Document of The World Bank Report No: ICR00003108 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-4577-PK) ON A CREDIT IN THE AMOUNT OF XDR 16.8 MILLION US$ 25 MILLION EQUIVALENT TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR A SECOND TRADE AND TRANSPORT FACILITATION PROJECT JUNE 17, 2014 Sustainable Development Department Pakistan Country Management Unit South Asia Region CURRENCY EQUIVALENTS (Exchange Rate Effective June 13, 2014) Currency Unit = Rupees PKR 1.00 = US$ 0.01 US$ 1.00 = PKR 98.39 FISCAL YEAR March 21 – March 20 ABBREVIATIONS AND ACRONYMS CSA Consultancy Services Agreement GoP Government of Pakistan MoCe Ministry of Commerce (Pakistan) NTCIP National Trade Corridor Improvement Program NTCMU NTC Management Unit NTTFC National Trade and Transport Facilitation Committee PC Planning Commission PD Project Director PDO Project Development Objective SDR Special Drawing Right TA Technical Assistance STA Senior Technical Advisor (UNCTAD) TEU Twenty-Foot Equivalent Units (shipping containers) TF Trade Facilitation TTF Trade and Transport Facilitation TTFU Trade and Transport Facilitation Unit TTFP II Second Trade and Transport Facilitation Project UNCTAD United Nations Conference on Trade and Development UNLK United Nations Layout Key Regional Vice President: Philippe Le Houerou Country Director: Rachid Benmessaoud Sector Manager: Karla Gonzalez Carvajal Project Team Leader: Manzoor Ur Rehman ICR Team Leader: Radia Benamghar PAKISTAN SECOND TRADE AND TRANSPORT FACILITATION PROJECT CONTENTS Contents A. Basic Information........................................................................................................ i  B. Key Dates .................................................................................................................... i  C. Ratings Summary ........................................................................................................ i  D. Sector and Theme Codes ........................................................................................... ii  E. Bank Staff ................................................................................................................... ii  F. Results Framework Analysis ...................................................................................... ii  G. Ratings of Project Performance in ISRs .................................................................... v  H. Restructuring (if any) ................................................................................................. v  I. Disbursement Profile ................................................................................................. vi  1. Project Context, Development Objectives and Design ................................................... 1  1.1 Context at Appraisal ............................................................................................. 1  1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) .................................................................................................................... 2  1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification.............................................................................................. 3  1.4  Main Beneficiaries:........................................................................................... 3  1.5  Original Components (as approved) ................................................................ 3  2. Key Factors Affecting Implementation and Outcomes .................................................. 6  2.1.  Project Preparation, Design and Quality at Entry............................................. 6  2.2  Implementation ................................................................................................. 7  2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization .... 10  2.4 Safeguard and Fiduciary Compliance ................................................................. 11  2.5 Post-completion Operation/Next Phase .............................................................. 13  3. Assessment of Outcomes .............................................................................................. 13  3.1  Relevance of Objectives, Design and Implementation ................................... 13  3.2  Achievement of Project Development Objectives.......................................... 13  Rating: Unsatisfactory .............................................................................................. 13  3.3  Efficiency........................................................................................................ 14  3.4 Justification of Overall Outcome Rating ............................................................ 15  3.5 Overarching Themes, Other Outcomes and Impacts .......................................... 15  3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ... 16  4. Assessment of Risk to Development Outcome ............................................................. 16  5. Assessment of Bank and Borrower Performance ......................................................... 16  5.1 Bank Performance ............................................................................................... 16  5.2 Borrower’s Performance ..................................................................................... 18  6. Lessons Learned............................................................................................................ 20  7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners............... 22  Annex 1. Project Costs and Financing .......................................................................... 23  Annex 2. Outputs by Component ................................................................................. 24  Annex 3. Economic and Financial Analysis ................................................................. 28  Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 29  Annex 5. Beneficiary Survey Results ........................................................................... 31  Annex 6. Stakeholder Workshop Report and Results................................................... 32  Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 33  Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 42  Annex 9. List of Supporting Documents ...................................................................... 43  MAP IBRD 36910 ........................................................................................................ 44  Pakistan SECOND TRADE AND TRANSPORT FACILITATION PROJECT DATASHEET A. Basic Information Trade and Transport Country: Pakistan Project Name: Facilitation II Project ID: P101684 L/C/TF Number(s): IDA-45770 ICR Date: 06/17/2014 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: TAL Borrower: PAKISTAN Original Total XDR 16.80M Disbursed Amount: XDR 3.59M Commitment: Revised Amount: XDR 4.30M Environmental Category: B Implementing Agencies: Ministry of Commerce Planning Commission Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 10/05/2006 Effectiveness: 08/24/09 08/24/09 Appraisal: 02/09/2009 Restructuring(s): 12/19/09 Approval: 05/12/2009 Mid-term Review: 06/18/2012 06/18/2012 Closing: 12/31/2013 12/31/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Unsatisfactory Risk to Development Outcome: High Bank Performance: Moderately Unsatisfactory Borrower Performance: Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Unsatisfactory Performance: Unsatisfactory Performance: i C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Unsatisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Public administration- Industry and trade 24 24 Public administration- Transportation 76 76 Theme Code (as % of total Bank financing) Export development and competitiveness 24 24 Trade facilitation and market access 76 76 E. Bank Staff Positions At ICR At Approval Vice President: Philippe H. Le Houerou Isabel M. Guerrero Country Director: Rachid Benmessaoud Yusupha B. Crookes Sector Manager: Karla Gonzalez Carvajal Michel Audige Project Team Leader: Manzoor Ur Rehman Jean-Noel Guillossou ICR Team Leader: Radia Benamghar ICR Primary Author: Radia Benamghar F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project Development Objective (PDO) is to improve performance of trade and transport logistics by facilitating: (a) the implementation of the National Trade Corridor Improvement Program (NTCIP); and (b) the simplification and modernization of Pakistan' s international trade procedures and practices. Revised Project Development Objectives (as approved by original approving authority) N/A ii (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Reduction in overall time of imported goods Value quantitative or Import time: 18 days 15 days 18 days Qualitative) Date achieved 01/01/2009 12/31/2013 12/31/2013 Not achieved. As reflected in the 2013 Doing Business Report, no improvement Comments was achieved subsequent to the project implementation. 2014 Doing Business (incl. % survey reflects the same. As discussed further in the report, the timeline for achievement) measuring key indicator Indicator 2 : Reduction in overall time of exported goods Value quantitative or Export time: 24 days 17 days 21 days Qualitative) Date achieved 01/01/2009 12/31/2013 12/31/2013 Comments Not achieved though average time was reduced by 29% (ref. 2013 Doing (incl. % Business Report). 2014 Doing Business survey confirms the same. achievement) Indicator 3 : Reduction in overall cost of imported goods Value Cost to import quantitative or Cost: US$680 per TEU Reduction by 10% US$705 per Qualitative) container Date achieved 03/13/2009 12/31/2013 12/31/2013 Comments Not achieved. Costs increased by 4% (ref. 2013 Doing Business survey). 2014 (incl. % Doing Business survey shows further increase with cost to import at US$ 725 per achievement) container. Indicator 4 : Reduction in overall cost of exported goods Value Cost to export quantitative or Cost: US$611 per TEU Reduction by 10% US$660 per Qualitative) container. Date achieved 01/01/2009 12/31/2013 12/31/2013 Comments Not achieved. Costs increased by 8% (ref. 2013 Doing Business survey). 2014 (incl. % Doing Business survey confirms the same. achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Implementation of NTCIP reforms iii Not achieved. Data not collected and implementation affected by unrealized NTCIP investments. Value Several policy studies No policy implemented Reforms fully (quantitative were completed but yet. implemented. or Qualitative) not fully implemented with the exception of the ICAO standards policy note (ref. Annex 2). Date achieved 03/31/2009 12/31/2013 12/31/2013 Comments (incl. % Data not collected and implementation affected by unrealized NTCIP investments. achievement) Indicator 2 : Implementation of national trade facilitation strategy (NTFS) Number of Value documents Number of documents for (quantitative reduced and closer 8 Export: 9 or Qualitative) to international benchmarks. Date achieved 03/31/2009 12/31/2013 12/31/2013 Comments Achieved only to a limited extent, reduced by 11%. (ref. 2013 Doing Business (incl. % survey). The 2014 Doings Business survey confirms the same. achievement) Indicator 3 : Implementation of national trade facilitation strategy (NTFS) Number of Value documents Number of documents for (quantitative reduced and closer 8 Import: 8 or Qualitative) to international benchmarks Date achieved 03/31/2009 12/31/2013 12/31/2013 Comments Not achieved, no improvement was achieved subsequent to project implementation (incl. % (ref. 2013 Doing Business survey). 2014 Doing Business survey confirms the achievement) same. Indicator 4 : Better understanding of international trade regulation and procedures. Could not be measured since Value Baseline not available. TBD, survey to be neither baseline data (quantitative Survey to be conducted carried out when collection nor survey or Qualitative) when project starts. the project starts at project end were carried out. Date achieved 03/31/2009 12/31/2013 12/31/2013 Comments (incl. % Could not be assessed. achievement) Indicator 5 : Compliance with trade regulations. iv Could not be measured since Value Baseline not available. TBD, survey to be neither baseline data (quantitative Survey to be conducted carried out when collection nor survey or Qualitative) when project starts. the project starts. at project end were carried out. Date achieved 03/31/2009 12/31/2013 12/31/2013 Comments (incl. % Could not be assessed. achievement) G. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 06/22/2009 Satisfactory Satisfactory 0.00 2 07/15/2009 Satisfactory Satisfactory 0.00 Moderately Moderately 3 04/21/2010 1.37 Unsatisfactory Unsatisfactory Moderately 4 11/21/2010 Moderately Satisfactory 1.58 Unsatisfactory Moderately 5 05/29/2011 Unsatisfactory 2.53 Unsatisfactory 6 12/31/2011 Unsatisfactory Satisfactory 3.30 Moderately 7 06/23/2012 Satisfactory 4.07 Unsatisfactory Moderately 8 12/22/2012 Moderately Satisfactory 4.67 Unsatisfactory Moderately 9 06/01/2013 Unsatisfactory 4.95 Unsatisfactory 10 01/05/2014 Unsatisfactory Unsatisfactory 4.95 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Key Approved Restructuring Date(s) Changes Made PDO Change DO IP in USD millions December 19, N/A U MU 4.9 Cancellation of funds 2013 v I. Disbursement Profile vi 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Country and Sector Context 1. Pakistan’s economic growth accelerated during 2003-2007 due to services and industrial sectors but faced both external and internal shocks starting in 2008, resulting in a deteriorating macroeconomic environment. The Government of Pakistan (GoP) has made efficient efforts to maintain macroeconomic stability and to ensure the economy is put back on a path of sustainable growth. The government’s objective is to achieve middle-income country status by 2030 with GDP of around US$ 700 billion and per capita income of around US$ 4,000. The GoP aims to achieve this goal by: (a) strengthening export competitiveness and reducing costs through supply chains; (b) increasing factor productivity; (c) diversifying the agricultural and manufacturing sectors; (d) expanding the high-tech and commercial sectors; and (e) developing Pakistan as a hub of sub-regional connectivity. 2. As a result, removing infrastructure bottlenecks was identified as a priority in the Country Assistance Strategy (CAS, 2006-2009) for Pakistan at the time of conceptualization of the Second Trade and Transport Facilitation Project (TTFP II). It was prioritized to support Pakistan’s rapid economic growth and in recognition of the necessary role transport and trade logistics efficiencies play in supporting economic stabilization, sustained growth and international competitiveness. The Project Appraisal Document (PAD) also referred to Pakistan’s Poverty Reduction Strategy (PRSP-II), which encompassed removing infrastructure bottlenecks through public-private partnerships. 3. TTFP II was one of several projects of a package supported by the World Bank to help facilitate the government’s National Trade Corridor Improvement Program (NTCIP), which was introduced in 2005 to improve national transport logistics, infrastructure and services. The program was the outcome of prior analytical and advisory work of the Bank, including in the Pakistan Transport Competitiveness Report (2006), which showed that the inadequate performance of the country’s transport system was costing the economy 4 to 6 percent of GDP per annum. The NTCIP package included targeted investment lending planned to support key reforms and to respond to the needs for improvement of infrastructure and its operation. As a medium term transport master plan for the country, the NTCIP provided a framework for donor engagement and was supported by the donor community (including ADB and JICA). The Second Trade and Transport Facilitation Project would help provide the analytical underpinnings necessary to implement the reform agenda and facilitate the preparation of investments under NTCIP. 4. TTFP II was a continuation and expansion of the 2001 Trade and Transport Facilitation Project (TTFP I), which was completed in June 2006 and supported the 1 reduction of average logistics costs from 11% of the national trade account in 1996 to about 6% in 2006. The first Trade and Transport Facilitation Project was credited for establishing trade facilitation as a core component of Pakistan’s international trade policy, in the Ministry of Commerce’s Trade Policy of 2005-06 and 2006-07. It helped establish the National Trade and Transport Facilitation Committee (NTTFC) both legally and operationally, through the consultancy support of UNCTAD. NTTFC remains a public- private institution with a mandate to foster dialogue and serve as an advisory body to the government on trade and transport facilitation issues. During the project implementation period, it became a valuable link between WTO negotiations and trade facilitation in Pakistan; and the project successfully supported the development of medium term trade and transport facilitation practices and procedures, including information flows, documentation and related legislation. At project end, the need was identified to expand these gains into more mature policy and institutional measures, and for NTTFC to position itself as the focal point on trade facilitation in Pakistan while strengthening linkages with the government’s NTCIP. A follow-up operation was set up in the form of the Public Sector Development Program (PSDP), as the project’s implementing agency for post-completion activities. At the same time, the Second Trade and Transport Facilitation Project was designed to carry out the above identified objectives: to further modernize traditional trade and transport facilitation practices and procedures in Pakistan. Sector Issues 5. Despite sustained economic growth from 2003 to 2007, improvements in the transport sector were far from satisfactory. Transport sector issues encompassed within road transport, railways, highways, civil aviation, trade facilitation, and logistic services included the following: poor quality and unreliability of road transport services, resulting in high road transport costs; loss of competiveness of railway to road due to long delays and low speed; insufficient funding for the maintenance of highway networks and road user complaints; cumbersome customs procedures remaining an obstacle to trade; civil aviation still not fully developed despite levels of economic growth; ports in Pakistan continuing to perform poorly and at high costs; logistic services unable to provide value-added services. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. The developmental objective of the project is to improve performance of trade and transport logistics by facilitating: (a) the implementation of the National Trade Corridor Improvement Program (NTCIP); and (b) the simplification and modernization of Pakistan’s international trade procedures and practices. 7. Key performance indicators in the PAD were: (a) Reduction in overall time of imported and exported goods (b) Reduction in overall cost of imported and exported goods 2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 8. PDO and Key Indicators were not revised during the project implementation period. As referred further in the ICR, revision was discussed during the MTR and an agreement was reached for level 1 restructuring, though it subsequently did not conclude. 1.4 Main Beneficiaries: 9. This project was designed to support priority reforms to reduce delays, improve quality, and reduce costs of transport. The main benefits of the project were expected to be partly modernized, streamlined and simplified commercial trade and transport facilitation practices and procedures. Initial beneficiaries of improved logistics systems would be Pakistan's industry and commerce which would have better opportunities to reduce their own costs of doing business, enhancing their competitive position on the international markets. This would in turn and, under competitive pressures, reduce costs to Pakistani consumers. Achieving all of the above was expected to create, in the longer term, a powerful force that would foster more transparent and accountable institutions, resulting in accelerated economic growth and faster poverty reduction. 1.5 Original Components (as approved) 10. The project has two components:  National Trade Corridor (NTC)  Trade and Transport Facilitation (TTF) 11. National Trade Corridor (NTC) Component, USD 19 million: This component supports the development and implementation of NTCIP, and comprises two sub- components: i. Technical Advisory Services (USD 16.44 million): This sub-component includes studies and technical assistance to underpin key reforms in support of NTCIP and help assess and design prospective investments which are part of NTCIP. This Technical Assistance (TA) supported activities in ports, railways, road freight services, air transport, cool chains, transport logistics, energy logistics, and maritime services; and, also other activities under NTCIP such as program monitoring and evaluation, social and environmental concerns mitigation, and developing public- private partnerships. ii. Project Coordination and NTC Component Management (USD 2.56 million): This sub-component supported the project implementation unit, the National Trade Corridor Management Unit (NTCMU), and included: coordination, supervision, monitoring and approval of the activities included in the Technical Advisory Services sub-component; consolidation of progress and reporting on activities of each sub- sector; quality control of procurement and financial management. 3 12. Trade and Transport Facilitation (TTF) Component, USD 6 million: This component builds on the results achieved by the first Trade and Transport Facilitation Project (TTFP I), extending efforts to streamline and integrate trade data exchange and official controls, sustaining the public/private sector collaborative institutional framework and strengthening the domestic logistics industry. TTF has two subcomponents: i. Technical Advisory Services (USD 4.71 million): This sub-component included the Pakistan in the World Trade Organization (WTO) negotiations on Trade Facilitation as part of Pakistan's trade policy with a realistic program and results to be achieved within following activities: reassess and update the national trade facilitation strategy and assist the framework of NTCIP; strengthen cooperation mechanisms for international trade facilitation, and cooperation between public and private sectors at regional, national and local levels; analyze the trade documents and efficiency of trade procedures and of new facilitation instruments for trade, transport and transit with particular reference to negotiations under the umbrella of the WTO; analyze transit operations; undertake feasibility studies for investments in inland clearance facilities; evaluate performance of key sectors against benchmarks in the international trade transaction chain to measure improvements over time; provide capacity building to the private sector and selected public sector institutions; conduct small pilot project of transit tracking system, and provide ad hoc advisory services to NTCIP in trade facilitation-related areas. ii. TTF Component Management (USD 1.29 million): This sub-component, which financed the Trade and Transport Facilitation Unit (TTFU) in the Ministry of Commerce (MoCe), included overseeing, monitoring, and evaluating the implementation of activities in the Technical Advisory Services sub-component. 13. The Planning Commission (PC) of Pakistan was assigned as the implementing agency for the NTC component; while the Ministry of Commerce (MoCe), with UNCTAD’s consultancy support, was responsible for implementing the TTF component. PC and MoCe were responsible for the overall implementation and coordination with other sector ministries/agencies in the Government and private sector. 1.6 Revised Components 14. The project components were not revised. 1.7 Other significant changes: 15. Change in Government. The project was designed in FY 2006/07 during a period of high GDP growth. By the time of the approval (May 12, 2009) and effectiveness (August 24, 2009) of the project, there had already been a major change in government. The economic revival of 2002/03-2005/06—which was the primary driver of the NTCIP and thus of TTFP II—was old news and there were serious concerns about Pakistan’s macroeconomic performance and growing fiscal constraints. The Government’s investment in development initiatives decreased.1 1 Illustrating how public sector development spending evolved during that period: real Public Sector Development Program (PSDP) grew by 32 percent (on an average) annually in the period 2004-07, and contracted by 6 percent in the following period 2008-12 – with almost 16 percent annual contraction in the first two years of this period. 4 16. Change in Government’s Priority. With no real ownership at the top political level, project implementation accountability suffered and project management degraded. For almost two years, GoP did not indicate any clear strategy on how to take the NTCIP and TTFP II forward despite efforts by the World Bank team, along with those of other major donors (such as ADB who were also financing NTCIP activities). It was not until the approval of the new economic growth framework in May 20112 that some discussions on the future of the NTCIP resumed in earnest. The World Bank task team subsequently initiated discussions with GoP on re-alignment of TTFP II with the new growth framework in the form of project restructuring. 17. Proposal for Project Restructuring. Two restructuring proposals were put forward at different time periods: May 2012 and August 2013. The first discussions on project restructuring started late 2010/early 2011 but stalled due to continual turnover in the Planning Commission leadership. Upon two official requests from the Government (May 2012 and August 2013), the Bank team prepared two restructuring level 1 packages. As explained further below, the process for the first restructuring in May 2012 was withdrawn in December 2012 due to the inadequate and unrealistic scope including disbursement projections. The second attempt for restructuring was also held back in 2013 due to non responsiveness of the government. 18. Cancellation of Funds. The restructuring process was abandoned in December 2013 when a level 2 restructuring was concluded due to the project team’s inability to complete the internal clearance requirements for a level 1 restructuring (legal, quality, controller, RVP, etc) within the time left to the original project closing date. This includes the absence of key financial submissions particularly for the NTC component (outstanding IFRs and expenditures reporting). As a result, the credit amount to be cancelled as part of the restructuring process could not be determined. Therefore, the Bank proceeded with level 2 restructuring (ref. restructuring paper dated December 19, 2013) to cancel part of unused IDA funds from this Credit (XDR 12.5 million, i.e. USD 19.2 million equivalent) - to allow the EAD to reallocate the funds to another Pakistan program. 19. UNCTAD Contract: The UN agency’s Trade Division provided technical assistance to the MoCe under the Trade and Transport Facilitation component. As part of the discussions on project restructuring and re-prioritization of activities, an amendment to the original contract (signed in 2008) was signed on November 14, 2012. The revised work plan reflected a focus on regional and internal trade (from the international trade focus with faraway markets that defined the initial project scope). The contract period was extended up to June 30, 2015, while the project completion date remained December 30, 2013. 2 The PC-1 revised growth framework (also referred to as the NFEG – New Framework for Economic Growth) was approved by the Cabinet in May 2011. PC-1 stands for “Planning Commission Performa 1” of the GoP. While this is an internal GoP process, it has a direct bearing on project implementation, as fund withdrawals should be within the budgetary allocations of the PC-1. 5 2. Key Factors Affecting Implementation and Outcomes 2.1. Project Preparation, Design and Quality at Entry 20. Project Preparation. The project design incorporated a number of lessons learned from the earlier Bank project: (i) public and private sector cooperation would be leveraged for the success of trade facilitation initiatives through the NTTFC, providing both a forum for dialogue and strategic leadership for the project’s trade facilitation activities; (ii) independent project management units were instituted (NTCMU, TTFU) and embedded in their respective IAs, to ensure effective cooperation across stakeholders; and (iii) effective cooperation across line ministries would be ensured through the establishment of the NTCMU, as the implementation arm of the Planning Commission (PC), with a mandate to coordinate, facilitate, and monitor activities across different sectors and line ministries. 21. Additionally, the readiness filter was complied with at project appraisal, (i) institutional arrangements were in place for both the NTCMU and TTFU, i.e. respective Project Directors appointed, other key staffs recruited, and implementation manuals adopted; and (ii) advance procurement conditions were met, i.e. contract with UNCTAD was awarded in January 2008 under component B, and three RFP (of two required) were issued before negotiations for consultants’ services under component A. 22. Design. Several issues were identified with regards to the project design: (i) there was a clear disconnect between the project outcomes and project outputs to measure the impact within the timeline of this TA, i.e. result of the policy reforms supported by TTPF II could only be effectively measured beyond the timeline of the project. In other words, the project was only a vehicle for the policy and institutional reform agenda, not an end in itself. The TA may, as a result, not have been the appropriate lending instrument; (ii) the M&E framework was designed to measure outcomes of the NTCIP, not of this project. This was evidenced by the fact that, (a) achievement of the key outcome indicators would result from NTCIP policy reforms, which TTFP II was to support (listed in Annex 3 of the PAD), and (b) achievement of intermediate indicator 1 required implementation of NTCIP reforms. This led to the choice of global indicators as key outcome indicators (based on the “Doing Business” surveys), and the weak linkage between project outcomes and outputs was not conducive to a strong M&E framework for a TA of this small scope. A better choice of DO and associated outcome indicators could have been made at appraisal stage: a shortcoming that was recognized but not adequately addressed until the mid-term review, which was scheduled one and a half year prior to the project closing date. 23. Participatory Processes. The project was prepared in a participatory manner with the involvement of key stakeholders including government ministries, designated government implementation agencies, local and district government units, development partners, nongovernmental organizations (NGO), and representatives from the private sector. However, simultaneous events described above substantially changed the project implementation environment. 6 24. Adequacy of Client Commitment at Entry. As part of the project design, the establishment of the high-level project oversight mechanism, i.e. regular Cabinet oversight meetings led by the Prime Minister, reflected the political support which was foreseen for the project. The NTCIP was, in effect, launched by the Prime Minister in 2005. The program was mentioned in the Party manifesto ahead of coming to power in 2008, which appeared to confirm sustained high level political support despite changes in government (including up to Board approval in August 2009). The new government held the first NTCIP task force meeting after coming to power on November 20, 2008. Depreciation of political commitment began to occur with the change in government, as reported in the following sections on assessment of project implementation.3 25. Assessment of Risks. A number of risks were identified in the Project Appraisal Document, i.e. government commitment and capacity. However, the Bank underestimated some of these risks, including inappropriate risk ratings,4 and no adequate mitigation measures were adopted. One of the shortcomings is the absence of an M&E framework for NTCIP, which should have been identified in the risk mitigation matrix and should have been part of the Covenants or a condition of effectiveness, in order to ensure its effective implementation.5 Additionally, the PAD acknowledges country risks that are beyond the control of the project (incl. security, political, and macro-economic risks), against which only project adjustments were foreseen on the basis of close monitoring. The Bank mentioned in the PAD that the sustainability of the project is closely related to the successful implementation of NTCIP. In other words, the failure of NTCIP implementation would cause the failure of the TA. 26. Quality at Entry. No quality at entry assessment of the project was carried out by the Quality Assurance Group. 2.2 Implementation 27. Implementation Arrangement for the NTC Component. A NTC Management Unit (NTCMU) was set up within the Planning Commission to act as the Secretariat of the NTCIP Task Force6 to coordinate the NTCIP initiative. The NTCMU was responsible for the overall management of the project and specifically the management of the NTC component in coordination with the sector ministries/agencies. The NTCMU was responsible for overseeing the project and consolidating information on implementation 3 This includes Cabinet oversight meetings not being held after the change in government. 4 Government commitment and capacity should have been high instead of moderate, in view of the country context. 5 A non-lending technical assistance was provided to set up a pilot monitoring, evaluation and decision support framework for NTCIP, but was not adopted. 6 A Task Force was set up under the chairmanship of the Deputy Chairman Planning Commission to provide overall policy guidance on NTCIP. The Task Force included the Ministry of Commerce and the Ministry of Finance, among other government Ministries and Agencies, as well as development partners (incl. WB) and representatives from the private sector. 7 of both NTC and TTF components and to report to the Government and the World Bank on implementation progress. 28. Implementation Arrangement for TTF Component. The TTF Unit (TTFU) was created by the Ministry of Commerce to be responsible for the implementation of the TTF component. The TTFU was to submit progress reports on the implementation of the TTF component to the MoCe and the NTCMU for review.7 29. Institutional and governance challenges: The implementation of the project components was deemed generally unsatisfactory in terms of achievement of key outcomes and objectives. The implementation of this project was challenged by a lack of commitment at the higher political level (including negligible investment in NTCIP), lack of project leadership at the level of the Planning Commission, and lack of strong ownership at the ministry and agency level. This led to slow mobilization of staff at the management units, as well as inefficient, inadequate and untimely budget allocations for the respective components, including resulting in slow recruitment of consultants, and slow payments throughout most of the implementation period. While the NTC component (i.e. Component A) consistently provided unsatisfactory performance in the achievement of the development objectives, progress of the Trade and Transport Facilitation component (i.e. Component B) was nuanced with some achievements in planned activities. 8 These main factors, which appear to have affected the implementation of the project, are further explained below: 30. Lack of government ownership and leadership. Although the NTCIP Task Force meetings continued to reflect the interest of the line ministries in the program at project effectiveness, the implementation of the NTCIP had already slowed down considerably since 2008. Project documents report that interest and ownership of the line ministries began to wane particularly after the 13th NTCIP Task Force meeting held in December 2009 – as evidenced by the 15 months gap before the next convening. 9 Due to the deteriorating macroeconomic situation and ongoing energy crisis, NTCIP was no longer a key focus but investments continued and reforms were initiated under NCTIP until 2010. 10 Two developments subsequently affected the commitment of the PC in the delivery of the NTCIP program: (i) the lack of continuity in the top management of the Planning Commission and appointment of a new Deputy Chairman in 2010 whose interest in the program was weak; 11 and (ii) the introduction of the New Growth 7 Continuing from the previous TTFP-I, the NTTFC, a Standing Committee of MoCe, was re-constituted by the GoP. NTTFC consisted of representatives from various ministries, public and private institutions/organizations and from development partners with observer status. It was chaired by the Secretary/Additional Secretary Commerce. The project was meant be set up to build the capacity of NTTFC to lead the public/private dialogue on trade facilitation and to progressively develop the skills to deliver advisory services to the logistics sector. 8 For a detailed list of achieved outputs by component, refer to Annex 2. 9 The 14th NTCIP Task Force meeting was held on April 8, 2011 (source: ISR Sequence 5, created 16 May 2011). 10 As reported in ISR Sequence 4 (created 21 September 2010), earlier, with support from the Cabinet, the Planning Commission had been successfully managing and coordinating the implementation of the NTCIP. The pace slowed down considerably since 2008, when leadership of the program lost pace (due to the reasons explained above). 11 ISR Sequence 4 (created 21 September 2010) reported that, since 2008 and up to the period under reporting, four different Deputy Chairmen had assumed office. 8 Framework of 2011, which contested the validity of the previous reliance on public investment as the main driver for growth and shifted towards a focus on private sector-led investments; 12 this affected investment and political commitment to the NTCIP. 31. Weak Project Leadership and Decision Making. The lack of government ownership and leadership was further reflected in the NTCMU’s (i) weak implementation and coordination capacity. In particular, coordination between line ministries (NTC component) and TTFU was not successfully achieved, despite incorporation of this “lesson learned” from the first Bank project through the establishment of the NTCMU itself; and (ii) poor decision making, a significant shortcoming given the NTCMU’s lead project coordination role. For several years after appraisalinception, the NTCMU operated on an ad hoc basis without a full-time Project Director,13 which provided no clear direction and guidance to the operational team or to the TTFP II project as a whole. Although the situation improved after the appointment, the Project Director was not able to exercise complete independence in managing day to day operations, which further affected project implementation.14 Similarly, under the TTF component, lack of decision- making and coordination affected the implementation of many TA recommendations proposed by the NTTFC through the support of UNCTAD. There were held up in ministries and government organizations because of procedural requirements. For instance, the revised National Trade Facilitation Strategy prepared by UNCTAD during the first half of 2012 was still not approved for circulation by project completion. 32. Ineffective supervision. The high turnover of World Bank task team leaders, i.e. 4 TTLs during implementation, was not conducive to resolving the bottlenecks during project implementation. This resulted in indecisive action on the part of the Bank team when it came to restructuring the project early on during the implementation process, when strong indications showed lack of government commitment to the NTCIP program, which was abandoned. Lack of risk taking undermined the Bank task team’s efforts in the context of the government’s lack of commitment both to the program and to the restructuring process of this project. Additionally, the relationship between the IAs and the Bank team appeared stronger with TTLs based in the country during the first years of project implementation (up to mid-2012), when modest project gains were achieved. It appears that the project may have suffered from a lack of coordination between the Bank and the Client in the latter years when the TTL was based in Washington, DC. 33. Weak technical and fiduciary capacity of implementing agencies. Under the NTC component, the Government’s (i) technical capacity to act as advisory services, prepare good terms of reference, review the studies and implement recommendations; and (ii) procurement capacity to select and mobilize consultants, appeared to be weak early on in the project. As of the supervision mission of February 8 to 28, 2011 only two consultancies had been awarded by NTCMU (i.e. the Pakistan Railways Consultancy on FIS/FMS, and the Civil Aviation Authority consultancy on ICAO Safety and Regulatory 12 Source: Pakistan: New Growth Framework, Government of Pakistan Planning Commission (2011) 13 Source: ISR Sequence 8, 9 and 10 and Aide Memoire, implementation support mission of June 14-18, 2010, para. 4. 14 Source: ISR Sequence 4 (created 21 September 2010) 9 oversight gap analysis). The process for the selection of other consultancies had been stalled since November 2010: the three large studies identified during appraisal were stuck at negotiation stage (i.e. Pakistan Ports Master Plan, Trucking Policy Implementation Strategy, and Inland Water Transport Feasibility study). Out of these three, only the Ports Master Plan Study was subsequently awarded as of July 2011. Therefore, weak procurement capacity remained an issue throughout the entire project implementation period, despite procurement training being delivered to the PMUs and line Ministries in April 2008, March 2009 and October 2010. In addition, the approval for procurement-related matters required clearances at various levels, which further delayed project implementation. 34. Stalled restructuring process. Discussions on project restructuring began from late 2010/early 2011,15 and an agreement on the need for its undertaking in the form of level 1 restructuring was subsequently reached in early 2012. The Bank received the formal request in May 2012 and a Mid-Term Review (MTR) mission was fielded in June 2012. Almost 3 years after the project effectiveness date, i.e. at 65% of time passed, only 15.5% of the financing had been disbursed. The restructuring package was processed but subsequently withdrawn as it appeared too unrealistic, including continuing to support the NTC project component despite the abandonment of the NTCIP program by the government. The government submitted a new request to restructure the project on August 12, 2013, including closing all activities under the NTC component while extending the completion of the activities under the TTF component to June 30, 2015. However, the restructuring stalled from lack of key financial submissions (outstanding IFRs and expenditures reporting) to conclude the restructuring.16 In the absence of these submissions and given there was not enough time remaining to process the level 1 restructuring for the Board’s consideration before December 31, 2013, the level 2 restructuring was proposed to cancel the amount of USD 19.2 million (of a total USD 25.7 million) and to reserve it for another IDA program in Pakistan. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 35. M&E Design. The overall monitoring and evaluation (M&E) function was the responsibility of the NTCMU. The project included performance monitoring indicators to monitor progress and the extent of achievement of the PDO during implementation. The 15 ISR Sequence 5 (created 16 May 2011) indicates that one of the main objectives of the implementation support mission of February 8 to 28, 2011 was to come to agreement with the Planning Commission on possible restructuring of the project. However, these discussions remained inconclusive, mainly due to the Deputy Chairman first wanting to hold the NTCIP Task Force meeting before agreeing on how the project could be realigned to support the Government. In the following supervision mission, discussions evolved around a tentative plan to undertake restructuring in February 2012, with a final board presentation in April 2012 (Ref. ISR Seq.6, created 14 November 2011) – subsequently delayed to June 2012 when a restructuring package was approved and later withdrawn. 16 A World Bank letter dated October 23, 2013 to Secretary, Economic Affairs Division requested (i) the Interim Financial Reports (IFRs) from the National Trade Corridor Management Unit (NTCMU) and from the Ministry of Commerce, i.e. IFRs for the quarter ended September 30, 2013 from both NTCMU and MoCe; (ii) confirmation that outstanding payments to consultants conducting the studies had been made and any final administrative costs had been included. The letter clarified that, “without the availability of the above mentioned financial information, we are unable to finalize the amounts for cancellation from this project for reallocation to other projects.” It also requested (i) the latest balances in respective Designated Accounts of NTCMU and the Ministry of Commerce; and (ii) that adjustment for the ineligible expenditures raised in the audit be resolved. 10 design made provision that NTCMU would be supported by line ministries and TTFU in reporting on project progress on a quarterly and yearly basis. However, the results framework was not adequate for assessing the achievement of the PDO of this TA project; rather, it was clearly appropriately designed to assess the PDO of the NTCIP.17 The PDO outcomes were too ambitious, unrealistic and unachievable. As a result, the reporting on the results indicators was also not adequate to assess the PDO. 36. M&E Implementation. The reporting was done in the Aide-Memoire and ISR twice a year. Frequency of reporting was annual for the PDO outcome and intermediate outcome indicators; and at project completion for two intermediate outcome indicators (measuring “better understanding of international trade regulations and procedures” and “compliance with trade regulations”). The data was collected by the NTCMU with the collaboration of the World Bank (through the “Doing Business” reports) for project outcome and intermediate outcome indicators, except for two intermediate indicators to be monitored by the TTFU (i.e. the two indicators mentioned above). However, the baseline was not collected for these two indicators during the preparation and until the closing of the project, which affected the end outcome. Tracking PDOs relied heavily on the mid-term evaluation report and supervision missions. The project monitored various outputs related to studies, including through supervision mission reviews of the World Bank, project studies, and annual and quarterly reports produced by NTCMU (and UNCTAD). However, the data was not systematically collected from the annual Doing Business reports to update the M&E framework. 2.4 Safeguard and Fiduciary Compliance Safeguard Compliance 37. OP4.01 was applied for screening and categorizing the project. No safeguard issues and impact were expected to arise, and they did not, as a result of project implementation. Fiduciary Compliance 38. Financial Management. Financial Management is rated Unsatisfactory. The Country Financial Accountability Assessment carried out in 2003 concluded that budget execution, accounting, financial reporting and internal controls need strengthening at the country level. However, Public Expenditure and Financial Accountability Assessment of the Federal Government for June 2012 showed that the Government of Pakistan (GoP) has a continuing agenda of PFM reform. Current programs are focused on areas of weaknesses in PFM administration including lack of internal audit and timely legislative scrutiny, among others, that have been identified by the GoP and Development Partners. Major efforts are well underway to enhance the effectiveness of financial management systems in place. 17 The PDO of both projects are very similar; the PDOs of NTCIP are: “to reduce the cost of trade and transport logistics and bring services quality to international standards in order to reduce the cost of doing business in Pakistan, and ultimately enhance export competitiveness and accelerate industrialization.” (Ref. PAD, TTFP II para. 17) 11 39. Existing financial management arrangements in the two implementing agencies of this project were used. Lack of adequate staffing and delayed financial reporting was an issue, especially in NTCMU, during the project implementation. Internal audit also remained an issue during implementation. 40. The two implementing agencies remained mostly compliant with the financial covenants submitting acceptable interim quarterly financial reports and annual audited financial statements albeit with delays. However, with lay-offs of all project staff including staff responsible for the financial management, acceptable IUFRs for the two quarters ended September 30, 2013 and December 31, 2013 have not yet been submitted by NTCMU; whereas the Ministry of Commerce (MOCe) submitted IUFRs for the quarter ended December 31, 2013 during the ICR mission. Furthermore, acceptable audited financial statements for FY 2012/2013 have not been provided by both implementing agencies. The Bank has issued letters to the Economic Affairs Division (EAD) on March 3, 2013 and May 7, 2013 indicating remedial action for fiduciary non- compliance by both the implementing agencies. Auditors’ performance generally remained satisfactory. Ineligible expenditure amounting to PKR 325,040 and PKR 595,893 were reported by the auditors in their reports on financial statements of NTCMU and MOCe respectively for FY 2011/2012.18 The Government was asked to refund the amount; this has not yet been done. 41. Bank FM staff remained in constant touch with the two implementing agencies and provided support to strengthen weak areas. 42. Procurement Performance. Procurement is rated Moderately Unsatisfactory. The project procurement included mostly selection of consulting firms, individual consultants and some goods for the two PMUs. NTCMU and TTFU had separate accounts and separate procurement arrangements. Procurement outlays of the two PMUs were mostly limited to goods and individuals, while TTFU had one major consultancy contract with UNCTAD. All the other consulting services were sector focused and the relevant departments/entities/ministries had the ownership of initiating the selection process, evaluation and award. NTCMU had the role of coordination and were responsible for keeping liaison with the various participating ministries. 43. Throughout implementation, the project had procurement and contract management issues. Under the NTCMU component, only one consultancy assignment awarded by Civil Aviation Authority was selected and implemented in alignment with the timelines and TORs. Whereas contracts for trucking policy, inland waterways, and the feasibility for railway link could not be awarded and remained at various stages of selection process. The railway FMIS, and ports master plan, were awarded after substantial delays and had major issues during implementation. 18 Ineligible expenditures of 1) PKR 325,040 for project allowance and honorarium paid to project staff not related to the project, under component A (NTCMU); 2) PKR 595,893 for payment made as 15% increment in the existing fixed salary of the project employees, under component B (MoCe). 12 44. Under the TTFU component, the UNCTAD assignment commenced relatively well, despite initial implementation delays due to the delayed start of the project. In 2009 and 2010, the deliverables were also adjusted with mutual agreement. There were delays in payment of UNCTAD, and the government since the first tranche never paid the payments due to UNCTAD, which had a detrimental effect on the progress of the contract. Later on there was a hiatus due to some technical gaps in understanding of the deliverables. 45. Overall the capacity of NTCMU to play a proactive and effective role in coordination among the various ministries was rather ineffective. The ownership of the ministries for their relevant components was also vacillating. The administrative arrangement of routing all the selection processes and payments through Planning caused delays in implementation. The agreed procurement arrangements, however, were simpler and provided operational authority to the sectoral entities. 2.5 Post-completion Operation/Next Phase Not applicable. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Moderate 46. The PDO remained highly relevant to the current national priorities and Bank strategy (CAS 2010-12 pillar 3, CPS 2010-14), which focuses on improving infrastructure to support growth and in particular, to reduce transport costs and transit times to improve transport logistics and trade facilitation. The PDO at appraisal was thus relevant and continued to be during project implementation. In addition, the most recent CPS (2010-14) reaffirmed its commitment to this project. However, as discussed above, the government did not demonstrate sustained ownership to TTFP II, despite its relevance to the CPS. 47. The project design was moderately relevant. Itwas undermined by the fact that (i) the project design to achieve the PDO was inappropriate in view of both the project timeline and indicators. It was designed to measure achievement of outcomes under the NTCIP, while the TA project was only a vehicle to support the policy and reform agenda of NTCIP; (ii) the government failed to demonstrate its commitment to the CPS. 48. Given that the relevance for PDO is High while the design is Moderate, the overall rating for the PDO is Moderate. 3.2 Achievement of Project Development Objectives. Rating: Unsatisfactory 49. The PDO was to improve performance of trade and transport logistics by facilitating (i) the implementation of NTCIP, (ii) the simplification and modernization of 13 Pakistan’s international trade procedures and practices. The achievement of the PDO was to be measured by the key outcome indicators of the project: (i) reduction in the overall cost of exporting/importing goods, and (ii) reduction in time of exporting/importing goods. It was also to be measured by the intermediate outcome indicators: (i) implementation of the NTCIP reforms, (ii) implementation of National Trade Facilitation Strategy, (iii) better understanding of trade regulations and , and (iv) level of compliance with trade regulation. As reflected in the updated results framework in section F, none of the key and intermediate indicators were achieved. This is due to the fact that, (i) the NTCIP was discontinued soon after project effectiveness (as explained above); (ii) implementation of project activities was consistently delayed or cancelled, resulting in many of the output targets not being achieved (especially with regards to the NTC component); (iii) recommendations of studies not being translated into policy/reforms as envisaged in the results framework (Annex 2). For instance, while the trucking policy was updated, the follow-up study planned to develop an implementation strategy was not initiated; the National Trade Facilitation Strategy revised by UNCTAD was not approved by GoP by project end; it appears that the trade documents aligned with UNLK were not adopted by GoP by project end; among other examples listed in Annex 2. 50. Additionally, measuring the achievement of project outcomes was difficult because of the disconnect between the indicators and project outputs, i.e. global indicators were selected as key outcome indicators, and high level indicators selected for several intermediate outcome indicators. Given that the project was only a vehicle for the policy and institutional reform agenda and not an end in itself, project outputs (mainly studies) were not directly related to the outcomes measured by the indicators. Two indicators were also not measurable by the end of the project cycle, whereby baseline data was not collected and survey at project end not conducted for indicators 3 and 4 (measuring “better understanding of international trade regulation and procedures” and “compliance with trade regulations”). 51. Given that none of the targets were achieved, the rating for the achievement of the Project Development Objective is Unsatisfactory. 3.3 Efficiency Rating: Unsatisfactory. 52. In view of the nature of the project, no calculation of the economic rate of return was attempted. 53. The efficiency in the use of project funds against actual outputs could also not be assessed due to unavailability of disaggregated expenditures data, i.e. the Project team did not have records of disaggregated actual costs against estimated costs per project activity. However, project efficiency was seen to be lacking in the following areas: (i) project outputs did not contribute to the achievement of the PDO, as explained above. In particular, the studies completed under the project were not effectively utilized in policy reform initiatives through implementation of the recommendations outlined in the studies. For instance, the Railways Revitalization Strategy, which was pending approval by the 14 Cabinet as of June 2013 (when last reported), remains unutilized by the Government19; (ii) several ongoing studies were not completed. This includes the Ports Master Plan Study (contracted for the amount of US$ 3.4m) – under NTC component, 20 and the Custom House Agents Industry Review – under TTF component. 21 It could not be confirmed what costs were incurred for the activities not completed. 54. After four years of project implementation, one could argue whether the funds were spent efficiently given that no single achievement of the expected outcomes was achieved. For this reason, the project efficiency is rated Unsatisfactory. 3.4 Justification of Overall Outcome Rating Rating: Unsatisfactory 55. The PDO and its indicators were articulated in a way which appears to be too optimistic and ambitious to achieve within the project life, aside of the fact that the PDO and indicators were not measurable. Overall outcome is rated Unsatisfactory, based on the rating of the three dimensions assessed for the relevance of the PDO and design (rated Moderate), project efficacy (rated Unsatisfactory) and efficiency (rated Unsatisfactory). 3.5 Overarching Themes, Other Outcomes and Impacts Not applicable. (a) Poverty Impacts, Gender Aspects, and Social Development Not applicable. (b) Institutional Change/Strengthening 56. One of the most important requirements for sustainable trade and transport reform is satisfactory policy reform with adequate institutional arrangements for its implementation. As discussed above, neither of these conditions were met: (i) the policy reform actions planned under the NTCIP and listed in the policy matrix of the TTFP II PAD have not been completed; (ii) the NTC Management Unit (NTCMU), which was set up to strengthen, monitor and facilitate the coordination and cooperation between different sectors and ministries, remained a weak institution through the implementation 19 Aide Memoire, Implementation Completion Follow-up Mission, March 28-April 3, 2014, para. 12 20 The consultants of the Ports Master Plan Study stopped working in June 2012, due to IA withholding the progress payment citing poor quality of the output by the Consultants. Upon submission of satisfactory justification, the Bank cleared the payment to the Consultants. However, as of the supervision mission of Jan-Feb 2013, the issue had been discussed and resolved, though the payment had not yet been made, and peer reviewers had not yet been recruited to evaluate the deliverables. The situation remained unchanged as of the supervision mission of June 2013; the payment had still not been made to the Consultants as of April 2014. It is unclear whether the balance work activities resumed, though it is assumed not given that the final product was not submitted to the World Bank project team. The Bank project team indicated that this activity suffered from a lack of proper management by the IA and by the Management Unit under the PC. Ref. Aide Memoire supervision mission of January 29-February 8, 2013, para. 6 and Aide Memoire supervision mission of June 17-24, 2013. 21 Under the TTF component, the consultant for the Custom House Agents Industry Study was mobilized in September 2013 and submitted a Study outline during the period of September-October 2013. 15 period. Staffing and capacity was reported as a major weakness of the institution by the Project team. On the other hand, the Trade and Transport Facilitation Unit (TTFU) was set up by the Ministry of Commerce (MoCe) to assist NTTFC to better promote collaboration between the public and private sector. The institution also lacked capacity, coordination and direction from the senior level within MoCe and its performance was held back by a lack of adequate funding for the consultancies that it was to award. (c) Other Unintended Outcomes and Impacts (positive or negative) Not applicable. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. 4. Assessment of Risk to Development Outcome Rating: High 57. Given the lack of government ownership and the weak capacity, it is doubted that outstanding activities would be undertaken at the government’s own cost and, as mentioned, development outcomes were not achieved. The intervention itself was in a risk-prone, highly sensitive, and at times politically charged area. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory 58. The quality at entry was Unsatisfactory. The Bank responded promptly to GoP’s request for technical assistance to support the NTCIP program which had existed for four years with strong government leadership (reflected in Component A). The project was also a continuation and expansion of the 2001 TTFP I, which aimed to modernize Pakistan’s trade and transport facilitation practices and procedures (reflected in Component B). Strengths of the project design at entry included, (i) readiness filters were appropriately met; (ii) a number of lessons learned were incorporated from the previous project. However, as mentioned in other sections, several deficiencies were noted: the Bank underestimated the risk of (i) government commitment to leverage the success of the project; (ii) government capacity to carry out such a complex program; (iii) technical capacity of the NTCMU to manage the project (quality of studies, technical advisory services and implementability of recommendations); (iv) synergy between the two IAs with different priorities and reform agendas. Moreover, additional shortcomings included, (i) inappropriate risk mitigation measures identified; (ii) inadequate M&E framework designed, i.e. outcome indicators were not designed to measure the TA; (iii) monitoring, evaluation and decision support framework for NTCIP not successfully set up; and (iv) the inability to assess project impact by project completion, against the timeline of NTCIP. 16 (b) Quality of Supervision Rating: Moderately Unsatisfactory 59. The quality of supervision is rated Moderately Unsatisfactory on the following: (i) inadequate supervision; (ii) poor responsiveness to project implementation challenges, including slow follow-up on issues; (iii) poor quality of reporting, including lack of comprehensive overview of project progress - detailed below. 60. Inadequate supervision. The frequency of supervision missions (two a year) was adequate and the appointment of local-based TTLs enabled closer coordination than when it was HQ-based. The field-based supervision supported project achievements in the period before MTR (up to mid-2012), when modest project gains were achieved. However, it appears that, despite recognized efforts to engage with the government, the Bank failed to effectively address the implementation challenges continued to hinder project performance throughout the implementation period. The Bank team failed to consistently include technical experts among its own project staff to effectively assist and advise the work undertaken by the Borrower and its consultants, who lacked technical capacity.22 The project team was not able to bridge the lack of coordination between the IAs and to engage effectively with government counterparts in order to act timely to re- design a project with realistic development objectives and indicators. This was in part due to the high turnover rate of officials in the Planning Commission, and the difficulty of having to engage with the Planning Commission rather than the concerned ministries. It also appears that the high turnover of World Bank task team leaders, 4 TTLs during implementation, may have challenged the Bank’s ability to provide strong engagement on these issues. 61. Poor Risk taking and decision making. It appears that the timing and duration of discussions on project restructuring was both late and drawn out, against the need for timely action in the context of a project supporting policy reform initiatives (which span over long periods of time). Long delays were incurred both in finalizing the restructuring packages at two different times during implementation, as well as delays incurred before taking action after the first attempt stalled. It is understood that internal Bank processes and procedures may have created additional challenges to effective action, given the need for government responsiveness in order to process project restructuring, or project cancellation (as well as managing institutional relationships in the face of these challenges). 62. Poor reporting. Close monitoring to assess performance across multiple agencies required considerable staff time. Except at mid-term review, Bank reporting failed to document and assesses the progress of project objectives comprehensively, i.e. the 22 Refer to risk mitigation measures listed in the PAD p.18, specifically that the World Bank and other development partners would participate in technical reviews and provide advice using their international experience and knowledge of best practices. This was to mitigate for the acknowledged weakness of NTCMU and TTFU who did not have the capacity to manage the technical aspects of the project (quality of studies and technical advisory services, and implementability of recommendations). 17 progress of respective activities and project outcomes was sporadically documented. In particular, after MTR, reporting efforts appeared to focus on the status of discussions regarding project re-design. The lack of comprehensive reporting was a challenge to the assessment of project implementation by the ICR team. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory 63. The shortcomings identified above in the Bank’s performance at both the design and implementation stages justify rating of the Bank’s overall performance as Moderately Unsatisfactory. 5.2 Borrower’s Performance (a) Government Performance Rating: Unsatisfactory 64. The GoP demonstrated a satisfactory level of commitment and ownership during project preparation. Readiness filters were complied with and the new government held its first NTCIP task force meeting soon after coming to power in 2008, before project appraisal. 65. However, after project appraisal, for almost two years, GoP did not indicate any clear strategy on how to take the NTCIP and TTFP II forward, until the adoption of the New Growth Framework by the government in 2011 - where private sector-led growth replaced an earlier focus on public sector spending and a “brick and mortar” approach to growth. During implementation the government failed to ensure the required enabling environment was provided, including (i) supportive institutional arrangements to work across government agencies (as required for a program on trade facilitation); (ii) adequate budget allocations through the Planning Commission’s Public Sector Development Program (PSDP) to the second project component, which were consistently inadequate to execute the program. The latter prevented the recruitment of experts to carry out the studies, slowing implementation progress. Hence, while the lack of ownership of the GoP and lack of staffing and capacity (as described in the sections above) slowed implementation progress of the NTC component, the performance issues of the TTF component were related, at least in part, to insufficient budget provisions. 66. Overall performance of the Borrower is thus rated Unsatisfactory, as further developed in the section below on respective performance of the IAs. (b) Implementing Agency or Agencies Performance Rating for NTC: Unsatisfactory 67. The NTC Management Unit (NTCMU), set up within the Planning Commission, was responsible for the overall management of the project across both components, and specifically the management of the NTC component in coordination with the sector ministries/agencies. The NTCMU was also mandated to report to the Government and the World Bank on implementation progress, consolidating information on implementation 18 of both the NTC and TTF components. Through the NTCMU, the implementing agency did not manage and coordinate the project effectively and its performance was undermined by the following factors: (i) the lack of project leadership during the first year of implementation (i.e. delayed appointment of full-time Project Director to June 2010) and lack of independence for day-to-day project management tasks, once appointed;23 (ii) inadequate staffing and capacity through the project implementation period.24; (iii) weak technical and fiduciary capacity, which had a considerable impact on project delivery; it was identified as one of the main reasons for slow disbursement of the project (alongside inadequate funding of PSDP for TTFU) by the Aide Memoire of the implementation review mission of January 29 to February 8, 2013. The latter resulted in significant delays and, at times, stalled procurements, i.e. no progress reported between November 2010 and the supervision mission of February 2011, with only two consultancies awarded one and a half years after project effectiveness. Only 3 of the total 14 regrouped studies planned were completed at project closing (Refer to Annex 2). 68. Confirming its loss of relevance after the change in government, the component’s linkage to the NTCIP led the government itself to request cancellation of this project component in its official request to the World Bank on August 12, 2013. 69. The reasons above and consistent lack of achievement and commitment to deliver this project component justifies a performance rating of Unsatisfactory. Rating for TTF: Moderately Unsatisfactory 70. The TTF Unit (TTFU) created in the Ministry of Commerce (MoCe) was responsible for the implementation of the TTF component. This component was a continuation of UNCTAD’s technical assistance to MoCe, which began under TTFP I, and justified sole source procurement of UNCTAD as the “implementing partner” of the TTFU/MoCe. In particular, the UN Agency managed the process of recruitment of international consultants, supported MoCe in the recruitment of national consultants, and performed quality control of deliverables. 71. The TTFU’s performance in managing the TTF component of the project was mixed: (i) performance under the TTF component was satisfactory up to mid-term review (MTR), when the TTF management rating was first downgraded from Satisfactory to Moderately Satisfactory (ref. ISR Seq. 7, June 2012). As of MTR, approx. 40% of planned activities were completed and the TTF component remained the only driving force of the project albeit implementation delays;25 (ii) as of MTR, the performance continued to deteriorate, particularly in the last 12 months of project implementation – resulting in a final TTF management rating of Moderately Unsatisfactory (ref. ISR Seq. 10, January 2014). As of project closing, only 12 of the 33 activities (as per the revised 23 Source: Mid Term Review Aide-Memoire (June 2012), para.33; ISR Sequence 3 (21 April 2010); ISR Sequence 4 (created 21 September 2010). The incumbent during this period was on acting charge and engaged not full-time. 24 Source: Aide Mémoire, Implementation Review Mission Jan 29-Feb 8, 2013 25 Source: Implementation Review Mission Jan 29th-Feb 8th, 2013 Aide Mémoire, para. 7 19 work plan of UNCTAD) had been completed.26 One additional study was completed and submitted to the World Bank in April 2014. It appears that the following factors may have undermined the performance of the IA and implementing partner (UNCTAD): (i) inadequate budget allocations provided by the Planning Commission to the TTFU throughout the implementation period. This undermined the IA’s ability to recruit national consultants to conduct the studies; (ii) the revised work plan for UNCTAD (formalized in the amendment to the contract agreement signed in Nov. 2012), did not obtain clearance of the Planning and Development Division through adoption of the revised PC-1, which never occurred; (iii) the extension of the project closing date to June 30, 2015 through project restructuring (to which the revised work plan of UNCTAD was aligned) did not materialize through project restructuring. 72. While the reasons above made it difficult to manage the project in an efficient and effective manner, release of payments from World Bank funds continued up to September 2013 – making it difficult to justify the weak performance reported in the last 12 months of implementation. This led to delayed clearance of a release of payment, due in September 2013 as per the CSA First Amendment, only cleared at project completion. Weak performance reporting of the IA and UNCTAD further undermined the performance under the TTF component, including non-compliance to the provision under CSA Annex IV for a Terminal Report to be produced by UNCTAD at project end. 73. In summary, although the MoCe remained strongly committed to the TTF component at first, subsequent delays in the completion of agreed activities, lack of follow-up actions and weak progress reporting weakened project performance under this component as from 2012 to project end; it justifies a performance rating of Moderately Unsatisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory 74. For the above cited reasons, the overall rating of the Borrower’s performance is Unsatisfactory. 6. Lessons Learned 75. Lesson 1: Developing Realistic Project Outcomes and Objectives. This project has highlighted the importance of developing a PDO and project indicators that are achievable and measurable within the timeline of the project. While the project may be contributing to higher level goals, these should not be used as key indicators which will not be measurable at project end. More granular project indicators are advisable where higher level objectives are sought. 76. Lesson 2: Importance of Government ownership/commitment. If the government’s will is lost, it is important to take risk and make prompt decision in either 26 Source: ISR Sequence 10, Archived in January 2014. This relates to the progress of activities as of the end of Sept. 2013. No further progress reported as of Jan. 2014. 20 restructuring or canceling the project. It is acknowledged that mitigation of political risks is difficult to incorporate in the project design. However, project teams should not assume government’s sustained commitment and should remain pro-active in managing it on an ongoing basis through the life of the project; this highlights the importance of building strong institutional relationships, which in-country TTL capacity has shown to help sustain. As mentioned above, cancellation of the project should be considered where government engagement is absent. 77. Lesson 3: Importance of Timing in Project Restructuring/cancelling. To accommodate emerging issues in a changing environment, a formal restructuring of projects under implementation is an effective mechanism for portfolio management. However, the timing is crucial. In retrospect, the prolonged discussions on project restructuring in the case of TTFP II presented a lesson learned in that regard. Especially in the context of engagement in policy reforms, if the government’s commitment is lacking it is advisable to immediately refer to project cancellation or restructuring with continued implementation only of those components of the project where the IAs are engaged. Empowering TTLs to raise issues earlier and for greater risk taking where needed, will require further study into World Bank instruments and processes, and how they can be adapted to help TTLs make these difficult decisions at the right time. In particular, the reluctance of the World Bank to cancel a project unilaterally can lead to unsatisfactory implementation records such as reflected in this project. In cases where government commitment is either absent or insufficient to lead successful project implementation, TTLs should be given means to take effective action early. 78. Lesson 4: Strengthening the Institutional Implementation Arrangements. The choice in implementing agencies should be closely correlated to the outcomes sought by the project. For instance, in the context of TTFP II the Planning Commission was mandated with oversight of the project, while the project team was seeking to engage directly with specific ministries. Project effectiveness would likely be enhanced it the project teams were in a position to engage directly with the relevant ministries. It would likely also have expedited discussions on project restructuring in the case of TTFP II. 79. Additionally, it is important to keep the implementation structure simple. In the case of this project, the involvement of too many players led to cumbersome administrative processes. For instance, the Planning Commission (PC) was supposed to coordinate the NTC component and the line ministries take the lead in procuring the studies in consultation with the PC. This caused significant project implementation delays. The process of approval of studies under the Planning Commission required the review of several institutional players incl. the Secretary Planning and the Deputy Chairman. The approval process in itself required up to 1.5 to 2 years to conclude in some cases. 80. Lesson 5: Importance of Retaining Key Project Staff Until Closing of the Accounting Books. As learned in this project, key financial management staff should be engaged up to the final closure of the project books, in order to avoid delays in submitting annual audited financial statements. 21 81. Lesson 6: Importance of having TTL in the country. It is important to assign a continuous local TTL or co-TTL to supervise the project given the context of the political and economic challenges to ensure stronger coordination, trust and relationship with Borrower. 82. Lesson 7: Importance of choosing the right lending instrument for policy and reforms. The challenges met in designing this TA project with a short timeline and ambitious project outcomes demonstrates the importance of considering different lending instruments. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies 83. The Borrower’s ICR reported in concordance with the ICR Bank team that the project suffered from, (i) inherent flaws in the project design; (ii) lack of political ownership from the outset, mentioning in particular that Task Force meetings decreased in number and were held further apart until finally no longer being held altogether through the project implementation period; (iii) lack of collaboration between the two IAs, which hardly interacted; (iv) insufficient amount of time to complete an ambitious number of activities; (v) recommendations of the studies which were not implemented. The latter reflects the Bank ICR team’s assessment that the timeline of the project was not well adapted to the project development objectives and also concurs with the Bank’s findings in mentioning that “the project was helpless in achieving the broad based agenda of reforms” in the absence of NTCIP. 84. The report also identifies several shortcomings of the Bank project team’s performance in supporting the IAs, which should advise future Bank operations: (i) insufficient efforts on the part of the Bank team to improve the design of the project (including after the initial government request for restructuring); and (ii) although training was provided, it was felt that additional training would have been beneficial during the course of the implementation due to unfamiliarity of the IA with World Bank procedures (procurement and financial management). The report also claimed that the project “suffered due to a clash of personalities between the government and World Bank staff”. 85. It must be noted that the MoCe, as IA of the TTF component, does not appear to have contributed to this report. (b) Cofinanciers Not applicable. (c) Other partners and stakeholders Not applicable. 22 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD million equivalent) Appraisal Actual/Lat Percentage Estimate es of Components (USD Estimate Appraisal millions) (USD Millions) 1 2 3 4 1. National Trade Corridor (NTC) 19.00 2. Trade and Transport Facilitation 6.00 (TTF) Total Baseline Cost Physical Contingencies - - - Price Contingencies - - - Total Project Costs 25.00 - Front-end fee IBRD - 0 Total Financing Required 25.00 4.9 (b) Financing Source of Type of Co- Appraisal Actual/Latest Percentage of funds Financing Estimate (USD Estimate (USD Appraisal millions) millions) Borrower 8.40 IBRD 16.60 . Project Costs (USD m) Components/Activities Current Proposed Local Foreign Total Local Foreign Total Transport Component 6.11 12.89 19.00 2.01 1.21 3.22 Technical Advisory Services 3.55 12.89 16.44 0.66 1.21 1.87 Management 2.56 0.00 2.56 1.35 0.00 1.35 Trade Facilitation Component 2.29 3.71 6.00 2.5 3.83 6.33 Technical Advisory Services 1.00 3.71 4.71 1.6 3.83 5.43 Management 1.29 0.00 1.29 0.9 0.00 0.9 Total Project Costs 8.40 16.60 25.00 4.51 5.03 9.55 23 Annex 2. Outputs by Component Outputs Achievement/Remarks Reference NTC Component Railways Prepared for implementation, incl. consultation with key Aide Mémoire, Revitalization stakeholders and labor unions of the Pakistan Railways. Supervision mission Strategy The Railways Revitalization Strategy was submitted to the June 2013; ISR Seq. 7 Pakistan Railways Board for review and clearance in 2012; (created in June 2012); Aide Mémoire MTR it was also presented to a Committee of the PC for review. (June 2012) However, the approval of the railways revitalization strategy by the Cabinet remained pending as of the supervision mission of June 2013. Updated Note on Final report submitted on 18 May 2012. ISR Sequence 7 ISR Seq. 7 (created in Trucking Policy (June 2012) reports that the trucking policy update was June 2012); Aide Reforms presented to a Committee of the Planning Commission for Mémoire Supervision review. Mission June 2013; Aide Mémoire MTR (June 2012) However, the study on developing an implementation strategy for the trucking policy was not procured by project end - the implementation of recommendations under the trucking policy update were thus not implemented. Note: the procurement process had been ongoing since Nov 2011 but to not avail. Evaluation of The Civil Aviation Authority (CAA) consultancy was Aide Mémoire MTR Compliance with completed during the period 27 May 2010 - 10 Jan 2011; (June 2012) ICAO standards all deliverables were submitted and approved by the and recommended Ministry of Defence. practices Consultancy on The study focused on the redesign of the Financial Aide Mémoire MTR FIS/MIS in Accounting System of Pakistan Railways as per (June 2012), Aide Railways International Accounting Standards, incl. development of Mémoire integrated automated Financial/Management Information implementation review mission Jan 29-Feb 8, System; it was to be followed with purchase of hardware to 2013 implement the proposed system (not completed at project closing due to procurement delays). The Aide-Memoire at MTR confirms that the study is ongoing; not confirmed completed at project closing in subsequent project documents. 24 Trade and Transport Facilitation Component Direct TA Supporting Pakistan Direct TA assistance in developing Pakistan's position to the UNCTAD Progress in WTO Trade Consolidated Negotiating Text, WTO (2011). This included reports, 1) Feb-Mar Facilitation conducting interviews of officials from MoC, Customs, TDAP, 2011; 2) June Negotiations and Ministry of Industries in Karachi and Islamabad on the 2011, 3) Jul-Aug 2011 proposed TF Agreement and compilation of a study based on this research; and held a validation conference to finalize the study (held on Aug 16, 2011). Based on the consultations mentioned above, UNCTAD UNCTAD progress conducted a study on the preparedness of Pakistan to achieve reports 1) Jul-Aug compliance with the future WTO TF Agreement. The first 2011; 2) Sept-Oct draft was prepared during the period Jul-Aug 2011 and 2011 finalized and circulated for comments in Sept 2011.The study was intended to be a source to further refines the GoP's negotiating position in the WTO TF negotiations. It also identified GoP's obligations under the future WTO TF Agreement and sought to help design a national implementation plan. The study was also leveraged by UNTAD to review and update the National Trade Facilitation Strategy. Supporting GoP in UNCTAD assisted GoP in its work to prepare the UNCTAD Progress Afghanistan- operationalization of APTTA (planned in February 2012). reports 1) Feb-Mar Pakistan Transit UNCTAD issued an "Information Note" to support both 2011; 2) Apr-May Trade Agreement Governments and provided ongoing technical assistance in 2011 (APTTA, 2010) 2011 (incl. regarding mechanics of "financial guarantee"). Alignment of trade UNCTAD worked in collaboration with Customs, PRAL, and UNCTAD Progress documents with the State Bank of Pakistan, with the coordination of NTTFC. A reports 1) Feb-Mar UNLK UNLK aligned version of SPS certificate, certificate of Origin, 2011; 2) Apr-May and commercial invoice was developed and shared with 2011; 3) Jul-Aug 2011; 4) Nov-Dec Pakistan Customs, which was forwarded to FBR to complete 2012 administrative/legislative formalities for these to be introduced for regular use by traders and their agents. Once implemented, all documents used in international trade by Pakistan and its trade and industry would be aligned with UNLK. UNCTAD engaged with FBR in the period of Jul-Aug 2011 to expediate the process. The UNCTAD progress report of Nov-Dec 2012 indicates that the adoption of UNLK aligned trade documents mentioned above had still not occurred. 25 Support to GoP for Ratification of TIR grew in importance with APTTA - UNCTAD Progress ratification of which would enable exports of Pakistan to CARs. reports 1) Feb-Mar international UNCTAD consulted with UNECE on TIR accession of 2011; 2) Apr-May Conventions, incl. GoP (i.e. discussion focused on "reciprocal rights" 2011; 3) Nov-Dec 2012 TIR imposed on contracting parties) and with the Special TIR Advisor in International Road Transport Union (IRU), and with TIR Audit& Admission in order to gather technical inputs shared with GoP. The UNCTAD Progress report of Nov-Dec 2012 indicated that the ratification of the selected customs conventions had still not been completed. STUDIES Regulatory framework UNCTAD Progress for freight forwarders; Study: Report requested by NTTFC in January 2011: a reports 1) Feb-Mar and capacity building note covering the overview of the issues involved, 2011; 2) Apr-May activities practices of selected countries and possible approach for 2011; 3) Aide GoP was submitted to MoCe in May 2011. At the same Mémoire MTR (June time, NTTFC prepared a draft bill titled "Logistics Service 2012) Providers Regulatory Authority Bill 2011" and held a meeting with stakeholders to refine the Bill (to be sent to Parliament after vetting from the Law Division). The note by UNCTAD also commented on the draft bill. Capacity building: In collaboration with FIATA and UNCTAD progress PIFFA, UNCTAD conducted a two weeks seminar to train reports 1) June 2011; the trainers in freight forwarding in Feb/Mar 2011. The 2) Jul-Aug 2011 programme was conceived to develop the local capacity of upcountry freight forwarders through follow-up courses to be conducted by PIFFA; training of freight forwarders at Lahore commenced. The aim was also to harmonize practices across the country (upcountry, in Karachi and in Southern parts). Customs disposal The study was requested by NTTFC but was not part of the UNCTAD progress procedures for original contract agreement between GoP and UNCTAD. reports 1) Apr-May abandoned cargo and UNCTAD decided to use its in-house expertise for this 2011; 2) June 2011; related auction study (i.e. did not hire a consultant), which would be 3) Jul-Aug 2011; 4) Sept-Oct 2011 procedures of limited to desk research. First draft was prepared confiscated cargo incorporating international best practices in the period Jul- Aug 2011. The work was completed and report submitted to GoP (and WB) in Oct 2011. Study on Integrated UNCTAD progress Checkposts in Wagha UNCTAD visited the Wagha border to evaluate ground report Jul-Aug 2011 facilities for transit trade under APTTA, especially the back-to-back transfer of Afghan cargo destined for India (as reported in UNCTAD progress report of Jul-Aug 2011). The consultant was mobilized on 5 Sept 2013. Completed study was submitted to WB in April 2014. Study on UNCTAD progress strengthening the The paper by UNCTAD provided recommendations on the report Sept-Oct 2011 NTTFC in line with NTTFC membership, working structure, secretariat international best capacity and financial sustainability of the NTTFC. The practices paper was completed and submitted to GoP in Oct 2011. 26 Regional Trade Held in collaboration with UNESCAP on December 9-10, UNCTAD progress Facilitation 2013 in Lahore and aimed to promote trade facilitation in reports 1) Jan-Mar Conference the region. 2013; 2) Apr-June 2013; 3) Jul-Aug 2013; 4) Sept-Oct 2013 Revised National The revised NTFS was submitted by UNCTAD on 1 June UNCTAD progress Trade Facilitation 2012 and was circulated to members of NTTFC for report Nov-Dec Strategy (NTFS) comments. A revised version was prepared and shared 2012; Aide Mémoire with GoP and NTTFC during the period Nov-Dec 2012. MTR (June 2012) By project end, the revised NTFS had still not been approved by GoP. Trade Information Aide Mémoire, Trade information portal was developed, launched, and Portal Supervision running. This encompassed all trade laws and regulations mission June 2013; made electronically available. Aide Mémoire MTR (June 2012) WB project team reports that the information portal continues to be used by GoP beyond project implementation period. Study on Trade As referred above: submitted in Sept 2011. Facilitation Initiatives for Achieving Compliance with the future Trade Facilitation Agreement Transit Operations UNCTAD prepared Acts submitted to the Parliament for Aide Mémoire, and Procedures: Cargo legislation - for carriage of goods by various modes i.e. by Supervision Tracking air, sea and road; as well as provided technical assistance mission June 2013 regarding the creation/implementation of cargo handling facilities at airports. 27 Annex 3. Economic and Financial Analysis Not Applicable 28 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Name Title Unit Jean-Noel Guillossou Sr. Transport Economist, Co-Task Team Leader SASSD Muhammad Zulfiqar Ahmed Transport Specialist, Co-Task Team Leader SASSD Amer Zafar Durrani Sr. Transport Specialist SASSD Hasan Afzal Zaidi Transport Specialist SASSD Uzma Sadaf Sr. Procurement Specialist SARPS Hasan Saqib Senior Financial Management Specialist SARFM Javaid Afzal Environmental Specialist SASSD Abid Hussain Chaudhry Program Assistant SASSD Comfort Olatunji Program Assistant SASSD Zafar Iqbal Raja Sr. Highway Engineer SASSD Imtiaz Alvi Institutional Development Specialist SASSD Shaukat Javed Program Assistant SASSD Ted Laing Ports & Shipping Consultant Consultant Farooque Chaudhry Ports & Shipping Consultant Consultant Richard Bullock Railway Consultant Consultant Douglas Andrew Aviation Consultant Consultant Carlos De Castro Trucking Industry & Trade Facilitation Consultant Consultant Sardar M. Humayun Khan Trucking Industry Consultant Consultant Michel Zarnowiecki Customs & Trade Facilitation Consultant Ernesto Sanchez-Triana Sr. Environment Specialist SASSD Fang Xu Economist SASSD Anwar Ali Bhatti Finance Analyst SACPK Ghulam Farid Program Assistant SASSD Stephanie Matter Consultant SASDT Bernard Aritua Infrastructure Specialist SASDT Neha Mukhi Consultant SEGEN Jose-Manuel Bassat Sr. Communication Officer EXTCD Fernanda Ruiz-Nunez Sr. Economist TWISI Radia Benamghar Transport Specialist SASDT Manzoor Rehman Sr. Transport Specialist SASDT (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including travel No. of staff weeks and consultant costs) Lending FY07 15 88 FY08 23 56 FY 09 50 170 29 Supervision/ICR FY09 3.35 18 FY10 20 101 FY11 36 97 FY12 36 149 FY13 35 188 FY14 26 128 30 Annex 5. Beneficiary Survey Results Not applicable. 31 Annex 6. Stakeholder Workshop Report and Results Not applicable. 32 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR GOVERNMENT OF PAKISTAN PLANNING COMMISSION MINISTRY OF PLANNING, DEVELOPMENT & REFORM (Transport & Communication Section) ********* Subject: SECOND TRADE & TRANSPORT FACILITATION PROJECT - CREDIT NUMBER 4577-PK IMPLEMENTATION COMPLETION REPORT (ICR) ORIGINAL OBJECTIVE OF PROJECT: The Project Development Objective (PDO) was to improve the performance of trade and transport logistics by facilitating: (a) the implementation of the National Trade Corridor Improvement Program (NTCIP); and (b) the simplification and modernization of Pakistan’s international trade practices and procedures. IMPLEMENTATION ARRANGEMENTS The Government of Pakistan set up a National Trade Corridor Task Force (NTC Task Force) on 18-8-2005 headed by Deputy Chairman, Planning Commission with Federal Secretaries of the Divisions of Revenue, Communications, Railways, Ports & Shipping, Defence, Petroleum, MINFA and Industries as its members. Nine sub-committees for implementation of the NTCIP were constituted (Annex-I). A core group comprising Planning Commission, World Bank, ADB and JICA was also formed. These development partners endorsed the NTC initiative and agreed to provide financing as Development Policy Loans to the tune of $6 billion for the resulting projects. Task Force Meetings Seven meetings on NTCIP initiatives were held by the then Prime Minister dated 18-8- 2005, 20-9-2005, 12-12-2005, 28-1-2006, 25-3-2006, 19-7-2006 and 1-3-2007; while fourteen meetings of NTC Task Force were held under the chairmanship of Deputy Chairman, Planning Commission. The original (umbrella) project costing Rs. 1500 million ($ 25 million), which is 100% IDA financed, was approved by the ECNEC in its meeting held on 30th November 2006. Modified PC-I with same cost ($ 25 million) was approved by the CDWP on 7th April, 2011 with completion date of 31st December, 2013. The Project comprised of two components: a. National Trade Corridor (NTC-Transport Sector) component. It included Technical Advisory Services designed in support of the National Trade Corridor Improvement Program (NTCIP) and to help underpin the designed prospective sector investments which were part of NTCIP; as well as it included the Project Coordination and Management sub-components. 33 b. Trade and Transport Facilitation (TTF) component. The component built on the results achieved by TTFP-I, thus extending efforts to streamline and integrate trade data exchange and official controls, sustaining public/private sector collaborative institutional frameworks and strengthening the domestic logistics industry. It also included Technical Advisory Services and Project Management sub-components. The Planning Commission (PC) of Pakistan was assigned as the implementing agency for the NTC component; while the Ministry of Commerce (MoCe), with UNCTAD’s consultancy support, was responsible to implement the TTF component. CLOSURE OF PROJECT The sectoral studies under the Transport Sector reforms component consistently lacked progress. Disbursements under the Project remained slow and at a very low level. Since June 30, 2013, six months ahead of the official closing date of the Project, the total disbursement of USD 4.9 million (about 19%) had been stagnant with a balance of USD 20.71 million. As of December 16, 2013, disbursement figures still had not changed. The Project from the outset suffered from lack of political ownership and changing governments and priorities. As a result the Task Force meetings decreased in numbers and were held further apart and ultimately stopped. This was assessed and evaluated at the Mid-Term Review (MTR) of the project undertaken in June of 2012 and in two subsequent implementation support missions. Level 1 Restructuring: Responding to the Bank’s proposal for a level 1 restructuring, on August 12, 2013, the Government confirmed its approval to close all the activities under the Transport Component while extending the completion of the activities under the Trade Facilitation component up to June 30, 2015. Thus the project restructuring got underway involving modification of the Project Development Objective. However, the process was abandoned due to shortage of time left before the actual project closing date of December 31, 2013. Hence the proposed extension (in restructuring) to the closing date could no longer be possible. However, at the Government’s request to avoid losing the unutilized amount, a level 2 restructuring was undertaken by the Bank to cancel part of the unutilized amount and reserve it for a “to-be-determined IDA project in Pakistan” to be approved by the World Bank Board. Level 2 Restructuring: A cancellation of XDR 12.5 million (USD 19.2 million equivalent) of the total XDR 16.8 million (USD 25.7 million equivalent) in the IDA credit for the Second Trade and Transport Facilitation Project was requested by the Government. This partial cancellation will allow the EAD to reallocate the funds to other Pakistan program under IDA. 34 ASSESSMENT OF OUTCOMES Under the Transport Component only 3 activities were completed: S. Study Objective Status No. 1 Evaluation of To review & identify The study was started in 16th April Compliance with discrepancies with the 2010 by the consultant M/s Integra, ICAO Standards and Standards and Denmark. Study completed in Recommended Recommended Practices September 2010 under the Practices to provide an action plan supervision of CAA / Ministry of Cost: € 321,873.5 to have these Defense. discrepancies corrected; to As a result, CAA performed improve CAA’s safety exceptionally well in the ICAO oversight system. Audit held in June, 2011 and achieved 82% compliance (world average is 65%) and has been placed in World’s Top Ten in Aviation Regulations. 2 Pakistan Railways To develop a road map for Completed in May 2012. A road Revitalization Strategy reforms implementation to map comprising of immediate, Cost: Rs. 8,264,320/- make Railways a viable / medium term and long term detailed profitable venture and an strategy / actions were identified efficient Public Service which would bring PR back on its delivery organization. feet. However the strategy was turned down by the Railways Board. Not paying heed to the Railways’ Board the strategy was sent to Council of Common Interest (CCI) by the Ministry of Railways for approval. 3 Updated Note on To prepare an updated Final Report submitted and Trucking Policy note on Trucking Policy presentation made to Deputy Reforms reform for seeking Chairman, Planning Commission on Cost: Rs. 2,583,300/- political consensus based 8-6-2012. The Report suggested on Deputy Chairman, improvement in the approved Planning Commission’s Trucking Policy which would observations in 14th NTC facilitate its implementation by the Task Force meeting. Government. 35 The uncompleted activities are as under: S. Background / Reasons for Study Current Status No. Delay 1 Ports Master Plan Contract Agreement signed on 7th meeting of the Steering 22nd August, 2011 between M/sCommittee was convened on Cost: $3.2 million HPC of Germany and M/o of 11th April, 2014 under the Ports & Shipping. ConsultantsChairmanship of DG Ports & mobilized on 5-9-2011 and Shipping Wing, Karachi, to address the issue of releasing submitted three Progress Reports so far out of seven. payment to the Consultants for Progress Reports I & II. It was The Steering Committee for the decided in a meeting that the study expressed dissatisfaction improved progress reports I & II over the last 2 deliverables and will now be examined by the the study was at a halt since June 2012. It has been decided to Steering Committee due to the fact carry out a Peer Review of these that the time for deliverables before making appointment of peer reviewer as decided earlier by the Steering payment to the Consultants. But Committee and the Planning peer reviewer could not be hired Commission has been lapsed. within the completion date of the project In the follow up of the 7th Steering Committee meeting, 8th meeting of the Steering Committee was held on 17th April, 2014 under the Chairmanship of DG Ports & Shipping Wing, Karachi. In a meeting the improved progress reports I & II were examined by the members of the Steering Committee in light of the observations raised in previous meetings of the Steering Committee and after detail assessment, the Steering Committee found the improved progress reports as satisfactory and recommended the release of payment. Payment amounting to €312,056.64 & Rs.16,648,320/- released to the consultant after seeking final approval from the Secretary P,D&R. 2 Restructuring/up- In 2005 Ministry of Railways After completing the codal 36 S. Background / Reasons for Study Current Status No. Delay gradation of Pak. (MoR) intended to restructure formalities additional payment Railway Financial and upgrade its Financial and amounting to Rs. 11.510 million & Management Management Information has been reimbursed to M/o System System to improve efficiency, Railways . Cost: $ 4 million service delivery and value of money spent out of the public exchequer. To meaningfully support the decision making on relevant financial information, the MoR decided to undertake a study namely “Restructuring and Up-gradation of Pakistan Railway’ Financial & Management Information System (FMIS)” in January, 2005 supervised by their Project Management Unit (PMU-PR). A PC-I amounting to Rs. 60 million and to be funded by the World Bank under their Public Sector Capacity Building Project (PSCBP), was prepared by MoR and approved by the CDWP on 7-3-2005. Following the World Bank competitive method for procurement of consultancy services and after fulfilling all the codal formalities MoR selected a chartered accountant firm M/s Riaz & Co to deliver the tasks mentioned in the Technical Human Resource component. The contract amount was Rs. 47.62 million which was signed between MoR and M/s Riaz & Co. Initially the cost of the said task was met through bridge financing by MoR budget, since the World Bank funding through Public Sector Capacity Building Project had not materialized. Later on, the World Bank project was closed and MoR kept on funding the 37 S. Background / Reasons for Study Current Status No. Delay project through their own resources. Later on, on 27-10-2009 the MoR requested the Planning Commission to include this study in the list of priority studies in the TTFP-II with willingness of the World Bank. The World Bank endorsed this request and recommended to the Planning Commission for inclusion of the study for financing through TTFP-II. The request of the WB and PR was considered by the Planning Commission’s Review Committee in its meeting held on 28-1-2011 and decided to include the study on FMIS in the list of studies under TTFP-2 and reimburse the amount spent by Ministry of Railways from the funds available with NTCMU from the PSDP allocations. In this regard, the first installment amounting to Rs. 29.239 million was reimbursed by the World Bank through NTCMU, Planning Commission. The second bill amounting Rs. 11.510 million was submitted by the Ministry of Railways on 25- 01-2012 3 Developing Procurement process halted on M/o Industries agreed to Implementation contract negotiation due to implement the approved trucking Strategy for reluctance by M/o Industries. In policy without hiring the Trucking Policy and consultation with the World consultants. Help Initiating the Implementation Bank, the PC agreed to take over Process the study. Procurement process Cost: $3 million re-initiated but afterwards Planning Commission stopped the procurement process and handed over the subject to M/o 38 S. Background / Reasons for Study Current Status No. Delay Industry. 4. Inland Water The study was started to run a pilot project aimed at testing the Transport technical, commercial and environmental viability of moving Cost: $ 0.4 million commercial cargoes on canals in the Province of Punjab or Sindh and River Indus link between Daud Khel & Nowshera. Procurement process annulled after the 18th Amendment due to devolution of IWT subject to the provinces. OUTCOMES OF PROJECT Original / Expected benefits Actual Achievements Project Maximum benefits from this Tangible achievements were made benefits project are related to the during the initial years of NTCIP implementation of the National (2005-08). However after the change Trade Corridor Improvement of government in 2008, there was a Programme (NTCIP) and its lack of political will to carry forward underpinning investment program. the NTC Program. The TTFP-2 however started in 2008 and approved by the World Bank Board in 2009. Since its infancy TTFP-2 suffered delays. First it became a slow moving project which became a troubled project in 2012. Since the success of the project was linked with NTCIP, it suffered from lack of interest and ownership by the government. The recommendations of the studies which were completed could not be implemented hence no benefits could accrue therefrom. Financial Reduction in non-factor costs benefits (logistics costs and financial costs) is estimated at US$600 million per year by achieving international benchmarks in Pakistan. Improvement of in-house logistics in No economic or Financial analyses industries is estimated to generate were carried out during the project. US$6 billion of saving annually. Economic Reduction in the cost of doing benefits business. Trade facilitation would remove unnecessary bureaucracy, promote transparency, and contribute 39 Original / Expected benefits Actual Achievements to lowering the levels of corruption. It will strengthen security through more effective controls, improve the investment climate and promote higher Customs revenues. The project does not generate direct economic benefits, but it will facilitate the implementation of the NTCIP. Social benefits During the project, an overall The SEPSA (carried out by Strategic Environmental Poverty consultants appointed by the World Social Assessment (SEPSA) would Bank) also suffered delays. The be carried out with the objective to SEPSA report was completed in 2012, identify key poverty and social issues and outlined the Social, and the distributional impact and to Environmental and Poverty impacts design policies aimed at ensuring of the reform measures under NTCIP. social sustainability of trade growth This report was of no use as it was resulting from improvements of the very much delayed and the NTCIP NTC performance and was non-existent by the time of its competitiveness to identify and publishing. evaluate the impact of NTCIP. Employment Direct employment generation is No employment generation took place Generation limited to individuals who will be other than the staff of the two engaged by the Planning management units. Commission and M/o Commerce. Indirect employment generation is a function of the impact of trade facilitation measures on Pakistan’s competitiveness. Environmental Preparation and implementation of Same as mentioned under Social Impact environmental assessments resulting benefits above. from investments which are part of NTCIP will be carried out under the responsibility of the concerned ministries or agencies as part of the preparation of those individual investments. The management of environmental and social aspects of the NTCIP, is under the responsibility of the Environmental Section of the Planning Commission. GOVERNMENT’s (BORROWER) PERFORMANCE Besides the lack of political will in the previous government to implement the NTCIP the project suffered numerous administrative delays in completing its activities. These can be 40 attributed to inherent flaws in the design of project, delays in getting necessary approvals, unfamiliarity with World Bank procedures, lengthy procurement procedures, low disbursements, lack of training of staff etc. Since the start of project (2008) till its closure about seven Project Directors were appointed on full-time and sometimes on additional charge. None of the staff were provided any kind of training to help them carryout project activities swiftly. Inherent Flaw in Project Design The Project was being implemented by two Government Ministries (Planning Commission and Ministry of Commerce). The two components had little in common and hardly interacted besides being located in the same office space. Both management units were responsible for hiring consultants to carryout studies and for management functions. The NTCMU was also to serve as the secretariat of NTC Task Force. In the absence of NTCIP the project was helpless in achieving the broad based agenda of reforms. There were a number of activities identified for each component and not enough time provided to complete all of them. The decision making regarding the studies rested with the line ministries and Steering Committees (Ports & Shipping, Railways, Industries, Defence etc.) which attributed to delays in decision making and sometimes deadlock (e.g. Ports Master Plan Steering Committee). PERFORMANCE OF THE BANK There were delays in getting the project approved by the World Bank. There was a turnover of Task Team Leaders (TTLs) on the World Bank side and during the implementation period the project witnessed four different TTLs. No attempt was made to improve the design of the project even when restructuring the project was requested the first time. World Bank did not provide adequate training to the government counterpart staff. The project also suffered due to a clash of personalities between the government and World Bank staff. 41 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not applicable. 42 Annex 9. List of Supporting Documents World Bank Documents Project Appraisal Document for Trade and Transport Facilitation Project, April 10, 2009 Financing Agreement for Trade and Transport Facilitation Project CR-4577-PK, May 27, 2009 Restructuring Paper for Trade and Transport Facilitation Project, December 19, 2013 Project Status Reports/Implementation Status Results Reports ISRs Sequence # 1-10 Aide-Memoire/Management Letters Preparation Mission, November 17-21, 2008 Appraisal Mission, February 9-18, 2009 Implementation Support Mission, June 14-18, 2010 Implementation Support Mission, February 8-28, 2011 Mid-Term Review Mission, June 18-21, 2012 Implementation Support Mission, January 29 – February 8, 2013 Implementation Support Mission, June 17-24, 2013 Implementation Completion Follow-up Mission, March 28 – April 3, 2014 Reports NTCMU Quarterly Progress Reports, Jul-Sept 2010 and Oct-Dec 2010 UNCTAD Progress reports, 2011-2013 Other Documents Contract Agreement between the Government of Pakistan and United Nations Conference on Trade and Development (UNCTAD), January 18, 2008 First Amendment to the Agreement between the Government of Pakistan and UNCTAD, November 14, 2012 Minutes of 14th, 15th, 16th, 17th, 18th NTTFC meetings, 2009-2013 Pakistan: Framework for Economic Growth, Planning Commission Government of Pakistan, May 2011 Project Appraisal Document, Trade and Transport Facilitation Project (TTFP I), March 26, 2001 Implementation Completion and Results Report, TTFP I, December 1, 2006 Doing Business Reports, World Bank Group, 2013 and 2014 Doing Business 2014 Economy Profile: Pakistan, World Bank Group (11th Edition) 43 IBRD 36910 PAKISTAN NATIONAL TRADE CORRIDOR EXISTING ROAD CORRIDORS AIRPORTS MAIN CITIES AND TOWNS MAIN ROADS BORDER CROSSINGS PROVINCE CAPITALS EXISTING RAIL CORRIDOR PORTS NATIONAL CAPITAL RAILROADS DRY PORT PROVINCE BOUNDARIES INTERNATIONAL BOUNDARIES 65°E 70°E TAJIKISTAN 75°E Khujrab CH INA CHINA PAKISTAN Ind FED. CAPITAL Chitral u s TERRITORY 35°N Approximate ISLAMABAD N . W . F. P. Line of Control Uri- To Saidu Chakothi Kabul Kargil Muzaffarabad Jalalabad- Torkham Srinagar Torkam Peshawar Jammu Kahat ISLAMABAD and Kashmir Rawalpindi F G HA A FG H A N I S TA N Bannu Wazirabad Gujrat Sialkot lum Jhe Gujranwala To b na Mandi he D.I. Khan Pindi C Wagar- To Kandahar Faisalabad Amritsar Zhob vi Lahore Ra Zhob PUNJAB To To Sahlwal Bhatinda Ludhiana 30°N Quetta 30°N D.G. Khan Multan tlej Su us Ind To Kerman Bahawalpur Nok Kundi BALOCHISTAN Surab ISLAMIC REPUBLIC Basima Khuzdar Ratodero OF Nag Sukkur Ranipur IRAN To Khash Panjgur Kokor INDIA ai shk Kwaranokor Ma Moro To Kerman Bela SINDH To Turbat Jodhpur 25°N Gwadar Pasni Hyderabad 25°N Karachi Thatta Badin PORT QASIM AND us KARACHI PORT TRUST Ind This map was produced by the Map Design Unit of The World Bank. The 0 50 100 150 200 Kilometers boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The 0 50 100 150 Miles World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 65°E 70°E 75°E APRIL 2009