Documt S The Woeid Bank FOR OMCAL USK ONLY C R9. /i53-2- 'AR 1et N.. P-3897-PAK REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCITON TO THE EXECUTIVE DIRECrORS ON A PROPOSED CREDIT IN AN AMOUNT OF SDR 147.6 MILLION (US$150 MILLION EQUIVALENT) TO THE ISLAMC REPUBLIC OF PAKIST%AN FOR A LEFT BANK OUTFALL DRAIN STAGE I PROJECT November 13, 1984 ther .6,1. d1ti afuPul -i u tbhrwhe be dis_asi whhw W_ M jmuk auhhs uig jt Currency Unit - Pakistan Rupee (Rs) 11S$1.00 - Rs 13.50 Rs 1.00 - 'US$ 0.07 FISCAL YEAR July 1 - June 30 ADBREVXATIONS ADB - Asian Development Bank ADBP - Agricultual Development Dank of Pakistan ADP - Annual Development Program CIDA - Canadian International Development Agency CIMP - Commad Water Management Project DPOD - Dhoro Puran Outfall Drain ECREC - Emecutive Coumittee of the National Economic Council GOP - Government of Pakistan GOSind - Government of Sind ha - hectare ICB - International Competitive Bidding IDA - International Development Association IND - Integrated Nanagement Organization km - kilometer - IPOD - Kadhan Pateji Outfall Drain a - meter N&E - Monitoring and evaluation Mt - metric ton ODA - Overseas Development Administration OFWM - On-farm water management OPEC Fund - Organization of Petroleum Exporting Countries Fund for Development O&M - Operation and maintenance PC-l - Planning Coumission Proforma No. 1 PSC - Project Steering Committee SCABP - Salinity Control and Reclamation Project SDC - Swiss Development Cooperation UNDP - United Nations Development Programme WAPDA - Water and Power Development Anthority of Pakistan WUA - Water Users' Association GLOSSARY bund - embankment to retain water command - area receiving irrigation water dhand - natural depression or lake watercourse - irrigation distribution system flowing from a canal FOR OFCIAL USE ONLY PAKISTAN LEFT BANK OTFALL DRAIN STAGE I PROJECT CREDIT AND PROJECT SUENARY Borrower: Islamic Republic of Pakistan Beneficiary: Sind Province Amount: SDR 147.6 million (US$150 million equivalent) Terms: Standard Relending Terms: From the Government of Pakistan (GOP) to the Government of Sind (GOSind) and the Water and PoweriDevelopment Authority of Pakistan (WAPDA) through budgetary allocations in accordance vith normal GOP procedures. ProJect Description The eight-year project would be the first stage of a major orainage program in Sind Province to reverse the deterioration of the land resource base caused by waterlogging and salinity. Integrated irrigation, drainage, and water manage- ment measures would permit increased cropping intensities and a reduction in abandoned land in an area of wore than 0.5 million ha. Principal project components include: (a) completion of a 300 km outfall drain and remodelling of existing drains to dispose of saline effluent to the Arabian Sea; (b) installation of a surface and subsurface drainage network in the three subareas; (c) installation of a power distribution systeh to supply the drainage tubevells and drain pumps; (d) introduction of on-farm water management practices including renovation of about 920 water- courses and precision land levelling; (e) remodelling of the Nara and Jamrao Canals, as well as construction of the Chotiari Reservoir, to provide supplemental irrigation water for the project area; and (f) technical assistance for project design and implementation. About 140,000 farm families (910,000 people), of whom three- quarters are below the rural poverty level, would benefit directly. Annual foreign exchange benefits of about US$180 million would be expected from additional production of about 315,000 mt This document has a restricd distribution and may be used by recpents only in te performance of I their ofricial dute Its conents may not otherwise be disclosed without World k authoriationa | tons of seed cotton and 215,000 Ut tons of whiet. Since the project consists of a number of integrated components, delay in completing any cne part could jeopardize the viability of the total project. To minimize this risk, project ezpeudi- tares have been carefully phased and adequate provision bas been mde for consltants to rein- force the mangemt organization. Estimated Costs: a (U-S$ Millions) Item Local Foreinu Total Drainage Disposal System 33.2 38.0 71.2 Javabshsh Area 32.9 27.7 60.6 Sangbar Area 39.4 40.0 79.4 Nirpurkbas Area 48.5 50.6 99.1 Water Resource Development 50.6 31.2 81.8 Institutional Development 0.9 8.4 9.3 Project Information System 1.5 1.5 3.0 Total Base Cost 207.0 197.4 404.4 Physical Contingencies 29.3 28.1 57.4 Price Contingencies 8G.8 93.1 173.9 Total Project Cost 317.1 318.6 635.7 Fiuancinz Plan: (p. jiions L Local Forei*u Total IDA 50.1 99.9 150.0 Asian Development Bank (ADB) 35.1 86.9 122.0 Saudi Fund for Development 13.5 38.5 52.0 Canadian International Development Agency (CIDA) 9.5 28.0 37.5 Overseas Development Administration (ODA-UK) 4.2 31.4 35.6 Swiss Development Cooperation (SDC) 8.0 2.0 10.0 OPEC Fund for Development 0.0 10.0 10.0 GOP 196.7 21.9 218.6 Total 317.1 318.6 635.7 J Including about US$97 million in taxes and duties. ~~~~~~~~~~~-i- Estimated DisburseMents: (us$ miillions) IDA FY F8 FY F 89 'O FY91 PY92 F193 YY94 Annual 9.6 13.4 20.0 19.5 27.9 24.0 18.4 12.3 4.9 Cumulative 9.6 23.0 43.0 62.5 90.4 114.4 132.8 145.1 150.0 sRate of Return: 14Z. Aiwraisal Report: No. 5185-PAK, dated November 5, 1984. M3RD 18245 INTERNlTIONAL DEVELOPHENT ASSOCIATION REPORT AND RECOUIIUDATION OF THE PRESIDENT TO THE EXECVIM DIRECTORS ON A PROPOSED CREDIT TO THE ISLAMIC REPUBLIC OF PAXCISTAN FOR A LEFT BANK OUTFALL DRAIN STAGE I PROJECT 1. I submit the following report and recommendation on a proposed credit of SDR 147.6 million (US$150 million equivalent) to the ISlamic Republic of Pakistan on standard IDA terms to help finance a Left Dank Outfall Drain Stage I Project. Six other external agencies are expected to participate in the financing of the project in amounts and on terms as follows: Amount Terms (US$ million Azency equivalent) Z Per Annum Yearshrace ADB 122.0 1 40110 Saudi Fund 52.0 3 2018 CIDA 37.5 grant - ODA 35.6 grant SDC 10.0 grant - OPEC Fund 10.0 1 17/5 PART I - THE ECONOMY 11 2. The most recent economic report 'Pakistan: Recent Economic Developments" (No. 4906-PAM, dated February 24, 1984) was distributed to the Executive Directors on March 13, 1984. 3. Economic developments during FY83 were generally favorable. GDP grew by 5.8Z, with value added in agriculture rising by 4.8% and in industry by 8.3%. Continued stagnation in (fixed) investment, which declined slightly from 13.6Z of GM? in FY82 to 13.4Z of GNP in FY83, was among the few unfavorable events. -National savings, on the other hand, rose sharply from 10.9% to an estimated 14.1% of GNP. The declining trend . 1/ Parts I and II are substantially the same as Parts I and II of the President-s Report P-3831-PAR (Second Small Industries Project), dated May 25, 1984. -2- in the rate of inflation continued; as measured by the consumer price index, the rate of inflation slowed from 11.5Z in FY82 to 5.2Z in FY83. 4. There was a dramatic turnaround in the balance of payments in FY83. The current account deficit, at US$554 million (1.8X of GNP), wan less than half the size of deficits in recent years. This outcome reflected three main factors: a resumption in the growth of ezports fol- lowing a substantial decline in FY82; a slight decline in the value of imports; and buoyant remittances from migrant workers. Exports grew by 13%, nearly regaining their FY81 level. The most striking feature of the export performance was the growth of non-traditional exports, which increased by over a third. The drop in imports reflected, inter alia. higher domestic production of oil and import-substitution in some key commodities. The incipient recovery in world trade and delinking of the exchange rate from the U.S. dollar in January 1982, with its subsequent depreciation, contributed significantly to the improved balance of pay- ments picture. Given the favorable outcome on the current account, normal levels of net inflows of long-term capital, and net IN! purchases, Pakistan's reserves more than doubled. At the end of FY83, gross official reserves stood at US$1,911 million, the equivalent of 3.5 months' of imports of goods and non-factor services. 5. Notable progress was made in many areas during the Fifth Five-Year Plan Period (FY79-83). Real grovth rates in national output (6.3Z), agriculture (4.4Z), industry (9.lZ) and exports (9.2Z), though below Plan targets, were all substantially above the rates achieved during 1970-78 and very respectable compared to the performance of other LDCs over the same period. This growth - coupled with increased inflows of migrant remittances - benefited large segments of the urban and rural population. The output of all major crops reached record levels and self-sufficiency in wheat and sugar vas achieved. Encouraged by improved government policies, private investment in manufacturing expanded by 8Z p.a. in real terms; this expansion was more than offset by the declining public invest- ment in the sector, however. The balance of payments performance was quite satisfactory: the current account deficit declined significantly relative to GDP. Government fiscal and credit policies reduced budget deficits and monetary expansion and inflationary pressures gradually subsided. This progress was made despite a number of unforeseen events: (a) world recession; (b) a 30% decline in the external terms of trade after 1979; (c) the crisis in Afghanistan, which necessitated increased outlays for defense and refugee assistance; and (d) a continued decline in real net aid flows. 6. In recent years the Government bas taken a number of initiatives to improve agricultural, industrial, fiscal and credit policies. In agriculture, particular attention bas been given to improving farmer incentives and input supplies. Support prices for all major crops bave been raised so that they are now closer to world prices. At the same time, steps have been taken to reduce the fertilizer subsidy. An -3- Agricultural Prices Commission bas been set up to wake recommendations on appropriate changes in crop support and input prices on a consistent and timely basis. 7. The Government has formulated and begun to implenent a new agricultural policy based on the main recommendations of a UE3P study on irrigated agriculture. The program emphasizes the need for efficient water delivery systems through the rehabilitation of canals and better scheduling of water deliveries to the farmer, and an expanded role for the private sector. Other programs-in pesticides, seeds, agricultural credit, extension, research and farm power-have also been strengthened. These initiatives are still at an early stage and a breakthrough from the problems of low productivity at the farm level is yet to take place. 8. Major changes have also been wade during the past five years in government policies in the industrial sector. The policies pursued in the early and mid-1970; of extensive nationalizations, tight restrictions on the private sector, and rapid expansion of the public sector to spearhead industrial investment and grovth have been gradually reversed. Most agricultural processing and some industrial units have been denationalized; constitutional safeguards have been provided to private industry against further arbitrary government acquisitions; and the areas open to the private sector have been widened. A wide range of fiscal incentives have been granted to encourage private investment and ezports. These have been supplemented by a liberalization of imports which has improved the availability of inputs. The investment sanctioning procedure has been streamlined. These measures have led to an improvement in private sector confidence and stimulated private investment, wainly in small and medium-scale projects. 9. At the same time, the Government has embarked on the difficult and inevitably long process of reforming the public industrial sector, which has been plagued by low efficiency and profits. The management and organization of the public sector, and the performance of individual enterprises has been reviewed. In accordance with the recommendations of these studies, the Board of Industrial Management (BIM) has been abolished, the number of sector-holding corporations has been reduced, and boards of directors have been established which have helped to increase autonomy at the enterprise level. Some public sector units which bave little prospect of improved financial performance have been closed down. These measures have helped to increase production and capacity utilization substantially in the public sector. 10. Fiscal performance improved significantly over the Fifth Plan period. The overall budget deficit and government borrowing from the banking system, whic.. stood at 8.8% and 4.3Z of GDP in the first year of the Plan, fell to 6.4Z and 1.7%, respectively, by the final year. Reduced levels of government borrowing from banks, together with overall credit restraint, led to lowe- rates of growth of the money supply and lessened -4. inflationary pressures; prices rose by 52 in the final year of the Plan as compared with 8Z in the first year. The improvement in fiscal performance wan, however, largely the result of expenditure restraint rather than better revenue performance. Real expansion in current expeuditures on economic and social services barely kept pace with population growth and development expenditures declined relatively to GDP. At the same time, government revenues remained constant at 16% of GDP and public saving., having risen in the first half of the Plan period from 1% to 3.8X of GNP, amounted to only 1.6Z in the last year of the Plan. Greater resource mobilization by the public sector will be critical for the implementation of the Sixth Plan. 11. The developments in the Pakistan economy since 1977 represent welcome steps towards the solution of a set of problems which are essen- tially structural and long term in nature. Notwithstanding these improvements, further wide-ranging measures to address the main issues are necessary if Pakistan is to sustain its recently improved economic performance over the Sixth Five-Year Plan period (FY84-88). These issues include the farm-level factors affecting low productivity in agriculture; the structure aud competitiveness of the industrial sector; the need to restrain the growth of energy demand and improve the exploitation of domestic energy resources; the factors lying behind continued rapid growth in population; and the problems of resource mobilization. 12. Agriculture remains the economy's mainstay, accounting directly for roughly a third of GDP, employing about 55Z of the labor force and, directly or indirectly, providing nearly two thirds of total exports. Except in the important case of vheat, agricultural growth since the mid-1970s has been the product of acreage expansion with little improve- ment in yields. Because of the high cost of extending the irrigation system, a switch to more intensive agriculture is essential. The achieve- ment of higher productivity will require improved agricultural services and increased efficiency of the irrigation system as vell as continued attention to producer incentives. Toward the latter part of the Fifth Plan, some progress was made in reorienting expenditures towards projects designed to rehabilitate and improve the operation and maintenance of the irrigation system, increase the efficiency of water use, improve quality of research and extension, and increase the supply of complementary agricultural inputs. These efforts will need to be accelerated during the Sixth Plan period. To encourage greater agricultural yields, the Government must also continue to rationalize prices of agricultural out- puts and inputs. In recent years, pricing decisions have been taken in a more systematic and timely fashion based on recommendations by the newly formed Agricultural Prices Commission; procurement prices have been brought more nearly in line with international prices and subsidies for fertilizers and pesticides substantially reduced. These efforts, too, will need to be continued during the Sixth Plan period. 13. Manufacturing contributes about 15X of GDP and during much of the 1950s and 1960s provided a major stimulus to growth. After a period of stagnation during the period 1970-77, manufacturing growth has again accelerated. To provide a solid economic basis for continued rapid growth, incentives for greater private and public manufacturing enterprise efficiency vill have to be implemented. Despite some success in reviving the private sector and improving the performance of public enterprises, much remains to be done to bring about a major restructuring of industry and place it on a competitive basis. 'he efficient long-term development of the industrial sector will require both a relaxation of government controls and rationalization of industrial incentives. To encourage industrial gruu:h more in line with Pakistan's comparative advantage, the process of import liberalization initiated over the past few years must be continued. In addition, the differential rates of protection given to various domestic products need to be substantially narrowed. To provide further encouragement for private investment as well as to attract risk capital, the number of administrative regulations must be reduced. In addition, the scope of price controls should be substantially narrowed, especially the use of cost-plus pricing which discourages improvements in efficiency and energy conservation. Further strong measures to increase efficiency and self-financing capacity in the public sector are also essential. The implementation of the Public Enterprises Signaling System in FY84-which has set performance objectives for individual enterprises and will provide bonus incentives for managers-should contribute toward the achievement of these objectives. 14. Energy shortages have become a significant constraint to rapid economic growth in Pakistan. Power and gas shortages are common and the country imports 90% of its petroleum needs accounting for over 262 of total imports. Energy investments to improve the energy situation total over 33Z of public investment in the Sixth Five Year Plan. The Government-s efforts to deal with the energy situation by adjusting domes- tic oil prices, and by encouraging the substitution of other energy forms and the exploration and development of domestic oil resources, have met with some success. Growth of petroleum consumption has been restrained by the development of hydroelectricity and natural gas resources as well as by petroleum price adjustments. At the same time, activity in the oil sector has been stepped up, in some instances through joint ventures with foreign private companies. Nevertheless, due to a variety of techn,cal, geological and other reasons, progress on exploration of new fields as well as the development of existing fields has been slow and Pakistan's considerable potential in the oil and gas sector has yet to be realized. The Government has begun to implement a number of reforms relating to such matters as energy planning, pricing and organization in order to accelerate progress. 15. While it is clearly vital to sustain rapid economic growth, it is also necessary to contain the rapid growth in population, currently run- ning at about 2.8Z p.a. Family planning programs have so far had little effect and there have been few changes in the socio-economic environment of a type that usually accompany declines in fertility. Rapid population growth places severe burdens on government resources simply to maincain -6- education and health programs at their current inadequate standards. Hovever, without higher literacy rates, improved health facilities and a reduction in child mortality, it is doubtful that population growth rates can be much reduced. The Government has recently hbown wore awareness of this problem. 16. Policies that face the longer-term issues in both the productive and the social sectors will take time to have an appreciable effect and will have to be implemented in the context of continued domestic and ezternal resource constraints. National savings averaged only 12% of GNP over the Fifth Plan Period. To improve the budget and the balance of payments, a fundamental improvement is required in the overall savings levels in the economy, particularly in public savings. Given the size of the public sector's domestic resource requirements, a comprehensive strategy that utilizes all available instruments, including taxation policy, greater reliance on user charges, curtailment of open and implicit subsidies and improved self-financing of investment by public enterprises, will be needed. 17. The Sixth Five-Year Plan, initiated on July 1, 1983, represents a pragmatic overall strategy for Pakistan's continued rapid development. The Plan puts heavy stress upon improvements in economic policies an vell as on a public expenditure program. Recognizing the importance of a dynamic private sector for rapid economic growtb and the limitations on public sector resources, it calls for reduced regulations on the private sector, increased emphasis on market incentives for greater production and efficiency and for increased participation in sectors where the Government has previously played a large role. The size and composition of the public sector development program is ap; ,priate provided the necessary resources can be raised. While public development expenditures would expand only as rapidly as gross domestic product, this iB a realistic target given projected available resources and the demands for improved public services. To achieve such an expansion - a reversal of the declin- ing trend experienced under the Fifth Plan - and to finance an increasing share from domestic resources will require a major mobilization effort. The largest increases in sectoral allocations will go to energy, agricul- ture and irrigation, and the social sectors. The shift in the composition of the public sector developmeat program is justified because of the threat to future growth posed by energy shortages, the need to increase agricultural yields by imp.-ovements in agricultural and irrigation/drainage services, and the past neglect of the social sectors. 18. The recent policy initiatives, which are to be continued during the Sixth Plan, have improved Pakistan's creditworthiness for commercial borroving and for a blend of Bank and IDA borrowing. At the end of calen- dar 1982, Pakistan's external public debt (excluding the undisbursed pipeline) stood at US$9.2 billion, of which US$4.8 billion was owed to bilateral members of the Pakistan Consortium, US$1.3 billion to OPEC and US$1.8 billion to multilateral agencies and the balance to other bilateral and private lenders. In 1982, the Bank Group's share in Pakistan's exter- nal public indebtedness was 15.2X and in external debt service was 12.1%. -7- According to Bank forecasts, provided recent policy improvements are sustained, Pakistan's debt service ratio (debt service divided by exports of goods and services), which was about 13.7% (including IMF charges) in FY82, is likely to remain below 15Z during the 1980s, even with sonewbat higher levels of commercial borrowing. PART II - BANK GROU1P OPERATIONS IN PAKISTAN 19. The cumulative total of Bank/IDA commitments to Pakistan (exclusive of Loans and Credits or portions thereof whicb were disbursed in the former East Pakistan) now amounts to approximately US$2.9 billion. During its long association with Pakistan, the Bank Group has been involved in almost all sectors of the economy. This has included its involvement with other donors, over a 20-year period, in the major program of works to develop the water resources of the Indus Basin. Approximately 3)% of total Bank1IDA commitments to Pakistan have been for agriculture and irrigation; 26% for industry including import program credits; 211 for transport, telecommunications and public utility services; 14% for energy including power, gas pipelines and petroleum; 4Z for social programs in education, population and urban development; and 5% for a .'L. 20. Lending operations in Pakistan have three main objectives: first, to support the directly productive sectors of the economy; secondly, to support the expansion of, and to improve the institutions which are responsible for, the principal public services supporting economic growth; and thirdly, to meet basic needs in the areas of rural and urban development. 21. In pursuit of these objectives, the Bank Group has placed special emphasis on lending for agriculture, which is the mainstay of the Pakistan economy. Projects in this sector are aimed at augmenting the supply of essential inputs, principally irrigation water, fertilizer, seeds and credit; strengthening research, extension and other agricultural support- ing servi_es; improving water management; reversing or controlling salinity and vaterlogging; and expanding livestock development. An impor- tant purpose of this lending is to assist the Government to obtain a balance between further investments in physical infrastructure and com- plementary institutional improvements. 22. In industry, lending through DFCs and other financial inter- meaiaries which has been mainly for the private sector totals US$488.5 million. This includes eleven Loans/Credits for the Pakistan Industrial Credit and Investment Corporation (PICIC), two Credits for the Industrial Development Bank of Pakistan (IDBP), one Credit for the National Development Finance Corporation (NDFC), two Credits for Small Scale Industries through five commercial banks, and a Loan/Credit for industrial investment through five participating financial institutions including two commercial banks. Direct lending for industry has also included assis- tance to three large fertilizer plants and a refinp."y engineering loan. As of Septedmr 30, 1984, IFC bad mde istents in 15 Pakistan enterprises for a total of US$174.2 million, of which US$163.2 zillion vas by wa of loans and US$10.9 million by equxty participations (these are shown in Annez 1)_ About US$51.0 zillion of these investments rema ned outstanding.- IC has assisted enterprises in the fields of pulp and paper products, textiles, food and food processing, petrochemicals, cment, steel, fertilizer, plastics, and vood processing. IPC is also a shareholder in PICIC. 23. The anmk has bad a long standing involvement in the energy sector. In Dover the Bank Croup has assisted the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Anthority (WhPYA) with four and thre¢ projects respectively; the sector has also been assisted by the conscruction under the Indus Basin Development Program of Nangla and Tarbela Dams. In petroleum. the two Sui gas transmission compazies have been assisted with five projects, while the Bank Group is financing two petroleum projects, for production and exploration, and is playing an important role in strengthening the public Oil and Gas Development Corporation. An IDA credit to support a Coal Exploration project was approved in mid-1983. These efforts are assisting in the efficient development and utilization of Pakistan's domestic energy resources and in establishing a policy and institutional framework for increased private imvestment iu the sector. Iu addition, IFC has made three loans in the petroleum sector. 24. The focus of Bank Group lending for trasuport and communications has shifted increasingly towards assisting Pakistan to better utilize existing capacity by improving the efficiency of operations and strengthening the institutions responsible for these services. especially the Karachi Port Trust, Pakistam Railways, the Telephone and Telegraph Department, and federal and provincial highway agencies. IDA has financed four projects in the urban and vater supply sector, two of which are currently being implemented. Five credits for education totaling US$62.5 million, have assisted in upgrading primary, post-secondary and higher technical and agricultural education, middle-level training of primary teachers and agricultural extension agents. A first population project was approved in April 1983. 25. In addition to financing specific bigh-priority projects in key sectors of the economy, the Bank bas from time to time supported Pakistan-s development through program assistance. A first structural adjustment lending operation (SAL) was approved by the Executive Directors in June 1982. This SAL program consisted of a number of significant reforms in government development planning and in policies and programs in the agriculture, energy and industrial sectors. 26. Arnn II contails a summary statement of Bank Loans and ID Credits as of September 30, 1984. Credit and loan disbursenents have been generally satisfactory. Some projects have experienced initial delays due -9- to protracted government procedures for project approval, which are being addressed, and to lowness in the procurement of goods and services. Rapid turnover of -snagerial and technical staff, in part due to migration to the Middle East, and budgetary constraints have been problems in the case of some projects. 27. A number of further projects for Bank Group financing are cur- rently under appraisal or being prepared in Pakistan. These include projects for power transmission and generation, direct and indirect industrial investments, oil and gas development, irrigation, agriculture, telecommunications, urban development and education. Pakistan coutinues to have domestic resource constraints for the reasons set out in Part I. To assist the Government to finance agricultural and other high-priority projects which have a low foreign exchange component, financing of some local expenditures in specific cases is justified. 28. In addition to lending, economic and sector work provides the basis for a continuing dialogue between the Bank Group and the Government of Pakistan on development strategy, and for the coordination of external assistance within the Pakistan Consortium. PART III - THE AGRICULTURE AND I2RRGAXION SECTOR 29. Despite its declining relative importance, agriculture continues to dominate Pakistan's economy. It contributes about 30Z of gross domes- tic product, provides about two-thirds of total exports, and employs approximately 55Z of the countryWs labor force. The agriculture sector's grovth rate decreased from an annual average of 6X in the Sixties to 2Z in the Seventies, in large part because of inappropriate policies. Following the change of Government in 1977, agricultural policies improved and growth rates rose to an average rate of 4.4Z during FY1979-83. A tem- porary setback in FY1984 caused by severe insect damage to the cotton crop and adverse weather conditions is not expected to slow the overall pattern of growth. Irrigation and Drainaae 30. Pakistan has a total land area of 79.6 million hectares (ha) of which about one-fourth is cultivable. The Indus irrigation system, commanding 632 of the total cultivable area, generates about 90Z of the nation's total value of -agricultural output. While the Indus waters have been used for irrigation for some 3,000 years, the basic system for con- trolled year-round irrigation was installed under British colonial rule in the 19th and early 20th centuries. Following partition of the subcon- tinent in 1947 and subsequent agreement on division of the Indus waters, large irrigation investments were made in Pakistan in the Sixties and Seventies. In general, these projects sought to replace water lost through partition and increase water supplies by providing reservoir storage and making greater use of groundwater to increase both the area irrigated and the cropping intensity. Today, the Indus irrigation system, which comprises three major storage reservoirs (Tarbela, Nangla and -10- Chasma), 19 barrages or headworks, 12 link canAls, 43 canal coumands, and some 89,000 watercourses, is the largest contiguous irrigation system in the world. 31. While development of the irrigation system has made possible increased agricultural production, it has not done so without a cost. The greatly increased continuous use of Indus waters for irrigation has sig- nificantly altered the hydrological balance of the Indus Basin. Seepage losses from irrigation canAls, distributaries, minorsr and watercourses, as well as deep percolation from the irrigated lands, have cauwsed a gradual rising of the groundwater table, resulting in waterlogging and salinity of much of Punjab and Sind provinces, vhere most of the countrys food and fiber crops are produced. The watertable, which was at least J5 meters (i) deep in most areas in the early 1900s, is nov less than 3 u in at least 50Z of the Indus Basin. A 1961 survey estimated that 40,000 ha of irrigated land was being abandoned annually at that time as a result of waterlogging and salinity, and available inEormation indicates that aban- donment is continuing. 32. In the early 1960s, to relieve Pakistan's waterlogging and salinity problems, the GOP initiated a series of salinity control and reclamation projects (SCARP) featuring public tubevell installation for drainage and supplemental irrigation in fresh groundwater areas. To date, about 12,000 such tubevells have been installed, mostly in Punjab Province. While tubevells have alleviated waterlogging and salinity in some areas, large saline groundwater areas, especially in Sind Province, still need immediate drainage relief. Moreover, benefits from public tubevells have been limited owing to inadequate operation and maintenance CO&N) caused by technical, financial, and managerial problems. 33. No Operations Evaluation Department report has yet been prepared for a project in irrigation or drainage comparable or related to the proposed LBOD project. However, over the last 25 years the Bank Group has played a major role in the development of the Indus Basin. The Bank facilitated the negotiations that resulted in the 1960 Indus Waters Treaty which divided the waters between India and Pakistan. Subsequently, the Bmnk mobilized financing for and administered the Indus Basin Development Fund established to finance a massive civil works program including con- struction of the Nangla and Tarbela dams. In performing this role and supervising the projects, the Bank's tecbnical, institutional, and policy advice has had a significant impact on the development of Pakistan"s irrigation water resources. Partly as a result of tbis assistance, the Water and Power Development Authority MAMPA) is today a relatively strong institution capable of undertaking major civil works projects, and con- siderable technical expertise exists in both the public and private sectors. In more recent years, the Bank has helped the GOP execute a number of studies to set the course of future investments in irrigated agriculture. -11- Government Policvyand Bank GrouD Assistauce 34. The GOP now recognizes that the huge investments in its irrigation infrastructure in the Sixties and Seventies vill be wasted if they are not properly maintained and if adequate drainage is not provided. The Government also acknowledges that greater emphasis must be given to on- farm ater management and complementary agricultural services. The Government's current investment priorities in agriculture favor rehabilitation and programs to reach the farmer directly, as well as selected major infrastructure projects, notably in drainage. This invest- ment program will be backed up vith continued efforts to widen the role of the private sector and maintain appropriate input and output pricing policies. The Bank is supporting this strategy by financing a nmber of projects in water management, irrigation system rehabilitation, salinity control and reclamation, research, credit, and eztension. 35. Nany of the agricultural policy reforms initiated in recent years grew out of a strengthened dialogue with the Bank. Bach of the irrigation projects has incorporated provisions to improve 0K and cost recovery (see paras. 53-55 and 64-67), while the Fertilizer Imports Credit (Credit 1066-PAt fully disbursed) and SAL (Loan 2166lCredit 1255-PAZ fully disbursed) dealt in addition with agricultural pricing and input subsidies. Procurement prices for Pakistau's major crops - wheat, cotton, and rice - are at or near parity with world market prices, and current output-input price ratios appear to provide adequate incentives to farmers. All subsidies on pesticides were eliminated by 1983, and the Government has regularly reduced the fertilizer subsidy in accordance with its commitment under the Fertilizer Imports Credit to phase out the sub- sidy by mid-1985. 36. Despite the policy reforms of recent years and the GOP's essen- tially correct priorities, a great deal more remains to be done if the potential of the agriculture sect.or is to be realized. More attention needs to be given to the link between extension and research, and to coordinated availability of agricultural information, inputs, marketing, and credit. Of particular importance will be the achievement of a balance between further investments in physical infrastructure and programs to improve the delivery of inputs and services to the farmers. In the past, the latter efforts have foundered because of inadequate funding and weak institutions and management. Success in ieproving services at the local level will require better coordination both between the federal and provincial governments and among various provincial agencies. The Baneks sector dialogue with the GOP is focused on these issues with a view toward support for further policy reforms through a possible sector lending operation. -12- Sind Province and Proiect Area 37. Sind Province contains about 25Z of Pakistan's total irrigated land. Located in the lover part of the Indus Plain, it is also the repository for the entire Plain's drainage water. Approximately 3.2 million ha, or more than 50X of Sind's total irrigated area, are already severely affected by vaterlogging and/or salinity problem s. 38. The proposed project would cover an area of about 516,000 ha in Sind, vbere there has been a dramatic rise in the watertable during the past 20 years. Currently, about 302 of the area has a watertable less than 1.2 v in depth, which bas induced salinization of uncropped land. Both cropping intensity and yields in the project area are low relative to Sind's potential. Lack of sufficient irrigation water and problms associated with the rising water table add salinizution are the main constraints. In addition, although fertilizer use is widespread, inade- quate cultivation practices, poor pest control, and limited use of high yielding seeds contribute to the low yields. 39. The project area's population of about 1.2 million, of which 73Z are classified as rural, comprises ,.6Z of the zural population of Sind. The project area includes an estimated 113,000 farm holdings, the majority of which are over 20 ha. However, since about 60Z of the units are farmed by share-cropping tenants, the average operational _am unit is less than half the size of the average land holding. Thus, about 701 of the opera- tional farm units are less than 5 ha and 901 are less than 10 ha. 40. As noted above (para. 36), supporting agricultural services throughout the country, including the project area, need to be strengthened. While this will be a long-term effort, existing services, reinforced by ongoing and ;roposed projects, Are considered adequate to support LBOD Stage }. Agricultural credit is available in the project area from the Agricultural Development Bank of Pakistan (ADEP) and from commercial banks. The availability of credit is being expanded through support to ADBP by the Bank and other donors. Narketing and pricing of inputs and outputs are adequate for the expected project output. The ongoing Sind Agricultural Extension and Adaptive Reseurch Project (Credit 922-PAK) is strengthening extension services in much of the proposed LBOD project area, and the remaining area will be covered during implementation of LBOD. While research is still not adequate to meet the practical needs of farmers in the area, this too will be improved under the ongoing Agricultural Research Project (Credit 1158-PAK). PART IV - THE PROJECT Background and Rationale for Bank Involvement 41. Proposals to halt and/or reverse the waterlogging and salinization in Sind by constructing major drainage facilities date back to the mid- -13- Sixties. Even at that time the Governmet realized that a comprehensive program to include improvements in the irrigation system and water manage- ment as vell an drainage was required. Hovever, owing to a shortage of funds, the GOP initiated, with its own funds, construction of only a main spinal drain in the 19709 on the assumption that external financing could be found to complete the required works At the GOP's request, in 1982 the Bank agreed to serve as Executing Agency for 1)1P-fitnnced preparation of a broader integrated project. The Bank's willingness to assume this role was based on: (a) its already substantial involvement in the development of the Indus Basin irrigation system; (b) its conviction that a drainage program of considerable magnitude and complexity was required; and (c) its continued commitment to support the agricultural sector as the mainstay of the economy. 42. The proposed project represents the culminatioa cf nearly two years of intensive vork, which built upon and amplified earlier work. During this time Bank staff had considerable influence on the design of the project and were able to help ensure its technical and economic viability. In addition, the Bank assisted the GOP in early identification of cofinanciers, a factor which made possible unusually close collabora- tion among the potential donors and with concerned Government agencies. Four donor agencies participated in the appraisal in January/February 1984, and a cofinanciers' meeting was held in Paris in Nay 1984. Negotiations were held jointly with the Asiaa Development Bank (ADB) in Manila, September 19 to 25, 1984; the Pakistan delegation was led by Wabab Sheikh, Secretary, Ministry of Water and Power. A Staff Appraisal Report entitled "Pakistan: Left Bank Outfall Drain Stage I Project" (Report No. 5185-PAR, dated November 5, 1984) is being circulated separately to the Executive Directors. A supplementay project data sheet is attached as Annex III. The Executive Director for India was apprised of the-proposed project prior to appraisal, and the Association has been informed that the Government of India has no objection to the project. Objectives and Scope 43. The proposed project would be the first phase of a comprehensive Left Bank Outfall Drain (LBOD) program to provide drainage relief and improve agricultural production within 11 sub-areas covering the entire left bank of the Indus River below the Svkkur Barrage. LIOD Stage I would include three sub-areas - Nawabshah, Sanghar, and Hirpurkhas (Map IBRD 18245) - selected on the basis of agricultural potential and need for drainage. Nawabshah is served by the Rohri Canal, and Sanghar and Mirpurkhas by the Eastern Nara Canal, which feeds into the Jaurao Canal. The limited original capacity of these canals, reduced further by erosiou deposits, deprives the subareas of valuable potential water. Construction of a substantial part of the main spinal drain has been completed with GOP financing; and the GOP is currently remodelling the Rohri Canal. The size of the proposed Stage I project reflects the economies of scale associated -14- with the core drain and the fact that it has the highest net present value of various alternatives. 44. The project, to be implemented over an eight-year period (FY86-FY93), would consist of a major outfall drain and a comprehensive drainage systemi to: (a) provide surface drainage for an area of about 516,000 ha; (b) provide sub-surface drainage relief for an area of about 392,000 ha; and (c) transport excess vater and salt out of the area, thus reversing deterioration of the land resource base due to waterlogging and salinity. To obtain maximum agricultural benefits from the drainage investments, the project would also include improvements in irrigation facilities and on-farm water management (OFn), as well as institutional support to ensure adequate OEM throughout the system. EKisting water-use efficiencies would be improved and unused surface flows, which currently escape to the sea, wouLd be stored for later use in the project area to increase cropping intensities from the present 81Z to about 117Z. Proiect Description 45. The project would include the following components: (i) Spinal Drain (a) Completion of a main outfall drain under the Government's ongoing program; (b) Construction of a bifurcation structure at the junction of the KadhAn Pateji Outfall Drain (KPOD) and the Dhoro Puran Outfall' Drain (DPOD); Cc) Remodelling of DPOD and RPOD to carry drainage flows from the spinal LBOD and the existing drain from the Kotri cormzand; (d) Construction of an outfall from Pateji Dhand to Shah Saanmdo tidal creek; (ii) Drainage Works (a) Construction of a surface drainage network to feed LBOD, and the installation of drainage tubevells, scavenger wells, and interceptor and tile drains for sub-surface drainage and the recovery of some fresh groundwater to supplement present irrigation supplies; (b) Construction of 11 kV distribution lines and enlargement of four grid stations to provide power for drainage tubevells, scavenger tubevells, tile drainage pumping stations, and interceptor drain pumping stations; -15- (iii) Irrimation Works (a) Remodelling of the Nara sad Jamrao Canals, rehabilitation of the Jamrao headvorks, and construction of Chotiari Reservoir to provide seasonal storage of about 864 million cubic meters; and (b) Improvement of about 920 watercourses and precision levelling of about 26,000 ha. Project Imulementatiou 46. Since the phasing of all other components would depend on the timely completion of the spinal drain, the Government has agreed that adequate provisions would be made to complete the spinal drain and associated structures up to the Navabsbah sub-area to required capacity by July 31, 1986 (draft Development Credit Agreement, Section 3.10). Another prerequisite for project implementation is eompletion of certain portions of the ongoing Robri Canal remodelling which the Government is also financing by itself. The GOP and GOSind have agreed that the Robri remodelling would progress at a rate which was sufficient to make the benefits available to the LBOD Project area by January 1, 1990 (draft Development Credit Agreement, Section 4.04 and draft Province Project Agreement, Section 3.09). The full benefits expected from construction of the irrigation works, including the Chotiari Reservoir, would only be achieved if use were wade of all the additional water. The GOP and GOSind have given assurances that the water supplies made available by the Nara and Jamrao Canal remodelling and constructi-n of the Chotiari Reservoir vould be fully utilized in the IBOD Stage I and adjoining areas, including the proposed Makhi-Faresh project to be financed outside the IBOD project (draft Development Credit Agreement, Section 3.11 and draft Province Project Agreement, Section 2.15). 47. Project Manazement. WAPDA would be responsible for implementation of all aspects of the project except the Nara and Jairao Canal remodelling and OPWN, which would be the responsibility of GOSind's Department of Irrigation and the OFWM Directorate in the Department of Agriculture, respectively. A Proiect Steeriwn Committee (PSC), comprised of ranking officials of WAPDA and GOSind's 'epartments of Irrigation, Agriculture, Planning and Development, and Finauce would provide overall project guidance and coordination. An Intesrated -Manamement Ortanization (I)D), headed by a Chief Engineer assisted by internationally selected consultants, would manage and coordinate project implementation. Establishment of the PSC and the IMO, with powers and functions satisfac- tory to IDA, would be a condition of credit effectiveness (draft Development Credit Agreement, Sections 3.05, 3.06, and 6.01(d)). The 3H0 would be subdivided into seven offices, each headed by a Project Director, to implement the various project components including the three sub-areas -16- (draft Development Credit Agreement, Section 3.07). These units would be staffed with qualified personnel from WAPDA and GOSind, depending on the agency responsible for the component. Assurances have been received from WAPDA and GOSind that the staff and local consultants required for project execution would be provided, if and when necessary, on a timely basis, and WAPDA has agreed that key INO staff for the first year would be appointed by April 1, 1985 (draft WAPDA and Province Project Agreements, Section 2.08). 48. The Project Directors would have responsibility for the planning and implementation of civil works, including OEM for one year after completion. The Project Director for OFWM - who would liaise between the Chief Engineer, IMO, and GOSind's Department of Agriculture - would be responsible for planning and execution of the OFWM program including watercourse renovation, precision land levelling, water management, estab- lishment of demonstration plots, and organization of Water Users' Associations (WUAs). The approach followed for the OFIM program would be similar to that successfully initiated under the ongoing OFUN Project (Credit 1163-PAK). Under the LBOD project additional OFWM teams would be fielded to ensure full coverage of the project area. For this purpose GOSind has agreed to complete training of at least two additional OFWN field teams by April 1, 1985 (draft Province Project Agreement, Section 2.09). 49. As under the ongoing OFWM Project, farmers along a given water- course would be required to form a WUA as a condition of receiving assis- tance to renovate the watercourse. The WUAs would again be responsible for renovation and 0& of the watercourses. To perform this task the WUAs would manage the farmer contributions of labor and cash (see para. 65). In addition, under the LBOD projecL. GOSind would undertake a phased program to extend the WUA functicns to include drainage O&M. For this purpose, by July 1, 1986, GOSind would amend the WUA Ordinance of 1982, or take other measures as necessary, to extend the powers and respon- sibilities of WUAs to cove. all aspects of drainage (draft Province Project Agreement, Sections 2.10, 2.13, and 3.08). 50. Monitoring and Evaluation {M&E). Monitoring of physical parameters would be incorporated in the ongoing data-gathering program of WAPDA's N&E Organization which is to be expanded under the project. IMO would: (a) by September 30, 1985 submit to IDA for comment a detailed monitoring and reporting program; and (b) by February 1, 1986 execute a memorandum of understanding with WAPDA's M&E organization covering the agreed monitoring work plan (draft WAPDA Project Agreement, Section 2.09). GOSind's Department of Planning and Development would be responsible for the eleven-year evaluation of the socio-economic impact of the eutire project. GOSind would: (a) by September 30, 1985 submit to IDA for com- ment a program for impact monitoring and evaluation including terms of reference and invitations for proposals from independent local institu- tions to carry out the work; and (b) by February 1, 1986 conclude with -17- such an inotitution a contract acceptable to IDA, including a sub-contract with a suitable internationally selected institution, to carry out the impact eveluation study under terms of reference and conditions satisfac- tory to IDA (draft Province Project Agreement, Section 2.14). 51. Sechnical Assistance and Trainina. In view of the size and tech- nical and managerial complexity of the project, a substantial amount of technical assistance and training would be required. The project would provide about 878 man-months of internationally selected consulting serv- ices to assist project management in overall planning and monitoring of project implementation; special studies; preparation of design criteria, final designs, specifications, tender documnts, and contracts; supervi- sion of construction; and preparation of 0& procedures. In addition, provision has been sade for about 264 man-months of local consultants to assist GOSind as necessary in carrying out the OFN program. The interna- tionally recruited consultants would be appointed and fielded by July 1, 1985. The consultants for O011 would be appointed and fielded no later than January 1, 1987 (draft Development Credit Agreement, Section 3.02 and draft WAPDA and Province Project Agreements, Section 2.02). 52. In-service local and overseas training would be provided to professional staff. About 30 engineers and other professional staff would receive mid-career and in-service training in O&M management. Visiting experts, coordinated by the overall project consultants, would conduct numerous short training courses. Training of additional staff for the project s OFWM program would be couducted mainly in the field bv existing staff. In addition, to improve the environmental monitoring capability raquired under LBOD (para. 69), officers of the Sind Department of torestry and Wildlife associated with the Rann of Kutch Wildlife Sanctuary would receive training as required. _Oeration and Maintenance 53. In past years, 0&M of the irrigation system has suffered from inadequate funding and weak technical and organizational capacity at the provincial level. While recent efforts, supported by Bank Group assis- tance and associated Government comnitments, have done much to correct the situation, GOSind recognizes that further improvement in funding and efficiency is required throughout the province. In the meantime, WAPDA and GOSind intend to ensure that all LBOD facilities are properly operated and maintained from the start. An O&M organization would be set up within the IMO to operate and maintain all drainage works constructed or improved under the project. About one year after completion of a given component or area, the staff, equipmeut, and facilities required to maintain it would be transferred from the IMO to GOSind s Irrigation Department. To ensure smooth turnover, assurances have been received from GOSind that provincial O&M personnel would be seconded to the IMO for at least one year prior to completion of works in a given area. In addition, GOSind and WAPDA would jointly inspect the facilities both at the time of comple- -18- tion of the works and again one year later immediately prior to transfer of the facilities to the Province (draft WAPDA and Province Project Agreements, Section 2.11). 54. The INO would develop operational procedures and by January 1, 1988 would submit a draft O&1 manual to IDA for review and coment. The manual would be updated as project components were completed, and a final manual would be prepared by January 1, 1991 (draft WAPDA Project Agreement, Section 2.10). 55. To further guard against long-term deterioration of the system, GOSind, assisted by WAPDA, would designate an independent technical team acceptable to IDA to monitor and review every three-years, beginning by January 1, 1988, the 0&M requirements of LBOD-Stage I in light of opera- tional experience. Funding for 0&K of the drainage facilities constructed under the project (including the spinal drain), when taken over by GOSind, would be provided from the provincial budget. Assurances have been received from GOSind that adequate funds vould be made available each year to meet O&M and capital replacement requirements of the drainage facilities constructed under the project, as determined by the periodic independent technical iLviews. In addition, GOSind has reconfirued its existing commitment under the Command Water Management Project (Credit 1487-PAK) to review annually the required funding for 06K of the Province's entire irrigation and drainage system and submit its proposed funding levels to IDA, for review and comment, by February 1 each year (draft WAPDA Project Agreement, Section 2.12 and Province Project Agreement, Sections 2.12 and 3.04). Proiect Costs 56. Total project costs are estimated at about US$635.7 million, including US$97.1 million taxes and duties. Foreign exchange costs are estimated at about US$318.6 million, or about 501 of total project costs. Base costs are expressed in September 1984 prices. About US$10.6 million is for O&M of completed works during project implementation. Project costs include physical contingencies (10-20Z of base costs) and price contingencies based on projected local (6-8Z) and international (6-9Z) inflation rates. Farmer-donated labor for watercourse renovation totall- ing approximately US$1.0 million has been excluded from the cost estimates. Financing 57. Tentative project financing totalling a3out US$417.1 million, or about 77Z of project costs net of taxes and duties, has been agreed upon by six external cofiuanciers, including IDA. This amount would finance about 93Z of foreign exchange costs and 55% of local costs (net of taxes and duties). The expected cofinanciers and the terms on which their funv-s would be made available are shown in para. 1 of this report. All external -19- funds would be passed on to GO0ind and WAPDA through budgetary allocations according to normal GOP procedures. The GOP would finance the remaining Us$218.6 million, including about US$97 aillion tazes and duties. The proposed IDA Credit of US$150 million equivalent would finance about 282 of total project costs (net of taxes and duties). IDA would finance construction of KPOD and DPOD, Nara and Jamrao canal remodelling, and electrification; and IDA would joint-finance technical assistance with the ADB and OFWM with SDC. To facilitate financing of the project, the GOP would establish a Special Account in the State Bank of Pakistan into which IDA would advance funds according to standard IDA procedures for such accounts. Sub-accounts for WAPDA and GOSind would be established for their respective parts of the project. Nost IDA-financed expenditures would be made through the Special Account. HowEver, payments for the internationally recruited consultants, civil works contracts over US$3 rtillion, and certain large procurement packages would be made in accord- ance with normal IDA credit withdrawal procedures. Conditions of credit effectiveness would require, inter_alia: (a) final approval of an umbrella PC-I (the GOP's project document) for the entire project by the Executive Committee of the National Economic Council (ECNEC}; (b) estab- lishment of the Special Account; and (c) meeting all conditions precedent to the effectiveness of the financing from the other external agencies (draft Development Credit Agreement, Section 2.02(c) and 6.01 (a,b,c)). Procurement 58. Each cofinancier would agree with the GOP on procurement proce- dures to be followed. About US$284.2 million equivalent, or 53Z of project costs net of taxes and duties, is ey,"ected to be procured accord- ing to international competitive bidding (ICB). Procurement procedures are summarized below: -20- Procurement Arrgniements According to Proiect Component (USS million equivalent)* Co,monent, ICB LCB Other N.A. a/ Cost A. Civil Works 1. Outfall-Drain System Core Program 8.4 a/ 1.9 10.3 KPOD & DPOD 19.9 (19.9) 5.0 24.9(19.9) Tidal Link 29.6 hI 6.0 35.6 Sub-Area Drainane Components Surface Drainage 34.8 6.7 41.5 Drainage Tubewells 48.3 10.2 58,5 Scavenger Wells 17.0 12.0 c/ 5.0 34.0 Interceptor Drains 13.6 16.4 4 4.7 34.7 Tile Drains 15.0 19.1 Al 5.2 39.3 3. Irrigation/OFWM Works Nara Canal Remo- 31.8 (30.5) 6.3 38.:(30.5) delling Jamrao Canal Remo- 43.3 (42.3) 9.7 53.0(42.3) delling Chotiari Reservoir 30.4 gJ 5.8 36.2 OFWN 17.0(8.0) e/ 19.2(8.0) 4. Electrification 47.3 (39.5) 11.2 aJ 2.2 66.0(39.5) 5. Maintenance Depot (Includes Workshop) 1.0 7.5 1.1 B. Equipment & Vehicles OFWN 0.3 (0.1) 0.1 0.4 Maintenance Equipment 20.8 cJ 12.6 33.4 Maintenance Depot/Workshop 0.5 CD 0.3. 0.8 Electrification Equipment - 10.6 a/ 1.8 12.4 C. Technical Assistance 13.2 (4.8) f/ 13.2(4.8) & Training D. Administration Engineering 41.4 41.4 OFWN (Salaries & Other) 9.5(4.9) 0.2 9.7(4.9) O&M and camps during 10.6 10.6 construction E. Monitoring & Evaluation 4.3 / 0.1 4.4 F. Land Acquisition - 17.0 17.0 Total Project Costs 284.2(137.0) 1.0 190.1(13.0) 160.4 635.7(150.0) * Figures in parentheses are the respective amounts financed by IDA. a/ To be financed by GOP (including taxes and duties of about US$97 million). O To be financed by Saudi Fund and procured under their ICB procedures. c/ To be financed by ODA.. d To be financed by CIDA. ej To be financed jointly by IDA and SDC. f/ To be financed jointly by IDA and ADB. ^| To be financed jointly by CIDA, ODA, and SDC under untied grant aid and administered by IDA. -21- 59. The XPOD and DPOD and canal remodelling financed by IDA would follow ICB procedures, with all labor, materials, and equipment to be supplied by the contractors. The electrification works financed by I;A would follow IDA's ICB procedures. The OPFM works, which are not suitable for ICB because they are small and scattered, would be carried out under small contracts awarded in accordance with local competitive biddiug procedures satisfactory to IDA or force account, as well as with farmer- contributed labor organized by the WUAs. The appointment of local super- visory consultants for the OPFM component would be in accordance vrith IDA guidelines. Other consultants and training would be funded on a joint basis by IDA and ADB. These consultants would be internationally selected and engaged by WAPDA on terms and conditions acceptable to IDA and ADB. The selected international consulting firm would be encouraged to associate with a local firm. 60. The relatively small amount of office &nd survey equipment required for the OFPM component would be procured following GOSind proce- dures satisfactory to IDA comparing prices from at least three independent sources. The aggregate amount of such locally procured equipment would not exceed US$300,000 equivalent. Civil works contracts over US$1.0 million would be subject to IDA review prior to award. Other contracts would be subject to selective post-award review. A 7.5Z preference on ICI civil works contracts would be extended to qualified local contractors in bid evaluation under ICB. Disbursements 61. D5-sbursements from the IDA Credit would be made against: (a) Civil Works: ,i) KPOD and DPOD - 80Z (ii) OFWM - 42% (iii) Electrification - 74% (iv) Nara Canal Remodelling - 80% (v) Jamrao Canal Remodelling - 80% (b) Office and Survey Equipment: 60% of local expenditures (c) Administration: Incremental salaries and operating costs for OFWM, including supervisory consultants - 50% (d) Technical Assistance and Trainin2: 37X -22- 62. Disborsements for (a) [except for item (ii)] and (d) for contacts of S$1.0 million equivalent or bigher wotld be fully documnted. Disbursements for items (a)Cii), (b), (c), and civil vorks for cotcts below US$1_0 million vould be made aai-nst statemts of epures. Supportin c t would be retained by the implementing agencies for review by IDA. Reimbursement applicti for expenditures to be funded tbrough the Special Account would be accompanied by a statemet of trans- action an the Special Account since the previous application, vith the balance certified by State Bank of Pakistan. It is ticipated that the final disrst ould be completed by December 31, 1993, about six months after project completion. The disbursement schedule is based on the di sement profile of IDA-supported irrigation and drainage projects in Pakistan, taking into consideration the mne use of a Special Account which is expected to ezpedite disbursements. Cost Recovery 63. GOP officials recognize the importance of cost recovery as a means to ensure adequate OEX funding and resource mobilization to sustain the irrigatio and drainage system. At the same time, they point out that the imposition of such charges is a provincial responsibility over wbich the federal government has limted authority; and they emphasize that the charges must be perceived by those asked to pay as reasonable in relation to increases in agricultural production and income. Over the Last four years, considerable progress has been made in Sind Province in increassng both the lewel of O&K funding for irrigation and the share of such funds recovered from the beneficiaries. In accordance with a number of existing IDaBank agreeents, Sind increased water char-es during FY1981-84 by an average of about 25Z a year in nominal terms. Iu addition, Sind intro- duced iu FY1984 a dra charge of about Rs 40 per cropped ha for the beneficiaries of public tubevenls and a smaller amount for beneficiaries of surface drains. Most recently, under Credit 1487-PAZ (signed June 13, 1984) GOSind reaffirmed its existing comitment to increase water charges periodically, or uske other appropriate financial arrangements, to cover an increasing percentage of the irrigation O&N costs so as to recover the full costs by July 1, 1988. 64. During negotiation of the proposed LBOD-Stage I project, the GOSind representative stated that the Province intends to increase water charges this year by 102 and again ia F11986 by 15Z. In addition, it was agreed that by February 1. 1986 GOSind would reviev with IDA the status of compliance with the existing provision under Credit 1487-PAC and measures required to meet the 1988 target for full irrization O&E cost recovery (draft Province Project Agreement, Section 3.06). 65. 0& costs8, including capital replacement, for IBOD Stage I would be high both in absolute terms and relative to existing irrigation 06W -23- expenditures because of the high energy and replacement costs of drainage tubevells. Thus the total drainage OEM costs of LBOD-Stage I would average about Rs 600 per cropped ha, which represents about 70Z of GOSind-s total FY1984 OWH expenditures for irrigation. To help ieet these drainame expenses, GOSind has agreed (a) about one year after commencement of full operation of the facilities in each sub-area, to collect drainage charges from the beneficiaries to cover 25Z of the OWH costs of the facilities; and (b) thereafter, at least every two years, increase the drainage charges so as to recover at least 501 of the OWH costs by July 1, 1995 and all the OWM costs by July 1, 2005, provided that the drainage charges keep pace and are co-mensurate with the benefits actually accruing to the beneficiaries. In addition, the Province has agreed to meet with IDA three months before the initial cbarge and each increase to review the actual benefits against the projected benefits and proposed charges (draft Province Project Agreement, Section 3.07). Estimates of the actual benefits would be obtained from the impact evaluation study (see para. 50). While no recovery of capital costs for drainage facilities is proposed, as under existing projects, faDmers benefiting fro watercourse improvements vould contribute all unskilled labor and repay 25Z of the cost of materials (draft Province Project Agreement, Section 3.05). 66. The initial combined irrigation and drainage charges (Rs 245 per cropped ha) collected from the project beneficiaries, none of whom no pay drainage charges, would be some three times greater than current charges (Rs 60 per cropped ha) for irrigation. The total recovery of irrigation and drainage OM costs proposed at full development (year 2005) would represent about 10-25Z of the net increment&' farm income, depending on the farm size, watertable, and cropping intensity. If an existing Islamic levy on agricultural production is included, the share of project-related incremental farm income recovered increases to 15-30%. Benefits and Risk 67. Benefits. The project would increase agricultural production over about 516,000 ha by lowering watertable and salinity levels, saving or recovering water lost from the irrigation system, and p:oviding supplemen- tary eater. The effect of reversing the abandonment of land, combined with increased cropping intensities and yields, is expt-ted to result in annual incremental production of about 315,000 mt of seed cotton, 215,000 at of wheat, and moderate increases in other crop and livestock products. The total annual foreign exchange benefits of this production would be the equivalent of about US$180 million. Additional benefits are ezpected from reduced damage to infrastructure currently caused by storwater and high watertables. The estimated economic rate of return for the LBOD Stage I project is about 14Z. While the previous investments in the spinal drain are justified "sunk costs", if they were included the project would still be economically viable with a rate of return of about 12Z. ~~~~~hn~~~~~~~~~~~. . .... .. .. -24- 68. About 140,00 farm families, or 910,000 people, would benefit directly from the project, and another 120,000 would benefit indirectly. Increases in income levels would range from 22% to 118% and would be expected to accrue primarily to families with annual incomes currently below US$100 per capita. While it is difficult to predict precisely the effect the project would have on the income of the tenant farmers who comprise nearly 75% of the project area-s population, based on existing practice, they would be expected to receive 50Z of the additional farr income and to share the water and drainage charges and other levies on a similar basis. On this assumption, the annual income of a typical tenant farm of about five ha is expected to be about US$270 per capita with the project as compared to US$175 per capita without the project and to US$90 today (all in mid-1984 prices). Tenants would be protected from eviction by a number of statutory and acquired rights, and the substantial project- generated farm employment requirements would further protect their rignt to the land and ensure that they received an equitable return. Since the population of the project area is expected to double during the project development period (1985-2010), without the project underemployment would become a major socio-economic problem and migration to Karachi and other cities would increase substantially. By contrast, after allowing for some mechanization, the project would generate additional farm labor require- ments equivalent to about 42,000 man-years or a 47% higher demand than without the project. On balance the income distributional effects of the project are likely to be neutral. Bovever, in view of the importance of this subject, it would be given special attention in the impact evaluation study (para. 50). 69. Environmental Imwact. The basic purpose of the project would be to improve the environment of valuable agricultural land wbich is increas- ingly threatened by waterlogging, salinity, and associated flooding and water pollution. Initial concerns about the possibility of environmental damage from saline drain-ge either in Pakistan or across the border in India were given intensive consideration during project preparation. The final design, incorporating a bifurcation weir across the Dhoro Link, would permit regulation of the quantity and quality of drainage flow from DPOD so that mainly fresh stormwater, vhich is necessary to support wildlife and fisheries, would reach the Shakoor Dhand. The weir would divert the saline flows through KPOD, entirely within Pakistan territory, to the sea. Construction of bunds would prevent any overflov into the Rann of Kutch or transboundary flow into India on the way to the sea. To ensure proper monitoring of the environmental impact of the project, staff of the Department of Forestry and Wildlife would be trained, and offices and quarters for field staff monitoring the environmental impact would be constructed. 70. Risks. Given the magnitude and integrated nature of the project, delay in completing any one part would jeopardize the success of the total project. In particular, delay in completing the irrigation works would reduce the expected increases in agricultural production and jeopardize * * -25- the economic viability of the project. To minimize this risk, project expenditures bhre been carefully pbssed and internationally recruited consultants vould reinforce project anagement. The strong com.ituent of both the federal and Sind governments to the project should ensure that necessary funds are made available. In addition, IUPDa's proven capability to execute large complex projects should reduce the possibility of construction delays. A further risk that nadequate O&N of the project's drainage system would cause a shortfall in expected incremental agricultural production would be minimized through initial funding of DAN incremental costs, teecnical assistance, and training during project execution and a series of agreed measures to maintain adequate 0l levels, as well as additional provincial revenues from cost recovery, throughout the life of the project. PART V - LEG&L INSTRUMENTS AND AUTRITY 71. The draft Development Credit Agreement between the Islamic Republic of Pakistan and the Association, the draft Project Agreements between the Association and WAPDA, and between the Association and Proviuce of Sind, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately. Additional conditions of effec- tiveness would be approval by ECNEC of the final PC-1 document for the entire project; meeting of all conditions precedent to the effectiveness of the agreements of the other external agencies; opening of a Special Account in the State Bank of Pakistan; and establishment of the PSC & IDM (draft Development Credit Agreement, Section 6.01). 72. Special conditions of the project are listed in Section III of Annex III. 73. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 74. I recomend that the Executive Directors approve the proposed credit. A. W. Clausen President Attachments November 13, 1984 -26- hUNx r '~~~ ~ ~ -5 01 36 1- luob- 970b- 013 - - -AB 'ml. ''. l ano M31:W. 227S 26. IN- 1m mi CKILOtMDZ Or on. Mg086tlZu SIL0 33.0 179.0 271. 56.3 m.s 2SLu P U70.0 IDNL 4ZaK C2SA6) 41tSLO 60669.0 - 7125.0 UmNII 1O9LA CZ OF 1 22.1 2.9 29.O 11z7 347 PlOOATU5 Mt MR 2000 01. 3.6 M S tZomw MV I3omm CR1w 37.3 10I5.AUO - .9 ssromez nJ. PM SQ. mi. 57.0 75.2 105.1 166.6 26.9 PM SQ. IOL a613 3A1 203.5 268.4 333.6 31S5 '173.1 201066231 ACC SVOUIS CZ) 0-t4 us 43.8 463 461 35.80 XS-" me5 SL -0.3 0. 5. 57.6 65MD A. . 2.7 4.3 3.3 74UAT COM0 JXK Z) SODL Z.3 1.8 3.0 L9 4.3 4.6 4.0 4.3 4.1 CE 3r 1C Cm 32165) 46.6 46.6 41.0 Xr.7 30.1 3CRE D313S NAm (5 MM) ZL4 19.3 .4 10.1 9.5 can 200OC3w 2aX 3.4 3.4 3.0 1. - 3.0 AC ,IS. _L C( ) - 101t 324O t0 .c - CZ OUzm ) - 6.014 t ,,- 1omD Am -OMM13 ~~~~~~INU Or NOo P06ERCAwmL C*10R-l J,OF = w.0 106.0 106.0 19.7 11. CA*R C Z OF _gtsRDM) a" o O le OILO 9r.7 11K4 1Rs CnE61PER0AT) 560 65.0 65.0 54 57.0 __ M= *8511 a P5S 23.0 2L-0 2. 0 2 Q 19 14.1 CsD CAe 1-4) MM AT 25.4 23.0 18 9.8 7a.2 'M EPCT. £z u7 C(wan 43.1 44.0 49.8 0O 60.4 PWAr IK RAE CP13t MS) t 6L5 143.0 129 13 663 ACE T SIlK SaU CS209) TOML 2L0 29.0 if 39 37.0 URBW 3 77.0 60.0 if- 70.9 54.8 RL .. 4.0 17.0 f 22t 26.4 ACCES TO910RM DISPOSAL CZ Or POIuMATIOU) TOZIL . 3. 6.0 .ZgIII UL3 Ulmaw 12.0 23.0 /J 72.8 47.4 95*1. .. .. .. ~~~~~~~~~~~~~~~~~~~4.6 33.3 1095X6710 PM3 ftISICIaN 5400 4300.0/b 3180. 3184.2 7749.6 POP. 113 MOR10 11360 11860.0 i05i0.oj9 5090 47931.1 26404 Lop. PM HOSPiTA 3so 70rAL 1750. 1860. 1560.0 /C 1064.5 1066L.2 Mmar 510.0 600.0 710.0 /* 256.0 653.2 MOMRAL 22350.0 £2410. 11360.0 re 5994 23946.6 A*mlnlM PON 30SP1V1. MM ... . .2.0 AVRG SDIZ OF3333 TIOZAL 5.4 5.3 6.1/IC amaw 5.6 5.5 C.A r R,RAL 5.4 5.2 / Q AVERAGE N0. Or 1105/O01IR TOTAL 3.1 2.0 It W_ SDC 1336Q0 105 K 01; SsZQO U93.1 2.7r 3.1 2.8 aIF ACO T 1T0 1C. (-0O MU1M10 .) 5101.0 . 17.9 At maw .. 5 r...1 aL .. s......4.9 -27- A I - wcm umwmU mc s 1LMoik lgyoik 3ImAub LIl a P.ACC &SUa & FAWC& namxt 20oL 350 40. 56. 97.4 o 1020 PAIS 46.0 57.0 78.5 U0.5 105.9 TIMAW UO LO 1331.0 2 L7 390.2 S _CUARb TO5. 11.0 13.0 17.0 339 46.0 - RAZZ 11.0 2410 27.0 44.6 4B.7 FUIAN= 3.0 5.0 7.0 26. 43.1 vOMUMArL CZ1 3CA L0 L5 1.0 /c 2.2 17.5 _ 1MU PKWAWir 39.0 4L.0 48. 3L.5 3L8 SinOMLVM 24.0 200 23.0 lc 1L.7 23.5 LIE.? WRAIC! "Z a) 15.4 20.7 .J /24.0 534 c72.9 -ommor' 1* UIUK MV 1.5 2.6 3.4 0.9 1 0.1 UlllO I/ FM 6.0 17.1 67.0 112.I 113.6 TV 5JlO V .. L6 9.7 15.7 S0.1 8QMAZI wAX CERL FM i00 0 1 13.2 17 Ic 16.2 - 539 C 1_ AL MUL 1.7 3.0 I1 Z.L2 j 3.6 3.4 =LUJ WlC= m ) I448LO 1731.0 25210.0 136*5 CPIt) 6.6 9.3 10.3 33.3 33.S A3 1OCOLI traClu* 6L0 59.0 57.0 69.6 52Z ZRoKm C 1CQl 1M0 19.0 20.0 1.6 17.9 TOtAL 31.5 2.7 29.0 42.6 38.7 AUZ 5.2 50.4 49.3 54.7 50.9 PIALZ 5.7 5.5 6.0 29.6 26.6 mIDCom D 0 L.5 L7 1.8 1.0 11 xe - n uosmo St lICHESD St or DDuUS 2aL3 Jk 17.6 .. .. 2L2 NIGRIT 2D0 or 45 45.3 4i *1. __ 48.0 1TAM= 20 6.4 iO 8L0 .. .. 6.4 TI 40Z CrO 17.3 if 2Z0. .. .. 13.5 - -S: vw TZWZ CUSS PER cApmo 0UNS .. 66.0 /1 176.0 /c 133.9 1S6 RALA ,. 47.0 I 122.0 re 111.6 1O0 99TAD XZADQ oEy EO O ZUSS C P CA) am. 36.0 38.01 .. 177.9 URAL .. 2Lo o SLO ..16.6 ZSTEUD MV. MM AU!! WVuz im LEU CZ) 0353 .. 42.0/1 3Z.O Ic 4 23.4 RURAL *. 43.0 1 29.0 _ 51.7 37.7 on1 AIYZL£CI? a he ap awm foe SWc lu=aer a popoItle-.laht.e rtl_#uc _. Cevaq of teatae momg the 4=almeton dlpaid ea avallaMllt of data .d Is ot _nIEr.. 11e eta_is "ted. "Ita foer19,0' et to r ea r yew eeus 1959 and 1961; 'Dta fer 1970 etm s 1969 ..d 1971; tad dat1 foe 9bat beget Vettamet" bttcm.3 1910 tel 1362. ic 979; 196; 1. 1977 IL9 / V76; I 195; I&g WGc s, tot a Petll n t etcy; 1973 j 192; 196. JnE 1914 -28- ANNEX I arivagems W nowL possation Page 3 m l.b . em oftm .1 m1 1.. I dmft.3uim m1 -Up mmd IV 436o Mm"s". L. mlbI. dl am . am .4%. inl M. md mlei - w _. _. a-m w .... __ _ J e 1 _ me. ft l_ 1 l ms -. 'm lb _e .m e ml -.. 'nolIs . .1eI mmM to-w - off"dietam.19... mistime ee. bis6mu .me me elfnlle). le lb w-mm se dlm4 lb mm -"Po"tlm slm waamdte - t. -% f-elies m ad w.-I A" v 31.4ew : lb -maul.. g.m km due ~ 4e.06-iin 3m- lb "e .1 .nle -ft lb ieli.e- =u~-l mi:l .6 mi mi I. ml dMli- m. -M 1. meml .mle.k em . 6.553.66mm u II. - -e"n - --IF ...6e ft .wpm" lb ml.. .1 m .eel.. 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Pm.... .. am. me.3.. ibm em 1mm U... ms-ueteeelm m Vona* me Isi mmeg. mt 1mid. d Isbyl-Mo. elme- Is. mImme C mliIm . mie imedh 4 m kuese m s sit - *ie_immir IS- ml CSmd t_ m -i.e.. a _rb m be . met a5 1 -k " -a _t_ _m mime eaee.tl-am.6 seselmi e - P 0um. trd m__ _ u* _e - .6 _Teeil meet em_ 1e Z 1mm(bb sesh l ha - mmee _r ead.t _ _-s e d t m _ _map . . 4._1d m cm.-" mm .315mm hr .11 inMIes emilleb hr m seseddI -arC 11m mguS. dI. =l.. dumle. *_ mg.: _ _m _ e _ . _imI . ele. _ 3. .- mmeem m am am lb.: 11 gi.. e. emmm i mwtf1mW lmm 1i7 sem mmsse" mmli glemle. .61m 6.16m ..~ s.lbm. mu. 5 .6. bmmi .mlaem ea semlefebi ml..= J..- -.. ea mehS a-es am me ime..km1 W"". - -1 - - C L emll.: S. i_ ~~~~f- --dm __swte -Led-t - -U ~ 111 -~~~~~i _ X EDE __ z_V -_ soft am el %- ~~~~~~~C - _____P- M Ime -1 -3. m U 1M em e-m Wmi. WV . ailS mlr 197mlgmi hs 11pmmma!mdulSStsn . C mt 1 IWm. IWA C-. "owes- ad dgpmu .00 .99tnt ulhm .- .; . m.s d -P-.W I -s-b~Wlmllm MdogpCp ,emet il solb r.~I .~1m sI . sll mie -29- Page 4 ECONOMIC EYRWPH PM~ So ATIOAL PRODucT I- 19Ul83 a #N L W C (Z. costlant rices) flLbillion 21... 1969170-1974175 151992LA19l1L!Z 198517 19J.3i/L GOP at rket prices 33.07 100.0 3.5 6.8 3.8 7.3 5.6 Gross domestic investment 5.13 15.4 -5.5 4.0 9.4 9.0 3.4 Gross ntional sving 4.12 14.1 -2.1 6.9 5.0 20.3 Current account balance -1.00 -1.7 Resowrce gap -3.18 -10.1 OUTY. L_OR FORCE AD PRODU=YT 1963184 ValIe Added Labor torce.& V. A. Per Worker - $ lg~~~~~~~RimQ -Z Nlillia _2 QSS _;_ Agriculture 6,679 24 14.1 53 474 6 Industry 7.832 29 5.2 19 1.506 147 Services lZ812 47 7.4 28 1.731. X. Total/Average 27.323 100 26.7 100 1.023 100 GOVWUnnXT FInAE General government Federgal Govern-yut (RB billion) Z of CDP (is bilion)* I of ODP M/82114 /e 1983184 1979I80-1983I8 19S3I 1a 1983184 1979180-1983184 Current receipts 73.2 17.4 16.6 58.2 13.9 12.8 Current expenditures 71.9 17.1 14.9 5i9 11.4 Current surplus 1.3 0.3 1.7 2.3 0.6 1.4 Capital expenditures Lf 29.1 6.9 8.3 22.1 5.2 6.5 External assistance (net) 6.0 1.4 2.8 6.0 1.4 1.3 MNEYW. CREDIT AOMEPRCES 1976177 1977178 1978/79 1979/80 1980/81 1981182 1982183 1983/84 La (Rs billion) Honey and quasi ucney 51.7 63.7 76.5 90.7 103.5 113.6 146.0 161.5 Rank credit to public sector 29.5 34.3 43;l 48.1 54.1 60.1 71.4 77.8 Bank credit to private sector 30.1 35.7 41.7 50.6 58.7 70.9 86.9 .105.6 (percentages or index numbers) Money and quasi money as Z of CDP 34.6 36.7 39.0 38.3 37.0 35.1 40.1 38.7 Consumer price index (1975/76-100) 111.8 120.5 128.5 142.2 159.8 175.3 113.7 199.0 Annual percentage changes in: Consumer price index 11.8 7.8 6.6 10.7 12.4 9.7 4.S 8.3 Rank credit to public sector 28.8 16.6 25.6 11.6 12.5 11.1 18.8 9.0 Rmnk credit to private sector 30.3 18.6 19.6 18.5 16.0 20.7 22.6 21.5 1!a Provisional. lb Does not include une ployed labor force. Ifc Includes manufacturing, mining, construction and electricity and gas. /d Consolidated revenues nd expenditures of Federal and Provincial Governments (excluding Federal-Provincial Government transfers). La Revised budget data. I Excluding principal repaymnts of loans. Capital expenditures as defined in government budget include certain current eXPenditures. :. .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 -30- Page 5 UUJJICE or ?AJS I WmILIlA !Wg 1971/79-1982183 mIiltF m2Lui 19801S1 m81i2 198LD8 ImLDS Ws ilhim tL (WSS millioe) ports of goods, 7FS 2,107 2.935 3.U1 3.052 3,416 3,440 aw cotton 302,3 12.4 lmports of goods. mis 4 f 5.,709 -6.j6 6.672 6.5U 72OS4 Cotton yom 210.7 8.6 Reource gap (deficit - -) -2.376 -2.734 -3.005 -3,627 -3.172 -3.619 Cotten cdoth 252.3 10.3 lice 401.9 16.4 ITterest payoets -261 -285 -357 -453 -421 -477 All other cemditizs I'M S 2.3 Workers remittances 1,395 1.746 2.097 2.225 2.886 2.737 Total 2,44.6 100.0 Other factor payments (net) 134 151 274 325 162 331 Net tasfers - ----, -- Lr Balanc on currnt accewnt -1.110 -1.140 -991 -1.530 -554 -1.028 E.WL.DJJ 191 Direct foreign invest .. .. ..m.t get 3LT borrowing Disbursemets 813 1.134 956 1.102 1.301 1.234 imortiion -235 -1C -516 -492 86 -56 Public debt. including garanteed 9.141.1 Sub-tocsl 578 824 440 610 915 665 Nonguanteed private debt Li Transactions with IIWI -14 78 315 358 413 -15 Total outstanding and dicer_ed 9.141.1 Other itms n.e.i. fL 238 600 S46 364 337 296 Inreser in reserves C-) 308 -362 -291 198 -1.111 82 DT SzKVCE RAT1O FOe 198Z183 LZ Gross reserves (end t r), 386 748 1,039 861 1.952 1.70 2 Official Cold (yr e d; million ounces) 1.8 1.8 1.8 1.8 1.9 1_9 Public debt. including guarateed 11.2 Eon-guarante private debt - ue and Related Materal Total 11.2 Petrolem imports g 530 1.079 1,535 1.710 1.610 1,419 Petrolem aports a 61 178 126 194 77 72 MT_E OF El RDI l C (Jue 1983)(Wmlio) Tbrusb Nby 11- 1972 FTom aX 12, 1972-eb. 15. 1973 USSI - Rs 4.7619 USS1 - Rs 11.00 Outstanding nd disbursd 353.5 1,105.7 -- 1 -11S0.21 Rs 1 - USSO.09 BUdisborsed 11IU6J 67.,3 Oftstand;in includin diburse 468.2 1.776.0 Tx=Feb. 16,1973-Jan, 7. 1982 from July 1981-Juoe 1982 AL rm July 19S2-Jue 1983 LK Frm Jul1913-June 19116 115$ 1 -U1Ws 9.90 USSI - Rs 10.55 S$I s - f 12.75 US$1 - Us 13.75 as I - USSO.10 Re I - USS0.095 as I - 1150.078 Ba 1 - uSso.073 Lk Including Trust Food. b Including met sobrt-term borrowing and errors sd omissio. A Zecluding gold reserves of about 1.8 million troy omuces. L- Crude and derivatives. lt Non-guaanteed private debt service is neligible. Il atio Of actual debt service to exports of goods. mon-factor services and vorkars- remittnes; debt service doe not iclude short-tems or W cbarges. IL Effective Juary 8. 1982, the rtpee is being _maged vitb referece to a weigbted beasket of curmecies. The arwage exchae rate soes is vis-a--via 5$ for the period hown. Not available. October 1984 -31- ae 1 STATUB 07 MEW GDMU DPMU&TB 13 PMEITM A. AMn OF-Us WUS AMID MOM (am of 5sutamba 30. 191) & CUS million) Leon/ CARMot net of cancllatimons Credit FiLcal 1.dis- _~~~~Jih £I. hlluaE Iuu 3! D. 1 ginty-five loan and credits fully disbwred 1k 781.4 32.0 960.81i 630 1976 Second Labore Water Supply - 26.6 0.2 643 1976 Irrigation a Drainage (Rhairpur) - 14.0 4.4 1366T 1977 Punjab Livestock Deelopment - 10.0 - 3.8 678 1977 Third Education 15.0 3.5 751 1977 Hill Farming Tech. Dvelopmt - 3.0 0.1 754 1978. Salinity Cotrol & Reclamation - 70.0 67.0 813 1978 mjab Ent. & Agric. 3ew. - 12.5 5.7 877 1979 Salinity Control a Rcl.- (ardan) - 60.0 54.4 892 1979 Primary Eduation - 10.0 4.5 922 1979 Sind Agricultural ZEtmion - 9.0 6.2 968 1980 Third WAP P!owr - 45.0 8.9 974 1980 Third Highwy - 50.0 24.4 1OL9 1980 PICIC Industrial Delopment - 40.0 4.8 llOgL 1981 Vocational Training - 25.0 9.8 11L3L 1981 Sall Industries - 30.0 3 7 1157l 1991 Grain Sto r - 32.0 20.9 1l58Li 1981 Agricultural Researcb - 24.0 17.0 1163L& 1981 On-Fm Wafter Manaogmewt - 41.0 15.8 11iiSL 1982 Industrial Development (IDUP II) - 30.0 11.0 2122 19U2 Forth Telecomeunication 40.0 - 20.4 2172 1982 Fertilizer Industry Rehabilitation 38.5 - 30.8 2247 1983 Recerroir Maintenance Facilities 10.2 - 10.0 2305 1983 Agricultural Dev. (ADBP V) 10.0 - 7.4 2324 1983 Fifth Sui Nortbern Gas Pipelines 43.0 - 42.2 1239LI 1982 Irrigation Systm Rehabilitation - 40.0 28.2 1243Li 1982 Baluchistan Minor Irrig. & gr. - 14.0 10.8 1256kL 1982 Tecbnical Assistance - 7.0 5.1 127S/e 1982 Eleventh tailvay Project - 50.0 41.6 1348LI 1983 lahore Urban Development - 16.0 14.8 L350jj 1983 Population - 18.0 14.9 1355jg 1983 Coal Engineering - 7.0 6.5 13741I 1983 Karachi Water Supply - 25.0 22.9 1375Le 1983 Fourth Drainage - 65.0 59.3 1380Le 1983 Agricultural Developmet (ADBP V) - 47.8 21.3 2218 1983 Refinery Zngineering Project 12.0 - 9.5 2351 1984 Petroleum Dxploration 51.5 - 51.3 2374 1984 Second Toot Oil and Gas Development 30.0 - 25.6 2380 1984 Industrial Investment Credit 50.0 - 49.9 1439Le 1984 Industrial Investent Credit - 50.0 47.2 1461ai 1984 Integrated Hill Farming Development - 21.0 2l.0 1480Le 1984 Second Technical Assistance - 7.0 6.6 14871c 1984 Car_ud Water Management - 46.5 46.5 1499Lc 1984 Secend Small Industries - 50.0 50.0 Total 1,066.6 42.0 1,962.2 909.9 of which bas been repaid 593 9 01 3I54 Total nov outstanding 562.7 41.3 1,926.8 Amount sold 23.9 of which has been repaid 23,_ Total nov beld by Bank and IDALd KA 43 9Z6.8 Total undisbursed 247.1 3 A., 659.0 909L9 La The status of the projects listed in Part A is described in a searate report on all RSankIDA financial projects in execution, wbich is updated twice yearly and circulated to the Executive Director, on April 30 nd October 31. Lk Excludes the disbursed portion of loans and credits wholly or partly for projects in the former East Pakistan whicb have no been taken over by Bangladesh. LI Not yet effective. Id Prior to exchange adjustment. -l IDA Credits under the 6th Repleniebhmnt denominated in SDRs. The principml in shown in US$ equivalent at the time of negotiation. Disbursed mounts are compusted at the merket rate on dates of disbursements. uL By using the market rate on dates of disbursements, the crrent principal for Credit 1066-PAZ and Credit 1255-PAZ (both fully disb s ed) is $42.5 and $77.5, respectively. -32- ANNEX II Page 2 B. STATEMENT OF IFC INVESTMENTS (as of Sebtember 30. 1984) Fiscal Amount In USS Million Year Obligor TvIe-of Business Loan Equity Total 1958 Steel Corp of Rolled Steel Pakistan Ltd. Products 0.63 - 0.63 1959 Adamjee Industries Ltd. Textiles 0.75 - 0.75 1962- Gharibval Cement 1965 Industries Ltd. CemenL 5.25 0.42 5.67 1963- PICIC Development 1969- Financing - 0.52 0.52 1975 1965 Crescent Jute Products Textiles 1.84 0.11 1.95 1965- 1980- Packages Ltd. Paper Products 19.26 0.84 20.10 1982 1967- Pakistan Paper 1976 Corp Ltd. Paper 5.38 2.02 7.40 1969 Davood Hercules Chemicals Ltd. Fertilizers 1.00 2.92 3.92 1979 Milkpak Ltd. Food and Food Processing 2.40 0.37 2.77 l!fl9 Pakistan Oitfields Ltd. and ;ttock Chemicals and Refinery Lid. Petrochemicals 29.00 2.04 31.04 1980 Fauji Foundation Woven Polypropy- lene.bags 1.78 - 1.78 1980 Premier Board Mills Ltd. Particle Board 2.70 - 2.70 1981 Habib Arkady Food and Food Processing 3.15 0.17 3.32 1982 Asbestos Cement 4.05 - 4.05 1983 Pakistan Petroleum Chemical and Ltd. Petrochemicals 86.05 1.56 87.61 Total Gross Commitments 163.24 10.97 174.21 Less: Cancellations, Terminations, Repayments and Sales 122.83 0.39 123.22 Total Commitments Now Held by IFC 40.41 10.58 50.99 Undisbursed (including participants) 67.12 0.33 67.45 -33- ANU E III Page 1 of 2 PAKISTAR LEFT BANK OUTFALL DRAIN PROJECT SUPPLEMENTARY PROJECT DATA -SEEE Section I: Timetable of Key Events (a) Time taken by the Borrower to prepare the project: -Two years (b) Agency which prepared the project: WAPDA and GOSind assisted by consultants (c) Date of first presentation to the Bank and date of the first mission to consider the project: March 1981; March 1982 (d) Date of departure of appraisal mission: January 1984 (e) Date of completion of negotiations: October 1984 (f) Plauned date of effectiveness: March 30, 1985 Section II: Special IDA Imlemlmentation Action In view of size and complexity, considerable staff involvement will be required over implementation period of eight years, and some staff will be required to administer impact evaluation study to be completed about four years after credit closing. Section III: Special Conditions of Effectiveness (a) Approval by ECNEC of the final umbrella PC-1 document (para. 57); -34- AN Z -ITI Page 2 of 2 (b) Meeting of all conditions precedent to the effective- ness of other external financing agencies (para. 57); (c) Establishment of PSC and I)o, and opening of Special Account (paras. 47 and 57); Other 8Decial Conditions (a) Spinal drain to be completed by July 31, i986 and Rohri canal remodelling benefitB to be available to project area by January 1, 1990 (para. 46); (b) GOSind to smend UA Ordinance, or take other measures as necessary, by July 1, 1986 to cover drainage (para. 49); (c) GOSind to wake available each year adequate funds to meet O&M requirerments as determined by periodic inde- pendent review (para. 55); and gd) GOSind to (i) collect drainage charge to cover 25Z of OH costs one year after completion of drainage system in given subarea, (ii) increase charge at least every two years so as to recover at least 501 of drainage OWH costs by July 1, 1995 and full drainage 0&N costs by July 1, 2005, and (iii) review with IDA three mouths before initial levy and each increase actual benefits against projected benefits and proposed charges (para. 65). [ P A K I S TA N , /)AFGHANISTAN !r LEFT BANK OUTFALL DRAIN STAGE I PRO.'0ECr7 _o j im map has been pr1eaed by fla lw\M mug emw* hI.e cmmmue of _ _ tPe eadwS and a eackie* for nAg euel of wm trfa qak I.d No Wh r*ah:nJ FdwnCe CaOrzaaah The dWaad aANu" baepd and VW baWIdw,e Elm" on NWe iD dO nd6 AW N eat at The RUN st dNW and VW hateAal Fu_ Caa . NW :: eU an NWe &e slatuO dm teary or Ny'W adeae or accWama, at_s uc hl.. _~~~~~~~~~~~~~~~ t:Ai'aion 'Sa 69' 70/ ( i', fiMoro *'> N PROJECT AREA ( .n \ \ FPROJECT COMPONENTS: z z t - \ sy Project Subarea Boundaries' d -. - X ,~ | 1Drainage Tubewells NAWABSHH Lt | --- J' \Scavenger Tubewells C. tE t \ NAWABSffA^/ - \ tZ A 3Tile Drainage e 85ko \ > . ~j-* sChofiari lohe I _ Surface Drainage I ~~~ No.wobshoh _____~~~~~~~~!2 Reservoir Construction \ %.< .-- - Canal Remodelling -' Sakrortd......... Outfall Drain -26 t-V-__ \ 5 . a~Sarigharl artgh~~~~~~~rj ~~EXISTING' 2e- -26° RD- Oulfall Drain River tE 3unded Area N ofil\/ \ 0\si \ 1 3 > # O Selected Towns S Villages x ))1 \ \ Kandiori,\\ .s Z. tMajor Roads vgfts_ °Tand IINII II Barrage A bdom -, __- ~~~~~~~~Otfall Drai \ MC,,C! \\ { § <\- A~~~~~~~~~~~~~~~~~X EZISTING: ii \ s °\\ N a b r - ~~Outfall Droin I : \\ > >Canals -26 o River A; \ oaimotA - 0 - ! Left Boasi Catchmt Area -26'-o Aj A o \f - - Selected Towns & Vill0ges of ArorIi, A-* Alfp \\3-\oBoroga \ d t , \ -- -- - ~~~~Tidal Mud Flasts . / // } m rs -_-' Seasonal Flooding/Salt Pans e .AV)-A Relative Distance MeasurePe I,)t i Prowincial Boundaries / J-~ / \ v \ dbInternational Soundories | -}J /1.1 / X R \ | |/ 0 20 40 60 MILES K hrochi / \ T 0~~~41 hatto danPPiji ~ D 5 Kadhan Porte#il/I z - \^- /ft i r~~~Oufall Draoin,