RESTRICTED
Report No.  P-501
F5f. r    0
This report was prepared for use within the Bank and its affiliated organizations.
They do not accept responsibility for its accuracy or completeness. The report may
not be published nor may it be quoted as representing their views.
INTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION
OF THE
PRESIDENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED DEVELOPMENT CREDIT
FOR A
HIGHWAY ENGINEERING PROJECT
PAKISTAN
August 10, 1966



INJTERNATIONAL DEVELOPMENT ASSOCIATION
REPORT AND RECOMMENDATION OF THE PRESIDENT
TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT
TO THE ISLAMIC REPUBLIC OF PAKISTAN
FOR A HIGHWAY ENGINEERING PROJECT
1.        I submit the following report and recommendation on a proposed
credit in an amount in various currencies equivalent to $1.C million to
the Islamic Republic of Pakistan to finance a highway engineering project
in the Province of West Pakistan.
PART I - HISTORICAL
2.        The Government of Pakistan on behalf of the Government of West
Pakistan has requested an IDA credit to assist in financing the services
of consultants to undertake the detailed engineering of two major roads,
one between Lahore, Sheikhupura and Lyallpur, the other between
Sheikhupura and Khushab. These two roads serve areas of growing economic
importance where existing communications are inadequate.
3.        Negotiations with the representative of the Islamic Republic of
Pakistan and the Province of West Pakistan, Mr. Shah Mahmud Sulaiman,
Economic Minister, Embassy of Pakistan, were held in Washington on July
29, 1966.
4.        The proposed credit would be the first made by the Association
for purely engineering purposes.
PART II - DESCRIPTION OF THE PROPOSED CREDIT
5.        Borrower:             The Islamic Republic of Pakistan.
Beneficiary:          The Government of West Pakistan.
Amount:               $1.0 million in various currencies.
Purpose:              To finance about 60% of the total cost
of detailed engineering and associated
services relating to the Lahore-
Sheikhupura-Lyallpur and Sheikhupura-
Khushab roads.



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Amortization:          The development credit would be for a
period of 10 years including a grace
period of 2 years. Repayment is provided
for in equal semi-annual installments
beginning January 15, 1969 and ending
July 15, 1976; however, the credit would
be subsequently refunded from the proceeds
of any future credit which IDA may make
for the construction of these works.
Service Charge:        3/1 of 1% per annum.
Relending Terms:      The Islamic Republic of Pakistan will relend
the proceeds of the credit to the Government
of West Pakistan on the same terms and
conditions.
PART III - PURPOSE
6.        An Appraisal Report entitled "Appraisal of a Highway Engineering
Project, West Pakistan" (TO-899a) is attachied.
7.        Lahore, the capital of West Pakistan, is connected with the major
industrial center of Lyallpur by two existing roads, both of which are of
low standard. The need for an all-weather road link, of modern design
standard, between Lahore and Lyallpur resulted in the Goverrment of W4est
Pakistan inviting the U.S. consulting firm of Louis Berger, Inc. to carry
out a feasibility study and pre:Liminary engineering.  As a result of
investigations made by the Government of West Pakistan and consultants, a
plan was formulated for an83 mile road at an estimated cost of US$20 million
equivalent. The nevi- road from Sheikhupura -to Klhushab would provide major
agricultural centers with an alL-weather connection and would join, at
Khushab, main roads £rom the west and north. On this road two main bridges,
one crossing the Chenab river and the other crossing the Jhelum river, are
required. Based on the feasibi:Lity study and preliminary engineering
prepared by Louis Berger, Inc., the construction cost of the Sheikhupura-
Khushab road, plus the two bridges (109 miles) is estimated at about
US$26 million equivalent.
8.        The detailed engineering of the two roads which link Lahore with
Lyallpur and Sheikhupura with Khushab will include among others, site
investigations, topographic surveys, detailed designs, the preparation of
bills of quantities, bidding documents, schedules of construction work and
cost estimates. The detailed engineering of the bridges across the Chenab
and Jhelum rivers on the route of the Sheikhupura-Khushab highway will be



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undertaken by the staff of the Province of West Pakistan and will be
reviewed by the consultants.
9.        To carry out the project, the Government of West Pakistan has
entered into draft contractual arrangements with two foreign consulting
firms and their respective Pakistani associates. The two firms are (a)
Sir W.4illiam Halcrow and Partners (U.K.) in association with Incorporated
Consulting Engineers, to be responsible for the Lahore-Lyallpur road, and
(b) Pacific Consultants (Japan) in association with Zafar and Associates,
to be responsible for the Sheikhupura-Khushab road. Upon the granting
of an IDA credit, it would be possible for the work to commence forthwith.
10.       This engineering work will provide more accurate cost estimates
for the roads and bridges concerned, thus permitting a proper review of
their economic justification and the preparation of an appropriate
financial plan. Wihile the engineering is being prepared, the Government
of West Pakistan will take suitable measures to obtain such right of way
as is necessary for the orderly and economical construction of the roads
and bridges. Construction work could then be undertaken with a minimum
of delay. On the basis of the provisional work schedule provided in the
engineering contracts, it is estimated that consideration could be given
to the financing of construction in about 12 months.
11.       The total cost of the engineering project is estimated at
US$1,66o,CCC equivalent, of which the foreign exchange component is b2`.
The proposed engineering credit of US1'l,CCC,COO would amount to about
60% of the total project cost. The balance of the funds required would
be provided by the Government of West Pakistan.
PART IV - LECGAL INSTLU11ENTS AMID AUTrORITY
12.       The draft Credit Agreement between the Islamic Republic of
Pakistan and the Association, the draft Project Agreement between the
Association and the Province of West Pakistan and the Recommendations of
the Committee provided for in Article V, Section l(d) of the Articles of
Agreement, are being distributed to the Executive Directors separately.
13.       The credit documents follow the general pattern of previous IDA
credits in West Pakistan, except that the terms of the credit would be
only 10 years including a 2 year period of grace. Attention is drawn to
the preamble of the draft Credit Agreement where it is stated that the
Association would be prepared to refund this credit out of the proceeds of
any credit which may later be made for the construction of the two highways
and the two bridges described in paragraph 7. Provision is also
made in Section 2.03 of the Prcject Agreement for the Province of West
Pakistan to tak-e all necessary action to acquire such rights in immovable
property as will be required for the construction of the proposed highways
and bridges.



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PART V - COMPLIANCE WITH ARTICLES OF AGREEMENT
14.       I am satisfied that the proposed credit would comply with the
Articles of Agreement of the Association.
PART VI -- RECOMENDATION
15.       I recommend that the Executive Directors adopt the following
resolution:
RESOLUTION NO.
Approval of Credit to the Islamic Republic of Pakistan
(Highway Engineering Project) in an amount equivalent to
US$l,0co,0CO.
RESOLVED:
THAT the Association shall grant a development credit
to the Islamic Republic of Pakistan in an amount in various
currencies equivalent to one million United States dollars
(US$1,CC0,OOC) to mature on and prior to July 15, 1976, to
bear a service charge at the rate of three-fourths of one
per cent (3/4 of 1%) per annum, and to be upon such other
terms and conditions as shall be substantially in accordance
with the terms and conditions set forth in the form of the
Development Credit Agreement (Highway Engineering Project)
between the Islamic Republic of Pakistan and the Association
and the form of the Project Agreement (Highway Engineering
Project) between the Alssociation and the Province of West
Pakistan which have been presented to this meeting.
Attachment                                         George D. Woods
Presidenit
by S.R. Cope
Wlashington, D.C.
uugust 1C, 1966