union and district levels, as well as third-party monitoringby POs. 33. The following key performance indicatorswill be used for monitoring o f project outcomes: a) amount o f restorationheconstruction grants disbursed; b) number o fhouses reconstructedrestored to EQ-resistance standards; c) number o f craftsmen trained inkey trades (masons and carpenters); and d) percentage o fcomplaints redressed. 20 APPENDIX11: LIVELIHOOD SUPPORT A. Overviewof Damage 1. Early estimates o f livelihood losses suffered by earthquake-affected areas indicate that these losses will affect a population o f around 1.5 million. The largest job/livelihood losses are estimated to have occurred in agriculture and the informal private sector, comprising mostly small businesses and shops, transport and construction. Beyond the job losses and material damage, the earthquake has had a profound social impact in affected areas. A large number o f orphaned children, along with widows, single-headed households, elderly, and disabled people are especially prone to psycho-social distress and may lack basic means necessary for subsistence. Many o f the displaced families still lack adequate shelter to protect themselves against the impending winter, while many others are living in camps under difficult circumstances. Pre-earthquake Proflle of Affected Areas 2. Employment patterns across sectors and occupations. Inorder to arrive at preliminary estimates of losses to livelihood, it i s necessary to establish baselines on employment in affected districts. The estimated total pre-quake employment in the affected districts o f the two provinces i s 1.12 million (see Table 1)'' This estimate was derived from employment figures published inDistrict Census Reports o f the Population Census o f 1998, and adjusted upwards to account for population growth since 1998 and female labor force participation (significantly under-reported by the Census), using'PIHS (200 1-02) as a reference. The estimate includes self-employment and paid employment of all individuals o f age 10 and above, but excludes employment o f migrant workers inregions outside the affected districts - following the definitions adhered to by the Population Census. 3. In rural areas, agriculture (including livestock rearing) is the primary source o f employment. Agriculture accounts for 37 and 49 percent o f total rural employment in AJK and NWFP respectively. Services and public administration account for 60 percent o f employment in the affected urban areas o f AJK, small trading andbusinesses account for 14percent, and construction and transport together account for 13 percent. Public administration, trade and small businesses, followedby construction and transport, are also the most significant sectors o f employment for the affected urban areas o f NWFP. Participation of women in the labor force i s low in the affected districts (around 17 percent o f women o f age 10 and above). Among those workmg, public administration and agriculture account for the highest shares. The employment estimates, however, are likely to understate productive activities o f women, particularly in home-based activities. 4. Migration and remittances. An important feature o f the affected districts i s remittances, sent by household members who migrate to other parts o f Pakistan as well as to other countries. More than half of households inthe affected districts o f NWFP receivedremittances from domestic sources according to PIHS (1998-99), while the incidence o f foreign remittances was almost negligible. Remittances amounted to around 29 percent o f household consumption expenditure. Remittances are even higher in AJK, with 68 percent o f households receiving remittances (including 25 percent who receive foreign remittances), which amount to 34 percent of total household consumption. Remittances amount to a quarter of the households' consumption expenditure inAJK and NWFP, even for the poorest 20 percent o f the population. "Notethatthis is the total employmentof the8districts affectedbythe earthquake. However, for most o f these districts, not all areas were affected or equally affected by the earthquake, which makes this number only a rough estimate of employment inearthquake affected areas. 21 Damage Estimates 5. Given the profile o f livelihoods outlined above, the most severe impact on livelihoods i s likely to occur in the informal sector - through loss o f livestock and other agricultural inputs, including land, and losses suffered by traders and small businesses. From the preliminary damage statistics, the primary impact on urban livelihoods i s in the form o f losses in wage employment and self-employment in the private sector - namely trade, small shops and businesses, construction and transport. For example, over 70 percent o f shops have been fully or partially damaged inBatagram, Muzaffarabad and Bagh districts. Even shops and businesses that have escaped damage face enormous challenges, given the loss o f markets and the uncertainty o f demand due to large-scale migration from some areas. 6. The largest source o f livelihood loss in rural areas is likely to be disruptions in agricultural and livestock-based activities, such as milk production. In agriculture, a temporary loss in output and employment can occur due to the inability to harvest crops, loss o f acreage for cultivation, and the inability to prepare land for the next season. Livestock losses, besides representing significant losses in terms o f capital assets, are also likely to have an enormous impact on the incomes o f rural households. All available sources indicate that significant losses in livestock have occurred, especially among households located at higher altitudes. 7. Aggregating across all sectors, the total estimated loss in employment or livelihood i s around 324,000, which represents approximately 29 percent o f the total employed population (above age 10) in the eight districts (Table 1). The provincial breakdown i s around 132,000 inAJK and 192,000 inNWFP, which amount to 38 and 25 percent o f total employment in the affected districts of the two provinces, respectively. The largest job losses are in agriculture, trade (small businesses and shops) and construction. Given the lack o f adequate information on lost employment, these figures are extrapolated from various proxies: outputhousehold income losses in agriculture, and damages to shops, businesses, roads and transport.'2 No employment loss i s assumed for migrant workers and public sector employees. 8. It is important to make a distinction between loss o f employment and the population whose lives are affected by this loss. A preliminary estimate i s that the above loss in employment and the resulting income shock has affected around 1.64million people inthe quake-affected district^.'^ 9. Finally, given the high incidence o f remittances in affected areas, it i s also important to consider the possible impact o f the disaster on remittance flows and employment o f migrant workers. The inflow of remittances can also be an important element o f the coping strategy o f households, particularly in the context o f shocks suffered to other sources o f livelihood. Among households receivingremittances, there i s likely to be an impact on the flows, particularly if they rely on post offices and banks for transfer o f money.14 To the extent that households were relying on private networks to receive remittances, these networks also may have been temporarily disrupted. Employment losses among migrant workers are only likely inthe event that they have to return to their homes to help their families to rebuild. The net impact of this on livelihoods i s uncertain, since it i s equally likely that some o f the migrants may decide to relocate their entire families outside the affected areas. l2 These numbersshould be considered preliminary and rough, and are likely to mask loss infemale employment in household-based activities, w h c h are typically under-counted in survey data and even innational accounting. The estimates also imply linear extrapolation from output or capital losses to employment, which can be misleading, particularly inthe case o f subsistence agriculture. l3 Ths estimate is arrived at by applying the ratio o f total number of employed persons to total population in affected districts, as reportedby Census (1998). l4 According to the State Bank o f Pakistan, out o f 230 branches that were operational inthe affected areas before the earthquake, 200 that were affected have resumed operations, while 18 have beencompletely destroyed. 22 Table 1: EmploymentLosses by Provinceand Sector 112,798 51 57,027 B. Reconstruction and Recovery Needs 10. A disaster o f this magnitude that has affected a multitude o f public and privately owned assets critical for economic activity and employment, calls for a multi-sectoral approach. A livelihood rehabilitation strategy that i s focused on the most vulnerable households and enterprises among the affected communities will be most effective if complementedby adequate investments in the rebuilding of public infrastructure such as roads, post offices, schools, health clinics and provision o f housing. Since the disaster's impact i s not uniform across affected districts and communities within districts, the overall support for livelihood will need to ensure that no affected community i s left behind, which will be a significant challenge given the remoteness o f certain areas due to the mountainous terrain. The challenge inthe short-term will also be compounded by the onset o f winter, which will likely delay reconstruction o f permanent housing and infrastructure. 11. A livelihood support strategy should be geared towards the following objectives: (i) protecting the most vulnerable in the short-term; (ii) rejuvenating economic activity in affected areas - including reviving small businesses and trades and replacing assets lost in agriculture, including livestock; and (iii) creating employment opportunities for those permanently disabled by the earthquake by providing training and skills enhancement programs. 12. To protect the vulnerable, a viable short-term option i s the provision o f cash grants to affected families, in the form o f a monthly support o f a fixed amount. As the cash grants are phased out, those needing extended support, like widows and the disabled, should be integrated into the country's regular social assistance programs. Over time, cash for work programs can also be effective in generating temporary employment for those who are able and willing to work at an appropriate wage, along with rebuilding community infrastructure. However, given that such programs are not common in Palustan, a phased approach through pilots may be necessary to gauge participation in and benefits from such a program. 13. Generating sustainable livelihoods in a post-disaster situation will also require critical financing to replace lost productive assets, particularly for entrepreneurs inthe informal sector (like small shops and businesses) as well as livestock owners. This assistance can take the form o f expanding microJinance 23 coverage to include affected entrepreneurs and livestock owners; and extending grants to micro- entrepreneurs, particularly those who have experienced severe losses and have limited access to formal channels o f finance. Finally, the highincidence o f severe injuries, many o f which may lead to permanent disabilities, suggests an urgent need for a strategy to rehabilitate such individuals, through training in suitable vocations and employing community-based rehabilitation approaches. C. ProposedProgramComponents 14. Cash Grants: description, amount and eligibility: The primary component o f the ERC for livelihood support will be the cash grant program, in the form o f a monthly income support o f a fixed amount targeted to affected and vulnerable households, recurring over a period o f six months. The proposed program offers maximum utility to beneficiaries by allowing them the flexibility to acquire goods in accordance with their needs. Moreover, it can be implemented quickly - critical given the urgency o f the situation and the fact that the challenge o f providing emergency relief and the onset o f winter is likely to delay other forms o f livelihood support for a few months. Duringthis interim period, as experience in other countries has shown, cash grants can be effective in protecting the vulnerable, as well as helping regenerate local economies by creating purchasing power in affected areas. These grants are envisaged to commence around midto end January, by which time the immediate relief operations as well as the movement o f population to relief camps and temporary shelters are expected to stabilize. A waiver o f OP 12.00 (Disbursements) and OP 8.50 (Emergency Recovery Assistance) i s required to allow use o f IDA for cash grants including livelihood support. Managementhas granted this waiver 15. The livelihood support cash grants will complement existing cash compensations that are being provided by GOP to various categories o f affected households. These include one-time compensations o f Rs. 100,000 per death and Rs. 15,000-50,000 per injury (ranging fi-om minor to permanent injuries), and Rs. 25,000 for damage that results inunliveable housing. These payments are subject to a cap o f a total of Rs. 500,000 per household. The disbursements o f these compensations have been initiated and are expected to be completed by end o f December. 16. It is important to note that the above compensation schemes, by the very nature o f their objectives, are not substitutes for the livelihood support cash grant. Firstly,the latter will provide regular income support to also those who may not be eligible for the other compensations. This will include households who have not suffered deaths, injuries or permanent damage to housing, but are vulnerable to an income shock since they have lost their only source o f livelihood, like livestock, shops or employment. Even among those who are eligible for other types o f compensation, particularly ones who have lost their main income earner, livelihood cash grants will provide regular transfers over a period o f time to partly make up for losses inincome flow, which none o f the other payments will compensate for. 17. The proposed grant amount has been set taking into account what i s needed on the average to satisfy the basic necessities o f a household. The national poverty line for Pakistan provides the reference point for estimating such needs, since it represents the imputed cost o f attaining a minimum calorie requirement, along with other basic needs like fuel and c10thing.l~With this as a reference, the amount o f cash grant per household will be Rs. 3,000 per month. Inarriving at this figure, we assume that the food requirements for vulnerable households for the next six months will be largely met by direct food relief provided by various relief agencies, and an average family size o f 7 in affected areas. An amount o f l5 The official poverty line is Rs. 674 of monthly expenditure per equivalent adult at 1998-99 prices, w h c h i s equivalent to Rs. 816 monthly per capita at current prices. A certain share of t h s amount i s what is deemed necessary to attain the basic requirement interms of food only - estimated to be Rs. 457 at current prices (the "food component" is obtained by multiplyingthe poverty line with the average share o f food consumption expenditure among the poor). The difference between this amount and the poverty line - Rs. 359 per capita per month - i s the amount neededto meet basic needs, net offood. 24 Rs.2,520 is adequate to fully attain all basic needs net o f food for a family o f 7 members, which is the average household size in many affected areas.16 Rounding this number to Rs. 3,000 also allows households to supplement some o f their other expenditures, for example on fodder for livestock or any unmet food needs. 18. The above calculation rests on the assumption that food needs are adequately met by direct relief. The situationreport o fNovember 20 byUNOCHA suggests that currently only an estimated 60 percent o f the food needs of the affected population are being met. This situation will need to be reviewed before initiating the cash grants program, and the grant amount may be adjusted to reflect unmet food needs. 19. The primary principles for setting eligibility criteria for cash grants are: (a) the criteria should be simple and verifiable easily on the ground; (b) they must include all potentially vulnerable categories o f the earthquake-affected population; and (c) applying the criteria should not pose significant "transactions cost" or administrativeburden. 20. The eligible households will be drawn from households affected by earthquake, defined by a reasonable set o f criteria appropriately defined. This could include, for example, households that have been displaced due to housing damage or lost their main source o f livelihood (shopbusiness, livestock or agricultural land). 21, Depending on the extent o f damage suffered by each community or village, the cash grants will be targeted geographically or at the household level. Geographic targeting, namely assistance to all households living in the village, will be an option for areas that have suffered nearly universal damage. These are likely to be areas inclose proximity o f the epicentre or the fault line. Among villages that have suffered moderate damage, individual households will be targeted among those affected according to eligibility criteria that are easy to observe and simple enough for identification and validation. One option would be to target households affected by the earthquake who also have three or more dependents (children below age 18, disabled or seriouslv injured, elderly above age 55 and widows),. Such an eligibility condition appears to be reasonable since it will likely ensure that all potentially vulnerable and affected households will qualify for the program. Efforts are underway, through extensive field interviews in affected areas, to determine the viability o f implementing such eligibility criteria. Determination o f the exact eligibility criteria will be a condition for disbursement o f the project funds. 22. Cost of theprogram: Given that the damage assessment estimated an employment loss o f around 324,000, and the existence o f an expected overlap betweenhouseholds who have lost livelihood and those who have suffered damage to housing, death to an adult member or loss o f livestockkhop, the universe o f affected population i s estimated to comprise 500,000 household^.'^ Among these households, around 50 percent are expected to meet the criteria specified above, based on indicative evidence from household surveys (PIHS). The notional cost o f cash grants o f Rs. 3,000 monthly per household for 6 months for 250,000 households i s $75 million. Adding an implementation cost o f 13 percent (for data collection, monitoring and other administrative costs), the total budget for the Progam i s estimated to be US$85 l6According to HIES and PIHS through the 199Os, the average household size o f Pakistan i s a little over 6, and around 7 for NWFP. The figure o f Rs. 3000 per household per month i s then arrived at by taking a per capita amount o f about Rs. 430, whwh i s a little higher than basic needs net o f food (Rs. 359). l7 The figure of 500,000 affected households translates to approximately 3.5 million individuals (assuming an average household size o f 7), which i s consistent with the size o f the affected population quoted by the government and other sources. 25 million.18 It i s important to bear inmindthat these estimates o f affected and target households are rough, and as more informationbecomes available, the final cost o f the programmay have to be revised. D. ImplementationArrangements 23, The actual implementer o f the program will be the district administration o f each affected district inboth AJK andNWFP, with the provincial government of NWFP (GoNWFP) and government of AJK (GoAJK),andthe Federal government assuming policy-setting and oversight roles. 24. Delivery of cash grant: Given the urgent need to deliver cash grants by mid to late January, a concerted effort will be made to explore the viability o f using existing information collected in affected areas by district governments, for identifying households eligible for the first round o f payments. It appears that there are ongoing efforts to identify households who have suffered losses interms o f death, injuries, damage to housing and livestock, conducted by revenue officials like patwaris with the help o f Union Council members. Such existing information will have to be assessed for completeness and can form the starting point for assigning eligibility for household level targeting. 25. Inareaswhere individualhouseholdsare to betargeted, eligibility willbe determined through a community-driven process. This will entail forming committees at the level o f Union Council (UC), which will conduct community meetings (kacheri) in all affected villages to apply eligibility conditions transparently for identifying eligible households. A readily available option i s to use the existing committees formed to validate death and injury payments, with representation from UCs (in NWFP), army and the civilian administration. The UC level committee will be responsible for sending the eligible lists to the district administration, which will issue payments to eligible families. The above process may need to be modified for urban areas, where organizing public meeting may be difficult. In such cases the information can be collected by DCO/DC and other officials and validated by posting eligible lists at public places and local media. 26. In areas that have suffered extensive or near-complete damage, households are likely to be dispersed and traumatized to the extent that community driven identification o f eligible households will be difficult, which will render household level targeting impossible. Moreover, in such areas, all households are likely to be vulnerable, which will justify geographic targeting, namely distributingcash grants to all living inthese areas. 27. The process described above will not obviate the need to develop a database o f affected households with details on household characteristics and the exact nature o f losses suffered. In the absence o f such a database, the program will run the risk o f excluding deserving households, particularly those living intemporary shelters and relief camps far away from their place o f origin. The viability o f developing such a database and the suitable partner organization to conduct data collection i s being discussed and coordinated with ERRA, and currently being evaluatedthrough a pilot data collection effort inaffected areas. The full database canbe usedto cross-check and validate the eligibility list for the first payment. This will minimize exclusion and mis-targeting starting with the second round o fpayment. 28. Roles and responsibilities of different levels of government: The district administration (the relevant offices/departments, like the DCO/DC and the revenue department) will be responsible for coordination across Union Councils in forming committees, issuing payments, and oversight on the community validation process. Grievances that arise from the community validation process should be handledby a suitable office in the district administration, with clear rules for adjudicating any changes to the eligible list. The estimate o f 13 percent for program implementation i s in line with international experience with similar programs, keeping inmindthe challenging terrain insome of the areas affected by the earthquake. 26 29. The provincial government o f NWFP (GoNWFP) and Government o f AJK (GoAJK) will coordinate policy directions with the relevant Federal government agency; coordinate implementation across districts; announce date and mode o f delivery o f payments; and monitor program implementation. ReconstructionAgencies (RAs) will be set up in NWFP and AJK to assist each government in carrying out the above functions. In addition, the U s will be responsible for reporting regularly on the progress o f the program to the relevant international donors and government regulators. 30. At the Federal level, ERRA will be responsible for setting policy directions inconsultation with GoNWFP and GoAJK; broad budgetary allocations across the two governments; and monitoring and tracking payments to beneficiaries. Setting policy directions will include assigning the eligibility criteria and determining payment amounts and the duration (and phasingout) o fpayments. 31. Closer to the time o f implementation, a comprehensive Operations Manual specifying the complete eligibility rules, rules for validation and appeals process, and the accountabilities o f different tiers of government will be developed and agreed upon with the relevant government counterparts. 32. Delivering payments to beneficiaries: The system o f delivering payments should comply with some broad principles that are critical to ensure that the program serves to alleviate cash constraints. These include: (i) the flow o f funds down to the beneficiaries should be transparent and amenable to financial auditing; (ii) beneficiaries should be able to access the payments without high transaction cost, interms of dealing with intermediaries, travel time and cost; and (iii) that possessionof a National given Identity Card (NIC) i s required to access most government services, arrangements should be made to provide IDS to beneficiarieswho have lost their IDSor never hadthem. 33. The options for distributingpayments include banks and post offices. Usingthe banking network to distribute payments has the advantage o f being amenable to tracking and auditing o f payments and ensuring that the payments go to the intended individuals. However, since many of the poor households are unlikely to have transacted with banks in the past, it will be necessary to create bank accounts in the names o f all eligible householdheads. The current cash compensations by the government are in a large part being channelled through banks, which justifies a similar mechanism for the disbursement o f livelihood cash grants. In areas where banks are not easily accessible, post offices offer a viable alternative. In such cases, too, a mechanism for creating accounts inthe names of beneficiaries will need to be inplace. 34. It will be important to coordinate with NADRA before the first payments are issued. The NADRAdatabasecanprovide additionalinformationto validate the eligible lists, andthe use ofNICs can ensure that the payments are collected by the beneficiaries they are intended for. In addition, matching this database with the village list in the Population Census o f 1998 and the eligibility list for the first payment will help ensure coverage o f all villages. However, the coverage o f NICs may not be complete, especially for women, and many may have lost their IDSinthe earthquake. For such categories o f people who are also eligible for the cash grants, a system should be put inplace to validate identities and issue new IDS,before banWpost office accounts can be created. Moreover, in areas where mobility of women i s restricted by cultural factors, special outreach efforts will need to be made to ensure that beneficiaries who are women (for example, women-headed families) are registered into the system. E. Key Indicators, Monitoring and EvaluationArrangements 35. Monitoring and evaluation (M&E) i s especially important for cash grants, since it involves direct transfer o f money, which i s susceptible to leakage and misappropriation. Periodic monitoring will also informpolicy-makers on the need to make swift corrections, particularly when payments are not reaching the intended beneficiaries, or where there i s large-scale mis-identification and exclusion. 27 36. For process indicators highlighted below, monitoring arrangements will consist of the managerial monitoring by the RA and operational spot-checks by an independent agency to assess payment delivery. For managerial monitoring, the RA will have program monitors who will visit the communities to check the functioning of the delivery mechanisms. The operational spot-checks will be conducted at regular intervals by an independent agency to check the effectiveness o f the delivery mechanism. The independent monitors will produce periodic reports (after each payment) that will inform GoNWFP, GoAJK and the Federalagencies to adjust the operation o fthe program as necessary. 37. For impact indicators highlighted below, a beneficiary survey to assess mis-targeting, exclusion and the impact o f the program on vulnerability will be conducted after the program i s phased out. This will also informthe implications for the broader safety net programs o f the country, interms o f the groups that are especially vulnerable and may need continued support. The survey will be conducted on a sample basis at the household level, ensuring representation o f the population in affected areas. The assessment should be conducted by the Federal counterparts in partnership with an appropriate independent local institution and will be supported by the World Bank. Finally, the program will be subject to financial audits after each round o fpayment i s completed. Table 2: Indicators and Modalities for Monitoring Indicators Means of verification Process indicators: 0 No. of communitiesivillages reached 0Project reports from R4 0 No. o f families benefited ineach district 0Reports from operational spot-checks by 0 amount o f money collected by beneficiaries independent monitors 0 No. o f communities/villages where payments were delivered o n time No. o f grievances/appeals received by district andhow many have beenresolved Impact indicators: 0 Proportion o f eligible households not receiving Beneficiary survey, lSf 2 payments) and 2"d (after paments and proportion o fbeneficiaries who round (after 6 payments). are not eligible 0 Proportion o f affected families meetingtheir basic needs Proportion o f affected families who need fixther support after 6 months 28 APPENDIX111: IMPORT FINANCING A. Macroeconomic Effects OverallEffects 1. The earthquake caused extensive loss of life and physical damage. Immediate efforts focused on rescue operations and the humanitarianneeds o f survivors. Beyond the unquantifiable human cost and in addition to relief costs, the Preliminary Damage and Needs Assessment placed the cost o f reconstruction at US$3.5 billion, or nearly 4 percent o f Pakistan's 2004/05 GDP. Part o f these reconstruction costs will fall on the private sector and households. However, the major share o f reconstruction costs will fall on the Government o f Pakistan for two main reasons. First, there i s widespread destruction o f public social and physical infrastructure in the affected area, which will have to be rebuilt with Government funds. Reconstruction cost o f rebuilding these assets and services i s projected at US$1.5 billion. Second, households in the affected areas are poor, and will require government assistance to rebuild their livelihoods and homes. The level o f this public assistance to households will be assessed by the Government o f Pakistan, taking into consideration criteria o f affordability and consistency with macroeconomic stability. 2. The earthquake will have an adverse impact on the economy, most notably on the fiscal deficit o f the Government o f Pakistan. In the absence of any offsetting revenue increases and expenditure reductions, fiscal deficits during FY06-08 year could increase by as much as 0.6 to one percent o f GDP per year. However, the Government has already stated that, in view o f the emergency created by the earthquake, it would be revisiting overall expenditure levels and composition with a view o f reallocating some less-priority spending towards reconstruction and rehabilitation o f affected areas. The government i s also considering implementing measures to enhance own revenue mobilization. The Governments o f NWFP and AX'S budget will be unable to accommodate a significant share o f the relief and reconstruction expenditure, although it would be expected and desirable that they would have significant role inreconstruction. 3. The impact o f the earthquake on Palustan's official GDP (which excludes GDP from A X ) i s expected to be relatively small, inthe order o f 0.4 percent. FY06 GDP growth was projected inJune at 7 percent; however, recent data on the outcome o f the cotton and sugarcane suggests that growth will be around 6.5 percent. The additional impact o f the earthquake i s likely to bring output growth further down, to around 6.1 per~ent.'~This loss i s due to a projected reduction inNWFP output for FY06. In addition, the output loss in A X could amount to Rs. 76.4 billion (US$297 million), or 27 percent of AX'S2004-05 output. As reconstruction activity starts, the impact on GDP growth could actually be positive, and will be felt mostly inFY07 andFOX. 4. The earthquake has now created additional expenditure needs for relief, reconstruction, and rehabilitation costs. These pressures could pose difficulties for Palustan's macroeconomic balances and may undermine the achievement o f its long-term development goals, unless additional concessional financing i s made available by the international community. A key element of the Palustan's PRSP i s the utilization o f the additional fiscal space created by prudent fiscal policy and aid to meet development and poverty alleviation objectives. It is, therefore, important that priority public expenditures be protected so that Palustan can continue to improve service delivery o f health, education, and public infrastructure. The Government has indicated that it would be prepared to absorb a part o f the budgetary impact o f the earthquake by making cuts in low-priority expenditures and raising additional domestic revenue. These This assumes that all of the income loss will fall inFiscal Year 2005/06, an assumption that may overstate the impact o f the earthquake on growth. 29 adjustments would be needed irrespective o f the amount and type o f financing that the donor community provides. However, given the magnitude o fresources for rehabilitation o f the affected areas, it i s unlikely that the government will be able to fully absorb the fiscal impact o f the earthquake without significantly affecting public sector development activities. Real Sector 5. Pakistan's economy has undergone a rapid recovery in the last five years, after a decade o f political instability, macroeconomic crisis, and limited economic and social progress. Pakistan i s now one o f the fastest-growing economies in Asia. This remarkable turnaround in the economy has been triggered by an ambitious program o f economic reforms and institutional strengthening, which has gathered pace inrecent years. For a third consecutive year, output has grown strongly, with GDP growth o f 8.4 percent for the fiscal year ending in June 2005. Strong domestic demand has boosted industrial growth in the automobiles, fertilizer, and consumer durable sub-sectors. The agricultural sector has grown by 7.5 percent inthe fiscal year ending 2005, and it has been driven by bumper cotton and wheat crops. The services sector grew on average 7.9 percent inthe same period. Exports have expanded at a higher rate than output. Private sector response to these developments has been impressive, and is seen in the rapid take up of excess capacity inmanufacturing, acceleration o f exports, and substantial investment intextiles, banking, andtelecommunications. 6. Over the short-run, the growth momentum i s unlikely to be significantly influenced by the earthquake as the affected regions account for a very small part o f the country's GDP. As shown in Figure 1, the two affected regions, NWFP and AJK, account for only 10.3 and 1.5 percent o f national output respectively. The affected districts inNWFP and AJK account for a small share o f national GDP, or 1.5 and 0.8 percent, respectively. As only a part o f the output inthese districts is likely to be lost due to the earthquake in the foreseeable future, the overall impact o f the disaster on GDP growth i s likely to be small. Over the medium-term, a second-round effect can be expected as soon as reconstruction activities start, and will translate into a stimulus to economic growth. Figure 1: Output Originatingfromthe AffectedRegions andDistricts,billionsof $US PO - 105 Nationaloutputoriginating from theaffectedareas NWP AJK I FourProvincesandAJK AffectedRegions AffectedDistricts FourProvincesandAJK Source:World Bank staff estimate. 7. While the affected areas will experience a significant dip in output, the impact on output at the provincialhtate and national level will not be large. Growth at the national level is expected to decline by 30 0.4 percentage points in 2005/06.20 At the sub-national level, output losses in the affected areas most severely hit by the earthquake are estimated to account for 3.6 percent o f the province's output inNWFP and 27 percent in AJK. Within the affected districts, output losses inAJK are severe, accounting for 52 percent o f GDP o f the state, and moderate inNWFP, where 25 percent o f output i s likely to be lost due to the earthquake (see Figure 2) Figure2: Output Losses at the Nationaland Sub-national Level 60%1 I I I Fromthe Districts'GDP PerspectiveofAffected Fromthe Perspectiveof Fromthe Perspectiveofthe National ProvincdState'sGDP Economy Source: WE?Estimates. Effects on Inflation 8. There have been localized spikes in commodity prices in the areas affected by the earthquake. These are expected to decline over the next few months. Once reconstruction starts, there will be further pressures on inflation, as the recovery will further contribute to aggregate demand. Hence, there will be a need for a monetary policy geared towards containing inflation, inthe absence o f which average inflation inFY06couldreachdouble digits, hurtingthe poor disproportionately. Effects on the External Sector 9. Pakistan's trade balance i s projected to deteriorate during the on-going fiscal year. Although exports have performed better than expected, imports have grown much faster than exports, and as a result, the trade deficit has widened. Although both remittances and foreign direct investment have shown healthy increases during the first three months o f the current fiscal year, these have only partly neutralized the pressure on the current account. As a result, during July-October 2005, gross official reserves have declined by $0.8 billion, to $9.2 billion. 10. The earthquake may affect export performance negatively, should migrant workers from the earthquake affected areas employed in textile and other export-oriented firms not return to their place o f work. The other potential impact on exports could arise from a diversion o f cement and other exports towards reconstruction and rehabilitation activities. In any event, the overall impact on exports is expectedto be limited, and exports are projected to continue growing rapidly throughout this fiscal year. 2o Loss in output i s derived by estimating the labor and capital input losses using a stylized Cobb-Douglas production function. 31 11. The more significant pressure on the balance o f payments, however, will come from import demand, which was already very strong before the earthquake. Reconstruction and rehabilitation needs will have some additional impact on import demand, due to higher demand for fuel, cement, steel and other construction materials and machinery, temporary shelters, medicines and other related goods and services. The overall increase in imports over the next two and half years i s estimated to be around U S $ 1.1billion (see Table 1);' o f which about 50%-60% i s expected during the current fiscal year. This, in addition to the strong import growth arising from an overheating economy, will place an additional strain on foreign exchange reserves. Table 1: RecoveryandReconstructionRelatedImports (US$ million) Commodities alue Fuel 500 Steel 334 Cement 53 Other Construction Material 63 Construction Machinery 100 Others Goods and Services 50 Total 1,100 Source: World Bank staffestimates. 12. To help the Government meet its immediateneeds, the World Bank has already made available to the government US200 million o f quick-disbursing, concessional credits. Even with this immediate assistance, a sizeable financing gap will remain in the balance o f payments. Additional donor assistance and actions by the monetary authorities would be required to overcome the impact o f earthquake on Pakistan's balance o fpayments (see Table 2). B. ProposedProgramComponents 13. The proposed Emergency Recovery Credit would assist the Government o f Palustan in early reconstruction and rehabilitation o f the earthquake-affected areas while maintaining macroeconomic stability by financing critical imports related to reconstruction and rehabilitation o f earthquake affected areas. The proposed Import Financing Component would help to provide foreign exchange to finance imports o f a positive list o f items (Attachment I). This component would, inter alia, help finance reconstruction and rehabilitation related imports, which, in turn, will lead to an early reconstruction and rehabilitate assets and restore economic activity while mitigating pressure on the balance o f payments. This component ofthe Credit will finance the import of: (i) adequate supplies o f fuel and petroleum products, cement, steel and other construction material; and (ii) construction and earth-moving machinery and spare parts to assist in reconstruction o f affected areas. 21This estimate is based on the calculations which show that 48.3% o f the over all reconstruction cost is related to reconstruction and repairs o f buildings and structures. Of this cost, 70% cost i s due to materials, with cement, steel and other materials having a share of 21%, 23% and 26%, respectively. Itis assumed that 40%, 50% and 10% o f the additional demand for cement, steel and other material need to be met through imports so as to minimize the impact on other construction activities and maintaining stable prices o f these materials. Estimates are other imports are based on information available from official and non-official sources. 32 Table 2: Pakistan Summary Balance of Payment - (US$ million) Trade Balance -1,208 -4,353 -6,353 -7,096 -7,694 -8,515 Exportsf.0.b 12,396 17,389 21,21 20,694 Importsf.0.b 13,604 18,724 23,742 24,341 29,209 Services(net) -3,594 -6,312 -6,515 -5,212 PrivateTransfers 6,116 8,555 9,067 9,069 o/w Workers Remittances 3,871 4,012 4,515 4,730 Current Account Balance 1,314 -1,776 4,110 -4,658 LongTerm Capital (net) -39 1,633 2,820 4,526 BalanceRequiringOfficial Financing 1,275 -143 -1,290 -1,501 244 -132 Official Assistance & DebtRelief 51 855 1,766 1,766 2,581 2,581 Overall Balance 1,326 712 476 265 2,825 2,448 IMF(net)/FCDslOutstandingbills -915 -496 -450 -450 -610 FinancingGap 411 216 26 -185 2,215 1,838 ImportFinancingfrom IDNADB 0 0 0 0 Memo items: Current account(as a %of GDP) 1.4 -3.2 -3.4 Exportsf.0.b. (growthrate, percent) 13.8 15.9 21.0 20.0 22.0 20.0 Importsf.0.b. (growthrate, percent) 20.1 37.6 26.8 21.8 20.0 ForeignExchangeReserves(US$ m) 10,621 9,985 10,011 9,800 11,866 11,638 (Inmonthsofnextyear imports) 5.0 3.8 3.3 3.2 3.9 3.2 Earthquake-relatedimports (US$ m) _ _ -- 0 600 0 300 Source: GoP (Ministryof Fmance) and WorldBankstaffcalculations. 14. The size o f this component (US$S5 million) i s determined on the basis o f the staff assessment o f the adverse impact o f the earthquake on the country's macroeconomic balances and on the expected aid from other sources. 33 Attachment I LIST OF PERMISSIBLEIMPORTS No. Code Description I. ListofGeneralImportsforRehabilitationandReconstruction 1. 232 Natural rubber latex; natural rubber and similar natural gums 2. 233 Synthetic rubber latex; synthetic rubber and reclaimedrubber; waste and scrap o f unhardened rubber 3. 244 Cork, natural, raw and waste (including natural cork inblocks or sheets) 4. 245 Fuel wood (excluding wood waste) andwood charcoal 5. 246 Pulpwood (including chips and wood waste) 6. 247 Other wood inthe rough or roughly squared 7. 251 Pulpand waste paper Except: 251.1Waste paper andpaperboard; scrap articles o fpaper or o fpaperboard fit only for use inpaper-making 8. 263 Cotton 9. 264 Jute and other textile bast fibres, raw or processedbutnot spun; tow and waste thereof (including pulled or garneted rags or ropes 10. 265 Vegetable textile fibres (other than cotton andjute) and waste o f such fibres 11. 266 Synthetic fibres suitable for spinning 12. 267 Other manmade fibres suitable for spinning and waste o fmanmade fibres 13. 268 Wool and other animal hair (excluding wool tops) 14. 273 Stone, sand and gravel 15. 281 Iron ore and concentrates 16. 287 Ores and concentrates o fbase metals, n.e.s. 17. 288 Nonferrous base metal waste and scrap, n.e.s. 18. 322 Coal, Iignite andpeat 19. 323 Briquettes; coke and semi-coke o f coal, lignite or peat; retort carbon 20. 333 Petroleumoils, crude, and crude oils obtained from bituminous minerals 21. 334 Petroleumproducts, refined 22* 335 Residualpetroleumproducts, n.e.s. and related materials 23. 511 Hydrocarbons 24. 5 14 Nitrogen-function compounds 25. 515 Organo-inorganic and heterocyclic compounds 26. 516 Other organic chemicals 27. 522 Inorganic chemical elements, oxides and halogen salts 28. 523 Other inorganic chemicals; organic and inorganic compounds o fprecious metals 29. 531 Synthetic organic dyestuffs, etc., natural indigo and colour lakes 30. 532 Dyeing and tanning extracts, and synthetic tanning materials, excluding cadmium containing compounds 31. 533 Pigments, paints, varnishes and related materials, excluding cadmium containing compounds 32. 582 Condensation, polycondensation and polyaddition products, whether or nor modified or polymerized, and whether or not linear (e.g., phenoplasts, aminoplasts, alkyds, polyallyl esters and other unsaturated polyesters, silicones) 33. 583 Polymerization and copolymerization products (e.g., polyethylene, polytetrahaloethylenes, polyisobutylene, polystyrene, polyvinyl chloride, polyvinyl 34 acetate, polyvinyl chloroacetate and other polyvinyl derivatives, polyacrylic and polymethacrylic derivatives, coumarone-indene resins) 34. 584 Regenerated cellulose; cellulose nitrate, cellulose acetate and other cellulose esters, cellulose ethers and other chemical derivates of cellulose, plasticized or not (e.g., collodions, celluloid); vulcanized fibre 35. 585 Other artificial resins and plastic materials 36. 651 Miscellaneous chemical products, n.e.s. 47. 612 Manufactures of leather or o f composition leather, n.e.s.; saddlery and harness; parts o f footwear, n.e.s. 38. 621 Material o frubber (e.g., pastes, plates, sheets, rods, thread, tubes, of rubber) 39. 625 Rubber tyres, tyre cases, interchangeable tyre treads, inner tubes and tyre flaps, for wheels o f all kindsExcept: (1) 625.12 Tyres, pneumatic, new, or fubber, for racing cars 40. 628 Articles o f rubber, n.e.s. 41. 633 Cork manufactures 42. 634 Veneers, plywood, 'improved' or reconstituted wood, and other wood, worked, n.e.s. 43. 635 Wood manufactures, n.e.s. 44. 641 Paper and paperboard 45. 642 Paper andpaperboard, cut to size or shape, and articles o fpaper or paperboard 46. 651 Textile yam 47. 653 Fabrics, woven, of manmade fibres (not including narrow or special fabrics) 48. 658.1 Sacks and bags, o ftextile materials, o f a kindusedfor the packing of goods 49. 661 Lime, cement, and fabricated construction materials (except glass and clay materials 50. 662 Clay construction, materials andrefractory construction materials 51. 664 Glass 52. 671 Pigiron, spiegeleisen, sponge iron, ironor steel powders and shot, and ferroalloys 53. 672 .Ingots and other primary forms, o f iron or steel 54. 673 Iron and steel bars, rods, angles, shapes and sections (including sheet piling) 55. 674 Universals, plates and sheets, o f iron or steel 56. 675 Hoop and strip, or iron or steel, hot-rolled or cold rolled 57. 677 Iron or steel wire (excluding wire rod), whether or not coated, but not insulated 58. 678 Tubes, pipes and fittings, o f iron or steel 59. 679 Iron and steel castings, forgings, and stampings inthe rough state 60. 682 Copper 61. 683 Nickel 62. 684 Aluminum 63. 685 Lead for construction purposes 64. 686 Zinc 65. 687 Tin 66. 689 Miscellaneous nonferrous base metals employed inmetallurgy, and cermets 67. 691 Structures and parts o f structures, n.e.s., o f iron, steel or aluminum 68. 692 Containers for storage and transport 69. 693 Wire products (excluding insulatedelectrical wiring) and fencing grills 70. 694 Nails, screws, nuts, bolts, rivets and the like, o f iron, steel or copper 71. 695 Tools for use inthe hand or inmachines 72. 697 Householdequipment o fbase metal, n.e.s. 73. 699 Manufactures o fbase metal, n.e.s. 74. 711 Steam and other vapour generating boilers, superheated water boilers, and auxiliary plant for use therewith; and parts thereof, n.e.s. 75. 712 Steam or other vapour power units, whether or not incorporating boilers (including mobile engines but not steam tractors, steam road rollers, or steam rail locomotives); and parts thereof, n.e.s. 35 76. 713 Internal combustion piston engines and parts thereof, n.e.s. Except: 713.2.5- Engines, piston, internal combustion, for annoured fighting vehicles 77. 716 Rotating electric plant andparts thereof, n.e.s. 78. 718 Other power generating machinery and parts thereof, n.e.s. Except: 718.7- Nuclear reactors, and parts thereof, n.e.s. 79. 721 Agricultural machinery (excluding tractors) andparts thereof, n.e.s. 80. 722 Tractors (other than those falling withinheadings 744.11and 783.2), whether or not fitted with power take-offs, winches or pulleys 81. 723 Civil engineering and contractors' plant and equipment andparts thereof, n.e.s. 82. 726 Printingandbookbinding machinery, andparts thereof, n.e.s. 83. 728 Other machinery and equipment specialized for particular industries, and parts thereof, n.e.s. Other machinery and equipment specialized for particular industries, and parts thereof, n.e.s. 84. 736 Machine-tools for workmg metal or metal carbides, and parts and accessories thereof, n.e.s. 85. 737 Metalworking machinery (other than machine-tools), and parts thereof, ne.s. Metalworkmg machinery (other than machine-tools), andparts thereof, n.e.s. 86. 741 Heating and cooling equipment and parts thereof, n.e.s. Except: (i) 741.31.10 Furnaces, electric, for separation or recycling o f irradiated nuclear fuels or for treatment o f radioactive waste; (ii)741.31.38 Ovens, non-electric, for separation or recycling o f irradiated nuclear fuels or for treatment o f radioactive waste; (iii) 741.32.14 Furnaces, non-electric, for separation or recycling o f irradiated nuclear fuels or for treatment o f radioactive waste; (iv) 741.32.34 Ovens, nonelectric, for separation or recycling o f irradiated nuclear fuels or for treatment o f radioactive waste; (v) 741.5 Air conditioning machines, self-contained, comprising a motor-driven fan and elements for changing the temperature and humidity o f air, andparts thereof, n.e.s. 87. 742 Pumps (including motor and turbo pumps) for liquids, whether or not fitted with measuring devices; liquidelevators o fbucket, chain, screw, band and similar kinds;parts, n.e.s. o f such pumps and liquid elevators Pumps (including motor and turbo pumps) for liquids, whether or not fitted with measuring devices; liquid elevators o f bucket, chain, screw, band and similar kinds;parts, n.e.s. o f such pumps and liquidelevators 88. 743 Pumps (other than pumps for liquids) and compressors; fans and blowers; centrifuges; filtering and purifyingapparatus; and parts thereof, n.e.s. Except: (i) 743.5.1 Centrifuges for separating uranium isotopes, (ii) 743.5.2 Centrifuges for separation or recycling of irradiatednuclear fuels or for treatment o fradioactive waste 89. 744 Mechanical handling equipment, and parts thereof, n.e.s. 90. 745 Other non-electrical machinery, tools and mechanical apparatus, and parts thereof, n.e.s. Except: 745.24 Automatic vending machines (e.g. stamp, cigarette, chocolate and food machines), not being games o f skill or chance; and parts thereof, n.e.s. 91. 747 Taps, cocks, valves and similar appliances for pipes, boiler shells, tanks, etc. (including pressure and temperature controlled valves) 92. 749 Non-electric parts and accessories of machinery, n.e.s. 93. 751 Office machines 94. 764 Telecommunications equipment, n.e.s.; and parts, n.e.s., and accessories o f apparatus falling withintelecommunications, etc. 95. 771 Electric power machinery (other than rotating electric plant o f heading 716), and parts thereof, n.e.s. 96. 772 Electrical apparatus for making and breakmg electrical circuits, for the protection o f electrical circuits, for malung connections to or in electrical circuits (e.g., switches, relays, fuses, lightning arresters, surge suppressors, plugs, lamp holders and junction boxes); resistors, fixed or variable (including potentiometers), other than heating 36 resistors; printed circuits; switchboards (other than telephone switchboards), and control panels, n.e.s.; parts, n.e.s. o f the foregoing apparatus. Except: 772.3.3 Dimmers, light, theatre 97. 773 Equipment for distributingelectricity 98. 778 Electrical machinery and apparatus, n.e.s. Except: 772.85 Particle accelerators, and parts thereof, n.e.s. 99. 782 Motor vehicles for the transport o f goods or materials for Earthquake rehabilitation and reconstruction 100. 784 Parts and accessories, n.e.s. o f the motor vehicles falling within heading722 and 782 101. 786 Trailers and other vehicles, not motorized, n.e.s. and specially designed and equipped transport containers Except: (i)786.12.2 Library-trailers (ii)786.12.3 Limbers, ammunition, annoured or not (iii) 786.12.9 Trailers, exhibition (iv) 786.12.13 Trailers, furniture-removal (v) 786.81other vehicles, not mechanically propelled 102. 812 Sanitary, plumbingand heating fixtures and fittings, n.e.s. 103. 821 Furniture and parts thereof; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings 104. 872 Instruments and appliances, n.e.s., for medical, surgical, dental or veterinary purposes 105. 873 Meters and counters, n.e.s. 106. 874 Measuring, checking, analyzing and controlling instruments and apparatus, n.e.s.; parts and accessories n.e.s. of the instruments and apparatus o f groups o f 873 and 874 Except: 874.52-Instruments, apparatus or models, designed solely for demonstrational purposes (e.g., in education or exhibition), unsuitable for other uses 107. 892 Printedmatter 108. 893 Articles, n.e.s. o f plastics 109. 895 Office and stationery supplies, n.e.s. 11.Sector Related Importsfor the Project 1. Community and householdrainwater tanks, fittings, fixtures, and rainwater harvesting pipingand harvestingequipment 2. Desludging equipment, pumps, trailers and associated fixtures 3. Materials for the construction o f sludge dryingbeds 4. Community and householdseptic tanks 5. Sanitary and plumbingfixtures and fittings 6. Solid waste management equipment for coping with debris, including glass and wood cutters, composters and compactors. Solid waste management equipment for coping with debris, including glass and wood cutters, composters and compactors. 7. Communal solid waste bins 8. Plumbingandrainwater harvesting tools and installation o f solid waste management equipment. 9. Seed 10. Farming tools 11. Fishprocessingequipment 12. Urgent Purchase and import o fhelicopter fuel for use by the helicopters involved inthe relief and rehabilitation operations 37 I-- B. ProposedComponent 3, Given the above implementation arrangements, the proposed component for capacity building consists o f two sub-components to: (i) current capabilities at all levels o f government and in all expand sectors to effectively plan, implement, and supervise reconstruction activities; and, (ii) support the GOP's hazard risk management capacity to deal with and mitigate the risks o f future disasters. a) Institutional Implementation Capacity Building: This sub-components would support (i) provision o f human resources and consultancy inputsat the federal, provincial, and district levels; (ii)continuous social impact assessments and thirdparty evaluations; (iii) and delivery o f design training programs on financial management and streamlined implementation processes; (iv) the provision o f information technology connectivity and the establishment and/or improvement o f management information systems (MIS); (v) facilities upgrade, including infrastructure, office supplies and neededvehicles, and development o f a communication strategy. i) Human Resources: The human resource capacity o f the key agencies involved in the implementation activities-ERRA, NWFP/AJK Reconstruction Agencies, District Reconstruction Units, as well as the line departments/district offices-will be enhanced through the recruitment o f qualified technical personnel, such as planning specialists, implementation specialists, financial management specialists, procurement specialists, monitoring specialists, M I S specialists, etc. It will also support the contracting o f NGOs for capacity augmentation. In addition, environmental engineers and social experts will be hired to ensure proper social and environmental management actions are taken during reconstruction. Staffing arrangements will be fine-tuned according to the implementation needs. ii) Social Impact Assessment and thirdparty evaluation: To address social issues raisedduring the reconstruction and rehabilitation period, a continuous social impact assessment (CSIA) will be undertaken to facilitate the articulation o f community perceptions, grievances and feedback. The CSIA will help monitor the social dimensions o f the emergency recovery program and flag potential risks. Through direct interaction with beneficiary communities, it will carry out an independent evaluation o f program implementation and distribution of program benefits. The CSIA study will monitor the impact o f the program and help initiate necessary mitigation measures. The GOP/ERRA will contract independent research institutions to undertake the CSIA, and the reports will be distributed as to the relevant federal, provincial, and district stakeholders, as well as to fundingpartners and the public. In addition, to ensure quality o f reconstruction and rehabilitation interventions, independent thirdparty evaluations will be undertaken. iii) Training:Inordertodeveloptheskillsofexistingandnewstaffwitheachoftherelevant implementation agencies, IDA will finance training programs on topics such as procurement, financial management, information technology and MIS, operations management, communications, and monitoring and evaluation. iv) Information Technology and Management Information Systems: Information technology (IT) systems would need to be put in place for communication and coordination among various levels of government, as well as for reporting and monitoring o f on-going programs. An MIS would need to be set up, or where it exists to be strengthened, to provide a platform for collecting and disseminating information on program implementation across the districts, The information technologyMIS sub-component also aims to strengthen information management capacity and knowledge-sharingboth horizontally and vertically among ERRA and the provincial and district governments. The MIS will also allow for standardization o f program reporting and monitoring between ERRA and ProvincialDistrict Reconstruction 39 Units and between sectors. To facilitate this information technology program, IDA will provide funding for IT staff costs, software and database management, and IT hardware. Infrastructure and Facilities Upgrade: Alongside the soft components needed for implementation capacity building, hardware - such as office supplies and furniture, computers, software packages, vehicles, and other office infrastructure - would be provided as needed. This component encompasses overhead expenses, including rent, utilities, and other routine costs. Communications Strategy: The Government faces a huge challenge o f determining and channeling the appropriate compensation to affected persons, and communicating details o f policies, awards and entitlements to affected parties inthe best possible way, and to decrease the level o f uncertainty among affectedpopulation; sharing knowledge and buildingtechnical capacity in all affected areas; facilitating and coordinating civil society and donor interventions; ensuring inclusion o f and justice to marginalized sections. These complex requirements would necessitate a continuous, multi-dimensional exchange o f information and technical expertise among the Government, affected populations, civil society partners, and secondary stakeholders, as well as a credible and transparent monitoring and vigilance mechanism. To deal with these issues, a Communication Strategy i s needed to enable the government to deal with these multiple demands. The Desired Outcomes o f the strategy include: consistent flow o f information provided to support coordination among multi- stakeholder, multi-donor activities; sustained and balanced focus maintained on the Project by government policymakers and implementation teams, media, donors and NGOs during each phase to enable sustained focus on the relief, recovery and rehabilitation program and to avoid overlaps and gaps; lessons documented to benefit future interventions. Specific activities here could include: Develop a communications and advocacy strategy to facilitate information exchange and discussion o f key issues; interview stakeholders, review background papers; include provisions for mobilizing and training, elements incivil society who can be effective and credible messengers to different target groups. Develop a list o f resource persons with expertise in these areas and serve as interface betweenmedia and experts for interviews, backgroundbriefings etc.; Facilitate coordination o f and synergy among the activities related to the rehabilitation and recovery o f the involved agencies; facilitate Government's coordination mechanisms to ensure synergy among the interventions o f all partners; Identify potential partners for implementing programs that will supplement government efforts; Identify and dialogue with media; identify sites for media personnel to visit for a more in-depth understanding o f issues and facilitate visits; Document and supervise documentation (written and AN) o f successful intervention stories and lessons learnt. b) Capacity Buildingfor Hazard Risk Management: Palustan i s subject to a number o f natural hazards, o f which flooding, earthquakes, cyclones and droughtheat waves are the most significant. Floods, droughts and landslides in Palustan tend to be frequent, seasonal, and localized. The snowmelt from the high mountains coinciding with the monsoon season leads to very large discharges o f the Indus River and its tributaries, resulting in annual floods. The earthquake hazard in Pakistan i s also high and derives from Pakistan's position on the eastern margin o f the collision o f the Indianplate with the Eurasianplate. The poor and most vulnerable 40 social groups are often the worst affected by disasters; the cumulative impacts o f disasters perpetuate the cycle o f poverty, as the poor tend to have few options for restoring lost assets and reviving their livelihoods. Given its social and economic vulnerability to natural disasters, it i s essential that Pakistan improves its approach to hazard risk management, and shift focus from emergency response to disaster prevention, through a comprehensive hazard risk management approach. The capacity buildingprogram inthis regardwill include the following activities: i) Multi-hazard vulnerability and risk assessment: Risks from perils such as floods and droughts are to some extent known, but mapping o f other hazards, particularly o f seismic zoning and landslides, needs to be updated. A multi-hazardvulnerability and risk assessment study at the national level will be undertaken to identify areas at risk o f severe damage from future disasters. This would be the basis for developing a long term riskmitigation strategy. ii) Reviewof emergencypreparednessmechanisms. Acomprehensivereviewoftheexisting hazard risk management system in place with emphasis on the emergency response and preparedness mechanisms will be carried out by a team o f local and international consultants in consultation with relevant government agencies and representatives from the provincial, district and tehsil levels. The review will present the current situation and then provide various solutions for possible implementation, ranging from the national to the local level. The study will include a focus on development o f a clear-cut strategy for emergency preparedness and response at the national level, which builds upon existing entities and mechanisms already in place. In addition, the study will recommend an approach to strengthen civilian hazard risk management mechanisms and emergency response as a complement to military involvement. The study will take into account lessons and experiences o f recent relief and recovery coordination as well as different systems from other countries to help determine the most effective model for Pakistan. iii) Development of a National Emergency Management Plan. It is envisaged that the development o f a National Emergency Management Planwould clarify roles, responsibilities, and streamline coordination across administrative levels and various stakeholders. This activity would entail several consultant workshops during the course o f preparation. The formulation o f the national Emergency ManagementPlan would then lead to the development o f emergency plans at the provincialhtate as well as district levels. iv) Country catastrophe riskflnancing strategy: This study will design a country risk financing strategy to finance any potential resource gap between available ex post budget resources and post-disaster finding needs. Such a strategy will provide the country with liquidity immediately following natural disasters. It could rely on reserves to finance frequent but not severe hazards (e.g., with a return period o f 5 years or less), contingent credit facilities to finance the mezzanine layer o f risk (e.g., events with return periods between 5 and 20 years), and (parametric) insurance and/or catastrophe bond to finance the upper layer o f risk (e.g., events with return periods higher than 20 years). 41 APPENDIX V: SOCIAL PROTECTION A. Key Issues andImpact 1. The earthquake has devastated AJK and the NWFP, already among the poorest and most vulnerable areas o f the county. Official numbers show that more than 73,000 people have died in the earthquake, an estimated 2.8 million people have become homeless and 1.5 million have lost their jobs. Many families have thus lost their main income earners, become widowed, and many children have lost one or both o f their parents. The earthquake has also ledto physical and psychological disability.22 2. Disability. An estimated 70,000 people were injured in the earthquake, and a large number o f individuals (currently estimated to be as highas 10,000) have become permanently disabled due to spinal injuries and amputations. Many individuals are also suffering from post-traumatic stress and other disorders brought on by the loss o f their families, communities andjobs. The absence o f rapid medical care i s compounding disability problems as wounds are becoming infected, with the potential for further amputations. The disabled will require emergency psycho-social and physical rehabilitation services. Community awareness and acceptance o f disability in the region i s limited, and the disabled often suffer social stigma. Concerted action will be required to increase public information and education about the disabled, and considerable efforts will be needed to integrate disabled into health and education services, workfare and other social safety nets, and employment. 3. Orphans. While accurate numbers are not available, an estimated 10,000 children have lost one or more family members inthe earthquake. Inmany cases, extended families, often poor and inneed o f financial support, are takmg care o f orphaned children. But some children have lost contact with their family networks or have no remaining families. Some o f these children who are in shelters will require placement with families intheir communities or regions and post placement follow up care and support. Children who remain in shelters will require counseling as well as financial or in-kindsupport to ensure that their basic needs, including food, clothing, education and health needs are met. 4. Unemployed. Many households have lost their main sources o f income as a result o f the earthquake, and need immediate temporary work as a form o f income support until their economic circumstances stabilize. Households headed by women who have lost their main income support are particularly vulnerable to long term poverty. Post traumatic stress disorders are becoming further exacerbated by lack o f gainful employment. Individuals with minor disabilities will also need temporary work to assist them inreintegratinginto economic activity. 5. Formal social protection support i s provided by the Ministry and Provincial Departments o f Social Welfare. This support includes cash transfer programs, programs for the rehabilitation o f disabled, child labor and poor vulnerable women. However, the coverage and capacity o f these programs to reach the poor i s very limited. Aside from public programs, a number o f non-government organizations are already involved inthe provision o f services to vulnerable groups. ~~ 22The exact numbers o f vulnerable groups are not well known, but data gathering efforts are underway to determine the exact magnitude o f affected groups. 42 B. The SocialProtectionComponent 6. The component would finance social welfare and care services for vulnerable groups through performance based contracts with NGOs and other service providers for: (1) psycho-social counseling support and rehabilitation services; (2) support for placement and follow-up care for orphans and unattended children; and (3) temporary employment o fvulnerable groups. Community Based Psycho-Social and Physical Rehabilitation Servicesfor Disabled 7. This component will finance psycho-social and physicalrehabilitation services to be provided in temporary community based centers and via their mobile units. 8. Psycho social support services will include counseling services for individuals suffering from post-traumatic shock and disorders. This sub-component will finance professional psycho-social support services (e.g. doctors, psychologists, social workers, and volunteers), rapid training for community volunteers, mobile units, and basic equipment for temporary care centers. 9. Physical rehabilitation services will include rehabilitation and physiotherapy for the disabled. This sub-component will finance prosthetics (e.g. artificial limbs), orthotics, (wheelchairs, crutches,) physiotherapy and rehabilitation services (professional providers and volunteers), rehabilitation and physiotherapy equipment, rapid training for community volunteers in rehabilitation, mobile units, and basic equipment for centers. 10. Social awareness through public information and education. The component will finance public awareness education and training regarding the inclusion o f vulnerable groups into socio-economic activity. Placement and Follow Up Carefor Orphans and Unattended Children 11. This component will include placement and follow up care for children without family care, some o f whom are currently in shelters. The component will finance service to place children with extended families and follow up care and support. The component will also finance support for the upkeep o f children inshelters, including food, clothing, health and education. TemporaryEmploymentfor Vulnerable Groups 12. This activity will provide a safety net for vulnerable groups through temporary employment in workfare programs at the local level to about 120,000 workers in 6,000 villages for about 20-30 days per worker. Separate programs for men and women will be implemented, if the situation requires. The primary focus would be to remove the debris and clean up villages and camps, and other small scale activities requiring manual labor. Complimentary skill-building activities (e.g. adult literacy and basic training) will be linked to workfare activities as needed. C. ImplementationArrangements 13, The implementationarrangements will follow the structure describedinAppendix IV 43 APPENDIXVI: HEALTH A. Overview ofDamage 1. The October 8 earthquake affected about 4 million people in eight districts o f NWFP province and h a d Jamu and Kashmir (AJK). According to available data, more than 73,000 people have died and more than 70,000 have been injured. The survivingpopulation will face significant challenges due to the approaching winter, inadequate shelter, pre-existing poor nutrition levels, and lack o f access to essential health care following the collapse o f the health system during the earthquake. The vulnerability o f the affected population i s likely to increase, particularly among women and children. The emergence o f new vulnerable population sub-groups, such as widows, orphans and physically handicapped, requires social support systems that address their specific needs. 2. The earthquake caused significant damage to the health sector. At least 574 health facilities and management offices were partially or fully destroyed, including 75 percent o f the first level care facilities. The secondary care District/Tehsil Hospitals and smaller health units serving remote small mountainous hamlets have also been destroyed. The earthquake destroyed vehicles, drug stores, cold rooms, health staff accommodations and offices, medical equipment, and official records. The loss o f staff was relatively small: 21 deaths have been confirmed, in addition to the 141 staff who have sustained injuries. Two supervisors and 19 Lady Health Workers (LHWs), which are part o f the community based PHC program, have also died. Most o f the health staff i s traumatized, as almost all have experienced the loss of family members or friends, household belongings, and homes. Due to the dearth o f credible information on the private sector prior to earthquake, the full extend o f damage to the private health i s not yet known. 3. The above losses have resulted in a complete breakdown o f the health system, including: i)a complete disruption o f primary and secondary health care service provision; ii)the breakdown o f medical supply and distribution systems; iii)the disruption o f community based service provision by the LHWs; and iv) the paralysis o f health management at the central level inAJK, the district level inboth AJK and NWFP, and at the facility level. The estimated damage to the health sector i s approximately Rs. 7,114 million (US$119 million) including Rs. 2,956 million (US$50 million) in NWFP and Rs. 4,158 million (US$69 million) inAJK. The estimate includes the loss from the destruction o f health facilities, medical equipment, furniture and vehicles; however, it does not include indirect damage due to expenditure on treatment o f survivors, public health interventions, loss o f health staff and the impact o f psychological trauma. 4. The health sector also faces the additional burden o f treating the new vulnerable population sub- groups, including the disabled, widows, and orphans, which require specialized care and services. Significant environmental issues are likely to emerge, such as the threat o f epidemics in tented villages and camps due to the accumulation o f waste and garbage and the collection and disposal o f debris in affected areas. This i s likely to create an environment conducive to the spread o f communicable and vector borne diseases, including measles, meningitis, Leishmaniasis (endemic in AJK) as well as water borne diseases like typhoid, hepatitis A and cholera. B. CriticalIssues 5. The critical issues which need to be considered include: e Access toprimary and secondary health care services. The disruption o f health services has left nearly four million people without access to primary and secondary health care, highlightingthe 44 need to focus on ensuring access to essential primary and preventive health and secondary care as the system i s rebuilt. 0 Targetingpopulationswith special needs. Women and children are the primary users o fprimary health care services, representing 60-65% o f the primary health care (PHC) clients before the earthquake and 70-75% o f the reported deaths and injuries from the disaster. The revitalization o f services for management o f acute respiratory infection (ARI) and diarrhea, antenatal and postnatal care i s a critical priority. The recovery strategy should address the needs o f this population as well as the emerging needs o f persons with disabilities Need for detailed needs assessment and mapping by each district to assess health facility feasibility interms o f population movement and functional existing facilities and emerginghealth situation. Coordination of the relief and rehabilitation activities. There i s a need to further strengthen coordination mechanism to enhance the effectiveness o f health interventions and the emergency efforts. Health sector capacity. The existing management o fthe health sector i s weak and lacks adequate capacity, especially at the district level. With staff traumatized and seeking options to move out of the earthquake areas, it will be essential to mobilize health managers and health staff from other provinces to work temporarily inearthquake affected areas. 0 Taking care of healthcare workers. The psychological impact of the earthquake on health workers i s likely to manifest in increased absenteeism from work, insomnia, and inaction. Close management attention i s required, as well as understanding besides counseling, to help overcome the mental trauma. Missed opportunitiesfor health promotion and disease prevention. The contact that affected people have with the health sector, relief organizations, and the army should be used for health promotion and disease prevention, especially inrelief camps. Seismically Safe Health Care Facilities. The health care facilities are among the most important buildings in a community under any circumstances and therefore need to be constructed to be safer than ordinary buildingsinan earthquake prone area. A large number o f health care facilities were damaged and rendered dysfunctional due to their poor construction, which was no different than ordinary building. As part o f the reconstruction effort, the repair and construction o f seismically safe health care facilities will needto be a priority. 0 Reconstruction within theframework of health reforms. As the health sector faces challenges including a large, poorly planned PHC infi-astructure with very low utilization, it would be imperative that the Government: o Rationalizeprimary and secondary health carefacilities: The Government should address redundancies within the health infrastructure as well as the low utilization o f PHC and some o f secondary care facilities. This can be addressed by rationalizing the tiers o f health care, the number o f facilities to be rebuilt, and the scope o f the secondary care facilities interms o f bed strength by talang into account developments such as population movements. Inaddition it would be useful to critically review the need for each facility in terms o f its past performance and the size o f the population it will serve. 45 o Alternate management arrangements for provision of PHC Services: The earthquake increased the vulnerability o f the populations in the affected districts. To ensure access to PHC services the Government should contract nongovernmental organizations to manage provision o f PHC service provision or for new services which need to be introduced. C. Reconstruction and Recovery Needs 6. There i s an urgent need to revitalize primary and secondary care service provision to the affected population, including the displaced population, to reduce vulnerabilities and save lives while the system i s revitalized and reconstructed. The recovery should encompass the Humanitarian Charter for minimum standards for health care, including the right to health and respect o f the dignity o f the affected population. The strategy should be constructed on the key principles o f equity, access to essential health care, timeliness, results and accountability. It should ensure provision o f an essential health care package including both the prevention o f communicable diseases, especially vaccine preventable and vector borne diseases, and MCH services. The short term priorities in the health sector include: revitalization o f the PHC system in temporary facilities, provision o f services in tented villages, provision o f services for the disabled, and psychological care for survivors and health care workers. Inthe medium term, priorities include the reconstruction and re-equipment o f all levels o f the health facilities including secondary care hospitals, community-based rehabilitation o f the disabled, and the strengthening o f health system management. The medium term plan should also consider developing and putting into place an epidemiological surveillance, emergency preparedness and disaster relief system inthe health sector. 7. The estimated total cost o f rehabilitating the health sector including new construction, repairing - damaged buildings,and replacing equipment and furniture - is approximately Rs. 15,888 million (US$265 millionincluding Rs. 5,273 million (US$88 million inNWFP; and Rs. 10,614 million (US$177 million in AJK. Inaddition, the short and medium-term costs required to provide PHC and secondary services in the short term and to address the needs for disability and psychosocial first aid will require another Rs.2,125 million (US$35 million). The total health sector needs over the next five years, including new interventions and replacing the damaged infrastructure, will cost Rs. 18,013 million (US$300 million). D. Proposed Project Components 8. Generous financial, technical and human resource support has been provided from international and national groups, NGOs, and both bilateral and multilateral development partners. In addition, the Government o f Pakistan (GOP) has provided financing from its budget to address immediate needs. The health sector needs for the short to medium are substantial, but there i s a strong commitment from development partners to finance these needs. IDA support would fill financing gaps for reconstruction effort in the health sector. At present it i s not clear which areas would require IDA resources, since commitments from development partners are not yet fully defined. 9. The objective o f supporting the health sector i s to restore equitable access to a better performing health care delivery system for the population living in the earthquake affected districts. The IDA financing for the health sector could support the following main activities: a) The revitalization of PHC and the provision of secondary care services including contracting NGOsto managePHC services; b) The reconstruction and re-equipment o f partially or fully damaged health institutions with a focus on civil hospitals, rural health centers and basic healthunits; and 46 c) Technical assistance to strengthen management, planning, and monitoring o f the recovery effort inAJK andNWFP i) Revitalization of PHC and Provision of Secondary Care Services. There i s an urgent need to revitalize PHC and secondary care to ensure provision o f essential health services, including public health interventions as the system i s rebuilt. The package o f services would include basic curative care; immunization services; maternal and child health care including management o f ARI and diarrhea; antenatal care and family planning; vitamin A and Iron supplementation; and communicable disease control interventions such as TB DOTS services with a regular drug supply. The component will support financing o f establishing primary PHC facilities inrentedor prefabricated structures andthe costs o fproviding services for two years through field hospitals that have already been established. The component could also finance the contracting o fNGOs to revitalize and manage all PHC facilities, including BHUs, RHCs, and dispensaries in the affected districts. The NGOs would be selected competitively using a performance based contract providing considerable management autonomy and flexibility to the NGOs to effectively manage service delivery, and should ensure means to monitor results through a thrdparty. ii) Reconstruction and Re-Equipping of Partially or Fully Damaged Health Facilities. This activity would support the reconstruction and re-equipping o f partially or fully damaged health facilities. The health facilities considered under this component will include Civil Hospital, Rural Health Centers and Basic health units that have been identified as partially or fully damaged by the provincial/district Departments o f Health, NWFP and Department of Health Government o f AJK, and that have not been identified by other donors for support. ERRA would need to provide technical support to the Departments o f Health to ensure reconstructedrepairedbuildingsare seismically safe. iii) Technicalassistancetostrengthenmanagementandplanningandsentinelsurveillancein AJK and NWFP. This component will support the strengthening o f management and planning capacity at the district level through the placement o f professionals from the provincial level inNWFP and fiom other provinces in A X on secondment. The component could also support management and planning capacities strengthening through technical assistance, the development o f district master plans for the sector based on principles and guidelines outlined by the government, performance-based incentives to district staff for effective implementation o f reconstruction efforts in the health sector and monitoring and evaluation o f the reconstructioneffort through the Federal Ministry o f Health. E. Implementation Arrangements 10. The implementation arrangements will follow the structure described inAppendix IV. F. Monitoring and Evaluation and Key PerformanceIndicators 11. The implementation of the components will be monitored according to the key performance indicatorsto be agreed with the Ministryo f Health and Departments of Health o fNWFP and AJK, ifIDA resources are used. Monitoring indicators will include bothprocess and performance indicators, such as: (i)theutilizationofhealthfacilities;and (ii)immunization coverage o f children aged 12-23 months. 47 12. The required data for measuring these indicators will be collected, aggregated and analyzed by DOHAJK andNWFPand verified bythe MOH. The monitoring reports will be submittedon a quarterly basis. The progress will also be assessedby a team of specialists fi-om the MOH at the end of a six month period and thereafter. 48 APPENDIXVII: EDUCATION A. Overview of Damage 1. The most affected districts inAJK are Muzaffarabad& Neelum, Bagh, and Poonch (Rawala Kot). Ninety five (95%) o f total institutions inthese districts, or 3,685 out of 3,879 buildings, have been either fully or partially damaged. InNWFP, the worst affected districts are Mansehra, Batagram, Kohistan, Abbotabad, and Shangla. Fifty three (53%) o f the buildings in these five districts have been fully or partially damaged, or 3,984 o f a total o f 7,577 institutions. Of the damaged institutions in AJK and NWFP, a majority are fully damaged. Mansehra, a district inNWFP, experienced the largest number o f fully or partially damaged institutions. 2. According to preliminary estimates, the total rehabilitation and reconstruction cost o f damage to the education sector i s approximately Rs. 28,057 million (US$472 million). The bulk o f the damage has been to schools-primary, middle and higher secondary-which account for 83% o f the institutions damaged inAJK and 78% o f the damaged institutions inNWFP. Damage to school buildingsconstitutes 44% of the damage cost in AJK and 52 percent o f the damage cost inNWFP, while damages to private sector institutions make up approximately 19% of total assessed costs in AJK and 26% in NWFP. In addition to the damage to buildings, the earthquake has also destroyed materials, furniture and equipment, and damaged education administration buildings. For example, the 69 units in JK University havebeen destroyed, includingdepartments, hostels, administration block, and the Central Library. Across the affected regions, the complete breakdown o f the social sector service delivery has left the management paralyzed, particularly inAJK. 3. Deaths, injuries, and trauma: In addition to damage to educational institutions and offices, the education sector has also suffered a loss o f people, including students, teachers, and school staff. According to preliminary estimates, about 18,095 students and 853 teachers and staff died inNWFP and AJK. The death o f teachers represents not only a loss to the teaching force, but also a loss of investmentby the government inteacher capacity development through teacher training. Furthermore, a substantial number o f teachers, school staff, and students are likely to suffer from emotional trauma and injuries and may require counseling services. Some students may also have special learning needs that would require new teaching approaches and modifications for handicapped-accessible school design. Teachers would therefore need to be trained for school-based psychosocial support and counseling. 4. Loss of learning time: Inthe absence o f suitable alternative spaces, the destructionand damage to school buildings has interrupted educational activities. There will be less time spent in learning, particularly for students who are preparing for their national examinations at the end o f the school year. 5. Additional information regarding damage i s available in the joint WB-ADB preliminary damage and need assessmentreport released on November 12,2005. B. CriticalIssues i) Transitional access to safe educational services: The most urgent requirement i s to resume classes at all levels. Temporary or semi-permanent structures can be used for this purpose. Care will need to be taken to avoid inequities inservice provision between affected students and other 49 students, who are not affected but belong to poor families. Moreover, seismically safe education facilities will needto be ensured inthe longrun. ii)Traumatized students and stafl Caring for traumatized staff should also be among the immediate steps taken. Counseling may be required for most staff and students. The resumption o f "routine" school activities will help establish some degree o f normalcy to the lives o f schoolchildren, teachers and staff. The needs o f children invarious locations shouldbe addressed through child profiling. The needs of girls and disadvantaged groups may be addressed by deploying female personnel and locating learning spaces close to homes. iii)Weakmanagement capacity: Managementcapacityhasbeenweakened significantlybythe earthquake, particularly at the district level. To augment capacity, planning for reconstruction should utilize empirical evidence, consultation, community participation, and participatory needs assessments. iv) Lack of transparent implementation arrangements: Managementcapacity is weak, and the task at hand is immense. Thus decentralized implementation arrangements with effective coordination and monitoring and a greater role o fthe lowest government tiers and credible civil society will be required 6. Policy decisions: This i s a special opportunity to reassess and reform Social Sector Service Delivery. It is desirable to take the following policy decisions to make the reconstruction work realistically suite the needs o f the areas and to avoid wastage o f scarce resources: i)Mappingwhereschoolsareneeded.Inthemostheavilyaffectedareas,thepopulationofschool- age children should be estimated to decide the appropriate number o f schools to be reconstructed ina prioritized way. For example, reconstruction ofnonfunctional schools may not be required. A government school may not be required if a private or NGO run school is meeting the educational needs of the area. Similarly, schools need to be provided to settlements where a school i s needed but where a school was not established prior to the earthquake. ii)Consolidationof schools. Consolidatefacilities, whereoneschoolisfeasibleinsteadoftwo, which were previously running with low enrollments. Rationalize school provision in terms o f location, number o f facilities and scope o f services. iii)Complement Service Delivery: Consider complimentary service delivery for provision of education, for example by building strategic partnerships with NGOs, the private sector, rural support programs and other partners. C. Reconstruction and Recovery Needs and Strategy 7. Key principles: 0 Ensure observance o f humanitarian charter o f minimum standards for social services, including the right to education and health and respect for the dignity o f the population Ensure equity 0 Timely access to safe essential education facilities 0 Ownership. Point o f ownership should be regarded as an important part o f the strategy. The involvement o f communities, and especially parents, inreconstruction will create ownership. The mindset will shift from "government school" to "my school" and communities will look after the school well 50 0 Focus on Results and Outcomes 0 Accountability for all, at all levels 8. In the short term, the most urgent requirement is to resume classes at all levels and provide psychological care for survivors and education sector staff. This would entail the provision o f temporary and semi-permanent alternative learning spaces, the repair o f partly damaged schools, the provision o f learning materials, and the training o f teachers to replace those who have perished. Students, where possible, can be accommodated innearby institutions. Education administrative structures will needto be revived. These measures in the short-term are estimated to cost Rs. 1,240 million. Developing the strategy and the action plan for the recovery and reconstruction will entail technical assessments to identify schools to be reconstructed and repaired. Assessments o f community education needs and site- specific technology options inthe context o f the disaster will also need to be undertaken. This activity i s estimated to cost Rs.60 million inthe short-term. 9. Inthe medium term, counseling for both students and staffwill be continued. The reconstruction and reequipping o f educational facilities, civil society engagement in reconstruction, and construction o f seismically safe facilities will be among the necessary measures to be adopted. 10. Inthe long term, line departments should focus on service provision with the help of the private sector, communities and NGOs. Overall reconstruction efforts should be supervised by a federal level agency. Establishment o f a regulatory body with enforcement powers will be necessary for setting standards for seismic safety o f social sector buildings, and subsequently to retrofit all facilities nationwide. 11. Local capacity building.of the system must be assured either by seconding staff from federal or other provinces or by hiringstaff from the market. D. ProposedProgram Components 12. The development objective i s to restore equitable access to higher quality education through improved design of physical learning spaces, social and physical access, teacher development, and capacity development o f the district education offices for improved service delivery. 13. While this credit does not focus on education, resources for reconstruction o f the education sector are expected from several donors, including ADB, Islamic Reconstruction Bank, EC, JBIC/JICA, UN donors and other bilateral donors. UNICEFhas already assisted inrestarting educational activities intent schools, and GOP i s starting the educational process o f using existing buildings in addition to the establishment o f tent schools. 14. IDAfundirtg will be made available to fill small financing gaps. The funding mightbe used for the following main components inthe order o fpriority given as under: i)Books and materials: (a) textbooks; and (b) reading and teaching materials for classroom activities; ii)CounselingandTraining:(a) studentandstaffcounselingincludingtrainingonhowtorespondto natural hazards infuture to save lives and property; andb) teacher training; iii)TechnicalAssistance: (a) consultancyservicestoimprovethedesignofphysicallearningspaces and to provide technical advice for community construction; and (b) monitoring educational outcomes; iv) Purposebuiltfurniture and equipment; 51 v) CivilWorks: (a) increasingthe ratio oftoilets to the number o fteachers and students, and (b) other civil works. E. ImplementationArrangements 15. The implementationarrangements will follow the structure described inAppendix IV. F. Key PerformanceIndicators,MonitoringandEvaluationArrangements Table 2: Key PerformanceIndicatorsand Results Framework DevelopmentObjective Outcome Indicator Use of OutcomeInformation Restore equitable access to higher Net enrollment andretention, at Information will be used to quality education, teacher least, o n 80% o f the pre- modify program strategy, if development, and capacity earthquake level. required, and adjust funding development o f the district accordingly. education offices for improved service delivery. Intermediate Results Results Indicators Use of Results Monitoring Complete (a) repair o f partially Number o f targeted educational Results monitoring will be used damaged institutions; and (b) institutions fully functional. to take corrective measures if reconstruct schools through reconstruction work falls short of improved design o fphysical targets. learning spaces. G. MonitoringandEvaluation 16. The provincial Departmento f Education (DOE)inNWFP and DOEinAJK will be responsible for overall progress monitoring through CAU and EC respectively inNWFP and AJK. Implementation has to take place in districts, therefore, EDOs (Education) in NWFP and District Education Officers (DEOs) in A X and their staff at district level and below will have a vital role in monitoring the progress of reconstruction activities. At the village level, NGOs can help monitor the community construction. Directorate o f Teacher Training inNWFP and Director Public Instruction (Elementary Education) inAJK will monitor teacher training. Progress monitoring will include reporting on reconstruction activities, student enrollment and retention, provision o f books and materials, teacher recruitment and development. ERRA will carry out impact monitoring as part of overall reconstructionprogram. Thirdparty validation and impact monitoring will be carried out by selecting an external agency usingtransparent process. 52 APPENDIX VIII: ROADS,WATER SUPPLY, AND INFRASTRUCTURE A. Overview of Damage 1. The earthquake o f October 8, 2005 severely damaged infrastructure systems in 5 districts in North West Frontier Province (NWFP) and 3 in h a d Jammu and Kashmir (AJK). A brief overview o f the damage ineach sub-sector i s presentedbelow. Roads Sector: National Highways - The three national highways damaged by the earthquake include N-35 (Mansehra-Pattan), N-15 (Mansehra-Naran), and S-2 (Kohala-Muzaffarabad). These three national highways serve as the primary corridor to the earthquake affected areas in NWFP and AJK. Managedby the National Highway Authority (NHA), the total length o f these highways is about 279 km. The damaged length i s about 194 kmrepresenting 70% o f the total length. Provincial & Rural Roads in NWFP - In NWFP, about 2,063 km roads were damaged representing 31% o f the total road network in the five affected districts. O f this, 652 km are provincial highways that are managed by Frontier Highway Authority (FHA), 1,O 16 kmare other paved provincial roads managed by the districts, 367 km are unpaved districts roads, and 27 km are urbanroads managedby municipal agencies. Provincial & Rural Roads in AJK - Inthe three affected districts o f AJK about 2,366 kmroads were damaged. Of this 203 km are major roads, 761 km are other paved roads, and 182 km are unpaved roads for a total o f 1,146 km representing 45% o f the total Public Works Department (PWD) managed roads. The Neelam Valley road and, to a lesser extent, the Jehlum Valley road were severely damaged. Bothroads are the primary transport arteries inAJK. Another 1,220 km of local unpaved roads developed with community participation and managed by the Local Government and Rural Development Department (LGRDD) are damaged. This represents 44% o f total LGRDD-managed roads inthe affected districts. Water Sector: Damages in NWFP - As a result o f the earthquake an estimated 77,500 households have only partial or no water supply. 220 o f the 763 large schemes (average 300 households per scheme) operated by the Water and Sanitation Department are partially damaged, needing minor to major repair. Out o f the 3,323 small community or Tehsil Municipal Administration (TMA) operated schemes (hand pumps and small gravity schemes) 1,234 are partially damaged. It i s estimated that as many as 25,000 households may have lost their sanitation facilities in NWFP. Drainage systems in urban areas o f Balakot, Batagram and Besham are estimated to be 40% to 90% damaged. The overall estimated cost o f damages to both PHED and community schemes i s Rs.482 million(US$8.0 million). Damages in AJK -All three large urbanwater-supply schemes are partially damaged (the supply o f water to urban cities has been reduced to about 62% o f system capacity). An estimated 11,400 rural households are now without access to water and another 64,600 rural households are getting only partial water service. Of the 3,147 mediumto small schemes operated by the communities (hand-pumps and gravity), it i s estimated that 234 rural systems are completely destroyed and 1,334 are partly damaged (minor to major repair). Inrural areas, the Government has reported 30% damage to drainage systems. The estimated cost o f urban water damage inthe affected area 53 i s Rs. 83 million (US$1.38 million). The estimated cost o f rural water damage i s Rs. 509 million (USSS.5 million). c . Damages to Institutional Infrastructure in NWFP - The NWFP water and sanitation administrative and institutional infrastructure has generally suffered only minor damages. The only TMA office with substantial damage i s Balakot, which suffered the loss o frecords and staff. d . Damages to Institutional Infrastructure in AJK - The AJK PWD administrative infrastructure has suffered major damage, including losses to life, property and records. Most o f the buildings housing the Local Government (LG) and Public Health EngineeringDepartment (PHED) staff in urban areas o f Muzaffarabad, Bagh and Rawalakot have either collapsed or are damaged beyond repair. B. CriticalIssues 4. Rapid implementation will be vital to both the short and medium term multi-sector reconstruction and recovery effort. To achieve this, implementation capacity o f some o f the concerned government agencies responsible for recovery and reconstruction will need to be strengthened. In some cases, inadequate capacity o f these agencies will be exacerbated due to demand for initiating major reconstruction works in short time frames. Further, the capacity o f the local contracting and consulting industry, nearing the saturation point even before the earthquake, will also need major enhancements to cope with the huge influxo f earthquake-relatedreconstruction. 5, Reconstruction activities will place heavy demands on availability o f key construction materials, particularly bricks, cement, steel (reinforcing bars and rolled sections), bitumen, etc. Government will need to carefully monitor prices and take timely and appropriate policy actions to ensure price stability. Large increases inprices will not only adversely impact availability, but will also delay the reconstruction process and constrain available financial resources. Considerationcould be given to import, on a limited basis, o f materials where capacity for local production i s limited. 6. For local unpaved roads there are considerable opportunities to employ local communities to reconstruct the damaged sections usingappropriate labor-based methods. This will also supplement local contractors' capacity. On other rural roads or road embankment works, cash-for-work or food-for-work type approaches can be adopted. Hence, as part o f short-term efforts, it i s important that local and rural roads are identified early on and communities or individuals employed to work on reconstruction or even clearance o f landslide debris, and the process for their engagement i s initiated. C. ReconstructionandRecoveryNeeds 7. Roads Sector: The overall estimated recovery needs for the roads sector are US$416 million. Short- and medium-term needs include: (i) removal o f landslide debris, installation o f temporary Bailey bridges and opening the roads to traffic; (ii)stabilization o f road embankments to withstand the oncoming snow, involving restoration o f retaining walls and drainage structures; (iii)comprehensive condition survey of the damaged roads; (iv) initiation o f reconstruction o f unpaved local roads using labor-based appropriate technology methods employing communities and individuals to create livelihood opportunities; and (v) procurement o f civil works contracts for priority damaged pavedroads. 8. Water Sector: The overall estimated recovery needs for the water sector are US$32 million. Short-term efforts in this sector should focus on: (i) rehabilitation o f partially damaged Government and community spring/gravity water schemes, dug-wells and hand-pump infrastructure; (ii) rehabilitation o f partially damaged surface water (river) schemes and associated treatment plants, such as in the case o f 54 Muzaffarabad town; (iii)rehabilitation o f partially damaged water distribution networks; (iv) rehabilitation o f communal latrines; (v) initiation o f a solid waste management program for clearing and recovery o f debris; (vi) provision o f basic buildings for AJK Government staff supporting water and sanitation related agencies; and (vii) development o f water quality and source monitoring, and leakage detection programs. Medium-term priorities will focus on: (i) provision o f water distribution networks for reconstructed settlements; (ii) provision o f water systems for selected new settlements resulting from land readjustment and small-scale relocation schemes; (iii) drainage and/or sewerage for reconstructed settlements; (v) formalization o f solid waste management schemes inlarge towns; (vi) reconstruction o f full AJK Government PWS and LGRDD offices; and (vii) upgrading o f sector facilities for disaster preparedness. D. ProposedProgramComponents 9. This componentz3 will finance goods, works, services and cash grantshredit associated with infrastructure repair, rehabilitation, and reconstruction. The World Bank i s financing reconstruction o f the national highways through additional financing o f its ongoing Highways Rehabilitation Project. Eligible sub-sectors under the ERC component include: (i) provincial highways and roads; (ii) district roads; (iii)sub-district and community roaddearthen paths; (iv) water supply & sanitation; (v) telecommunications; (vi) public buildings across different sectors such as education, health, works & services, and water supply & sanitation; and (vii) community infrastructure such as community buildings, irrigation channels, etc. 10. The overall strategy and project design needs to be responsive to the short and medium term needs identified above. Therefore, the infrastructure project shall be prepared broadly according to the following guidingprinciples: Ensure restoration and connectivity o f priority provincial highways and the core district roads network with the national highway network, in order to improve the overall transport logistics chain from rural communities to urban centers. Restore and develop community level economic and social infrastructure, with a focus on (i) rural transport infrastructure and services, and (ii) rural water supply and sanitation infrastructure. Strengthen safety nets through: (i) labor-intensive, cash-for-work workfare programs to support rural livelihoods; and (ii) cash grantshredit to support transport entrepreneurs, including the mechanics, vendors, etc. Consistency with the housing sector strategy and overall approach, in particular water and sanitation services will complement predominantly in-situ rebuilding and rehabilitation o f housing. ImplementationArrangements The implementation arrangements will follow the structure described inAppendix IV. Key PerformanceIndicators,MonitoringandEvaluationArrangements Key performance indicators include: 23Investments subject to the Banks safeguardpolicies o n Safety o f Dams (OPBP 4.37) and Projects o n International Waterways (OPBP 7.50) are not eligible under the ERC. 55 (i) The number o f kilometers o froads repairedrehabilitatedreconstructed; (ii) The number of water supply and sanitation facilities repairedrehabilitated reconstructed; and (iii) The number o f tons o f properly disposed debris. 13. These indicators will be monitored through periodic progress reports, disbursement reports, and supervision reports. 56 APPENDIXIX: AGRICULTURE A. Overview of the Damageand ItsImpact 1. The earthquake has caused major depletion in agricultural assets that were available for generating livelihoods for thousands o f affectees, and has disrupted normal agricultural and livestock production systems. The damages to standing crops o f maize, rice and fodder, which could not be harvested; damages to stocks o f food and inputs, which were buried under collapsed houses; and damages to fruit and other trees are significant. Damage to irrigation infrastructure, terraces and agricultural fields due to landslides was also substantial. Livestock causalities were also severe in some parts o f the earthquake hit areas (Table 1). Table 1: Overview of Agriculture Sector Damage Direct Damages Indirect Losses Crops Damage to standing crops. Inability to plant Rabi crops. Loss o f food and input stocks. DamageAoss o fterraces and fields. ................................................................................................................................................................................................................................................................s Damage to trees. Infrastructure Damage to irrigationfacilities Reduced irrigation capacity DamageAoss o f terraces and for cropping. fields. Reducedland for crops. .............................................................................................................. Other Crop Related Damage/collapse o f Reduced capacity to cultivate. Damages agricultural extension and Lower yields and labour research buildings. productivity. Loss o f farm equipment and . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . machinery. Livestock Animal mortality Animal productivity losses. Damagekollapse o f animal sheds. Loss o f stocks o f feed, fodder and inputs. Livestock and dairy development buildings damagedlosses. 2. Maize i s the main cereal crop in the area. Harvesting was underway when the earthquake struck. That part o f the crop which was already harvested has been buried under collapsed houses or stores, or has rotted if left unattended in the fields. Standing crops of maize have been mostly destroyed since owners were unable to harvest. Rice harvest was also underway and due to the earthquake, the harvest has not been completed. This has ledto shattering and grain loss, which will increase with time. Inthe cases of grasses, which are used for fodder duringthe winter, grass cutting was abandoned and not collected for fodder. Estimatedlosses o f crops inthe affected areas range from 30 to 75 percent. 3. Major disruption in the Rabi crop season i s anticipated. Stocks o f seeds (wheat and winter vegetables such as turnips, onions, radish and cabbage) for the upcoming season have been lost due to the collapse of houses and stores. Wheat i s the main crop planted in the Rabi season, and the last planting date i s the end o f November. At lower altitudes, where tractors are available for cultivation, there are already signs that cropping i s underway; however, the capacity at higher altitudes to get a crop into the ground i s greatly reduced, and it i s unlikely that there will be much planting at all. Inthe earthquake-hit 57 areas, most households have fruit trees, with a highproportion o f soft fruits at lower altitudes. Much o f the fruit already harvested was destroyed. InNWFP and AJK many tractors which are used on flatter landhave been lost or damaged. 4. The affected area has large infrastructure in terms o f field bunds and terraces for rainwater harvesting and channels for irrigation, which have been damaged. In some cases deep cracks have formed which have caused splitting across terrace retaining walls. Cracks appear to run deep into the subsoil. At the onset o f rains and heavy winter weather there i s a strong likelihood o f further landslides that will hinder farm activities and block access. Insome places, terraces and retaining walls have often fallen and collapsed over long stretches. Land slippage has caused the shifting o f entire ledges o f soil, in effect creating entirely new terraces. The slope o f the land has in some cases changed; substantial re- grading will be required to give rise to new slopes on irrigated lands. Water distribution systems will have to be completely re-aligned inmany places. Increasingly, terraces are being used to erect tents and other temporary shelters, further depleting the area available for immediate cultivation. Many natural springs have dried up, which will create problems not only for crops but will also impact drinking water supplies for both humans and animals. InNWFP, it i s estimated that 50 to 60 percent o f the irrigation structures have been damaged. Insome o f the hardest hit areas o f AJK and NWFP, entire fields have been lost due to land slides. 5. Livestock keeping i s one o f the key activities inthe areas affected by earthquake. It i s one o f the main forms in which assets are held and provides the bulk o f the value o f output at farm level. The earthquake caused a huge number o f casualties among livestock. Livestock are usually kept in sheds or rooms alongside or underneath human dwellings. Animal housing are made o f stone, timber and a thick layer o f earth on top (sometimes up to 30-50 c m thick) to keep out the cold. Duringthe earthquake, these structures collapsed. The fall o f the heavy roof on top o f animal caused highmortality (up to 100 percent inthe worst affectedareas). There are variations inmortality figures, depending on the extent to which animals were moved outside the sheds before the earthquake that morning. The land and rock slides caused by the earthquake also resulted in a large number o f deaths and injuries among these people and their livestock. A reduction in livestock numbers in households continues as animals abandoned by affected families are dying or are being sold or slaughtered in anticipation o f the harsh winter and a lack of fodder and housing. Surviving animals, particularly lactating buffaloes, are likely to face large reduction in yields due to lack o f feed and shelter, since buffaloes are subtropical animals and the cold substantially reduces milkproduction. 6. In addition to crops, livestock and irrigation infrastructure losses, other aspects of agricultural services and rural life have been seriously affected and hampered. Agriculture support facilities such as research centers, laboratories, training centers and extension centers have collapsed or have suffered severe damage. Animal health facilities (veterinary stations and clinics) have been damaged. Stocks o f medicines and other supplies have also been destroyed due to collapse o f structures as well as the electricity cut which lasted for several days after the earthquake. The capacity o f rural families to rebuild their livelihoods has been compromised by an enormous loss o fpersonal possessions. Cash held at home has not yet been recovered, buried in the ruins o f people's homes, often under tons o f mud or rubble. Jewelry i s another very common means o f saving in the rural population, and this has suffered a similar fate. 7. The most recent damage assessment (after the completion o f the Damage and Needs Assessment) puts the overall damage to Rs. 16.7 billion (US$279) in AJK and Rs. 7.8 billion (US$130 million) in NWFP at a total estimated damage o f $410 million (Table 2). 58 Table 2: Estimates of Damages and Losses inAJK and NWFP AJK Livestock 8.3 3.6 11.9 137.7 60.0 197.7 Crop 4.3 0.3 4.6 72.1 5.0 77.1 Irrigation 0.2 0.0 0.2 4.0 4.0 Total 12.8 3.9 16.7 213.8 65.0 278.8 NWFP Livestock 3.9 2.4 6.3 64.7 39.5 104.2 Crop 1.3 0.2 1.5 21.7 3.0 24.7 Irrigation 0.1 0.0 0.1 1.3 1.3 Total 5.3 2.6 7.8 87.6 42.5 130.2 AJK+NWFP Livestock 12.1 6.0 18.1 202.4 99.5 301.9 Crop 5.6 0.5 6.1 93.8 8.1 101.8 Irrigation 0.3 0.0 0.3 5.3 5.3 Total 18.1 6.5 24.5 301.4 107.6 409.0 B. Rehabilitation Needs and Strategy 8. Recovery of farm production systems. The earthquake has severely damaged or destroyed crops, soils, trees, livestock, machinery, equipment and infrastructure. The highest rehabilitationpriority should be to help farmers and other persons reliant on agriculture (landless laborers, traders, processors and input suppliers) to restart production and trade. This should include support for quick impact activities, including clearing cultivated areas o f debris and restochng of animals. The clearing o f debris, and irrigation and drainage canals, could be organized by the Public Works Departmentwith the collaboration o f communities, which could be funded by cash-for-work programs, or other arrangements. Talung up such work through affected communities will serve two purposes: (i) restoring land productivity and (ii) restoring productive capacity and dignity o f victims. Seeds and fertilizer have to be provided, and lost or destroyed tools, machinery and equipment, and livestock, have to be replaced. Every effort should be made to incorporate local self-help actors inseed and seedling production nurseries to meet demand. Any public distribution of assets should also be targeted to those most in need and done transparently with a clearly defined arbitration and dispute settlement mechanism. 9. Targeting communities and vulnerable groupshouseholds most in need. As part o f the rehabilitation strategy, it i s important to train local government staff in rapid damage assessment and in participatory planning methods to create capacity to identify the communities most inneed o f assistance, and the most urgent and longer-term reconstructionneeds o f communities. This will need to be gender sensitive and must recognize and cater to the special needs o f the landless and other vulnerable groups such as orphans and the physically handicapped. For the short-term recovery activities, first priority will be given to assisting the most devastated communities inthe Districts o f Muzaffarabad, Bagh, Mansehra and Battagram, which are most in need o f assistance. Second priority will be given to recovering agricultural productioninthe less affectedlocations, which are presently easily accessed. Such a strategy will ensure that resources reachthe needy and will assist displaced people to return as quickly as possible to their communities, thereby reducingtheir dependence on aid. 10. Introduction of Appropriate New Technologies. There i s vast experience in introducing appropriate new technologes in food and estate crops, livestock, ago-forestry, on- and off-farm storage and processing, and in small-scale income generating activities. This includes such things as Integrated Pest Management, Integrated Nutrient Management, improved integrated farming systems, and small 59 income generating activities. The approach will be to mobilize this experience to help the affected farming families. 11. Integrated Approach to Improving Livelihoods. The agriculture strategy emphasizes an integrated approach to livelihood improvement whereby farming households become the focus o f attention. This will require a holistic approach recognizing all productive interests o f households, which may include food crops, orchards, livestock or other income generating activities. Extension personnel will need to be trained on how to undertake such an approach, and will need to work as a team, at times with agriculture and forestry extension staff, to be able to respond to the diverse production and income generation needs o f the people. Activities supported through the agnculture plan will need to be integrated with the activities supported through other sectoral plans, especially agriculture, forestry and industry. 12. Major efforts are underway to provide immediate relief to help overcome the winter. These include provision o f seeds for the Rabi crop (wheat, vegetables, fodder, etc.), and feed and shelter for the animals. However, with the approach o f the spring, farmers will clearly like to start productive activities on a larger scale including planting o f maize, which i s their main cereal crop; restocking o f animals; rebuilding o f animal shelter and repair reconstruction o f infrastructure, particularly irrigation. Financial help would be required for this along with support services such as animal health and introduction o f new technologies such as construction o f earthquake proofhousing for animals. 13. Inimplementingthese strategies andactivities, the needs anddesire ofthe affectedpopulationhas to be taken into consideration. These include important findings o f recent assessments carried out inthis regard such as: 0 The rural population has a strong preference to stay on or, if they have left for the winter, to return to their farm. This preference i s due to social and economic factors including the fact that valuables and cash may be buried under debris, and that livestock, which i s their main asset, cannot easily stay at camps or other collection points, where there i s no space for shelter nor the possibility o f grazing. 0 They will restart productive activities as soon as possible to reduce their dependence on external relief supplies. This will include planting crops and caring for their animal. 0 Financial and technical support that helps them in restarting economic activities would be most critical. However, markets may remain disrupted for some time and there i s a need to channel support that takes account o f this. 14. While there i s an urgent need to restart the economy and rebuild economic and social relationships, there must be a clear-cut and deliberate attempt not to recreate poverty and unsustainable livelihoods. Key strategc actions that will be instrumental to this are: 0 to empower communities and community-based organizations to take a leading role in the planning, implementation and management o f the activities supported through the program; 0 to restart the rural economy by helping production to recover and markets to start functioning; 0 to introduce appropriate technologies and extensionmethods; 0 to invest inenabling and facilitating infrastructure; 0 to create support services which are efficient and responsive to the needs o f the people; and 60 to invest in community involvement in moving into new economic activities that are economically and financially viable, and to create employment opportunities that are environmentally sustainable C. ProposedProgramComponents 15. Program Objectives. The main objective o f the Program would be to rebuild agriculture and rural livelihoods in the affected areas through selected quick impact activities, which are aimed at: (i) farmersrevivetheircrop/livestock productionsystems; and(ii) helping restoring some o f the most essential agriculture support services. 16. Program Components. The following are the main program components for the rehabilitation o f the agriculture sectoP4: a) Reviving Agriculture and LivestockProduction 17. Support would be provided to rejuvenate the rural economy. Many earthquake affected people remained on the land or will return as soon as weather conditions allow. They need to be provided essential inputs,materials and equipment to start farming. The program would fund: (i) agricultural input packages for the Kharif 2006 crop; (maize seed; fodder crop seed; vegetable seed and, fertilizer); (ii) livestock packages, (iii) infi-astructurepackages and, (iv) restoration o f support services. 18. The input packages would be distributedinall the 153 Union Councils affected by the earthquake (89 inAJK and 64 inNWFP) -provided that these can be reachedby motorisedtransport. The proposed amount would be sufficient to cater to the needs o f about half the farming households in the affected areas. The Union Councils (UCs) would be required to prepare lists o f households to which the packets would be distributed. The beneficiary households would be selected by the UCs with priority given to small farmers (owning less that 0.5 ha o f cultivated land). Some 26,000 farm families in AJK and some 22,000 families inNWFP would be provided these inputpackages. Distribution would be supervised by a committee comprising representative o f MINFAL, line departments, NGOs, Local Councils and FAO. Such committees have already been formed invarious UCs and play an important role ininput supply. 19. The program would fundlivestockpackage that comprises the following: 0 Shelter for livestock: The program would provide assistance for construction o f new animal sheds. These sheds would be built using improved design and materials. Farmers would be provided with kits, including materials and detailed instructions about building. The Department would also work with the Union Councils to provide training to farmers for construction o f these improved units. Distributionwould be undertaken by various agencies. 0 Feed packages: The feed packages would be distributed in the same way as the packages for crops inputs, with priority being given to families with not more than two cattle or buffaloes. In AJK, the feed package would be given to 20 000 animals (seven percent o f population). In NWFP, the feed package i s for 9 000 lactating animals which i s five percento f the population. 0 Restocking. Restocking would be done by supplying 1500 lactating buffaloes inAJK and 1200 buffaloes inNWFP. 20. The program will also fund repair and rehabilitation o f communal infrastructure including the following 24Investments subjectto the Banks safeguardpolicies on Safety ofDams (OPiBP 4.37) andProjectsonInternational Waterways (OPiBP7.50) are not eligible underthe ERC. 61 0 Irrigation: Funds would be provided to communities for repair and reconstruction o f irrigation facilities. The program would provide materials and, where required, pre-cast sections o f irrigation channels. Communities would be required to organise labour but the program would partially pay for this. Thirty irrigation schemes would be covered in AJK and 20 in NWFP respectively. 0 Other Infrastructure: Funds would also be provided to repair or reconstruct other types of communal infrastructure including tracks, culverts and drinking water for humans or livestock. Wherever possible, pre-cast sections and pieces should be used. Terraces would be improved for 500 hectares in AJK, which i s three percent o f the total terraced area. InNWFP, field terraces would be rehabilitatedon 200 hectares representing five percent o f total terraced area. b) RestoringEssential SupportSewices 21. The program would provide funding for material, equipment and supplies for restoring high priority support services. The services that will be financed under the program include: 0 Animal Health System: The program would provide support to prevent epidemics and diseases among livestock. Animals which have over-wintered in the area are likely to be weak and new animals may bring diseases. Key activities would include vaccinations for large and small ruminants, deworming for small ruminants and vaccinations against Newcastle Disease for poultry. Essential vaccines would be provided for carrying out a vaccination campaign in early 2006 with second a dose after 6 months. Inthe case o fpoultry the vaccines would be provided to farmers through the community animal health worker for use inthe villages. 0 Nurseries for Fruit and Timber Trees: Fruit and timber tree planting i s likely to be an important activity as farmers return to their lands. Tree planting will be important to stabilize soils and help rebuild terraces. At the same time, with less labor likely to be available for a number o f years, farmers would find it difficult to cultivate as much land as before. Tree planting offers a high return alternative on this land. The program would provide funds to restart public as well as private nurseries. This would include essential materials (plastic bags, seeds, etc); replacement o f damaged equipment; and provision o f building materials to repairh-econstruct buildings, If necessary a supply o f seedlings may have to be provided to these nurseries from other parts o f Palustan. 0 Repair or reconstruction o f key facilities and offices: The program would provide funds for the repair or reconstruction o f key Government facilities such as the laboratories, animal health clinics, offices. Associated office furniture and equipment would also be provided. D. Implementation Arrangement 22. The implementation arrangements will follow the structure described inAppendix lV E. Key PerformanceIndicators,Monitoring and Evaluation 23. The expected outcomes o f the program would be to: (i) the crop production system back to bring the pre-earthquake level in terms o f area and productivity within one year; (ii) return the earthquake damaged irrigation infrastructure to operational conditions guarantying water conveyance to farmers; (iii) help farming communities in the restocking o f their livestock and maintain andfor improve the productivity o f the livestock thorough proper feeding and provision o f health services. 62 APPENDIX x: ENVIRONMENTAL AND SOCIAL SCREENING AND ASSESSMENT FRAMEWORK A. Introduction 1. The earthquake o f October 8, 2005 left widespread destruction in its wake in A X and eastern NWFP. These areas have suffered extensive damage to economic assets and infrastructure, with social service delivery, commerce and communications either debilitated or destroyed. At the request o f the Government of Pakistan, IDA i s financing an Emergency Recovery Credit to support the reconstruction and recovery efforts. The main areas for IDA support are: (i) Import financing for early recovery; (ii) Livelihood support; (iii) Housing reconstruction; and (iv) Capacity building; as well as contingency arrangements for social protection, health, education, roads, water supply and other infrastructure, and agriculture. 2. Project components and activities eligible for fundingunder this project will be required to satisfy the World Bank's safeguardpolicies, in addition to conformity with relevant safeguards legislation o f the Government o f Pahstan (GOP). World Bank policies and guidelines, pertaining to environmental safeguards, which may require consideration under this project are OP/BP/GP 4.0 1 Environmental Assessment; OP 4.12 Involuntary Resettlement; OP/BP 4.10 Indigenous Peoples; OPN 11.03 Cultural Property; OP 4.37 Safety of Dams; OP 4.04 Natural Habitats; and OP 7.50 Protection o f International Waterways. A s details o f specific sub-projects and activities are yet to be finalized, specific environmental and social issues cannot be identified at this stage. Therefore, an Environmental and Social Safeguards Assessment Framework (ESSAF) has been prepared, based on which project specific safeguards assessments will be conducted once sub-projects and activities have been identified. Insuch circumstances, OD 4.01 requires that arrangements be made whereby the project implementing institutions undertake the functions o f sub-project screening, EA review and implementation o f mitigation and monitoring plans. 3, This document summarizes the Environmental and Social Safeguards Assessment Framework, which i s a template, and will form the basis for undertaking sub-project specific environmental and social analysis once the specific sub-projects and activities are identified. The ESSAF i s being submitted inlieu of a project EA and has formed the basis for appraising the environmental and social aspects o f the project. It has also been made available for public review and comment inrelevant locations in Pahstan and in IDA'S Public Information Center in accordance with BP 17.50 requirements o f disclosure. Detailed environmental analysis for individual sub-projects and activities will be carried out by implementing agencies and will be reviewed and cleared by the Federal Environmental Protection Agency and/or the NWFP and AJK Environmental Protection Agencies, under prevailing national environmental legislation inPakistan and the World Bank. B. Objectives of the ESSAF 4. The Environmental and Social Screening and Assessment Framework (ESSAF) provides general policies, guidelines, codes o f practice and procedures to be integrated into the implementation o f the initial phase o f World Bank-supported emergency reconstruction operations inPakistan. This Framework has been developed to ensure compliance with the World Bank's safeguard policies in connection with the emergency earthquake reconstructionwork inPakistan. The objective o f the ESSAF i s to ensure that activities under the proposedreconstructionoperations will address the following issues: 0 Protect human health; 0 Prevent or compensate any loss o f livelihood; 63 e Minimize environmental degradation as a result o f either individual subprojects or their cumulative effects; e Minimize impacts on cultural property; and e Enhance positive environmental and social outcomes. C. General Principles 5. Recognizing the emergency nature o f the proposed relief and reconstruction operations and the related need for providing immediate assistance, while at the same time ensuring due diligence in managingpotential environmental and social risks, the ESSAF i s based on the following principles: e The proposed operations will support multiple subprojects, the detailed designs o f which may not be known at appraisal. To ensure effective application of the World Bank's safeguard policies, the ESSAF provides guidance on the approach to be taken during implementation for the selection and design o f subprojects and the planning o fmitigation measures; e Environmental category `A' subprojects are not expected. If any do occur, EAs for specific subprojects will be prepared during implementation, instead o f before appraisal. Corrective measures in the form o f an Environmental Management Plan will be built into either the emergency project or a future lending operation. The above i s in accordance with paragraph 13 o f OP 4.01 and paragraph 5 o f BP 4.01; e No resettlement issues are expected inany o f the FY04 operations for the first year's subprojects. If any do occur, Resettlement Plans'(RPs), and/or Resettlement Policy Frameworks for specific subprojects will be prepared. However, these RPs can be prepared during implementation, provided a waiver on the submission o f RPs prior to appraisal i s given by the MD. The waiver would also specify a timetable for the preparation o f the RPs, inaccordance with the requirements of OP 4.12, duringimplementation; 0 The proposed emergency reconstruction operations might finance feasibility and detailed design studies for these subsequent investments, which will include environmental assessments and social studies as requiredby World Bank safeguardpolicies; e Project design and subproject selection will aim at maintaining regional balance and equity among ethnic and religious groups inthe affected areas o f North West Frontier Province (NWFP) and Azad Jammu Kashmir (AJK), considering variations in population density. Employment opportunities within the projects will be available on an equal basis to all, on the basis of professional competence, irrespective o f gender or ethnic or religiaus group. Inall projects which require consultations with local communities or beneficiaries, consultations will be conducted to elicit the views o f the male and female population; and e Consultation and disclosure requirements will be simplified to meet the special needs of these operations. This ESSAF will be disclosed in the sector ministries and other public places in Palustan and inthe World Bank Infoshop. D. Environmental and Social Screening and Assessment Framework (ESSAF) 6. The ESSAF has been developed specifically for the proposed operations to ensure due diligence, to avoid causing harm or exacerbating social tensions, and to ensure consistent treatment o f social and environmental issues by all donors and the Governing o f Palustan. The purpose o f this Framework i s also 64 to assist the Project Implementing Agencies in screening all the subprojects for their likely social and environmental impacts, identifying documentation and preparation requirements and prioritizing the investments. 7. OP 4.01 Environmental Assessment. Most o f the proposed subprojects are likely to focus on the repair, rehabilitation, reconstruction and upgrading (where necessary) o f damaged buildings, roads, bridges and infrastructure o f critical importance. This would include water supply and sanitation, agricultural infrastructure, irrigation and drainage networks including health care facilities and rehabilitation o f primary and secondary schools as well as tertiary education facilities. Support may also be provided to restore degraded ecosystems, once studies to assess the damage on ecosystems are completed. The work in these areas will be done under OP 4.01 and it i s anticipated that OP 4.04 on natural habitats may be triggered as well. 8. Considering the nature and magnitude o f potential environmental impacts from relatively limited scale and magnitude of reconstruction works, the proposed operations are likely to be classified as category `B'. The requirement to carry out an Environmental Analysis as part o f project preparation can be waived but, for subprojects with potential adverse impacts, a limited Environmental Analysis will be done duringproject implementation. At the same time, prior to appraisal the implementing agency will agree to apply the following minimum standards during implementation: inclusion o f standard environmental codes o fpractice (ECOP) inthe repair and reconstruction bid documents o f all subprojects; review and oversight o f any major reconstruction works by specialists; implementation o f environmentally and socially sound options for dispo9sal o f debris; and provisions for adequate budget and satisfactory institutional arrangements for monitoring effective implementation. 9. OP 4.12 Involuntary Resettlement. The need for involuntary resettlement or land acquisition in specific subproject areas will only be known duringproject implementation, when site-specific plans are available. Therefore subprojects will be screened for applicability o f the resettlement policy and any subprojects involving involuntary resettlement or land acquisition will only be approved after preparation of a resettlement plan acceptable to the Bank. The safeguards framework will therefore include procedures for identifying eligible project-affected people, calculating and delivering compensation, and mechanisms for land dispute grievance redress. 10. Although land disputes o f affectees o f natural disasters are not covered by OP 4.12, the policy does cover those displaced by the project's activities. Even for those not covered by the policy, and to ensure effective poverty reduction, it i s good practice for the borrower to undertake a social assessment and implement measures to minimize and mitigate adverse social impacts, particularly on poor and vulnerable groups. Well documented consultation mechanisms will be required to establish eligibility for compensation. Absent refugees who later claim compensation will require clear legal remedies to resolve or adjudicate disputes. 11. OP/BP 4.10 Indigenous Peoples. There are no known indigenous peoples living inthe affected areas and ethnicity is in any case only one o f many factors determining vulnerability in the present situation in Pakistan. In this perspective, a social assessment with focus on potential vulnerability covering all affected groups is planned to ensure effective consultations and culturally appropriate benefits for each group, instead o f focusing only on groups defined as "indigenous peoples". As part of this analysis, subproject preparationwill assess the vulnerability o f different groups inparticular project contexts (interms of potential exclusion from project benefits, negative project impacts, and the need for specific culturally compatible mechanisms for participation, e.g. for women, permanently disabled), and will incorporate adequate measures to address such vulnerability inproject design. 65 12. OPN 11.03 Cultural Property. The emergency operations may pose limited risks o f damaging cultural property, assuming that they will not include large-scale excavations, movement o f earth or demolition. Nevertheless, projects and subprojects will be reviewed for their potential impact on cultural property and clear procedures will be required for identification, protection o f cultural property from theft, and treatment o f discovered artifacts, and will be included in standard bidding documents. While not damaging cultural property, subproject preparation may later identify and include assistance for preservationo f historic or archeological sites. Ifthese opportunities occur, cultural property management plans would be prepared for those subprojects. 13. OP 4.37 Safety of Dams. There are 2 dams over 15 meters high in AJK (Mangla Dam) and NWFP (Tarbela Dam), but were outside the area o f influence o f the earthquake. Investigation done on these dams shows no impact or loss o f structural integrity due to the earthquake. Therefore, these dams will not be included inthe operations. However, because of local site conditions, even restoring smaller, earthen dams and linked irrigation infi-astructure (partly abandoned, damaged or destroyed by civil unrest and war) will require application o f standard engineering safety codes, inspection and evaluation o f their safety status, and preparation and implementation o f operation and maintenance procedures. Decisions on dam safety requirements will be made with the concurrence o fthe Bank. 14. OP 4.04 Natural Habitats. The earthquake may have damaged sensitive ecosystems and natural habitats due to landslides. While the extent o f such damage i s not known at this time, studies that will be conducted to assess damage to ecosystems and natural resources will be identify such damage or degradation, if any. Subsequently, ecosystem restoration activities are proposed and may be funded under this operation or by another donor agency. In addition, since the World Bank will not support sub- projects that involve conversion o f critical natural habitats such as in Declared Forest Reserves, Wildlife Reserves and National Parks and Sanctuaries, an EA i s required prior to initiation o f the specific sub- project that may involve the conversion o f naturalhabitats. Decisions on actions and requirements will be made with the concurrence o f the Bank. 15. OP 7.50 Projects on International Waterways. There are two major rivers inthe affected area that are shared with India-Jhelum and Neelum-which eventually become part o f the Indus. There i s a water sharing agreement between India and Pakistan in place. There are also potential water sharing issues with downstream users in provinces o f Pakistan. Components affecting waters in riparian neighbors and downstream users will trigger the policy and project components will be screened to identify riparian issues and to ensure adequate notification, as required under the policy. Decisions on actions and requirements will be made with the concurrence o fthe Bank. E. SafeguardScreening andMitigation 16. A Social Assessment (SA) will be conducted to provide a baseline and inform the project regarding the applicability o f the Framework in specific cases while a continuous social impact assessment (CSIA) will facilitate the articulation o f community perceptions, grievances and feedback vis-&-vis identification o f beneficiaries for the housing, livelihood and vulnerability components and the mobilization o f resources. The CSIA will help monitor the social dimensions of the program and flag potential risks. Through direct interaction with beneficiary communities it will carry out an independent evaluation o f the program implementation and distribution o f program benefits. The CSIA will monitor the impact o f the programand help to initiate necessary mitigation measures. 17. The selection, design, contracting, monitoring and evaluation o f subprojects will be consistent with the guidelines, codes of practice and requirements stated in the ESSAF. The Governments o f Pakistan and o f AJK will confirm that areas to be accessed during reconstruction and rehabilitation activities have been de-mined. 66 F. Responsibilitiesfor SafeguardScreening andMitigation 18. Each Implementing Agency will be responsible for applying the safeguard screening and mitigation requirements to its own subprojects. Within each Ministry, a Safeguards Focal Point (SFP) will be identified with responsibility for overseeing the implementation o f the Framework. The federal Ministryo fEnvironment/EnvironmentalProtectionAgency (EPA) andthe EPAso fNWFP andA X will be responsible for environmental clearance for operations or sub-projects that require statutory environmental clearance, as required by law. Although the GOP and AJK's clearance procedure i s adequate and fairly reliable, IDA will still review a samples o f the EAs prepared under each sub- component and provide necessary concurrence for the approval o f disbursements o f funds. 19. ERRA will have staff with expertise in Social Development and Environment respectively to oversee the implementation o f the ESSAF by sub-projects. ERRA will also be responsible for the overall compliance with the ESSAF. The staff should be inplace within two months after Project effectiveness. All Departments/Authorities implementing sub-projects will have focal persons for Social Development and Environment in place within two months after project effectiveness. They will be responsible to oversee the initiation and completion o f the Social Assessment study in the immediate future and the continuous Social Impact Assessment at given points over the life o f the project. They will be directly responsible for compliance with the ESSAF at sub-project levels. G. Capacity-Building andMonitoring of SafeguardFramework Implementation 20. As part o f the capacity-building to be provided for implementation o f the proposed operations, the Safeguards Focal Points and relevant staff o f the concerned Ministries will also receive training in ESSAF's application. The Environmental Protection Agency (EPA) o f the federal government and the EPAs of NWFP and AJK will be trained inevaluation o f environmental assessments prepared under this operation. 21. To assist in this capacity-building, and to provide subsequent guidance and review o f the ESSAF's application, the Governments o f Pakistan, NWFP and AJK will contract specialist services for environmental and social safeguards. Duringsupervision o f these operations, the World Bank will assess the implementation o fthe ESSAF, and recommendadditional strengthening, ifrequired. H. Consultationand Disclosure 22. This ESSAF has been shared with the related Government Ministries o f Pakistan and AJK, concerned nongovernmental organizations and development partners o f reconstruction o f the earthquake affected areas. It was disclosed in Urdu and English by the Ministry o f Environment and the Environmental Projection Agencies o f AJK and NWFP in Islamabad, Muzaffarabad and Peshawar. It will also be made available at the World Bank's Infoshop. Relevant subproject specific safeguard documents/mitigation plans prepared subsequently will also be disclosed. 23. The proposed operations will support a number o f feasibility and detailed design studies for future infrastructure investments for which World Bank safeguard policies relating to consultation and disclosure will apply. Inparticular, for environmental Category A and B investments proposed for future operations, the implementing agency will consult project-affected groups and local nongovernmental organizations on the project's environmental and social aspects, and will take their views into account. The implementing agency will initiate these consultations as early as possible, and for meaningful consultations, will provide relevant material in a timely manner prior to consultation, in a form and language(s) that are understandable and accessible to the groups being consulted. 67 24. For Category A projects, the implementing agency will consult these groups at least twice: (a) shortly after the environmental screening and prior to finalization o f the terms o f reference for the Environmental Impact Assessment (EM); and (b) once a draft EM report i s prepared. For the initial consultation, the implementing agency will provide a summary o f the proposed project's objectives, description, and potential impacts. For both Category A and B projects, the implementing agency will provide these groups with a summary o f the EM report's conclusions. In addition, the implementing agency will make the draft reports publicly available to project-affected groups and local nongovernmental organizations. 68 APPENDIXXI: PROCUREMENT A. General 1. This operation will supplement the activities under the emergency recovery program focusing on the reconstruction of housing stock, provision o f cash grants for livelihood support, and import financing of goods required for the reconstruction phase o f the program in NWFP and AJK, as well as any contingencies that may arise inother sectors. 2. Procurement for the proposed program would be carried out in accordance with the Guidelines: Procurement Under IBRD Loans and IDA Credits dated M a y 2004; Guidelines: Selection and Employment of Consultants by World Bank Borrowers dated May 2004, and the provisions stipulated in the Development Finance Agreement. The broad description o f various items under different expenditure categories to be financed under the program i s provided below. For each contract to be financed under the Credit/Grant, the Government and IDA will agree upon the procurement method, the consultant selection method, and the need for prequalification. A detailed procurement plan for the first six months of the program, excluding the livelihood support cash grants, will be agreed prior to implementation. The procurement plan will be updated each subsequent six months. A guidance note on simplified and applicable procedures for all procurement actions under the program will be prepared. 3. The procurement o f goods, works and services other than consulting services, to be financed under the project following International Competitive Bidding (ICB) and Limited International Bidding (LIB)procedures, will use Bank's Standard BiddingDocuments. Consultants will be selected based on the BanWIDA Standard RFP and procurement methods described in the DFA. The Bank's Standard BiddingDocuments will be used for procurement o f goods and works following National Competitive Bidding (NCB) procedures already agreed with IDA and, for the selection o f consultants for small assignments, Request for Proposals (RFPs) documents based on IDA mandated samples. Additionally, based on the specific need and subject to prior review, IDA may agree to the use o f other standard documents prepared by the Public Procurement Regulatory Authority (PPRA) or the PakistanEngineering Council (PEC), specifically for emergency operations following natural disasters. Procurement of Works 4. Small scale rehabilitationheconstructionwork may be packaged to the extent possible to procure following national shopping procedures. Where possible and applicable, community based organizations would be contracted to carry out rehabilitationheconstruction works. Direct contracts will be estimated based on market rates. Reconstruction o f damaged houses and new housing construction will be carried out by the beneficiaries following direct contracting or shoppingprocedures. Procurement of Goods -Quick Disbursement Component 5. A positive list o f items for import financing has been agreed with the Government (Attachment I).Procurement wouldbelimitedto goods fromcountries that are eligible underthe Bank's Procurement Guidelines (Guidelines. Procurement under IBRDLoan and IDA Credits of May 2004). Up to 20% of the funds available under this credit will be qualify for retro-active financing of contracts for goods in the positive list placed after 8 October, 2005, provided procurement procedures acceptable to the Association have been followed. a) Commonly traded commodities may be procured under the Project by both the public and private sectors through established international commodity markets as defined in Clause 2.68 of the Bank's Procurement Guidelines, or through simplified procurement procedures in accordance 69 with the Bank's Procurement Guidelines (Table PI). All contracts would be subject to a post review by the Bank. Goods other than commodities procured by the public sector under this Project would follow simplified international competitive bidding, in accordance with the Bank's Procurement Guidelines (Clauses 2.66 and 2.67). However, to facilitate the speedy import o f items required immediately for the recovery effort, public sector agencies would be able to use international shopping procedures, in accordance with Clauses 3.5 o f the Bank's Procurement Guidelines, for contracts o f value less than US$3 million up to a period o f one year from 8 October 2005, the date of the earthquake. All contracts would be subject to a post review by the Bank. Goods other than commodities with a contract value o f less than US$5,000,000 under this Project may be procured by the private sector through established commercial practices acceptable to the Bank. Table P1: Summaryof ProcurementProcedures for Items onthe PositiveList PROCUREMENTCATEGORY PROCUREMENTMETHOD Public Sector Procurement Commodities Through established international commodity markets, or other channels o f competitive procurement as defined in Clause 2.68 o f the Bank's Procurement Guidelines Goods Simplified international competitive biddingprocedures under Clauses 2.66 and 2.67of the Bank's Procurement Guidelines. Public sector agencies would be able to use international shopping procedures, inaccordance with Clauses 3.5 o f the Bank's Procurement Guidelines for contracts o f value less than US$3,000,000 up to a period o f one year from 8 October 2005, the date o f the ....................................................................................................................... ...,.,......,,,......,................................ ... .............................. earthquake. ............................................................................... ............................................................................................................................................ Private Sector Procurement Commodities Through establishedinternational commodity markets, or other channels o f competitive procurement as defmed in Clause 2.68 o f the Bank's Procurement Guidelines Goods for contracts valued at less than Based on establishedcommercial practices acceptable to US$5,000,000 the Bank Cash Grantsfor Livelihood Support and Housing Support Activities 6. Government will provide beneficiaries a cash grant on a monthly basis to affected families up livelihood activities. The beneficiary will be fully responsible for all procurement action using the proceeds from the grant. 7. Government will also provide beneficiaries a cash grant to commence owner-driven housing repairh-econstruction activities. The beneficiary will be fully responsible for all procurement action using the proceeds from the grant. 8. Contingencies. If gaps are identified, IDA funds would be used to support additional financing sectors including social protection, health, education, agriculture, and roads, water supply and infrastructure. 70 Selection of Consultants 9. Consultancies will include beneficiary assessments, review and revision o f building standards for design of structures to withstand natural disasters, design and construction supervision contracts, studies on natural resource systems in the affected areas, environmental safeguards, social safeguards, national parks and wetlands, impact on the land and water resources, monitoring and evaluation, public awareness programs and riskmitigation studies. 10. Depending on the nature and the emergency timing for carrying out consultancy assignments, Single Source Selection and Consultant's Qualification Selection (CQS) may be considered as preferred methods. 11. Shortlists o f consultants for assignments estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants inaccordance with the provisions o f Paragraph 2.7 o fthe Consultant Guidelines. B. Assessment ofthe Capacityto ImplementProcurementunder the Program 12. An overall update o f the assessment o fprocurement capacity inthe NWFP and AJK basedon the on-going procurement performance in the projects under implementation in the two provinces was undertaken by Asif Ali, Procurement Specialist. A summary o f the assessment i s providedbelow. Implementation Arrangements 13, The GOP has established an Earthquake Reconstruction and Rehabilitation Authority ( E M ) at the federal level with the responsibility for overall policy and planning, standard setting, regulation, coordination as well as monitoring o f the reconstruction and rehabilitation program. At the province level, steering committees will be established. The NWFP and AJK Earthquake Steering Committees, chaired by the respective Chief Secretaries will oversee provincial planning and implementation o f sub- components. These committees would be supported by professionally staffed Reconstruction Agencies (RAs) which will have an autonomous status. The execution o f works and the procurement o f goods and services for specific components would be done by these professional bodies in close coordination with relevant line departments and local governments. At the district level, District Reconstruction Units (DRUs) would be established to support preparation o f plans and implementation o f small contracts in coordination with districts governments/ district level line agencies and Partners Organizations (POs). Exposure to I D A Procurement Procedures 14. ERRA is a newly formed organization and consequently does not have any previous experience of IDA funded programs. In the NWFP, various departments have adequate experience with IDA projects. These are NWFP CIP I(Cr.2829-PAK) and I1(Cr.3906-PAK) and NWFP OFWM (Cr.3516- PAK). In AJK the LGRDD has worked on the AJK RWSSP (0.2228 -PAK) and is currently implementing AJK CISP (Cr.3689-PAK). Other than goods to be procured under import financing, there will not be any highvalue procurement actions under the proposedprogram. IDAhas already conducteda training program for district level rural development staff. ERR4 shall recruit or reallocate staff within the system to strengthen the procurement capacity o f the project management units (PMUs). Inaddition, NWFP and AJK governments will support district/TMA units as needed in implementation of the agreed procurement plan. 71 Actionsfor Improving theAgencies' Procurement Capacities 15. IDA would conduct at least two training programs at the ERRA and NWFP and AJK governments' level to create an awareness o f the IDA procurement guidelines and to enhance the procurement capability o f the implementing agencies andthe decision-making authorities. C. ,ProcurementPlansand SelectionMethods 16. The relevant implementing agencies will develop procurement plans-that include the agreed procurementmethods-which will provide the basis for all procurement activitiesunder the program. Methods of Procurementfor Works and Goods 17. The proposed methods for procurement o f goods and works will follow one o f following procedure: 0 International Competitive Bidding [ICB] 0 National Competitive Bidding[NCB] 0 Shopping 0 Direct Contracting 0 Force Account 0 Community participation inprocurement 18. The Government and IDA shall agree to comply with the improved procedures for procurement following N C B as indicatedthe attachment to this Appendix. Methodsfor Selection of Consultants 19. The selection o f consultants will be made on the basis o f the following methods depending on appropriateness ineach case. 0 Quality and Cost Based Selection [QCBS] 0 Quality Based Selection [QBS] 0 Selection under a FixedBudget [FBS] 0 Least Cost Selection [LCS] 0 Selection Based on Consultants Qualifications [CQS] 0 Single Source Selection [SSS] 0 Selection o f Individual Consultants as per SectionV o fthe Guidelines 20. Considering the emergency situation, most o f the assignments are expected to be procured following Single Source Selection (SSS) and Consultant's Qualification Selection (CQS) Methods. D. ProcurementSupervisionandReporting 21. In addition to prior-review of contracts by IDA, where required there will be up to of two procurement review missions in each year that would include field visits, on-site inspections and post- review o f procurement actions. Auditor General o f Pakistanwill be strengthened to conduct an extensive ex-post procurement audit o f the contracts on a sample basis. 22. Procurement information will be collected and recorded as follows: 0 Prompt reporting o f contracts award information by PMUs for the respective components. 72 0 Comprehensive quarterly reports by PMUs indicating: (i)Revisedcostsestimatesforindividualcontractsandtotalcost;and (ii)Revised procurement actions including advertising, bidding and contract award and completion time for all contracts. E. Thresholdsfor Procurement MethodsandPriorReview 23. Thresholds for the various procurements methods are given inthe following table. Table P2: Thresholdsfor ProcurementMethodsfor items other than the PositiveList ~~ Sxpenditure Contract Value Threshold (US$) Procurement Method Prior Review Requirements Zategory . Works For each contractestimatedto cost NCB All above 300,000 For each contract estimatedto cost NCB FirstNCB contractfor eachimplementing between50,000 and300,000. agency, irrespectiveof value. Below 50,000 Shopping None.Postreview only 25,000 andbelow ForceAccount or Direct Contracting All Direct Contracts includingcommunitycontractingfor the initialperiodoftwelve months after 8 October, 2005, with prior ameement with IDA l. Goods For each contract estimatedto cost: 300,000 and above ICB All Below 300,000 NCB First NCB contractfor eachimplementing agency, irrespectiveof value. Below 50,000 Shopping None.Post review only Proprietaryitems, software, small Direct Contractingduringthe initial All value drugs, spare parts for existing periodoftwelve months after 8 equipment, etc. October 2005, with prioragreement with IDA 3. Grants for All Directby the beneficiary Livelihood ;upport ~ L For each contract estimatedto cost: Zonsultant 200,000 and above QCBS [inspecificcases, methodof All Services procurement canbe other than QCBS, which will be identified inthe procurementplan] Below 200,000 4ny methodas per the CrediUGrant First consultancycontract for each 4greement implementingagency, irrespectiveo f value Single Source Selection All Individual consultants>50,000 SectionV ofthe Consultants All hidelines Individual consultants<50,000 SectionV of the Consultants First consultancycontract for each 3uidelines implementingagencyirrespectiveofvalue Prior review requirements will be identified inthe procurementplans, which will be regularly updated for review and agreement with IDA. 73 F. OVERALL PROCUREMENT RISKASSESSMENT 24. The overall risk for procurement i s Hlg;h. Agreed Proceduresfor National CompetitiveBidding Invitation to bid shall be advertised in at least one national newspaper with a wide circulation, at least 30 days prior to the deadline for the submission o f bids; Bid documents shall be made available, by mail or inperson, to all who are willing to pay the required fee; Foreign bidders shall not be precluded fi-om biddingand no preference o f any kind shall be given to national bidders inthe biddingprocess; Biddingshall not berestricted to pre-registered firms; Qualification criteria shall be stated inthe biddingdocuments; Bids shall be opened inpublic, immediately after the deadline for submission o fbids; Bids shallnot be rejected merely on the basis o f a comparisonwithan officialestimate without the prior concurrence o fthe Association; Before rejecting all bids and soliciting new bids, the Association's prior concurrence shall be obtained; Bids shallbe solicited and contracts shall be awarded on the basis ofunitprices andnot on the basis o f a composite schedule o frates; Contracts shall not be awarded on the basis o f nationally negotiatedrates; Contracts shallbe awarded to the lowest evaluated and qualified bidder; and Post-bidding negotiations shall not be allowed with the lowest evaluated or any other bidders. 74 APPENDIXXI: FINANCIALMANAGEMENT AND DISBURSEMENT A. Country andProvincialIssues 1. A CFAA was carried out for Palustan and a final report was presented to the Government in December 2003. The report highlighted certain strengths and weakness in the financial management systems and included a time-bound action plan, as part o f the reform program, for implementation by the Government. The Government has achieved reasonable progress in the implementation o f the reform measures in a number o f respects although progress i s uneven in some o f the key areas like internal auditing. 2. The Earthquake Emergency Recovery Credit (ERC) will be implemented, principally, in the two affected provinces/territories o f Pakistan (NWFP and AK). While a Provincial Public Financial Accountability Assessment, finalized for the NWFP in January 2004 also highlighted some specific deficiencies, progress in the implementation o f the provincial financial management reform program indicates that NWFP i s a most reforming province. The Province has adopted the New Accounting Model using the new Chart o f Accounts which i s IMF GFS compliant, and i s only one o f two provinces that have achieved a state o f readiness to roll-out the use o f a uniform chart o f accounts for all its 24 district governments. The province has also achieved the highest reconciliation levels for fiscal and financial data amongst the four provinces o fthe federation. 3. The financial management arrangements at AJK are, on the other hand, conducted on the same underlying principles as applicable at the Federal level. The accounting, internal control, reporting, and auditing systems are all based on the federal model while recognizing that AJK i s not a traditional province inthe federation. The CFAA (2003) conclusions, equally applicable to AJK, indicate that there are significant challenges remainingwithin the country's financial management reform agenda to improve the effectiveness and productivity o f public spending not only through a better allocation o f resources and a more careful choice o f policies and priorities but also through better implementation, more efficient delivery o f services, and improved controls over financial flows. Since then, AJK achieved the highest accounts reconciliation rate when compared to the four provinces o f Pakistan and the Federal Government. Reconciliation levels for receipts, expenditures, intergovernmental accounts, and suspense accounts have been held at 100% respectively over the past 3 years. This has resulted to a greater reliability and accuracy o f the financial and fiscal data supplied from the A K despite the multiplicity o f financial transactions carried out through manual accountingprocesses. B. ImplementationArrangements 4. A form o f Statutory Authority, establishedbyNotification, called Earthquake Reconstructionand Rehabilitation Authority (ERRA) was founded to manage the overall implementation and monitoring arrangements for the recovery exercise. This institution will be the umbrella agency that will define the operational policies and guidelines and direct the uniform implementation o f the country's disaster management program as well as manage the grievance process. It will also be responsible for the overall management of the funds provided by multilateral and bilateral donors, private targeted donations, and budgetary contributions o f the Government towards the reconstruction and rehabilitation program. IDA funds to be provided under the auspices o f the Earthquake Emergency Recovery Credit will equally be routed and managed through the Authority under financial management arrangements harmonized with the rest o f the donors. 5. ERRA shall not manage the President's ReliefFund(PRF). This fund, which received donations fi-om private individuals and corporate institutions, is currently disbursing the funds for relief related operations under the authority o f the Prime Minister's Secretariat. While the PRF will not constitute part 75 of the sources o f funds for the ERRA Fund Account, separate financial statements o f that Fund will be prepared and audited and certifiedby the Auditor General o fPakistan. 6. An Operations Manual o f the Recovery Program i s currently being prepared by the Government under the auspices o f ERRA. This Manual will provide the policies and guidelines that shall constitute the strategic and operational management o f the program as well as enshrine the transparency and accountability o f the resources provided for the reconstruction and rehabilitation exercise. Financial management and auditing procedures, including funds flow control arrangements and procedures, designed by the Auditor General o f PahstadController General o f AccountshIinistry o f Finance, shall formpart o f this Manual. 7. The ERRA funds shall be credited into the `Public Account' - `ERRA Fund'. Specific `special purpose' budgeting and accounting codes shall be introducedby ERRA to capture and track receipts into the account and payments from the account in order to produce reports consistent with the outline and contents o f the financial statements. 8. Implementation o f the recovery program will be undertaken through NWFP/AJK Provincial Reconstruction Agencies and District Reconstruction Units, NHA, WAPDA, FWO, PWD, PPAF, NGOs or such other mechanisms that ERRA will authorize. The ERRA will finance the remunerationdfees o f qualified technical and financial management personnel in each o f the provincial Reconstruction Agencies and district reconstruction units, and support the evaluation and monitoring processes during implementation. 9. The government budgeting and accounting system will be used up to the extent possible, at all levels. For the purposes, however, o f expediting and fast tracking the implementation process, and harmonizing the reporting and assurance process through a central coordination entity, ERRA will prescribe the reporting requirements o f each o f the two Reconstruction Agencies, based on the specific formats for its own Entity reporting. The Reconstruction Agencies will also, in turn, prescribe the reporting requirements o f the district reconstruction units. ERRA i s however empowered to vary the channels o f control o f implementation activities where capacity constraints exist. Financial management of the program's activities to be implementedby NHA, WAPDA, PPAF, FWO, NGOs will be carried out under the auspices o f each o f these entities since they already all have acceptable financial management arrangements. However, monitoring o f implementation progress inthese entities shall constitute ERRA's role. C. StrengthsandWeaknesses 10. The commitment o f the Government o f Pakistan to ensuring the adherence to transparent and accountable processes for the reconstruction and rehabilitation program i s a strength that the project can develop on to provide the requisite fiduciary assurances. The Office o f the Auditor General, in collaboration with the CGA and MoF, has spearheaded the preparation o f the funds flow, accounting, internal control, financial reporting, and external auditing mechanisms for the Program. Since the AGP i s currently implementing the PIFRA project, the office i s well poised to supporting the effective and efficient delivery o f the financial management and overall fiduciary requirements for this type o f project/program. Financial reporting using the existing S A P R 3 application software that i s becoming widely used in the Pahstan public sector has the requisite functionalities to execute the accounting and reporting needs o f the project and the overall program. Where found expedient, an off-the-shelf FM software or specially programmed application could be acquired, without delay, to support ERRA's financial accounting and reportingrequirements. 11. A key weakness which is in itself a risk is the time required to institutionalize the FM arrangement in ERRA as well as in the ReconstructionAgencies and District ReconstructionUnits to be 76 established for this recovery program. A mitigating factor however i s the committed responsiveness and commitment o f ERRA to complete the recruitment, appointment, and induction of all the required personnel within one month o f Credit effectiveness. D. RiskAnalysis 12. The Financial Management risks o f the project, arising from the identified weaknesses, together with their mitigating measures are highlightedinthe following table: Risk Rating RiskMitigatingMeasures Inability to comprehend the complexity inthe H The FM capacity o f the Reconstruction funds flow arrangement due to the multi- Agencies will be strengthened with qualified sector, multi-govenunent nature o f incremental FM staff out o f projecVprogram implementing the program. funds. Adequate FM procedural guidelines will be included as part o f the overall Operations Manual. Dearth o f a Financial Management Team at H Head o f Finance (ERRA) shall be in place ERRA to spearhead the FM arrangements in before negotiations. good time. A support team o f professionally qualified and experienced FM staff will be inplace withm one month after Credit effectiveness. Weak auditing capacity and potential o f Auditor General will conduct audit o f all ERRA funds notbeing used for intendedpurposes. funds on a regular basis through its presence in Islamabad, AJK and NWFP. Inaddition, ERRA will have an internal audit unit, which will conduct ongoing post audits. These staff may be recruited as incremental staff o f the AGP and paid out o f the project funds to also address internal control weaknesses. Administration and delivery of Livelihood The Auditor General o f Pakistan or a f i i o f Cash Grants may be mismanaged Chartered Accountants with international accreditation and representation will conduct a special purpose assurance audit o f cash grants over the 6 month grant payment period. Overall riskrating 13, With the overall financial management risk o f the project rated `High', the projecUprogramwill needintensive supervision from an FMperspective. E. StaffingArrangements 14. ERRA will be staffed by adequately qualified financial management team (comprising at least 4 market-based professional accountants). Internal auditors to be assigned on deputationby the CGA or as project-paid incremental staff shall also be positioned in ERRA and the Reconstruction Agencies and District reconstruction Units. These staff will be required to be on board within 60 days o f Credit effectiveness. In the interim, financial management staff deputed to the Authority by the CGA shall carry out the accounting and financial reporting o f the Program funds. 77 15. At the NWFP and AJK Reconstruction Agencies which are to be established for the delivery of the recovery program, they shall each establish a financial management wing, staffed by at least 4 professional accountants from the market. For each o f the 8-9 District Reconstruction Units, one professionally qualified accountant and one other part-qualified accountant from the market shall be recruited to support the accounting and financial reporting o f the district implementation activities to be handled at that level. Inrespect o f other implementing self-accounting entities like NHA, WAPDA, etc. these already have adequate financial management arrangements to enable compliance reporting to ERRA. F. Accounting PoliciesandProcedures 16. ERRA shall comply with the IPSAS Cash Basis o f Financial reporting for its year-end financial statements o f the Entity, and shall also provide by way of notes to the accounts material financial commitments at each year end. The notes should equally include a summary o f expenditures pertaining to each o f the 8-9 affected districts on a segmental basis and according to the core components o f the Recovery Program. Other specific operative procedures relevant for the project will be defined in the financial management procedures prepared by the AGP/CGA/MoF. These procedures shall form part o f the Operations Manual o f ERRA. G. InformationSystem 17. ERRA shall implement a Computerized Financial Management System, using the existing SAP/R3 (appropriately configured with the support o f PIFRAZ5),an off-the-shelf package, the DERA FMIS application reconfigured to meet the ERRA specific accounting and reporting requirements, or a specifically programmed FMIS application. This system shall serve as a consolidation bench for the integrated M I S o f the entire program and shall be availed the capability to produce FMRs and financial statements o f the program. Installation o f this system will be carried out at ERRA and each o f the two Reconstruction Agencies within one month o f Credit effectiveness. Meanwhile, ERRA shall operate a manual FMIS system. H. Flow of Funds and Disbursements(IDA Funds) 18. There shall be established one dedicated Special Account for receipt and disbursement o f ERC funds and this account shall constitute a sub-set o f the ERRA FundAccount held with the SBP. Other donor contributed funds shall also form part o f the ERRA Fund Account but as sub-receipt accounts thereof, Equally, all ERRA targeted donations shall be channeled through a sub-account o f the ERRA FundAccount heldwith the SBP. Releases from the FederalGovernmentbudget shall be transferred from the Federal Consolidated Fund to the ERRA Fund Account also as a sub-account thereof. All funds received shall constitute part o f the `Public Account', shall be non-lapsing, but held intrust to be utilized solely for intended purposes as per the financing plan, and in accordance with Government o f Pakistan's transparent and accountable financial rules for emergency situations. 19. The accounting mechanism for the purpose o f receiving and reporting the Credit will be done as per the requirements o f Government o f Pakistan's M o F Circular o f November 25, 2002 as revised on April 15, 2005, relating to the maintenance and operation o f `revolving fund' accounts of IDA/IBRD/ADB credits and loans. For this particular emergency reconstruction and rehabilitation program, all funds for the program must first be channeled through the Federal Consolidated Fundheld with the SBP and eventually transferred in total, according to sources, to the designated Public Account (ERRA FundAccount) through a budgetprocess. *'PIFRAi s Projectfor Improvement of FinancialReportingandAuditing 78 20. For this particular program, the SBP shall credit the ERC funds first into the `Consolidated Fund Account No. 1- Non-Food' o f the Federal Government, and correspondingly transfer the funds into an IDA sub-account of the ERRA FundAccount held in the `Public Account'. The AGPR and ERRA as well as the M o F and EAD shall be advised accordingly. 21, Withdrawals from the IDA credit would be `Report-Based' (Financial Monitoring Reports) rather than transaction-based (Statement o f Expenditures). `Report-Based' will allow for adequate funds to be made at the disposal o f ERRA, based on its own plannedrequirements for up to two quarters inadvance. The FMRs shall be provided, covering the whole program operations as well as the specific IDA operations. The format o freporting shall be uniform for all donors. 22. Withdrawals from the IDA Special Account shall be specifically for IDA financed eligible expenditures o f the program and shall be reported accordingly as such. Since Fund Accounting i s not anticipated, the Bank will accommodate FMR withdrawal applications from the Credit as long as the overall expenditure eligible under its `financed components and categories' i s more than or equal to the amount that ERRA seeks to withdraw from the Credit. For example, if under housing grants, a sum o f $50 million has been disbursed under the Program while the Special Account Advance was only $20 million, the Bank will, prima facie, be satisfied that the Special Account Advance has been appropriately expended and that ERRA could seek for replenishment o f the account. If, on the other hand, the amount disbursed under the program at a particular reporting period is, say, $15 million when the IDA Special Account Advance was $20 million, IDA will replenish the Special Account only to the extent o f the following six months' budgeted expenditures less the balance o f $5 million ($20m less $15m) unutilized by the Program at the time o f the replenishment request. This is consistent with the `entity approach' for this Program 23. ERRA shall release funds from the ERRA FundAccount held with the SBP, on `front-loaded' basis, to each o f the two Reconstruction Agencies (NWFP and AJK) or participatingpublidprivate sector agency based on the budgeted expenditures for approved programs and schemes to be implemented by them against their annual work programs. The releases will be the equivalent o f the funds required for the next six-months based on the costing o f the respective Agencies' annual work programs. The releases would be transferred to a separate Bank Account of the Agencies and shall constitute a sub-set o f the Public Account o f NWFP and AJK respectively for the Recovery Program. Other implementing entities like NHA, PPAF, FWO, PWD, WAPDA, ADAs, and NGOs would open separate bank accounts to receive and disburse the funds received through ERRA releases in order to finance approved schemes. Equally, the releases would be the monetary equivalent o f six months' budgeted expenditures against their approved annual work programs. 24. Funds shall be released to and disbursed through the 8-9 District Reconstruction Units by the respective Reconstruction Agencies on a form o f Imprests. The District Coordination Officers (inrespect of Reconstruction Units in NWFP) and the Deputy Commissioner (in respect o f AJK Reconstruction Units) shall serve as the Principal Accounting Officers under the guidance and direction o f the District Nazims and the District Advisory Committees. Inaddition, transfers to designated Bank Accounts shall be made by ERRA to other national implementing/participating entities like NHA, PPAF, FWO, WAF'DA, ADAs, and NGOs. All programs and schemes must first have been pre-approved by the relevant Provincial Steering Committees, headed by the Chief SecretariedAdditional Chief Secretaries, and all releases o f funds must be intimated to all the approving authorities at the federal, provincial and district government levels. 25. For each funds release, ERRA shall ensure that the "Special Purpose" government budgeting and accounting codes are used and that the releases relate to financing of specific activities and schemes that hadbeen processed and approved under appropriate delegation o fpowers. Reporting back to ERRA shall 79 follow the same coding structure. The delegation of financial powers, as appropriate, shall be defined in the Operations Manual. 26. For the purpose of meeting the operational expenses of ERRA at the Central level, ERRA shall establish and operate a Bank Account with the National Bank of Pakistan in Islamabad. Funds to be released from the ERRAFundAccount heldwith the SBP shall bethe equivalent o f six months' budgeted expenditures of ERRA. 27. ERRA shall be responsible for consolidating the funds inflow (by fund source) and outflow (by district/program/activity/scheme) related to the entire program, and shall also ensure that the funds utilized from the ERC are clearly delineated as part of and as a sub-set o f the overall sources and uses of funds (even by way of a note in the ERRA entity financial statements). The FMRs submitted for withdrawals from the Credit would constitute the basis for this delineation. 28. Below is a schematic flowchart of the funds flow aspects of the program as a whole (IDA resources included): ` ' BilateralI Multilateral Funds \ I / > ConsolidatedFund [Ministryof Finance] -State Bank of Pakistan Budaet I 2 Reconstruction Reconstruction NHA, FWO, PPAF, PWD, Agency1 Agency1 RSPs,WAPDA, NGOs] [District Reconstruction Units] lmprestAlCs Units] lmprestAlCs *TheserepresentPublic Accountfunds releasedby ERRA and heldinCommercialBanks I. Accounting,InternalControl,andFinancialReporting 29. At the district reconstruction units in the NWFP, the office of the DCO, through the financial management staff that ERRA shall recruit from the market and pay for from the ERRA funds (as well through DAOs, where necessaiy), will be responsible for the accountingand reporting of the expenditures of approved district programs and schemes to the NWFP Reconstruction Agency. As regards AJK, the office of the DeputyCommissioner, through recruited financial management staff (as well through DAOs, where necessary), shall provide the accounting and reporting services thereat. The two Reconstruction Agencies would carry out the reconstruction activities which may not be delegated to district reconstruction units. These Agencies shall include a financial management unit in their structure that shall be responsible for the accounting, internal control, and financial reporting o f all funds released to themby ERRA. The arrangement also includes the consolidation, bythe ReconstructionAgencies, o f the 80 District Reconstruction Units' financial reports (using a simplified imprest accounting and reporting format) prepared anddelivered to them on monthly basis. 30. As for other implementing/participatingentities which are autonomous, self-accounting, andhave acceptable financial management and reporting arrangements, financial reporting from them will entail the provision o f summary financial returns on expenditures as well as implementation progress made for approved programs and schemes they are implementing. These will serve the purpose o f consolidating in the overall financial statements o f the ERRA. ERRA shall provide a template to these institutions on the format o f such reports. 31. Internal control and internal auditing on regular basis will be instituted inE m , NWFP and AJK Reconstruction Agencies, and at each o f the 8-9 District Reconstruction Units.Internal auditors shall be delegated by the CGA's office through deputation, or recruited from the market at cost to the Program. This will ensure that the financial returns to be submitted to ERRA head office for consolidation are reliable, accurate and comprehensive, and that they provide the required pre-assurance that the consolidated Entityfinancial statements o f ERRA are true and fair. 32. Additional internal control procedures will be specified in the project financial management procedures manual to bridge any gaps and to promote results-based accountability framework particularly with regards to the special flexibility implementationnature o fthe multisector programto be funded by a multiplicity o f donors, inassociation with the Government. 33. On a quarterly basis, ERRA shall provide a consolidated financial and implementation progress report to the Government o f Pakistan and the donor community in a form of `Sources o f Funds' (according to contributor categories), and `Uses o f Funds' (according to districts, sectors, programs, activities, and schemes), as well as physical progress monitoring reports. The reports should, for transparency purposes, be made publicly available and ina website that ERRA shall establish. 34. ERRA shallbe responsible for providing the overall assurance to the Government o fPakistan, the citizens, and the donor community that the program i s being implementedtransparently and that the funds expended from the ERRA Fund Account have been used for intended purposes and with economy and efficiency. In this case, the financial statements o f ERRA as an entity, which shall be subject to a separate independent audit by the Auditor General o f Pakistan, shouldbe made available within 4 months o f the end o f each fiscal year. 35. Inthe event that funds are transferred to community basedorganizations to carry out community work, ERRA and the Reconstruction Agencies and with validation by the AGP, will outline the reporting formats and simple accounting procedures that should be followed in: (i)budget preparation; (ii) recording sources and uses o f funds; (iii) inventory control; (iv) asset management; (v) internal controls; and (vi) audits, etc. 36. As an enhanced form of effective delivery assurance, the Performance Audit Wing o fthe Auditor General's Office shall conduct performance auditing of the program within six months o f the end o f each fiscal year in order to enhance the accountability process, and instill corrective measures related to implementation performance in good time. This report, which shall be available by December 31, each year, shall be shared with the donor community. J. ExternalAudit 37. The Auditor General of Pakistan (AGP) shall conduct an annual audit o f the ERRA as an entity and certify the consolidated financial statements for the entire program. This activity shall be additional to the continuous post-audits that will be performed at the Reconstruction Agencies and District 81 Reconstruction Units by the assigned AGP staff. For the purpose o f conducting continuous post-audit o f the program, the Auditor General's office shall be provided with additional resources to recruit qualified and experienced personnel to handle the activities at Agencies and Units as well as at ERRA since the existing capacity of the AGP i s already well stretched. As the AGP also carries out audits o f NHA, WAPDA, FWO, PWD, and would conduct the same for Reconstruction Agencies, the requiredassurances on the consolidated financial statements of ERRA will be adequate to meeting the reporting and assurance requirements o f donors, the Government, and the citizens o f Pakistan. IDA will therefore accept ERRA's entity audited financial statement and audit report, with adequate disclosure o f the financed activities o f the Recovery Program. The audit reports on the entity financial statements o f ERRA shall be due within four months o f the end o f each fiscal year and shall be publicly available. 38. With a view to enhancing the transparency inthe provision andpayment o f livelihood cash grants to affected communities over a period o f 6 months, a special purpose assurance audit shall be carried out that compares the eligibility criteria with the applied criteria, the identification mechanisms used for entry o f beneficiaries in the beneficiary database, the funds transfer through intermediary institutions, and the disbursement mechanism and coverage, as well as the timeliness o fpayments to affected individuals. The specific terms o f reference for this special purpose audit will be agreed with ERRA upon project effectiveness. The Auditor General o f Palustan shall perform the audit or hire a firm o f Chartered Accountants with internationalrepresentation inPakistan to perform the audit. Inthe latter case, the audit will be financed from the Program funds. The report o f the auditors shall be presented to the Auditor General, ERRA, and the donor community. K. Audit Reports 39. The following audit reports will be monitored: ImplementingAgency Audit Opinion DueDate ERR4 EntityFinancial Statements October 31 ERRA ERRAFundAccount October 31 40. Inaddition to the above, special purpose auditreports ofthe independentprivate auditors shallbe due in respect of livelihood cash grants within four weeks o f the end o f each calendar month over the 6 months' disbursement period. L. LegislativeOversight 41. The audited entity financial statements (annual) together with the audit reports thereon shall be available to the Public Accounts Committee for their scrutiny and action not later than 5 months after the end o f each fiscal year (].e. November 30). M. DisbursementArrangements 42. The project, which shall be implemented as a part o f the overall Program over three years at a total cost o f $400 million, will follow report-based disbursement procedures. The specific components and withdrawal categories, against which FMRs will be based, together with the allocation o fthe ERC IDA Credit thereto, are as presentedinthe table below: 82 Components Amount (US$ million) HousingFinance Grants 210 LivelihoodSupportCashGrants 85 Import Finance 85 CapacityBuilding 20 Total 400 DisbursementCategory Allocated Bank Financingthereof 1. Goods (except under Part 3 of 20 100 the Project), works, consultants' services (including audit costs), and OperatingCostsfor the Project 2. Livelihood CashGrants 85 100 3. Housing Grants 210 100 4. GoodsunderPart3 ofthe Project - Import 85 100 Finance Total 400 100 43. A Special U S Dollar Account will be established at the SBP, as a sub-account o fthe ERFUFund Account, and managed by ERRA. The Special Account shall be operated under terms and conditions acceptable to IDA. IDA shall advance to the Special Account the equivalent o f six months' budgeted expenditures against the identified expenditure categories o fthe project. 44. IDA will disburse the Credit on the basis o f financial monitoring reports (FMRs~~), incorporating financial & physical progress reports, in agreed formats, submitted by the ERRA on a quarterly basis. ERRA, the two ReconstructionAgencies, and the other self-accounting and autonomous implementing entities, shall retain the supporting documentation for their respective activities, including completion reports and certificates, and these shall be available for audit and to the Bank during project supervision. The implementing agencies will provide physical progress and other technical and financial reports to ERRA and on the basis of which ERRA shall submit withdrawal applications directly to IDA for replenishment o f the Special Account held under its authority. In respect o f expenditures at the district reconstruction units that are made on account o f the imprest funds advanced by the Reconstruction Agencies, the original documents, along with the imprest account returns, will be held at the ReconstructionAgencies. 45. The Project will benefit from the simplified expenditure eligibility mechanisms agreed under the Country Financing Parameters for Pakistan whereby 100% financing o f expenditures against applicable categories shall apply. N. Retroactive Financing 46. The Credit shall finance eligible retroactive expenditures o f the project from date o f the earthquake (Oct. 8) to date of Credit signingor up to four months as of October 8, which ever comes first. The amount o fretroactive financing o f eligible expenditures shall be upto 20% o f Credit amount. 26FMRs for withdrawalof funds fromthe Credit shallconstitutethe following reports: CashRequirementsForecast,Actual and Forecastcash Flow Statement, SpecialAccountActivity Statement, and PhysicalProgressand ProcurementMonitoring Statement. 83 0. ActionPlan 47. The following actions shall needto be completed by the defined dates. ResponsibleAuthority/CompletionDates ~RequiredAction 1. Finalize and Approve Operations ERRA-Within four months o f Credit Manual o f ERRA for the Overall Effectiveness Recovery Program I 2. Finalize FinancialManagement/Audit Guidelines 3. Select and Appoint qualified FMand audit staff at ERRA, Reconstruction to be inplace by Negotiations; the remaining Agencies, and at District Reconstruction staff complement within two months o f Credit Units effectiveiess 4. Agree TORfor independent audit o f AGP/ERRA -Withintwo months o fCredit LivelihoodCash Grants and appoint Effectiveness auditors 5, Agree formats o f interim and annual E W A G P -By Negotiations II Financial MonitoringReports Subject to the completion o f the agree actions as identified above, the financial management arrangements are acceptable. P. ApplicableFinancialManagementCovenants 48. The following conditions shall be included inthe FinancingAgreement (FA): 0 The Government o f Pakistan, through ERRA,will establish and maintain throughout the duration of the project, satisfactory and acceptable financial management arrangements managed by qualified professionals; and 0 ERRA shall submit annual financial statements of the entity to IDA, audited by the Auditor General o f Pakistan, no later than four months o f the end o f the fiscal year to which those statements relate; and 0 The Authority will prepare and submit FMRs to IDA no later than 30 days following the end o f a reporting calendar quarter. 84 APPENDIXMII:STATEMENT OFLOANS CREDITS AND Pakistan Status of Bank Group Operations - 5-Dec-05 IBRDnDA Total Disbursed (Active) 229.11 o fwhich has been repaid 0.00 Total Disbursed (Closed) 13,213.68 o f which hasbeen repaid 5,098.28 Total Disbursed (Active +Closed) 13,442.78 o f which has been repaid 5,098.28 Total Undisbursed (Active) 987.43 Total Undisbursed (Closed) 0.00 Total Undisbursed (Active +Closed) 987.43 Difference Between Active Projects Last PSR Expected and Actual Supervision Rating Original Amount in US%M Disbursements ai Development Implementation Fiscal Project ID Project Name Objectives Progress Year IBRD IDA GRANT Cancel. Undisb. Orig. FrmRev'd PO71454 An< CommunityInfrastructure&Senices S S 2003 50.0 43.5 106 PO74797 BankingSector TechnicalAssistance S S 2003 26.5 14.5 8 6 PO35823 GEF-ProtectedAreasManagementProject U MS 2001 10.1 8 1 2 0 PO10556 HighwaysRehab S S 2004 150.0 1500 260.3 32 7 PO74856 HIViAlDS PreventionProject S S 2003 37 1 29 9 9 6 6.6 PO82621 NWFPCommunityInfrastructure u U 2004 37.1 34.2 1 2 PO71092 NWFP On-FarmWater ManagementProject S S 2001 31.4 3.4 23.6 114 4.5 PO77288 NationalEducationAssessmentSystem S S 2003 3.6 3 3 1 4 PO34301 PhaseOut of ODSR e S S 1997 13 0 5.7 0 3 0.6 PO76872 P I F MII # # 2006 84.0 80 9 PO83370 Public SectorCapacity Building S S 2004 55.0 40.7 4 7 PO82977 SecondPovertyAileviationFundProject S S 2004 338.0 212.5 4 5 PO56213 SindhOn-FmWater Management MS u 2004 61.1 53.9 20 6 PO56213 Trade& Transport S S 2001 3.0 0.1 0 0 PO88994 TaunsaBarrageEmergency S S 2005 123 0 93.1 6 2 PO77306 Tax AdminiswationRefom S S 2005 24.4 78.5 96.8 18.4 Overall Result 291.4 955.3 23.1 3.4 1,001.1 132.1 11.7 ai Intendeddisbursementsto date minusactualdisbursementsto date as projectedat appraisal. 85 APPENDIXXIV: PAKISTANAT A GLANCE POVERTYand SOCIAL South Low- Pakistan Asia income Developmentdiamond* 2004 Population,mid-year(millions) 152.1 1,448 2,338 GNI per capita (Atlas method, US$) 600 590 510 Life expectancy GNI (Atlas method, US$ billions) 90.7 860 1,184 T Average annual growth, 199804 Population(%) 2.4 1.7 1.8 Labor force (%) 3.0 2.1 2.1 GNI Gross per primary Most recent estimate (latest year available, 199804) capita enrollment Poverty(% ofpopulation belownationalpoverty line) 33 Urban population (% of totalpopulation) 34 28 31 Lifeexpectancyat birth (years) 64 63 58 Infantmortality (per 7.000live births) 74 66 79 Child malnutrition (% ofchildren under5) 35 48 44 Access to an improvedwater source (% ofpopulation) 90 84 75 I Literacy (% ofpopulation age 75+) 47 59 61 Gross primaryenrollment (% of school-age population) 68 97 94 Pakistan Male 80 105 101 -Low-incomegrow Female 57 92 88 KEY ECONOMIC RATIOS and LONG-TERMTRENDS 1984 1994 2003 2004 GDP (US$billions) 31.2 51.9 82.3 96.1 Gross capital formationlGDP 18.3 19.5 16.9 17.3 Exportsof goods and serviceslGDP 11.1 16.3 16.9 16.0 Trade Gross domestic savingslGDP 6.7 16.8 17.5 10.4 Gross nationalsavingslGDP 25.9 22.2 23.1 23.0 Currentaccount balancelGDP -2.2 -3.2 5.1 2.0 Interest paymentslGDP 1.8 1.9 1.o 0.8 Total debtlGDP 39.3 52.8 43.6 37.1 Total debt servicelexports 19.5 35.0 16.7 15.4 Presentvalue of debtlGDP 36.1 Presentvalue of debtlexports 164.4 Indebtedness 1984-94 1994-04 2003 2004 2004-08 (average annual growth) GDP 5.5 3.4 5.0 6.4 6.7 ~ P a k i s t a n GDP per capita 2.9 0.9 2.5 3.9 Exportsof goods and services 10.8 4.7 28.4 -1.5 7.9 STRUCTUREof the ECONOMY 1984 1994 2003 2004 (% of GDP) Growth of capital and GDP (X) AgricuIture 27.9 I 25.6 23.6 22.3 IoT Industry 22.7 24.3 23.0 24.9 5 Manufacturing 16.1 16.8 16.2 17.6 0 Services 49.4 50.2 53.4 52.7 -5 Householdfinal consumptionexpenditure 81.2 71.1 73.6 73.3 -10 General gov'tfinal consumption expenditure 12.1 12.1 8.9 8.4 Importsof goods and services 22.6 19.0 16.3 14.9 1 ~ G C F q G D P 1 1984-94 1994-04 2003 2004 (average annualgrowth) Growth of exports and irnporrs(oh) Agriculture 4.4 3.0 4.1 2.2 Industry 6.7 3.8 4.7 12.0 Manufacturing 6.2 4.9 6.9 14.1 Services 5.4 4.1 5.2 6.0 Householdfinal consumptionexpenditure 4.2 3.2 0.5 8.2 General gov't final consumption expenditure 5.1 2.2 7.2 2.1 Gross capitalformation 4.6 0.8 6.3 -3.2 -Emports -OllmDorts Importsof goods and services 3.2 0.1 11.2 -8.6 Note: 2004 data are preliminary estimates. * The diamondsshow four key indicators in the country (in bold)comparedwith its income-groupaverage. Ifdata are missing, the diamond will be incomplete. 86 IBRD 34424 TAJIKISTAN TURKMENISTAN CHINA PAKISTAN FED. CAPITAL Approx. Line EARTHQUAKE EMERGENCY TERRITORY of Control ISLAMABAD N.W.F.P. MuzaffarabadMuzaf arabad RECOVERY CREDIT Peshawar Jammu and AFGHANISTAN ISLAMABAD Kashmir Area of Map HEAVILY AFFECTED TOWNS Lahore SELECTED CITIES AND TOWNS PUNJAB PROVINCE CAPITALS Quetta PAKISTAN NATIONAL CAPITAL RIVERS BALOCHISTAN ISLAMIC PROVINCE BOUNDARIES REP. OF INTERNATIONAL BOUNDARIES IRAN INDIA SINDH Karachi This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Arabian Sea shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 70°E 75°E 0 25 50 Kilometers TAJIKISTAN 0 25 50 Miles CHINA PAKISTAN K a ra k o r K u s h Epicenter a m K2 7.6 Saturday, October 8 , 2005 (Mt. Godwin- Austen) 5.6 & 5.8 Wednesday, (8,611 m) H i n d u October 19, 2005 R a n g e Chitral Chitral Indus AFGHANISTAN 80 km N . W. F. P. 60 km 35°N 40 km Approximate Approximate BatagramBatagram Line of Control Line of Control Saidu Saidu 20 km Bala Kot Bala Kot Kargil Kargil MansehraMansehra Muzaffarabad Muzaffarabad AbbottabadAbbottabad BaghBagh SrinagarSrinagar PeshawarPeshawar RawalakotRawalakot Jammu ISLAMABAD and Kashmir Kahat Kahat Rawalpindi Rawalpindi FED. CAPITAL TERRITORY ISLAMABAD Bannu Bannu P U N J A B 70°E 75°E DECEMBER 2005