83828 Khyber Pakhtunkhwa (KPK) Consultations Report World Bank Group (WBG) Country Partnership Strategy (CPS) 2015-19 Updated December 2013 Table of Contents A. Introduction / Background .................................................................................................................... 2 B. WBG Presentation: CPS 2015 Roadmap and Emerging Priorities ....................................................... 3 C. Key Discussion Points and Feedback Received ...................................................................................... 4 C-I: Meeting with the Chief Minister Khyber Pakhtunkhwa .................................................................... 4 C-II: Meeting with the Chief Secretary and the team ............................................................................... 5 C-III: Session with Academia, Think Tanks, Policy / Media Analysts .................................................... 6 C-IV: Session with Civil Society and Youth ............................................................................................ 8 C-V: Session with the Private Sector. ....................................................................................................... 9 C-VI: Session with the Political leaders ................................................................................................. 11 D. Follow up / Next Steps ........................................................................................................................... 13 Attachment: List of Persons Met 1 Khyber Pakhtunkhwa (KPK) Consultations Islamabad, July – December 2013 World Bank Group (WBG) Country Partnership Strategy (CPS) 2015-19 A. INTRODUCTION / BACKGROUND 1. The CPS consultation meetings with the Government of Khyber Pakhtunkhwa and other stakeholders were held on July 10, July18, Nov 7-8, and on December 16 and 18 in Islamabad. The objective was to exchange views on the challenges and development priorities for the province for WBG support under its new five-year strategy. The WBG team met with the Chief Minister, the Chief Secretary, the Additional Chief Secretary and Senior Officials of the Government of KPK. In addition, the WBG team also met with representatives of academia, think tanks, policy analysts, civil society, non- governmental organizations, and youth groups. Please see Annex I for list of participants in the consultation sessions. 2. Based on the feedback received from the government and other stakeholders, key priorities for KPK are emerging as: i. Economic growth, jobs and youth engagement ii. Education, skills, and health ( focus on youth and women): Support for the “Education City” iii. Governance, transparency and social service delivery improvement (fiscal management, implementation capacity, performance monitoring, strengthening local governments) iv. Energy and water management v. Productivity and value addition (small industries, mining, agriculture and livestock, trade) vi. Improving security and combating extremism 3. Consultations in KPK were part of the process of engagement to identify priorities for WBG support for the new five-year country strategy for Pakistan. Several meetings have taken place to date, including strategic level discussions with the Prime Minister, Federal Ministers of Finance, Planning and Development, Water and Power; meeting with the Economic Team including the Governor State Bank, as well as the Chief Ministers of the four provinces. For the federal government, AJK and GB counterparts, a technical level session was co-chaired by the Economic Affairs Division (EAD) where representatives from key ministries were invited. In addition, separate sessions were also held with representatives from the Government of AJK and GB respectively. For the provinces, meetings were held at the provincial capitals of Sindh, Punjab, Balochistan and KPK with the provincial administration under the leadership of Chief Secretaries or Additional Chief Secretaries. A separate session was also organized with FATA Secretariat. 4. In addition to the federal, provincial, and regional governments, the WBG has also reached out to a range of other stakeholders including parliamentarians and political leaders, academia, think tanks, media, civil society, youth groups and the private sector. Findings and outcome of these discussion sessions are being documented for record and shared with the participants. 5. As explained during the consultations process, while an effort will be made to take various views on board, some level of prioritization and trade-offs would have to be made as WBG would not be able to respond to all demands with its limited resources. We would need to exercise selectivity to seek visible 2 impact and results. One important element of the WBG strategy would be to leverage the strengths of the private sector and other development partners to support the key priorities in Pakistan. The three institutions of the World Bank Group will work together to bring value to the clients in Pakistan. The WBG includes International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), International Finance Corporation (IFC), and Multilateral Investment Guarantee Agency (MIGA). The IDA and IBRD work with the governments and provide concessional credits, grants, loans and knowledge support (analytical work and non-lending technical assistance). IFC provides advice and commercial loans to the private sector, while MIGA provides political risk insurance guarantees for private investment in the country. B. WBG PRESENTATION: CPS 2015 ROADMAP AND EMERGING PRIORITIES 1. The WBG presentation focused on the process of CPS development, timeline and the emerging diagnostic of challenges and opportunities for Pakistan. Key areas of reforms priorities for the country, as highlighted during various consultations, were also shared. 2. The CPS preparation process includes two rounds of consultations with the federal and provincial governments and other stakeholders – the first one from July 2013 – January 2014- is for priority setting and the follow–up in February 2014 to validate the draft strategy. After EAD‟s review of the final draft, the CPS would be presented to the WBG Board of Executive Directors in June 2014 and the implementation period of the CPS would start from July 1st, 2014. The implementation plan includes regular performance/portfolio reviews, an annual exercise of results assessment and learning reviews; a mid-term progress report (half-way into implementation), and a full program evaluation at the end of the CPS implementation period. This process allows for flexibility to review performance and results on an ongoing basis and make adjustments as necessary. 3. The priority setting process for the Country Partnership Strategy starts with preparing a Systematic Country Diagnostic (SCD), an assessment of challenges and opportunities, and disseminating it early in the process of consultations. Based on the emerging themes or priorities, the areas of focus are identified and are clearly linked with the outcomes. The implementation plan is prepared separately providing details of interventions and programs to achieve the intended outcomes. 4. The initial diagnostic suggests that there are both challenges and opportunities for Pakistan that together with the key global trends, are influencing and shaping up the development landscape of the country. And if addressed in a systematic way, it can unlock the great potential for economic revival and growth and can create a path to growth and poverty reduction that is inclusive, equitable and sustainable in terms of employment generation, livelihoods and human opportunity for all. 5. Looking at the key global trends, one finds that the Official Donor Assistance is shrinking and more and more, these limited resources are being used to crowd-in private capital. Technology and innovation are driving development solutions and interconnectivity, e.g. increasing use of smart phones for monitoring and transparency, BISP smart cards based payment system in Pakistan. Besides, citizen‟s active engagement in development process is increasing, and climate change is driving development agendas in a major way. 6. Given this global context, Pakistan‟s economic growth and development is challenged by scarcity of financial resource and heavy dependence on external financing, slow progress on MDGs, rapidly increasing population and growing urbanization vis-à-vis limited resources and infrastructure, manifesting itself to an extent in the energy crisis and water scarcity that we witness today.Recurring natural disasters and deteriorating law and order and security environment are also holding back development in Pakistan. 3 On the positive side, the recent democratic political transition, a geographic location with potential regional linkages, natural resource base, the ongoing devolution process, and the increasing working-age young and female population, are some key opportunities for Pakistan that can contribute to the economic revival and growth in the country. It is important to recognize, however, that this cannot be done by the government and donors alone; private sector needs to be a partner in this process. And to facilitate private sector participation, improving investment climate and business environment remains the key. 7. In terms of key priorities for Pakistan, we have heard that job creation and employment generation remains an important goal for the country. There are several important ingredients to a successful job strategy but a centralone is that it has to be private sector led for which conducive investment conditions are necessary. Another critical element is the human resource development. Pakistan would need an educated, skilled and healthy workforce for creating more and productive jobs and sustaining higher growth. 8. The Planning Minister, in the five-year plan for Pakistan, is focusing on indigenous / homegrown drivers for jobs and growth to minimize dependence on external factors. The initial set of priorities include raising own revenues for investments, improving investment climate for private sector, value chains for industry and agriculture products, and improving regional linkages for trade. The energy security, infrastructure upgrade, and building social capital remain key support areas for this agenda. 9. While human development is a central pillar of any job strategy, we have heard that on its own it remains a key priority and the government‟s focus on infrastructure should not be at the expense of human development. This calls for continued investments in education and skills, health and nutrition, income support and microfinance. 10. The third theme that has come out as priority is that of governanceand anti-corruption reforms. There is an increasing recognition that support to devolution / local governments, addressing weaknesses in the public service delivery mechanisms, and promoting transparency would be required for sustaining any development gains in Pakistan. C. KEY DISCUSSION POINTS AND FEEDBACK RECEIVED 11. The discussion at the consultation sessions was focused around the following five questions to the participants. Session-wise summary of feedback is provided below: i. Do you share similar diagnosis of the challenges, opportunities & priorities for Pakistan and KPK? ii. What should be the top three reform priorities for WBG to support? In order to be selective, what should the Bank do more of and less of? iii. What could be some of the success indicators / Results? e.g. number of jobs created, level of resources mobilized etc.? iv. What are the risks we need to mitigate in the strategy? v. How can we improve implementation? C-I: Meeting with the Chief Minister Khyber Pakhtunkhwa 12. A meeting with the Chief Minister, Mr. Parvez Khattak, took place on July 10 in KPK House Islamabad, where a discussion was held on the mid to long term vision of the new government. 4 13. The Chief Minister (CM) highlighted that the new government got a mandate to bring peace and change in KPK and address corruption; this translates into an ambitious agenda to implement. Key priorities are education, health, local governments –down to the village level, jobs (for youth in particular), governance, addressing corruption and energy. 14. KPK government has set up advisory committees and working groups to chalk out reform plans under the priority areas and is keen to work with the development partners to strengthen focus and delivery of the targeted outcomes. C-II: Meeting with the Chief Secretary and the team 15. The meeting with the Chief Secretary and his team of key Secretaries and senior government officials was held on July 10, 2013 at the KPK House, Islamabad. The Chief Economist of KPK made a detailed presentation on the vision and key priority areas of the new government and the ongoing initiatives. Priority areas are jobs and economic growth, energy, social service delivery, management of water resources, citizen‟s participation, and enhancing fiscal space for development. Transparency and accountability, peace building and rule of law.The WBG introduced the process of developing the new Country Strategy 2015-19 and shared the presentation on KPK SWOT analysis and review of the first government budget with priority expenditures and fiscal management aspects. 16. The Chief Secretary shared that a number of working groups and task forces have been set up to support the new government in defining the outcomes/ results to achieve in the next 3-5 years and the indicators for success under the priority areas of education, health, local governments and others. It was suggested that the WBG could organize a two–day Results Retreat with the reform working groups and task force to facilitate a discussion on results. 17. Implementation was highlighted as a critical challenge -- GoKPK is establishing reform delivery and monitoring units in key ministries to strengthen focus on implementation and ensure delivery of the commitments and results. The WBG was asked to arrange learning events on the structure and functioning of the delivery units in other countries, such as Brazil, to exchange experience and knowledge. 18. The Bank‟s expertise and advisory support was also requested for the priority legislations work that the KPK government is doing -- including the Right to Information Law (RTI), the Ehtesab (accountability) law, Conflict of Interest Law, Right to Services Act, and E-services law. 19. To follow up on the fiscal management aspects in the province, it was agreed that WBG would provide support and knowledge on the Comprehensive Spending Review and potential for revenue generation. 20. KPK government appreciated support provided under the MDTF and would like continued engagement with the World Bank. For the next round of MDTF to be ambitious, it is important that the ongoing programs are implemented well and show results.  Session on Jobs, July 18, 2013, at KPK Civil Secretariat, Peshawar 21. A follow up session on Jobs was organized at the Civil Secretariat at Peshawar on July 18, 2013. The WB Sector Director for Human Development for South Asia, Jesko Hentschel made a presentation 5 on the World Development Report (WDR) on Jobs and how some of the findings could be relevant to Pakistan and KPK. 22. The discussion focused on the challenges of job creation in a conflict environment as KPK has been badly affected with the ongoing wave of terrorism. What could be done at the policy level and how to bring the private sector to create jobs and economic opportunities for engaging the inactive youth of the province? The government is particularly interested in engaging women in the labor market and the traditional approach of offering small loans to women has not worked in the past. 23. The Government is focusing on Vocational skill development as this would also allow for export of skilled labor abroad, particularly to the Middle East. A large part of KPK population is currently working in other parts of the country, including Karachi and Lahore, as well as employed in the Middle East and help the provincial economy by sending back remittances. Other areas that could help create jobsin the province were identified as trade and logistics; small scale industries (handicrafts, gemstones,) oil and gas, the mining industry; creating economic hubs around local resource. Value addition / value chains in agriculture are also an important area to develop. There is a lot of potential in horticulture and fruit orchards but there is shortage of land. It is unfortunate that KPK is not able to fully utilize its share of water to cultivate barren land as the cost of needed infrastructure is very high. 24. The WBG was asked to provide support in improving the investment climate and engagement of the private sector to create more and better quality jobs. IFC offered to organize forums where the GoKPK could meet with members of the private sector.It was agreed that WBG will work with the KPK government on the job strategy – a Strategy and action plan for employment generation; identifying the drivers of jobs and needed measures.  Results Retreat, August 26-27, 2013, Serena Hotel, Islamabad 25. In continuation of the discussion with the Chief Minister and the Chief Secretary, a Results Retreat was organized by the WBG in coordination with the GoKPK. The objective of the Retreat was to bring together the various working groups and task forces KPK government has established in the priority areas, and the development partners to discuss the targeted results. 26. The process facilitated a discussion on the results and action plans for each of the priority reform area. The outcome of the retreat also contributed to the development of KPK Strategic Development Partnership Strategy, between the provincial government and the key stakeholders including development partners, members of the civil society and the private sector. It allows for collective accountability with follow up mechanisms to track and review progress on results. C-III: Session with Academia, Think Tanks, Policy / Media Analysts 27. A consultation session with representatives from academia, think tanks and analysts was held on November 7, 2013 at the World Bank office in Islamabad. The session was chaired by Rachid Benmessaoud, Country Director, World Bank1. 28. Investment in education was stressed as an essential component for the country‟s economic progress and emerged as a key priority for the province on KPK. Adequate financing needs to go to education to get any credible results. It was also said that education is the vehicle through which militancy The session was combined for federal, KPK and FATA audience. This summary reflects the messages relevant for 1 KPK, while Federal and FATA specific comments are captured in their respective consultations reports. 6 can be addressed in the long term – all levels of education from primary to opportunities for higher education are important. A new education policy and revised curriculum is needed, particularly in KPK and FATA since the current education system is not keeping up with global trends in education. Initiatives that provide incentives for parents to send girls to school have been successfully used in other parts of the country and should be introduced in KPK and FATA. 29. Opportunities for higher education are limited, particularly for KPK and FATA. Higher education was termed an „engine for growth‟ for the economy and the period from 2002-2008 where universities got increased government support through the HEC was seen as a high point for higher education. It was suggested that such support be provided to the higher education sector for thirty years at a stretch to achieve sustained improvement in the sector, with examples of China and Malaysia being quoted. Currently, access to higher education is only about 7% and in some areas, especially FATA and Balochistan, it is less than 1%. Pakistan‟s global rankings in education are one of the worst in the world, including GDP investment in education.To make the university education purposeful, the curricula should emphasize applied skills. Academia should be involved in public policy formulation. Implementation of education programs through the government structure has not worked. WBG needs to look at alternative mechanisms; it can consider working directly with universities, as other development agencies do, to create a greater impact. 30. Job creation and employment opportunities for youth needs to be tackled on priority. There is limited access to markets in KPK, which needs to be kept in mind especially when thinking about private sector led growth and jobs. People have also started to migrate out of KPK to Karachi, Islamabad and other cities for employment opportunities. Security concerns have played a role in this as well. Vocational training and skills development was also highlighted as a priority area and the example of USAID supported community college project was shared; the project prepares the students and allows transition to regular schools. Facilitating trade with Afghanistan and Central Asia can also be helpful in creating economic opportunities for KPK, but the locational advantage that KPK, FATA and Balochistan have would not materialize as private sector is not investing. Government needs to look for avenues for creating employment as it cannot wait for the private sector. 31. Agriculture sector was highlighted as a key focus area for KPK, particularly for the Swabi and Mansehra regions. It was suggested that university education and diplomas/certificate level skills training specific to agriculture sector should be promoted forpreparing a skilled labor force for the sector. Investment in the agriculture sector would provide opportunities to both men and women. It was stressed that food security is not just a provincial issue rather a national one and that investments in vocational training can develop skills to improve both the meat and dairy sector. The Government and the donor community should engage with Academia to develop programs in this area. 32. WBG was asked to adopt region-specific approach as there are local resources and needs specific to each. There are significant equity challenges in KPK, with some of the southern districts not having even the basic facilities like potable water. Gender inequality is also a major issue–there is a need to focus on the needs of these lagging regions. The local government system, particularly KPK‟s government plan to take it to village level could help in addressing regional disparities and needs, but without building necessary capacity it would not work. 33. The security challenges are huge and peace efforts need to be encouraged. The replacement of war economy also needs to be considered. Security concerns are exacerbating the region‟s problems and instability, restricting access to education and economic opportunities; also hampering trade with neighboring countries. This will remain a challenge for economic stability of the whole country. 7 34. Energy supply was mentioned as a major issue that needs to be addressed on priority. Focus on cheaper sources of generating power to make the economy competitive. The impact of the energy crisis on the education sector was discussed and rising electricity prices and declining performance of students was highlighted. 35. Weak implementation capacity, governance challenges were highlighted. Major constraints include severe policy deficit, Government plan formulation is currently very dependent upon external consultants due to low capacity. The size of government was emphasized as one of the biggest issues and that the decision making process is currently too complex and time consuming. There needs to be a balance in the federal and provincial governments and roles need to be more specifically identified. C-IV: Session with Civil Society and Youth 36. A consultation session with representatives from civil society and youth was held on November 8, 2013 at the World Bank office in Islamabad. The session was chaired by Rachid Benmessaoud, Country Director, World Bank2. 37. The participants asked for continued engagement of the WBG with the non-government stakeholders. While WBG was appreciated for its work on institutional strengthening, it was also advised that a more balanced strategy should be developed which not only builds on previous successes and international best practices but is also realistic, innovative and context specific. 38. The participants highlighted that while there is a vibrant civil society and media that continue to play its part, but the state has limited ability to respond to demands. The credibility of NGOs is being questioned as they have merely become implementers of large projects funded by development agencies. 39. Lack of governance was identified as a major hurdle to development. The local level bureaucrats have serious capacity issues and policies are formulated without deliberation or thought process for implementation. There was an appreciation of the reform effort of KPK government but it was cautioned that the essence of these reforms will not be captured unless more demand side work is conducted. Otherwise, it will be of similar fate as previous governance reforms where more power was given to the local government but did not produce the desired results as it was a forced supply side intervention only. It was suggested that properly functioning local governments with better coordination needs to be emphasized by the WBG as currently each level of government is working separately resulting in duplication of efforts and inefficiencies. Better resource allocation and efficient and responsible public financial management is critical, especially in the context of resource scarcity. The WBG was asked to play a role in transparency and accountability of the government to ensure funds allocated are used for the intended purposes. While some efforts are being made to improve government accountability for example through the RTI law, the implementation on ground is limited. Access to technology is limited and getting information from respective department is very difficult. There is a need to build technological capacity of the people and the government for successful implementation. 40. Continuous security issues and widening inequality in the society were highlighted as key threats to reforms. Inequality was termed as a bigger threat than poverty. Security problems, including life threats to human rights defenders, affecting the work of these civil society actors. Similarly, prevalence of The session was combined for federal and KPK audience. This summary reflects the messages relevant for KPK, 2 while Federal related comments are captured in the respective consultations report. 8 extremism is another challenge that requires changing the mindset of the masses. Tolerance needs to be built through revision of the curriculum and working with the opinion leaders to help address some of the negativity in the society. 41. Lack of social cohesion was highlighted as a major problem plaguing the development process of the province. Youth engagement is critical to address this issue. Otherwise elements of social unrest, extremism and militancy will increase in the country, as currently youth is the most deprived segment of the society with no skill development and self-expression opportunities. Special programs targeting the needs of youth should be developed such as leadership initiatives, skills enhancement and entrepreneurship trainings. If people are provided jobs and livelihoods opportunities, they will have resources to invest in education and health. Within youth, there should be special attention towards catering to the needs of the most marginalized including women and internally displaced persons. Existing structures for youth engagement, such as Girl Guides and Boy Scouts, can be effectively utilized. There is a need to increase education and awareness of youth, and easy access to information through advocacy campaigns. Similarly, there is a need for job creation for the younger generation by developing new industries, such as tourism where Pakistan has huge potential but has been neglected for years. In addition, private public partnership should be prioritized for resource mobilization. 42. Focus on economic opportunities for income generation should be prioritized in the province by increasing agriculture productivity, and investing in horticulture and livestock activities. In particular, there should be a focus on value addition of products. Government needs to address the issues of mistrust and security to capitalize on private sector investment and build private public partnerships for resource mobilization. In addition, the province is in dire need of forest reforms and water management as KPK has great potential and sources of water to serve the whole country. 43. Natural disasters management. Growth pattern has not been sustainable, particularly with growing population needs. While many organizations are working on rural Disaster Risk Reduction (DRR), more needs to be done to enhance preparedness. Internally Displaced Persons (IDPs) are one particular vulnerable group that requires attention. Protected areas programs need to be scaled up. 44. The idea of differentiating provincial /regional strategies based on needs was appreciated, as challenges and needs are distinct. World Bank was advised to take the lead in coordinating institutional linkages with other donors. There is a need to have a strong M&E mechanism in the strategy cycle going beyond the complaint hotline, to learn lessons from past efforts and also for capturing the local best practices. The Bank needs to bring in the learning element to respond to complex political economy challenges and uncertainty in the country, in terms of what works. It needs to recognize how it is perceived by different stakeholders and has to become more dynamic to align with demands of different groups. There is also a need to widely disseminate information on the WBG programs and results achieved as the civil society needs to know what is being done by the development partners and the government under their strategies and programs. C-V: Session with the Private Sector. 45. Consultations session with the KPK private sector representatives was held on December 11, 2013. The meeting was participated by traders, businessmen, SMEs and representatives of SMEDA. Participants discussed and shared views on the challenges, opportunities and priorities for the KPK province. 9 46. Development challenges of job creation in a conflict environment: At the outset, the meeting highlighted that development in KPK needs to be looked at differently than the rest of the country, as the province is confronting serious conflict and security situation for the last many years. This has adversely affected the operating environment, especially for private sector and job creation. In recent years, there has been an increase in migration of labor, including youth, from KPK to other provinces to seek better jobs and livelihood opportunities, thus creating a vacuum in the province. There is a need to think and work differently in the KPK province to achieve focused and tangible results. 47. Skills development and employment for youth: Youth in KPK is a great resource and asset. However, the youth suffers from lack of skills. There is a need to improve productivity levels through better training and skills development to meet the demand of the private sector. A strategy needs to be devised in order to bridge the gap between the existing skills of the labor force and the requirements of the private sector. In this regards, human resource development is critical to ensure an educated, skilled and healthy workforce. The youth also need to be trained for entrepreneurship, so they do not only support themselves but are also able to create jobs in the economy. It was emphasized that providing jobs, particularly to the youth is key to addressing terrorism and conflict, as poverty is driving vulnerable groups to be attracted to militancy. 48. Infrastructure for private sector investments: Providing incentives to private sector to bring in more investments into key sectors for growth was identified an important priority area. Industrial and economic zones should be created as investors look for projects which have the basic infrastructure access. With KPK suffering from overall infrastructure deficit, the province is unable to attract private sector investors. Mining has a great investment potential, especially in marble and granite, followed by coal. However, mineral bearing areas in KPK do not have good infrastructure and local labor force has low skill levels not suitable for large mining projects. Technology upgrade, capacity building and training of the local workforce and project managers is critical, as there is a lot of wastage due to traditional methods of mining, loading and transportation. 49. Private sector’s role as alternative delivery mechanism for improving governance: It was proposed that private sector should be involved in the implementation of development programs to strengthen the implementation process given the weak governance and overall capacity of the public sector. WBG needs to look at alternative delivery mechanisms, partnering with civil society and private sector and empowering people for checks and balances. Use of technology to promote transparency and good governance(such as e-governance, electronic tracking) was also identified as a key area to be focused. The private sector could also play a role in the agriculture sector of KPK where better farming practices could be introduced to improve the productivity and quality of crops. For example the yield of sugar cane is upto 19 percent in most countries, while in Pakistan it has remained below 9 percent, due to poor quality of seeds. If the WBG wants to see the difference and impact through its intervention, it will have to involve non-political members of the society and the large private sector in implementing its development projects. 50. Energy sector:The energy scarcity is severely impacting country‟s economy. Alternative low cost energy solutions need to be developed to address the immediate to medium term energy needs. KPK is a net exporter of power to the rest of the country. Given the huge capacity in the province, particular focus should be placed on energy efficiency and to further enhance its capacity to produce more low cost hydel power. Energy efficiency can be achieved through using technology and privatizing power feeders. Given the huge hydel potential for power generation in the KPK province, it is important that regulatory incentives are provided to materialize long term private sector investments in this area. In addition, tax 10 incentives should be provided in the energy sector to attract industry development in the sector. It was proposed that a Hydel Investment Conference be held to showcase power generation potential in KPK and to attract domestic and international investors. 51. SMEs access to finance, access to markets and improvements in value chains: SMEs play a critical role in the economy as these act as a backbone of the value chain for any sector. Market development for SMEs is an important priority area that can lead to employment generation as well as economic growth. SME‟s grow this constrained by limited access to formal financing, as investments are needed at every stage of the value chain to enhance productivity and efficiency. Access to finance will also encourage entrepreneurship, which is currently lacking and should be supported by the World Bank Group. SMEs should be supported to play a significant role, especially in horticulture and agriculture sectors for self-sufficiency and food security in the province as well as increased incomes. Investment in transport is important for easy access to markets. The WBG can play a significant role in helping the agri- based value chains through investments and technical assistance, which in turn will improve the quality and standards of the finished products. For example, 70% of the peaches are produced in Swat, however only a portion of the produce makes it to the markets due to lack of proper storage facilities, access to roads or transportation. It was emphasized that with appropriate trade agreements with neighboring regions, the KPK province can progress tremendously, especially if trade with Central Asia could be established. 52. Increasing women participation in economic growth: Women entrepreneurship should be encouraged in other than traditional areas. Access to markets and finance for women and youth is important to provide impetus to the growth in SME sector in the province. Focus should be on bringing women to mainstream, as productive members of the society rather than restricting them in their traditional roles. It was emphasized that despite traditional systems and culture, women could work and contribute productively to the household and the economy. There is a misconception that Purdah limits their ability to work. Examples of other Muslim countries, such as Malaysia and Bangladesh were provided where women have made progress, particularly in the horti-culture industries. Vocational training for women, beyond the traditional sewing and stitching was emphasized. Also, business management and marketing training would be beneficial for women, as this will improve their ability to market their product. 53. Business facilitation for tribal business: Tribal business community is unable to formally register, and also lacks appropriate know how to run their businesses. Business facilitation and regulatory framework for tribal businesses need to be provided so that these businesses can integrate in the mainstream economy and are ableto expand, grow and export. C-VI: Session with the Political leaders 54. A consultation session with Parliamentarians and Political Leaders from Khyber Pakhtunkhwa was held on December 16, 2013 at the World Bank office in Islamabad. The session was chaired by Rachid Benmessaoud, Country Director, World Bank. The three main priorities highlighted by the participants included education, security, and job creation. 55. There was a perception that federal government planning exercise (vision 2025) is Punjab-centric and not sensitive to the needs and requirements of the provinces like KPK. There is a need to engage with a broad range of stakeholders. 11 56. The participants spoke about introducing tax incentives for the business community of KPK– something that the previous government did. However, they felt that if equal incentives are provided to both Punjab and KPK, businesses will automatically be attracted to Punjab given the security situation in KPK. To compensate for this, KPK needs higher incentives as compared to other provinces. A large percentage of the population and industry has shifted out of KPK due to the better security and employment opportunities in other parts of the country. However, until now there seems to be no upcoming government plan to provide any incentives specific to KPK for the industry and job creation. 57. Education was highlighted as a top priority by all participants, especially girls‟ education. But quality remains a big issue. There are hundreds of un-attended and „ghost‟ schools andquality of teachers is questionable. It was stressed that the training of teachers be made a priority as well as the introduction of a proper examination system. There are hundreds of schools that appear only on paper across FATA, Sindh and many parts of Balochistan. The importance of segregated (women-only) universities was highlighted with regards to women who are unable to attend co-educational institutes due to social and cultural limitations. 58. Skill development was also highlighted as an important focus area with regards to job creation. It was said that skills should also cater to job opportunities in the Middle East so that our workers are well equipped to apply for available jobs. Unemployment is the biggest concern and top issue that the government needs to deal with and it leads to a vicious cycle resulting in poverty. Due to war and security issues, all industry in the province has dwindled; with tourism also, being affected very badly. There are serious economic needs that have to be addressed with a focus on job creation. 59. It was shared that an „education city‟ is being planned by the KPK government which is expected to generate extensive economic activity. This mega project is planned right opposite the Malakand – Dir motorway. This mega city will also help take the burden off Peshawar which is overwhelmed at the moment. An MOU has already been signed with the British Council and the vision is to build models similar to the education cities found in Qatar and Dubai. The government strongly endorsed education city as both an economic opportunity and a much needed human development intervention. The proposed city would have industrial and economic zones as well as international standards of residential areas, with modern infrastructure, health services and hotels. WBG was requested to provide assistance for the education city under its new CPS. 60. The participants asked for a stronger focus on women development in KPK. Some key issues highlighted were water supply, especially for women in the southern areas including Laki Marwat. It was emphasized that lack of adequate water supply is affecting the hygiene and health of the society. Lack of hospitals and trained staff, particularly female doctors and nursing staff is a priority issue for maternal and child health. It is important for the WBG to support interventions that could help women to earn livelihood and be economically independent. Providing education and sending girls to school could have a big impact on women status. Schools at the community level are very important in this regard. Promoting cottage industries as well as skill based trainings for women were also suggested as possible areas for intervention by the WBG. Other issues included lack of legal aid, particularly for IDPs, as well as gender based violence. 61. Governance and lack of security is the root of the KPK‟s sufferings. Governance decline particularly seems irreversible.Security has regional and international dimension. WBG was asked to be mindful of the implications of the ISAF withdrawal from Afghanistan in 2014 while designing the strategy, as it would have a significant impact on KPK being the border province. Increasing security concerns including the bombing of girls‟ schools and targeting of polio vaccinators in KPK are also important factors to consider while implementing development programs. 12 62. Strengthening of local government and village councils was discussed and it was said that it will be a huge task to build capacity of these new institutions. The focus should be on strengthening the existing system rather than introducing something new. Currently, people are not satisfied with the BHUs, schools or municipal services. A robust system for performance monitoring of village councils and municipal committees needs to be developed. 63. Energy and water management are key priorities. It was highlighted that being water stressed country, Pakistan needs to undertake some measures urgently: the first is an agreement with India on better and more scientific water management practices. Population is rising and coupled with problems including soil erosion and seepage, water losses and availability of water for agricultural sector is declining rapidly. Many hydropower and water storage projects are planned in KPK and these will hopefully be undertaken with the help of donors. There are potential sites around Kunar and Kabul rivers and an effort should be made to have an agreement / treaty with Afghanistan for sharing the water for power generation to meet needs of both the countries. Incentives are needed in KPK to encourage exports of fruits and vegetables. This is a possible area to be studied. Peshawar valley, the backbone of KPK agriculture, is in danger due to soil erosion and inundation of land due to recurring floods, with the quantum of land available for agriculture decreasing. This is an urgent issue that requires attention. 64. Mineral resources in Kohat, Lakki, Banu, Karak etc. are being exploited but WBG could assist in carrying out studies to assess the potential. Also, there is a lot of mismanagement in mineral resource extraction due to improper mining methods, lack of facilities, missing infrastructure for transport and poor capacity. The WBG could also provide technical assistance and knowledge on management and economic growth in this sector. 65. WBG as a development partner was also requested to push the provincial and federal governments to come up with a long term strategic plan. The biggest issue in Pakistan is lack of continuity of policies and national consensus on priority issues. 66. To counter the negative perception of the WBG at the community level, it was suggested that the WBG engage more frequently with the stakeholders and community. WBG was also urged to support donor coordination and work with the government to ensure transparency in development aid since a collective impact of donor assistance is not visible in KPK. D. FOLLOW UP / NEXT STEPS 67. The WBG team thanked the participants for their active participation, contributions and sharing views on the challenges and priorities for Khyber Pakhtunkhwa. As mentioned before, the WBG has limited resources and may not be able to respond to all demands. We would however share the inputs at various forums and try to facilitate and leverage support for Khyber Pakhtunkhwa development priorities to the extent possible. 68. Next steps: the consultations report documenting the discussions being shared with everyone. Second round of consultations would take place in February 2014 and first draft of the WBG CPS document will be shared for validation and comments. The CPS will be finalized and presented to the WBG Board of Executive Directors in June 2014. CPS implementation will start from July 1, 2014. During implementation, effort will be made to share widely progress and results on a regular basis. 13 Please follow us on Facebook (www.facebook.com/WorldBankPakistan) or the webpage (www.worldbank.org.pk) for providing feedback and regular updates/information on Pakistan Country Strategy and Program. We can also be reached at the following address: The World Bank 20-A Shahrah-e-Jamhuriat G-5/1, Islamabad Phone: (+92-51) 227-9641-6 Fax: (+92-51) 227-9648-9 E: mariamaltaf@worldbank.org E: islamabadoffice@worldbank.org Attachment: List of Persons Met 14 CPS Consultation Session: Academia, Analysts, Think Tanks November 7th, 2013 S No Name Designation/ Party 1. Dr. Noor Ul Haq Senior Research Fellow, Islamabad Policy Research Institute 2. Dr. Javed Chatta Director, center for Energy and Econ Studies, GIK Institute 3. Yaser Iqbal Paracha Incharge, Vice Chancellors Secretariat, Uni. Of Agriculture, Peshawar 4. Professor Dr. Muhammad Afzal VC, Uni. of Agriculture, Peshawar 5. Dr. Minhas Majeed Khan University of Peshawar 6. Dr. FR Malik VC 7. Brig Azam Jamal Director General NUML, Islamabad 8. Fazli Javed Afridi NIRE 9. Dr. Farrukh Saleem 10. M. Saleem Khan Jhagra 11. Rear Admiral Saleem Akhtar Pro-Rector, Bahria University 12. Dr. S.M Junaid Zaidi Rector, COMSATS IIT, ISB 13. Tahir Naeem Director (PDS HRD, COMSATS IIT, Isb. 14. Dr. Bushra Yasmin Chairperson Econ Dept, FJWU, RWP 15. Ayaz Wazir Former Ambassador 16. Dr. Nasser Ali Khan Vice Chancellor 17. Imtiaz Gilani Vice Chancellor UET Peshawar 18. Sakib Sherani 19. Prof. Dr. Masoom Yasinzai VD, QAU 20. Rachid Benmessaoud World Bank, CD 21. Uzma Basim Senior Project Officer, Word Bank 22. Hanid Mukhtar Senior Economist, WB 23. Sana Shahid Ahmed CMU, WB 24. Hira Sarfaraz CMU, WB 25. Muhammad Waheed World Bank 26. Shahnaz Arshad World Bank 27. Huma Zafar World Bank CPS Consultations Civil Society and Youth November 8th, 2013 S No Name Designation/ Department 1. Duaa Mujeeb Communications Intern, GSP PCNA 2. Ali Gohar Apprentice 3. Amjad Ali Chairman OHD/YMTA 4. Shahid Ullah Jan Program Coordinator HRCPPSN 5. Dr. Ahsan Mir, CEO, TVO 6. Farhana Azmi National Commissioner, Pak Girl Guide Association 7. Nasseer Memon, CEO, SPO 8. Ibrar Anjum ibrar@rspn.org.pk 9. Agha Ali Javad 10. K.K. Tetlay COO 11. Muzaffaruddin CEO, BRAC 12. Imtiaz Khan Deputy sec. KPK Boy Scout Association 13. Aftab-ur-Rehman Rana President, Sustainable Tourism Foundation 14. Abrar Haq COO, PMN 15. Tayyaba Gul COO, Youth Catalyst 16. Shirin Javed Project Officer, Aurat Foundation 17. Rubina Massey Executive Director ICDI 18. Babar Bashir 19. Ghulam Qadri Deputy Director 20. Furqanullah Program Manager 21. Tahir Rasheed GM- LEAD Pakistan 22. Saadullah AYaz Manager, IUCN 23. Muhammad Idrees Director Program 24. Saleem Malik Executive Director- Bedari 25. Rashida Dohad Omar Asghar Khan Foundation 26. Lily Phan World Vision 27. Shahid Fiaz The Asia Foundation 28. Ahmad Jamal Senior Group Head PPAF 29. Kanwal Qayyum Senior Program Manager, PCP 30. Maryam Bibi Social Activist 31. Masood Ul Mula SRSP 32. Basit Subhani Payaam Trust 33. Dr. Zakir Shah Pop Council 34. Rachid Benmessaoud World Bank, CD 35. Uzma Basim Senior Project Officer, Word Bank 36. Hanid Mukhtar Senior Economist, WB 37. Sana Shahid Ahmed CMU, WB 38. Hira Sarfaraz CMU, WB 39. Muhammad Waheed World Bank 40. Shahnaz Arshad World Bank 41. Huma Zafar World Bank CPS Consultations KP, Private Sector December 11th, 2013 S No Name Designation/ Department 1. Ishfaq Ahmed Afridi SMEDA 2. Haji Saleem DI Khan Pak Millan Sohan Halwa 3. Hamid Ali Rehmani General Sec. Markazi Ajnuman –e-Tajiran 4. Adeel Rauf Khyber Match Factory 5. Shahid ur Rahman Tribal Chamber of Commerce and Industry 6. Nauman Wazir Frontier Foundry Pvt. Limited 7. Nasira Lughmani Moon Way Beauty Parlour 8. Shamama Arbab 9. Rachid Benmessaoud World Bank, CD 10. Uzma Basim Senior Project Officer, Word Bank 11. Shabana Khawar Senior Project Officer, IFC 12. Vardah Malik Consultant, IFC 13. Huma Zafar Consultant, WB CPS Consultations KP Political Leaders December 11th, 2013 S No Name Designation/ Department 1. Ms. Dina Naz Khattak MPA, PTI 2. Hajra Awan Advocate, JI 3. Rustam Shah Political Analyst 4. Illyas Bilour Senator, ANP 5. Rashda Riffat MPA, JI 6. Rachid Benmessaoud World Bank, CD 7. Uzma Basim Senior Project Officer, Word Bank 8. Sana Shahid Operations Analyst, WB 9. Hira Sarfaraz Operations Analyst, WB 10. Huma Zafar Consultant, WB