PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA384 Public Disclosure Copy Project Name PK: Punjab Cities Governance Improvement (P112901) Region SOUTH ASIA Country Pakistan Sector(s) Sub-national government administration (45%), General water, sanitation and flood protection sector (35%), General transportation se ctor (20%) Lending Instrument Specific Investment Loan Project ID P112901 Borrower(s) Economic Affairs Division Implementing Agency Planning and Development Board, Government of Punjab Environmental Category B-Partial Assessment Date PID Prepared 07-Sep-2012 Estimated Date of Appraisal Completion 00000000 Estimated Date of Board Approval 11-Sep-2012 Decision I. Project Context Country Context Pakistan is the world's sixth most populous country, yet its economy is ranked the 45th largest in the world. As such, with a per-capita income of US$1,050 in 2010, Pakistan is ranked as a low-income country. After a period of strong economic growth and poverty reduction in the early part of this millennium, progress appears to have slowed considerably. Provincial context: Partly because of its size, Punjab has a significant influence on the level and change of national economic and social indicators. In the early to mid- 2000s, Punjab managed its finances quite prudently. Abundant transfers from the federal government, and fiscal and financial management reforms created sizable fiscal space. Between 2002/03 and 2006/07, provincial revenue almost doubled. As a result, it’s recurrent expenditure increased by 52 percent and its development program increased almost six-fold from Rs 18 billion in 2002/03 to Rs 110 billion in 2006/07. In 2008/09, however, as economic conditions deteriorated due to external and internal shocks, the provincial fiscal situation was badly impacted. Large shortfalls in revenue and sharp increases in expenditure led to a fiscal deficit, prompting the provincial government to borrow heavily from the State Bank of Pakistan. Servicing this debt has imposed an additional burden on already weak finances. Nonetheless, the province showed a significant fiscal surplus in 2010/11. This was partly an outcome of a favorable NFC Award that significantly Public Disclosure Copy enhanced the province’s share of federal revenue, but partly was also due to a strong effort made by the provincial government to reduce its low priority expenditure II. Sectoral and Institutional Context Cities are at the center of Pakistan’s economic development and growth. Of Pakistan’s current population of 177 million, over 65 million (or 37%) live in cities compared to 43 million (32%) in 1998 . Urban economic sectors have become the drivers of economic growth in Pakistan as a whole, as well as in the Punjab. It is estimated that cities contribute 78% of the country’s GDP ; in the Punjab, the five largest cities account for 50% of the gross value of industrial production . Punjab is among the most urbanized regions of South Asia and is experiencing a consistent and long-term demographic shift of the population to urban regions and cities. The urban population in 2011 is projected as 48% of the total on the basis of the inter-census rate of 3.4% per annum recorded in 1998 . While Lahore, the capital of Punjab and its largest city, is currently home to about 8 million people, its population is expected to reach 10.8 million people in 2025 owing to its position as an urban magnet in the region. Punjab has four other cities with populations in excess of one million, namely Faisalabad (3 million), Gujranwala and Rawalpindi (2 million each), and Multan (1.7 million) . Collectively, about half of the urban population in Punjab is concentrated in these five cities. In addition, three other large cities (Sialkot, Bahawalpur and Sargodha) are poised to cross the one million mark. Yet cities in the Punjab face many challenges. Cities have inadequate infrastructure and urban management capacities to meet current needs, let alone an ability to respond to growing demand. Institutional and systemic obstacles pose significant challenges to improved performance in urban areas: (i) Fragmented mandates and vague jurisdictional boundaries hinder spatial planning; (ii) City level systems for resource planning and management are severely lacking; (iii) Urban areas also suffer from non-predictable capital investment funding and low own source revenues; and, (iv) There is an absence of accountability of local governments to citizens. Government of Punjab’s Urban Agenda: The government’s fundamental urban goal is to improve the performance and accountability of cities – by strengthening the planning, financing, execution, and monitoring functions of local governments. The Government of Punjab (GoPunjab) Urban Agenda is reflected in the Mid-Term Budgetary Framework (MTBF) 2011-2014 . According to the MTBF the vision of GoPunjab for the urban sector is to “develop modern and efficiently managed urban centers to serve as engines of growth for provincial economy�. GoPunjab has recognized that carrying out of urban reforms is a long-term undertaking, and therefore is approaching it in three stages. In the first stage, which is largely complete, the GoPunjab has initiated, through a series of provincial instructions, changes aimed at improving the operating environment for urban development i.e., institutional coherence in strategic and medium term planning, transparency in procurement decisions, professionalization of service delivery entities, and introduction of GIS based information system. As a second step, GoPunjab is currently focusing on strengthening urban governance – the institutions and management systems need to ensure that these operational reforms are successful. Based on these policy and governance improvements, GoPunjab plans to tackle service delivery in the third stage of its urban strategy. III. Project Development Objectives Public Disclosure Copy The project development objective is to support the Punjab large cities in strengthening systems for improved planning, resource management, and accountability. IV. Project Description Component Name Component 1: Performance Grants Component 2: Project Implementation and Capacity Building V. Financing (in USD Million) For Loans/Credits/Others Amount BORROWER/RECIPIENT 5.00 International Development Association (IDA) 150.00 Total 155.00 VI. Implementation The project implementing entity will be the Government of Punjab through the Planning and Development Department (P&DD). P&DD will be responsible for coordination between relevant provincial departments, for which it has established a Steering Committee (SC) for the project headed by the Chairman, Planning and Development Board. It comprises of Secretaries from four provincial departments (Finance, Local Government and Community Development, Housing and Urban Development, and Public Health Engineering), the five District Coordination Officers of the project cities, and the Project Director USPMSU as the Secretary. The SC will be responsible for overall guidance and monitoring of project implementation. External monitoring will rest with the Directorate General Monitoring and Evaluation, Planning and Development Department (P&DD). P&DD will entrust project management and implementation to the Urban Sector Planning and Management Services Unit (USPMSU) through an Agreement between GoPunjab and the USPMSU (Private) Limited. Under this arrangement, the liaison, internal monitoring, and coordinated project reporting at the provincial level will be the responsibility of the USPMSU on behalf of the P&DD. In addition, USPMSU will be the main agency responsible for implementation of Component 2 of the project. A City Program Unit (CPU) will be established in each of the five cities to support project implementation and assist in delivering on the city level activities. CPUs will function under the office of the executive head of the city (DCO) who shall be ultimately responsible for delivering on the Public Disclosure Copy project activities. Each CPU shall be adequately staffed with requisite skills to support the cities to deliver on the project results. The GoPunjab has signed Memorandum of Partnerships (MoPs) with the five participating cities, delineating roles and responsibilities of all parties. The MoPs lay out the envisaged institutional roles, operational responsibilities, and results required to be achieved under the Project at the provincial and city levels. Upon the activation of Component 3 subject to the fulfillment of due conditions, the GoPunjab will need to designate the responsible agency for implementation of activities under Component 3, and may delegate the development and adoption of Contingent Emergency Response Implementation Plan as well as the development, adoption, and disclosure of safeguards instruments to the responsible agency. VII. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ VIII.Contact point World Bank Contact: Raja Rehan Arshad Title: Lead Disaster Risk Management Specialist Tel: 473-7387 Email: rarshad@worldbank.org Public Disclosure Copy Borrower/Client/Recipient Name: Economic Affairs Division Contact: Mr. Javed Iqbal Title: Secretary Tel: 92519210 Email: secretary@ead.gov.pk Implementing Agencies Name: Planning and Development Board, Government of Punjab Contact: Javed Aslam Title: Chairman Tel: (92-42) 9921-4069 Email: chairmanpnd@gmail.com IX. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy