GOVERNMENT OF NWFP

NORTH WEST FRONTIER PROVINCE

COMPREHENSIVE DEVELOPMENT STRATEGY

2009 - 2015
DRAFT FINAL REPORT This is a draft final report and may be updated, replaced or obsolete by updated version at any time. It is inappropriate to cite this document as other than "work in progress".

2 April 2009

NWFP Comprehensive Development Strategy NWFP COMPREHENSIVE DEVELOPMENT STRATEGY 2009 Table of Contents A 1. 2. 3. 4. B 5. 6. C Context and Framework ......................................................................................... 12 The Development Challenges for NWFP 12 Strategic Overview 15 Public Finance 17 The Approach Used in Developing the CDS 20 Governance, Security and Institutional Development ........................................... 22 Governance 22 Security 25

The Social Sector ................................................................................................... 28 7. Education 28 8. Health 32 9. Social Protection 38 10. Local Development and Poverty Alleviation 41 Infrastructure .......................................................................................................... 44 11. Access and Roads 44 12. Irrigation and Water Resource Management 45 13. Energy and Power 48 14. Water and Sanitation 52 15. Housing and Public Building 54 Economic Management ......................................................................................... 56 16. Agriculture and Livestock 56 17. Reconstruction Opportunity Zones 60 18. Minerals 61 19. Facilitating Private Sector Development in NWFP 64 20. Technical Education 66 Urban Development And Transport....................................................................... 70 Implementing the CDS .......................................................................................... 72 21. Managing the Strategy 72 22. Financing the Strategy 73 23. Risk Management 77 24. Monitoring and Evaluating Progress under the CDS 78

F G

NWFP Comprehensive Development Strategy Abbreviations ADB ANP BISP DSP ESED FD GoNWFP GoP HD HIES IDP IFI LGRDD MDGs MTBF NEPRA NRM NWFP O&M OPM PASDEC PBM P&DD PPHI PRSP PSDP RSP PSLM TEMPD TEVT TMA WD WFP

Asian Development Bank Awami National Party Benazir Income Support Programme Decentralization Support Programme Elementary and Secondary Education Department Finance Department Government of North West Frontier Province Government of Pakistan Health Department Household Income and Expenditure Survey Internally Displaced Person International Finance Institution Local Government and Rural Development Department Millennium Development Goals Medium Term Budget Framework National Electric Power Regulatory Authority Natural Resource Management North West Frontier Province Operation and Maintenance Oxford Policy Management Pakistan Stone Development Company Bait-ul-Mal Planning and Development Department Peoples Primary Healthcare Initiative Poverty Reduction Strategy Paper Public Sector Development Programme Rural Support Programme Pakistan Social and Living Standards Measurement Survey Technical Education and Manpower Training Department Technical Education and Vocational Training Tehsil/Town Municipal Administrations Department of Works World Food Programme

Glossary Abiana deeni madaris Gadoon-Amazai Guzara Hazara Khushali Kohistan Rahim Yar Khan Sarhad Tameer i Sarah tehsil Zakat

NWFP Comprehensive Development Strategy Map of NWFP

NWFP Comprehensive Development Strategy Executive Summary North West Frontier Province stands at a critical point in history. Decades of steady development have been interrupted by a conflict that has spread across the border from Afghanistan. The conflict is patchy but there are some areas of the province where lives are greatly disrupted and where it is difficult to maintain normal public services. This Comprehensive Development Strategy describes a path that aims to benefit all the people of the Province by offering the possibility of better employment and access to improved public services involving government, civil society and the private sector. The progress that was being made in NWFP before the conflict demonstrates the potential of the Province. Despite the disadvantages of isolation and the difficulties of providing basic services of education and health, NWFP grew faster than the rest of Pakistan. The province has strong agricultural skills, well adapted to the unspoilt natural environment. Located at the crossroads of important international trading routes, the people of NWFP have long traditions of trade and travel. Hydroelectric power and minerals offer resources for a modern economy. Despite the proven potential for development in NWFP, the Province starts from a backward position arising from decades of incomplete involvement in national development. This affects levels of poverty and some social development indicators, as described in the table below. There are large geographical variations in the nature and severity of poverty and the large gender differences. Table X1 Key Indicators for NWFP and Pakistan Population (1998 census) Population (March 2009 estimate) Population under 15 GDP Growth Rate Population below poverty line Literacy rate Rate of attended births Roads km / sq. kilometre Households with tap water Households with safe sanitation NWFP 17.7m 22.2m 47.2% 4.6% 38.1% 47% 51% 0.16 47% 60.8% Pakistan 132.4m 165.7m 43.4% 5.8% 34.0% 55% 61% 0.32 34% 62.5%

Sources: NWFP Development Statistics; NWFP White Paper 2008-09; Demographic Health Survey

The Government of NWFP receives 83% of revenue from Federal sources. The timing and level of Federal transfers is difficult to predict, which undermines effective budgeting in the Province. As a result, Revised Estimates for expenditure are produced each year, which involve substantial changes. In recent years, the revisions have had to accommodate changing policy priorities associated with higher security spending and the need to accelerate some high profile programmes that will build confidence in local communities. In real terms, revenue and expenditure has increased by 7% per year over the last 10 years. This has allowed government to improve services and to introduce a programme of decentralisation and other institutional reforms. 5

NWFP Comprehensive Development Strategy However, the increasing levels of conflict in recent years have had major implications for government finance. The Government estimates that damage to public property has amounted to nearly Rs 5bn to date. Additional policing costs are about Rs 3.5bn. About Rs 5bn of revenue has already been lost and a further Rs 5bn is expected to be lost through the remainder of the conflict and recovery. The new provincial government is determined to address these challenges and opportunities and has produced the CDS with the participation of the provincial departments and with consultation and advice from key representatives of civil society and the private sector. The CDS has the following priority policies. Governance and Security. Several recent initiatives for improving governance were launched in the province in the recent pass which will be particularly important through the short and medium term, when large increases in public expenditure are planned and the absorptive capacity of government will be improved. The maintenance of law and order has required the diversion of public funds to the police services in recent years, and this will need to be maintained for the next two years. A programme of investment in new police post, lines, office and stations is needed to respond to the expansion in the number of districts and the new facilities will now need to be designed and equipped to deal with the conflict. Key measures in governance and security include: deepening of the programme of Public Financial Management construction of policy infrastructure in new Districts, improvement of police infrastructure in conflict areas, repair of damaged facilities and procurement of equipment, vehicles and ammunition for the police police training, capacity building and exposure to new subjects like counter terrorism etc Social Sectors. Education standards in NWFP have improved markedly in recent years, with literacy increasing from 37% in 1998 to 47% in 2006. However, literacy is still well below the national average of 55%. Low literacy reflects the challenges of providing high quality schooling in the difficult terrain and complex social traditions of NWFP. The Gross Enrolment Rate in primary education in NWFP is currently about 82%, compared with 91% for Pakistan as a whole. Although this rate has improved dramatically from a level of 70% in 1998, the rate of improvement has lagged behind that of Pakistan as a whole, especially in the last few years. NWFP has an exceptionally young population and this will lead to a very rapid growth in the demand for education in the next twenty years. The Government is planning to address this with an ambitious programme to improve the number of teachers and classrooms. Equally important, the education plan also stresses the need to switch from a knowledge education to a skills education and to be more flexible in cooperating with schools run by civil society and by the private sector. The health status of NWFP is complex. Infant mortality indicators are significantly lower for NWFP than for Pakistan as a whole (at 6.3% and 7.8% respectively). This is despite relatively low levels of attended birth for NWFP compared with the national average (51% compared with 61%). Immunisation rates in NWFP are below that of Punjab, but 6

NWFP Comprehensive Development Strategy significantly higher than in Sind or Baluchistan. The private sector currently provides between 70% and 80% of health services in NWFP, which is high by international standards but low compared with other Provinces. The NWFP strategy for health is based on a major improvement in access to health services, including: investment in health facilities; recruitment of new staff; supply of equipment, supplies and drugs; and coordination with the private sector. This strategy builds on the success of the Peoples Primary Healthcare Initiative. In addition, the health strategy includes initiatives to improve the efficiency of management, to allow health services to be more closely matched to demand and to improve regulation and quality assurance. Improvement in emergency response is also stressed, given the nature of the security situation. The main programmes of social protection are defined at national level and the CDS includes measures to ensure that these programmes are implemented more efficiently. In addition, a programme of labour intensive works is planned, which is designed to provide sustained employment for young men and thereby help reduce anti-social behaviour. There will be some expansion of spending on stipends and on investment in new shelters, centres and refuges for the most vulnerable. The strategy aims at stimulating the ....in the microfinance and to make it as an effective tool for poverty reduction in the province. The CDS attaches a high priority to undertaking high visibility local development activities to build confidence in communities. This programme will build on the successful experience with Rural Support Programmes (RSPs) and) and other organizations engaged participatory development in the province. The spirit behind this initiative is the explicit acknowledgment that some of the organizations working with the local communities have required and developed some unique set of abilities and capacities. These organization excel in the fixed of social mobilization and participatory Development. The cds aims at giving these organizations a role in local development and poverty alleviation. The government of NWFP will partner with some organization which is break from usual official business. Key priority measures in the social sectors include: increased expenditure on teachers salaries free textbooks training for teachers construction and rehabilitation of schools improving health facilities increased health staff health equipment, supplies and drugs improvements in emergency response capability local development programmes, including welfare programmes, community infrastructure, education, health and agriculture

Infrastructure. Over 90% of freight and 96% of passengers in NWFP travels by road. Demand for road transport has been expanding at a rate that is much faster than economic development as a whole. The majority of the funding for roads has been devoted to expanding the network and expenditure on road maintenance has been a small fraction of what is required. As a result, 44% of Provincial roads and 78% of District roads are in poor or bad condition. The CDS continues with the programme of improving 7

NWFP Comprehensive Development Strategy and expanding the road network, but stresses that a much higher proportion of resources will be devoted to increasing recurrent spending on roads. There are substantial opportunities for expanding the irrigated area in NWFP and the CDS will accelerate the current programme of investment in new irrigation infrastructure. However, current spending on maintenance of the irrigation system is about a quarter of what is required and there is an even higher priority in maintaining and rehabilitating existing schemes to increase water efficiency, in view of the constraints on overall water supply. Priority is also given to investment in water efficiency programmes, including small scale schemes, water conservation and regulation of groundwater. Finally, in view of the increasing variability of rainfall and reduction in natural mountain water storage that is likely to arise from climate change, a significant sum is committed for flood protection. In energy and power, the Government of NWFP will seek to promote private investment and to negotiate attractive terms with investors that will ensure improved electricity supply and contribution to government revenue. The majority of investment in water and sanitation is undertaken through urban development plans and local development in rural areas. The Department of Local Government will provide the necessary policy environment to ensure that this investment is effectively allocated and that incentives exist for efficient maintenance. The lack of availability of housing in NWFP makes it difficult to retain government officials in this post. Especially in the provincial metropolis and some of the far flung area. The Government is therefore committed to a programme of rehabilitation and construction of housing for officials. In addition, government is committed to obtaining land for housing for the poorest households in NWFP. The priority measures for infrastructure are: maintenance and rehabilitation of roads investment and improvement in roads maintenance and construction work on large dams and canals government contributions to public-private partnerships on hydel work on small dams flood protection works housing Economic Management. About three quarters of the population in NWFP are at least partly dependent on agriculture and this includes many of the poorest households. About 70% of the value of production is crops and 30% livestock products. The recent events in world food markets have highlighted the importance of agricultural production in NWFP, both as a way of protecting the population from the impact of increasingly expensive food imports and as an opportunity to make rapid improvements in profits. However, agricultural growth is constrained by fragile natural resources, fragmentation of land holdings, underfunded research and extension and limited availability of financial services, all of which contribute to low levels of productivity. The Government will provide assistance through improved access to inputs and technology and through a programme of investment in land levelling and development and investment in water harvesting that is geared towards increased efficiency and productivity. 8

NWFP Comprehensive Development Strategy

Major opportunities exist for the expansion of employment through business creation in Reconstruction Opportunity Zones and in minerals development. Public investment in infrastructure will allow these opportunities to expand efficiently. Some assistance with marketing activities will also be provided and better coordination between provincial and national level export and investment promotion will be achieved. The relative ease of establishing businesses in NWFP will be promoted and reforms will be introduced to simplify the administrative procedures. The business environment in the province will be made friendly and efforts shall be made provide the requirement infrastructure community and industry in the province The services in technical education are constrained by limited funding which means that over 90% of expenditure is on salaries and there is limited scope for applied work. Many courses are still run along traditional lines and the Government is committed to improving the scope and content of technical education to match more closely the needs of employers in NWFP. The priority measures in economic management do not involve the same costs as in other sectors of government intervention, since the role of government is to facilitate private investment. The main costs are: land development and the promotion of water harvesting and soil conservation upgrading existing and establishment new industrial zones to exploit the opportunities associated with ROZs expansion, restructuring and rehabilitation of the technical education system Urban Development. The Government have developed Urban Development Plans for 22 urban areas in NWFP. These cover the main public services, including water, sanitation, drainage, streets and public infrastructure to accommodate private services in transport, agriculture and trade. Implementation. The implementation of the CDS will be assured through the link with the Medium Term Budgetary Framework, which will rely on the CDS for the identification of major priorities. Implementation will be coordinated by a high level committee supported by a special development unit in P&DD. This committee will monitor the level of expenditure on the key priority measures and will ensure that the CDS priorities are reflected in the annual Budget Strategy Paper, at the start of the annual budget cycle. Departments will produce progress reports as part of the budget process and will report any problems encountered with their priority measures. Cross-cutting Issues. The Government of NWFP recognises the importance of providing additional weight to a number of cross-cutting issues. This will be achieved through the formation of gender equality, including in education, health and employment environmental sustainability, notably concerning water resources community participation in government programmes strengthening provincial and district capacity and promoting transparency youth employment

Costing. Costing estimates have been made for the CDS and these distinguish between: the short term, over the next two years when reversing the course of the conflict is the 9

NWFP Comprehensive Development Strategy highest priority; the medium term, over the following three years, when the province will be in a phase of recovery; and a further period of two years. The costs have been reviewed and adjusted by the Provincial Government departments in the province to reflect the balance of priority across sectors. The estimates suggest that a total of Rs 145 bn will be required in the next two years, above the current levels of expenditure. Rs 34 bn will be provided by the real growth in revenue and a further Rs 10bn from renegotiated hydel profits, leaving Rs 101 bn (US$ 1,258m) to be covered by expanded foreign grants and loans, above the current level. In the medium term, from year 3 to year 5, the total additional requirement is Rs 238 bn, of which Rs 86 bn will be provided by increased domestic revenue, plus Rs 15bn from increased hydel profits, leaving Rs 137 bn (US$ 1,714m) to be covered by increased donor support. From year 6 to year 7, an additional Rs 159bn will be required, with Rs 67bn (US$ 834m) required from development partners. This is summarised in Table X2. Table X2 Funding for Full CDS Implementation (Rs bn) Y1-Y2 Y3-Y5 Additional CDS Expenditure 158 255 Added Revenue from GDP growth 34 86 Added Revenue from hydel 10 15 Foreign Grants and Loans 114 154 in US$m 1422 1930 Table X3 summarises the sectoral allocation of resources. Table X3 Sectoral Allocation of Resources (Rs m)
Sector Governance Security Education Health Social Protection Local Development Access and Roads Irrigation Energy Water and Sanitation Housing Agriculture ROZs Minerals Privates sector Development Technical Education Urban Development Total Y1-Y2 560 8,340 29,683 31,300 6,240 21,727 18,200 16,909 2,404 2,136 1,360 9,707 1,963 1,000 10 900 5,345 157,784 Y3-Y5 750 3,200 67,415 46,649 9,179 47,745 26,345 18,233 6,338 3,360 3,844 8,230 3,425 1,425 4 2,460 6,825 255,426 Y6-Y7 500 1,800 45,277 31,100 6,119 31,830 17,396 12,089 4,226 2,218 2,562 5,487 2,283 950 2 1,640 4,550 170,029 Total 1,810 13,340 142,374 109,049 21,538 101,302 61,941 47,231 12,968 7,714 7,766 23,424 7,671 3,375 16 5,000 16,720 583,239 % Total 0.3% 2.3% 24.4% 18.7% 3.7% 17.4% 10.6% 8.1% 2.2% 1.3% 1.3% 4.0% 1.3% 0.6% 0.0% 0.9% 2.9% 100.0%

Y6-Y7 170 82 10 78
975

Total 583 202 35 346

4328

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NWFP Comprehensive Development Strategy

Five sectors require 83% of total support. These are: education (25% of total), health (20%), local development (19%), roads (10%) and irrigation (9%). Risks. Security provides both the primary objective of the CDS and the main source of risk. To address this risk, there is a high dependency on local implementation. There is also a risk of limited implementation capacity. This risk is also addressed by using local management capacity, following proven methods, such as those of the RSPs, and by provided strong central coordination. NWFP is also vulnerable to rapid movements in world food and fuel prices, which could adversely affect the provinces poorest households. This is addressed by giving a high priority to agricultural development. Improved agricultural productivity, along with investment in flood protection, will also help increase the Provinces ability to adapt to climate change. The CDS will require a major increase in donor funding, which will generate risks of duplication and inconsistency. This will be countered by the strengthening of public finance management in general and of the Foreign Aid Wing of P&D in particular. Finally, the provisional Government is aware of the risks that the recurrent costs implications of the CDS will place pressure on the budget in future. The Government has calculated these costs and is confident that the expanding revenue associated with economic growth will be sufficient to meet them. Monitoring. The overall progress of the province will be monitored using 12 core indicators, focusing on social welfare and economic capability. These indicators are presented in Table X4 below. Table X4 Monitoring Indicators
Indicator Poverty rate Roads in good condition Area of land bought into cultivation (ha) Literacy rate Primary net enrolment rate Ratio of girls: boys in primary school Infant mortality Proportion of fully immunised children Maternal mortality rate per 100,000 Contraceptive prevalence rate Access to drinking water Access to sanitation Aid as a % of GDP MDG MDG 1 MDG 1 MDG 1 MDG 2 MDG 2 MDG 3 MDG 4 MDG 4 MDG 5 MDG 5 MDG 7 MDG 7 MDG 8 Latest 39% 24% 0 47% 49% 0.52:1 6.3% 47% 275 31% 71% 66% 0.4% 2010 2015 Target Target 30% 20% 30% 45% 20000 70000 55% 75% 60% 80% 0.70:1 1:1 6.0% 5.5% 60% 75% 250 200 45% 70% 75% 85% 72% 85% 5.0% 3.3%

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NWFP Comprehensive Development Strategy A CONTEXT AND FRAMEWORK

The NWFP Comprehensive Development Strategy presents the Governments vision for the future of the Province. It is comprehensive in its scope, covering all areas of government policy. It is comprehensive in its depth, moving from overarching strategy to the priority policies and programmes that will implement this strategy. And it is comprehensive in the sense that it is an important early step in improved public sector planning that will link to new initiatives in transparency, budgeting and participation. The CDS takes into account the short term (2009 and 2010), the mid term (2011 to 2015) and the long term (2016 to 2030). It defines clear and changing priorities for each of these periods and assesses the costs of the priority programmes involved. It matches the expected costs with funding from domestic and from foreign sources. And, finally, it defines 10 core indicators which will be used to assess the progress of the strategy. 1. The Development Challenges for NWFP

Information on the standard of living in NWFP are provided by the national Household Income and Expenditure Survey (HIES, 2001/02) and the Pakistan Social and Living Standards Measurement Survey (PSLM 2005/06). The Pakistan Demographic and Health Survey (PDHS, 2006/07) provides additional information and a Multiple Indicator Cluster Survey (MICS) is currently being finalised. Poverty. NWFP has a population of about 22.2m, growing at about 2.8%. The province has the highest incidence of poverty in Pakistan. According to the 2001/02 HIES, 39.2% of the population in NWFP was poor, compared with 34.0% for Pakistan as a whole. Rates of poverty in rural areas of NWFP were 41.1% compared with 28.1% for urban areas of NWFP. The poverty rate amongst women is higher in NWFP than in other provinces. Statistics on income distribution are unclear, with the HIES and PDHS surveys suggesting that NWFP has a relatively equal distribution compared with other provinces, and the PSLM 2004/05 data suggesting the opposite. This reflects the complex forces influencing the nature of poverty, associated with land ownership, economic trends, social conventions and natural resources. Despite the challenges facing NWFP, the province has had some success in promoting economic development. Between 1998/99 and 2001/02, the level of poverty in NWFP did not worsen significantly, at a time when national poverty levels were worsening. This was achieved despite high population growth rates. The relative success of NWFP in protecting itself from declining poverty appears to have been based on increased production of some agricultural crops, especially maize, and a marked increase in remittances. The recent global economic recession will affect the level of remittances received and place increased pressures on poverty. Since 2001/02, poverty levels are likely to have worsened, through the combined impact of the 2005 earthquake and the increasing insecurity in parts of the province. Behind the statistics of poverty are more complex dimensions of poverty involving gender, health, education, income, environmental pressures, natural disasters and destitution arising from violence. 12

NWFP Comprehensive Development Strategy

Women are strongly disadvantaged in NWFP. Employment rates for women are low and representation in government and senior decision-making positions is very limited. Access to education and health care is low and rates of maternal health care are particularly low, leading to high maternal mortality. Most women are subject to economic dependence and are often forced to take on the majority of the manual work of the household. There are serious concerns about violence against women. Despite the education of an increasing number of girls, the traditional roles of women have changed little in the last decades. The education status is described in chapter 7. According to household survey data, the incidence of poverty is significantly higher amongst households whose head has no education. The health status of NWFP is dealt with in chapter 8. The link between health and poverty is complex and takes place mainly through the effects of poor nutrition the tendency of the poor in NWFP to make fewer visits to health services, poor coverage and quality of public health services, cost of private health services. Affordability of a major segment of population. The poor are particularly dependent on forest and water resources, both of which are coming under increasing pressure. The increasing rate of forest depletion is already reducing the access of the poor to firewood, both for household use and as a source of income. Declining rainfall and river flows are beginning to threaten productivity on rain fed and irrigated land. As with the other factors affecting poverty, the relationship between poverty and insecurity is complex and works in both directions. High levels of poverty and unemployment, especially amongst young men, have a major effect on insecurity and this insecurity then affects the well-being and incomes of the wider population. The 2005 earthquake in Hazara devastated the region, destroying homes and public service facilities and having a major impact on livelihoods, including crops, livestock and tourism. Finally, the regional insecurity has led to large numbers of Afghan refugees living in NWFP, many of whom are now involved in economic activities, such as transport, construction and hotels, thus reducing employment opportunities for the local population. The poverty of women is particularly marked when including health and education status, as women have very low rates of use of health services and low school attendance rates, compared to men.
Table 1 Key Indicators

Population (1998 census) Population (March 2009 estimate) Population under 15 GDP Growth Rate Population below poverty line Literacy rate Rate of attended births Roads km / sq. kilometre 13

NWFP 17.7m 22.2m 47.2% 4.6% 38.1% 47% 51% 0.16

Pakistan 132.4m 165.7m 43.4% 5.8% 34.0% 55% 61% 0.32

NWFP Comprehensive Development Strategy

Households with tap water Households with safe sanitation

47% 60.8%

34% 62.5%

Sources: NWFP Development Statistics; NWFP FD White Paper 2008-09; Demographic Health Survey

The NWFP faces a particular challenges arising from the fact that it has the most youthful population in Pakistan, with about 30% of the male population being between the ages of 15 and 29. The large majority of this young male population has little formal employment and only limited opportunities for informal income generation. The young male population provides a major resource for economic growth, but also a serious risk to security, if it is unable to find rewarding activities.
Box 1 The Shah family: a typical poor household in NWFP The Shah family have 10 people. The head of the family is not working and has problems with addiction to hashish. He has no regular source of income. He has two sons and six daughters, many of whom are involved in child labour and hardly meeting their daily nutrition needs. They are living in a mud house borrowed from a cousin without paying rent and cannot afford to use the health or recreation facilities in the neighbourhood. The mother of the family gave birth to the first 6 children without a skilled attendant. However, after problems with the seventh child, a neighbour organised some visits from a midwife working with a health NGO. The two sons attended primary school and have some basic literacy skills. They now work as casual manual labour on occasional construction and farming jobs. The eldest three daughters did not go to school. The family are frequently affected by health problems associated with malnutrition and drug issues. One of their daughters has heard about the BISP, but they are unaware about how to apply and there are no contacts that can help in their village.

Security. NWFP has been severely affected by increasing insecurity in recent years. This has been triggered by insurgency originating in Afghanistan, but has exploited existing sectarian, tribal and factional tensions. The range of security threats is now complex and includes bombings of officials and civilians, kidnapping and increased levels of general crime. The implications of this insecurity are widespread: economic opportunity and employment is declining, with many businesses closing or moving out of the province it is difficult to maintain basic public services in some areas the costs of maintaining law and order are greatly increased large groups of displaced people require basic support regional trade has been disrupted, reducing employment and revenue international funding for development has declined markedly The situation is not uniform across the NWFP. As a result of the security situation, development activity needs to work closely with local institutions, including governments at province and district level and local communities. Economic Activity and Employment. Economic statistics are not yet collected separately for NWFP. Economic growth was probably about 4.5% for most of the period from 1990 to 2005, which means that per capita income has been increasing by about 1.5%. The large majority of the population earn their livelihoods from farming or from retailing activity (see Table 2), both of which are carried out on a small scales with low incomes. Remittances, both from Pakistan and from abroad, are important in NWFP, accounting for about 18% of GDP. 14

NWFP Comprehensive Development Strategy

Table 2 Composition of Employment in NWFP

Occupation Agriculture and fisheries of which unpaid Services, shops and market sales Professionals Technicians and associate professionals
Source: HIES 2001/02

% 38.0 17.6 32.0 3.5 3.3

Physical Environment. The NWFP enjoys very valuable natural resources, including good water flows, large forest areas and spectacular scenery. However, the rapidly increasing population places strong pressures on these natural resources and many areas now experience water shortages and deforestation, with the associated problems of soil erosion and vulnerability to floods and other related natural disasters. There are now some areas of the province where natural resource pressures are threatening livelihoods in a dramatic fashion. There are some measures that can be taken to reduce environmental pressures, notably involving more efficient use of water and alternative cooking fuels, and the province has some good experience with these measures. However, the experience and resources available are insufficient to address the scale of the problems. 2. Strategic Overview

The overarching strategy of the Government of NWFP fits clearly within the Vision 2030 document prepared by the National Planning Commission in 2007. NWFP will play its part in the emergence of Pakistan as a middle income country based on: skilled use of limited natural resources; access to basic public services, including education, health, water and sanitation; and freedom of economic opportunity. NWFP will contribute to the national goals of equity, gender mainstreaming and access to justice.
Box 2 National Strategies The current Federal Poverty Reduction Strategy (PRSP II) is based on ten pillars: (i) macroeconomic stability and growth; (ii) protecting the poor and the vulnerable; (iii) increasing productivity in agriculture; (iv) integrated energy development; (v) making industry internationally competitive; (vi) human development for the 21st century; (vii) removing infrastructure bottlenecks through public private partnerships; (viii) capital and finance for development; (ix) housing and land management; and (x) governance for a just and fair system. In addition, PRSP II identifies three priority cross-cutting themes: strong monitoring and evaluation of policy; gender equality and environmental sustainability. The Pakistan Planning Commission produce Pakistan in the 21st Century: Vision 2030 in 2007 after two years of consultation. Economic growth is expected to be sustained at 7%-8% per annum, bringing Pakistan into the ranks of middle income countries by 2030 and leading to the creation of a thriving middle class, through balanced and equitable growth. The Vision foresees strong growth of modern economic activity, with confident engagement in global markets. Natural resources will be managed carefully, to minimise wastage, and the country will prepare for the uncertainties of climate change. Breakthroughs are foreseen in the areas of education, employment and energy, with particular dynamism stemming from the growth of large cities. The Vision concludes by highlighting the role of todays young people, who will drive the country forward over the next 25 years.

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NWFP Comprehensive Development Strategy

This Comprehensive Development Strategy builds on the Manifesto of the Awami National Party (ANP) and on the first Policy Speech of the Chief Minister of the new provincial government. The Chief Ministers first speech stresses the importance of viewing politics as a public service, particularly to the poor and disadvantaged. The present coalition government is committed to democracy and freedom, the eradication of poverty, the protection of human rights, the combating of extremism in all its forms and the creation of equal opportunities for all citizens. The Manifestos of the both coalition parties include commitments to eliminate corruption and illegal trading and to narrow the difference between the highest and lowest paid officials. Whilst promoting uniform judicial systems, the Manifestos also allow some reorganisation of federating units, according to local preferences. The Manifestos recognise the importance of negotiating fair arrangements on hydel profits and on oil and gas royalties. Economic policy concentrates on shifting the focus to the private sector whilst ensuring safety nets for lower income groups. Policy directions are proposed for agriculture, employment, industrial development, banking and investment, urban development, education, health, environment, trade, power and irrigation. In addition, the Manifestos make important commitments on womens rights and on external affairs. The first Budget Speech identified a number of important priorities, including; a major increase in police spending; maintenance of the wheat subsidy; and an above average increase in road maintenance and agriculture. The budget share for health and education increased roughly in line with total spending.. The increase in share of the provisional government outpaces both the support from the federal government as well as foreign assistance. The focus of the ADP was on completing existing schemes. The full range of support was maintained, but there was some shift in resources to agriculture and industry, reflecting the importance of these sectors in providing employment in NWFP. Allocations to police, social protection, forestry and environment also received an increased share of the ADP. Important new initiatives were also supported in education and health. The Governments strategic overview defines two phases: in the short term, over the next two years, the focus of all government activity is to bring to a rapid resolution in all areas of the province the current conflict; and, in the medium term, over a period of five further years, to consolidate this progress and to foster the recovery of the province and the return to dynamic and successful progress. In the short term, the priorities are: rapid improvements in basic health and education services in all areas of the province, but particularly in areas that have suffered from conflict in recent years providing high visibility improvements in villages, notably for drinking water, with an associated institutional structure involving broad community engagement a programme of labour intensive public works providing employment especially to young men investment in the construction, improvement, rehabilitation and maintenance of schools, health facilities, roads and irrigation infrastructure, with a strong emphasis on maintenance 16

NWFP Comprehensive Development Strategy employment generation through opportunities for private sector development, including through the use of Reconstruction Opportunity Zones technical support to the public sector to ensure that the rapid increase in activity can be implemented without delays and mismanagement The medium term priorities are: consolidation of the progress made in the short term expansion of public-private financing mechanisms, especially for minerals, hydroelectricity and tourism training and skills development, especially for unemployed youths teacher training and incentives to improve the quality of education strengthening institutions of public sector management, including greater public participation and greater collaboration with federal level institutions 3. Public Finance

Management. Financial management is currently constrained by a number of challenges. Predicting revenue is difficult for the provincial government largely because of the variability of Federal revenue. The Government of NWFP is improving its ability to predict revenue, using a financial programming tool that links revenue to expected economic growth. However, both at Federal and provincial level, elements of revenue are unpredictable, both where they are funded from international assistance and from own revenue. Major revisions are made to the original budget. Figure 1 shows the original and revised budgets, along with actual expenditure. The figure demonstrates the difficulties that the provincial government has in budgeting. For most departments, the direction of budget revision and actual overspend (or under spend) varies from one year to the next and is often different between recurrent and development. In most cases, the main recurrent budget is prepared in an incremental manner and the causes of budget revision are associated with lumpy items that are added to the more routine element of the recurrent budget In the capital budget, revisions are associated more with the need for policy priorities to adapt to the rapidly changing circumstances in the Province and to the unpredictability of Federal and donor funding for development programmes.

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NWFP Comprehensive Development Strategy

Figure 1 Original, Revised and Actual Expenditure (Rs m)
60,000 50,000 40,000 30,000 20,000 10,000 0 2005/06 2006/07 Recurrent 2007/08 2005/06 2006/07 Development 2007/08 Original Revised Actual

There is great variation between departments in their budget behaviour, as shown in Table 3. Over half the departments having a change of more than 10%. Revisions are made both upwards and downwards. The net effect of the revisions has varied in recent years. The revisions in the development budget are larger and less systematic than in the recurrent budget.
Table 3 Overspend compared to original budget by department (Rs m) Recurrent Development 2005/06 2006/07 2007/08 2005/06 2006/07 Police 270 254 1,684 Agriculture -61 -6 -69 17 2,471 Social Welfare 58 45 -58 -17 -12 Health -289 -200 -213 -1,034 -1,516 Education 2,026 -869 -195 -2,140 -2,347 Roads -17 276 -181 438 233 Sanitation 18 13 -30 -37 361 Irrigation -1,633 -531 -302 153 953 Urban and rural -1 98 -9 -497 85 Industry 8 1 170 -143 -149 District non salary -116 76 279 District salary -348 375 District programme -274 15 Special programme 406 -2,231 Public buildings 9 73 132 2,712 7,041 Other 325 907 -56 -463 -230 Total 597 -210 1,526 -879 4,675
Note: excluding finance, excise, grants in lieu of O&Z tax, subsidies, pensions Source: NWFP Finance Department

2007/08 1,195 -5 -444 862 -7 232 1,372 190 -140

-79 -6,105 -972 -310 -4,211

Fiscal Balance. The fiscal accounts show a high variation in fiscal balance which reflects the availability of net financing. In 2005/06, substantial non-project borrowing was 18

NWFP Comprehensive Development Strategy available, in the form of a WB DPL, which allowed expenditure to be significantly higher that would otherwise have been possible. By contrast, in the following two years a surplus was generated, allowing some repayment of debt.
Table 4 Provincial Fiscal Balance Revenue Current Expenditure Development Expenditure Balance
Source: NWFP Finance Department

05/06 60,426 45,642 21,788 -7,005

06/07 80,062 46,325 29,246 4,491

07/08 91,818 55,758 31,956 4,104

Provincial revenue in recent years has varied between about 8.2% and 9.7% of provincial GDP. There is some suggestion of an increasing trend, but substantial variation around this trend. About 83% of revenue comes from the Federal government, with 52% from the divisible pool of taxes and 16% from grants in aid. Net profit from hydroelectric power, which is collected at a Federal level, provides 6% of revenue. Receipts collected by the NWFP provide about 8% of total revenue and foreign governments provide the balance of about 5%. Over the past 3 years total receipts have risen roughly in line with GDP, although some important elements, such as hydel profits, have not increased in line with GDP.
Table 5 Revenue (Rs bn) Provincial Receipts Share of Federal Divisible Pool Transfers on Oil and Gas Grant in Aid Net Profit from Hydel Foreign Grants Federal Grant for PSDP Foreign Loans Total
Source: NWFP Finance Department

05/06 Actual 5,189 33,818 1,307 0 6,000 879 3,530 9,703 60,426

06/07 Actual 5,733 42,412 2,226 9,766 6,000 886 7,419 5,621 80,062

07/08 Actual 6,981 51,804 4,152 11,799 6,000 646 5,755 4,681 91,818

08/09 Budget 8,212 67,016 4,429 14,432 6,000 780 8,215 4,183 113,267

Current expenditure is dominated by the social sector, which accounts for about 60%. The largest share of development expenditure is allocated to infrastructure, with nearly 40%.
Table 6 NWFP Government Expenditure (Rs m) Current 05/06 06/07 Actual Security 4,616 5,857 Social Sector 18,861 24,654 Social Protection 540 628 Education 15,270 21,750 Health 3,051 2,276 Infrastructure 1,699 1,886 Roads 787 510 Water 831 1,114 Development 07/08 Budget 0 0.0% 5,293 13.4% 1,040 2.6% 2,403 6.1% 1,849 4.7% 15,178 38.5% 6,565 16.6% 4,776 12.1%

07/08 8,229 31,196 2,103 25,883 3,210 2,061 542 1,180

19

NWFP Comprehensive Development Strategy

Urban Economy Agriculture and NRM Industry and Mines Other Items GRAND TOTAL

81 1,254 1,189 65 19,212 45,642

263 1,075 984 91 12,852 46,325

338 1,292 1,044 248 12,980 55,758

3,836 4,832 2,836 1,996 14,159 39,462

9.7% 12.2% 7.2% 5.1% 35.9% 100.0%

Source: NWFP Finance Department and ADP

The Fiscal Costs of Insecurity. The effect of insecurity in the region on government finances is felt both directly and indirectly through the wider impact on the society and on the economy. This has been estimated in a recent report by the Government of NWFP on the Costs of the Conflict. The following table summarises the impact.
Table 7 The Direct and Indirect Impact of Insecurity on Government Finances (Rs bn) Cost Period (Rs bn) Additional Direct Costs Displaced people and refugees 0.1 to date Additional policing costs 4.9 4 years conflict Replacement of damaged/destroyed public 13.0 to date property Compensation to families for death, injury, 0.3 to date damage1 Lost Revenue Lost provincial receipts from lost GDP 2.1 12 year conflict/recovery Lost provincial receipts from reduced collection 5.6 4 years conflict rate 2 Federal receipts 2.2 12 year conflict/recovery Total Direct Costs and Lost Revenue 28.2 Donor support reduced by implementation delays Conflict resolution/recovery focus of the CDS Total Fiscal Impact 54.0 60.0 142.2 last 3 years conflict next 7 years of the CDS

These costs are met largely by Federal Government The proportional affect on Federal receipts is the same for all Provinces Source: Government of NWFP Cost of Conflict Report April 2009
2

4.

The Approach Used in Developing the CDS

The CDS has been produced by the Government of NWFP to present the priorities of the ANP government and how these will be implemented. The CDS process has been guided by a Policy Reform Management Group, chaired by the Additional Chief Sectary representation from the largest Departments. The preparation of the CDS has been managed by office of the chief economist, planning and development Department of Planning and Development (P&DD). Whilst the CDS presents the priorities of the ANP government, it has made use of the available existing strategies in each sector. Sector chapters have been largely prepared by the relevant departments and discussed with P&DD. Where possible, bilateral discussions have been held with civil society and the private sector. 20

NWFP Comprehensive Development Strategy Costing estimates have been made for the CDS and these distinguish between: the short term, over the next two years when reversing the course of the conflict is the highest priority; the medium term, over the following three years, when the province will be in a phase of recovery; and a further period of two years. The costs have been reviewed and adjusted by the central Government departments in NWFP to reflect the balance of priority across sectors. There has been some consultation on the CDS, including discussions with key private individuals and representatives of the private sector and civil society. However, this consultation has, to date, been informal and a formal process of consultation outside government will take place in the next few months.

21

NWFP Comprehensive Development Strategy B 5. GOVERNANCE, SECURITY AND INSTITUTIONAL DEVELOPMENT Governance

The Government of NWFP operates a system of Cabinet Government that provides the mechanisms for ensuring that overall policy is translated into action and that resources are adjusted to reflect that policy. The Government is committed to improving this process and has introduced various initiatives to achieve this. The budget cycle starts in August, with the preparation of departmental budget proposals, based on previous years allocations. The first budget circular is sent out to Departments in December and includes indicative ceilings. Submissions are made by February, with current budget submissions going to Finance Department and Development Budget submissions going to Planning and Development Department. Negotiations over the budget then last until May, when the budget documents are prepared for consideration by the Assembly. The White Paper includes introductory sections describing the broad trends in the budget and explaining the reasons for sectoral shifts in spending. Budget Books provide details of the sectoral budgets, whilst ADP provides details of the Annual Development Programme. The budget is presented in the Provincial Assembly in June and approved before the 1st of July. Recent PEFA analysis suggests that budget discipline in NWFP still faces many challenges. In particular, the variation between actual expenditure and original and revised budgets is large, by international standards. Variations are not dominated by any particular pattern and may be positive or negative in different departments in different years, suggesting that there is no obvious dominant factor that is hampering budget discipline. Improvement in budgeting is one of the four core areas of the ongoing Provincial Reform Programme (PRP) in NWFP. New practices are being developed to improve revenue projections. These should allow for greater accuracy of revenue, which will help budget discipline. Over 80% of NWFP revenue comes from Federal government transfers. The Provincial Government is improving its capacity to predict Federal GDP growth which will help with projections of revenue from Federal sources. However, policy decisions regarding the rates applied to different source of Federal revenue are outside the control of the Provincial Government and projections of revenue from Federal transfers will remain unpredictable for this reason. Although the provinces own receipts are low (roughly 9% of total receipts), due net hydel profit has been unpaid in recent years, whilst the salaries and pensions budget is increasing. The Government has been piloting the introduction of performance budgeting practices that define explicitly the outputs that are expected to be produced from services. The pilots have involved detailed definition of output indicators and beneficiaries have been involved in assessing the indicators and discussing the conclusions and lessons learnt from the performance. Pilots have so far been run in education, health and agriculture with good success. However, the practical experience with performance budgeting has been problematic and it has not yet had a strong influence on decision-making. The Government is also introducing a new programme of top down performance budgeting that will involve defining the core programmes of each department and the 22

NWFP Comprehensive Development Strategy indicators that will be used to monitoring the progress of the programmes. This process will start with a Twin Track activity that examines past expenditure patterns and they relate to policies and programmes. The Government is determined to make the budget process one that allows policy to be translated efficiently and effectively into changes in resource allocation and changes in service delivery on the ground. Ultimately, this will be achieved through a rigorous Medium Term Budgeting Framework (MTBF). The current MTBF provides projections on current revenue and spending patterns. As the new MTBF practices are introduced, government departments will associate resources more closely with programmes and policies so that the MTBF will reflect the changing policy environment. In the short term, a Budget Strategy Paper will be produced by November each year which will provide the strategic guidance to the budget process. A Provincial Financial Accountability Assessment (PFAA) was made fro NWFP in 2003 and identified a number of issues. In particular, there is insufficient information about finances through the year to allow the executive to manage the budget effectively. The impact of this is felt particularly on development projects, which have lumpy access to funding through the year which compounds the existing problems associated with frequent changes in specifications and a shortcoming in monitoring. The NWFP has a Public Finance Reform Programme, benefiting from support from a Project to Improve Financial Reporting and Auditing (PIFRA), with funding from the World Bank. This has included a programme to introduce an integrated government financial management system, including the computerisation of District Accounting Offices. The PIFRA has also supported the piloting of a New Accounting Model in NWFP which provides a new chart of accounts. There has been progress in public procurement reforms, under a World Bank TA on Public Procurement Regulatory Framework, and a new Procurement Law and associated rules are under preparation. However, further work is needed to implement the regulatory framework and this is guided by phase 3 of the Procurement Reform Action Plan. The PRP is also supporting improved ability to forecast pension liabilities. Improvements are also being made in human resource management (HRM), with new HRM guidelines being developed with support from the PRP. The database is being strengthened and a programme being developed to improve job descriptions and to manage careers in a more structured way. At present, the Public Accounts Committee (PAC) takes more than 3 years to prepare their reports on public accounts. The Government is committed to speeding up the preparation of PAC reports and to strengthening the quality of the reports. The increasing clarity of definition of policies and programmes, combined with analysis of past performance will build the evidence and capacity to undertake more rigorous evidence-based policy evaluation for new policy options. The Government will undertake some pilot policy evaluations in 2009 and will extend this practice over 2010 and 2011. by which time standard practices will have been developed and all major policy initiatives will require Policy Impact Analysis before political decisions are finalised. 23

NWFP Comprehensive Development Strategy Decentralisation. Pakistan introduced a major policy of decentralisation in 2001. The province has 24 Districts, 22 urban areas, 826 Rural Union Councils and 7373 villages. NWFP has responded by passing responsibilities for key local services to districts and tehsils. There are, however, constraints in the capability of districts to take over all the responsibilities envisaged in the decentralisation, both with routine expenditure management and with expenditure reconciliation and internal audit. The decentralisation process has been supported by the Essential Institutional Reforms Operationalisation Programme (EIROP), which has organised training, workshops, studies and support for information systems in local government. It is also being support by the Decentralization Support Programme (DSP), which is being implemented with the partial funding from ADB, to carry forward reforms in the areas of decentralization, fiscal restructuring and local governance. It is an innovative, demand-driven and output oriented program, serving a range of clients at all level of governments. DSP's objective is improved local government representation; accountability and efficiency, resulting in improved service delivery. The Government already maintains websites for all the main departments and many key public documents are available on-line. The Government intends to expand the capacity of e-Government to include greater access to public services and provision of monitoring indicators to promote a culture of customer service provision. Monitoring and evaluation (M&E) in the NWFP Government is currently undertaken in an ad-hoc manner by different departments, with a strong emphasis on project M&E. The Government is implementing a plan for the improvement and coordination of monitoring information systems, with support from the PRP. This will involve establishing a standard information system in at least 5 departments and at least 50% of districts by 2011. It will also include better coordination with the Bureau of Statistics to ensure that data is collected and reported in an efficient manner. This may include an ability to produce estimates of Provincial GDP at the same time as the estimates of national GDP. The Government is introducing new guidelines for human resources management, which will cover recruitment, assessment, promotion, a human resources information system and training and needs assessment. New job descriptions are being prepared and will be piloted in at least two departments in 2009, leading to full updating of job descriptions in all departments by 2011. The Government is also building greater capacity to forecast pension liabilities. Foreign assistance to NWFP is monitored by the Foreign Aid Wing of P&DD. The Government is committed to substantial strengthening of the Foreign Aid wing to make sure that donors are provided with clear directions and that there is a central source of information on donor activity to reduce the risks of duplication and inconsistency. The Foreign Aid wing will cooperate with the national aid coordination services and, especially, with DADPAK and will establish a provincial Development Assistance Database (DAD). Policy on justice is determined at Federal level. There is currently a major initiative to improve access to justice involving the following priorities. Major improvements have been made in the last five years in the number of cases processes by the courts and in reducing the number of cases pending. In many parts of NWFP, there are now no cases that are pending for more than one year. A system of Member Inspection Teams now 24

NWFP Comprehensive Development Strategy monitors all courts in NWFP and a reward system has been introduced. A complaints procedure has been introduced, with a system for responding to complaints. There is now a Justice Development Fund which provides independent funding to the judiciary. Goals. The NWFP Government aims to improve the management of public services so that public policy is translated efficiently into action and so that the public can follow the performance of government services. Priorities. The NWFP Reform Programme includes the following features. Resource Management more reliable, timely and accurate information on financial flows through the year improvements in internal control and audit leading to more reliable financial statements improved financial management institutions, including a Provincial Financial Controller, the Public Accounts Committee and publication of NWFP Annual Reports improved external audit improvements in public procurement with wider knowledge of procurement rules and regulations improved monitoring and evaluation, extending from project-based activities to cover all government services Access to Justice providing a legal basis for judicial, policy and administrative reforms improving the efficiency, timeliness and effectiveness of judicial services improving equity of access to judicial services for the most vulnerable ensuring transparency and accountability of the judiciary and justice institutions
Table 8 Priority Measures in Governance (Rs m) Measures Y1- Y3- Y6Y2 Y5 Y7 Support to the Foreign Aid Wing of 60 DPD Transparency programmes 100 Capacity building implementation Support to PRP Total for CDS 200 200 560 90 120 240 300 750 60 80 160 200 500

Total Notes 210 300 600 700 1,810 technical assistance technical assistance TA and training

6.

Security

The recent wave of militancy and terrorism has spilled over rapidly to the settled districts of NWFP from FATA, threatening entire social fabric. The current volatile law & order situation has badly effected economic development and deteriorated all social sectors in the effected districts. Economic development and peace are closely interlinked. The improvement in the fighting capability of police will help to suppress the militants which would lead to peace and economic development.

25

NWFP Comprehensive Development Strategy The current insecurity situation comes before the police have been fully able to respond to the increase in the number of districts from 12 to 24, so that some district police forces do not yet have sufficient infrastructure and equipment to fulfil their duties. There are 11 districts that do not have basic infrastructure, such as police posts, offices and lines. As part of these reforms, the number of police stations was doubled and 80 police stations are now located temporarily in police posts, in other government building, such as health units and schools or in rented buildings. Most of these buildings are poorly located and without the facilities required in police stations. Furthermore, the rehabilitation of police infrastructure following the 2005 earthquake is not complete and current plans do not cover the entire police infrastructure that has been delayed. Law enforcement personnel are particularly threatened by the militancy, as they are seen as legitimate targets by the militants. The Frontier police force has not been designed to resist the current pressures and the insurgency has seriously exposed the constraints of the Frontier Police in terms of their inability to effectively fight the militants. A lack of sophisticated weapons, equipments and transport are particularly limiting. In addition, police stations and other infrastructure requires substantial upgrading with boundary walls, watch towers, bunkers etc and associated equipment such as radio jammers. A further implication of the insecurity implication is that police efforts are diverted away from fighting crime. As a result, there has been an alarming increase in serious crime, to menacing proportions. The police have been pursuing an active policy of community policing and there is growing use of the practice and awareness of its role in communities. The initiative is currently focused on the creation of Lashkars, or groups of local people who work with the police service to promote law and order in their area. Police Activity in NWFP is governed by a Police Order passed in 2002 which brought many important changes in the police. Public participation is now achieved through Public Safety and Police Complaint Commissions, operating at the district, provincial and national levels. In addition, there is a Citizen Police Liaison Committee. The Provincial Police Organisation has 7 Directorates, including: Operations; Prevention; Investigation; Capital Police; Intelligence; Log/Training; and Traffic. The police have an active programme of developing e-policing to improve their accessibility to the public. This will gradually incorporate the 25 registers maintained in each police station and will also extend to the Prosecution Branch, the Criminal Records Office, the Police Record and Office MIS, and the Automated Fingerprint Identification System. Goals. The strategic goals of the Government security strategy are to ensure law and order in all areas of NWFP and to eradicate terrorism from the province within two years. Priorities. The Government has already taken action to recruit . new police officers. The priorities are now to make sure that these officers have the proper infrastructure, facilities and equipment to fight terrorism and crime and to ensure their own safety. the police require radical improvements in weapons, security and communications equipment and in ammunition and armoured transport equipment upgrading police infrastructure and associated equipment, including police lines, police stations, police posts, patrolling posts, offices etc, plus associated 26

NWFP Comprehensive Development Strategy ammunition, protective equipment, transport, communication and forensic equipment
Table 9 Priority Measures in Security (Rs m) Measures Y1Y2 Procurement of Arms & 2,000 Ammunition, Security Equipment, Transport and Wireless Equipment for NWFP Police Police infrastructure and equipment 3,340 Raising of Elite Force Total Y3Y5 600 Y6Y7 400 Total Notes

3,000 Arms & Ammunition, Security Equipment, Transport and Wireless Equipment 600 400 4,340 Rehabilitation of police posts and associated equipment for the posts 3,000 2,000 1,000 6,000 8,340 3,200 1,800 13,340

27

NWFP Comprehensive Development Strategy C 7. THE SOCIAL SECTOR Education

Governments strategy in Education is defined in the Education Sector Plan, which was prepared in June 2008. Some further work has been done in recent months to estimate the costs of implementing the plan. Literacy levels in NWFP are amongst the lowest in Pakistan and this presents a major challenge to government. The province has 64% men and 30% women literacy .and the literacy rates vary considerably across the province. Despite the challenges facing the education sector, most statistics show that the literacy rate has been steadily improving. Participation in primary education is low by international and national standards, with a gross enrolment rate (GER) of 83%, compared with a national average of 87% (see Table 10). The GER for girls is significantly lower than boys, at 70%. About 79% of primary school children attend public schools, 19% attend private schools and 2% attend deeni madaris (although these official figures may underestimate attendance at private schools). The relative importance of public and private schools varies greatly within the province. Drop out and repeated grades are common, with only about 60% of children finishing primary school. This reflects partly the difficulties in maintaining high quality teaching, with limited teacher training, a high rate of teacher absenteeism and poor facilities and materials. The current teacher student ratio in primary schools is about 1:40. In some areas, formal primary education is not supported by local communities and religious leaders, whilst in other areas there is strong interest and support.
Table 10 Enrolment and Literacy Rates for NWFP and Pakistan PIHS 1998-99 PIHS 2001-02 PSLM 2005-06 T M F T M F T M F Gross Enrolment Rate (Class 1-5, age 5-9) Pakistan 71 80 61 72 83 61 87 94 80 NWFP 70 84 54 77 97 56 83 93 70 Net Enrolment Rate (Class 1-5, age 5-9) Pakistan 42 47 37 42 46 38 53 56 48 NWFP 39 47 30 41 48 33 49 51 42 Literacy Rate (aged 10 +) Pakistan 45 59 31 45 58 32 54 65 42 NWFP 37 56 20 38 57 20 46 64 30
Source: NWFP ESED

PSLM 2006-07 T M F 91 82 56 49 55 47 99 96 60 56 67 67 81 67 51 41 42 28

The problems of middle, secondary and higher schools are similar to those of primary school. GER for ages 10 to 14 is low at 35% (and only 23% for girls) and private schools cater for over 20% of children. For higher schools (ages 15-16) the GER is less than 5%, with only 30,000 pupils, although many children move directly to post secondary colleges at aged 15. Attendance in pre-primary classes is relatively high, with a gross enrolment ratio of about 80%.

28

NWFP Comprehensive Development Strategy There are currently 26,498 public schools in NWFP and 60,507 classrooms. Class size is around 40 for most schools, but there are over 200 schools with only 1 classroom that have average sizes of 70 to 100 pupils. In rural areas, there are many children that have to travel for more than 1 hour to school. In many of these areas, public transport is nonexistent and, when options do exist, they are sometimes not secure. These problems are particularly severe for girls, because of the smaller number of girls schools, and for secondary education. Expanding the number of schools to fill major gaps in coverage is one element of government action and has been a strong focus of investment in recent decades. However, the emphasis on new building has led to a neglect of the maintenance of existing buildings and of the management of schools that do exist. The Government is currently incorporating information on the condition of school infrastructure into the Education Management Information System and is using remote sensing evidence to help build objectivity into the data and reduce political interference in the prioritisation of maintenance work. The reconstruction of schools, colleges and DESE buildings after the 2005 earthquake has started and a rolling programme has been defined. Teacher quality is constrained by limited and poor teacher training programmes and by excessive political interference in postings and transfers. Most teachers have been trained in a system that stresses the dissemination of information, rather that the development of skills. There are problems with encouraging qualified teachers to accept appointments in unattractive areas and in ensuring attendance in these areas. Some districts have 20% to 30% of teaching posts unfilled, which often reflects the state of security in the district. Private schools are an important source of education, but they are expensive and there is poor coordination with public schools. Private schools are limited mainly to urban and semi-urban areas and there are few private schools in unattractive areas. The Government has initiated some schemes to improve coordination, including allowing private schools to use public buildings and allowing the private sector to publish textbooks. The Frontier Education Foundation and Elementary Education Foundation were established primarily to promote education in the private sector, although these foundations have diversified their activities. The interest of communities in supporting education is patchy. The Government is attempting to increase the role of Parent Teacher Councils, with funding and training, as a way of improving ownership and mobilising community support. There are cases where communities have contributed land, buildings, teachers salaries and materials and supplies (eg the Aga Khan Education Service in Chitral and the Society for Advancement of Higher Education schools). Budget constraints limit the physical facilities in schools and the supply of materials and textbooks. Supervision is poorly funded and has insufficient capacity to provide the frequency of inspections required. Some training is being provided in management systems, but there is a need for more training of inspectors and for developing systems to improve efficiency and to make the most of the inspection visits that can be made. There are plans to reintroduce the cluster training mechanisms that brought teachers, managers and inspectors in an area together for joint training on a regular basis. 29

NWFP Comprehensive Development Strategy

The Government aims to improve the management of education through a comprehensive Capacity Development Plan that is currently being prepared. This will focus on the management in DESE and will address all levels of education. It will include a clarification of roles, training needs and delivery plans. It will also cover the expansion of monitoring and evaluation activities. The National Education Foundation and Elementary Education Foundation are national level initiatives to improve literacy. Nationally, about 772,000 people have received nonformal literacy training in the last 3 years, of which 72% are women. Literacy centres now exist in 20 NWFP districts. Public Expenditure. Education received nearly 50% of total current spending in NWFP and 14% of development spending, as shown in Table 11. About 90% of current spending is in the form of transfers to districts for the payment of teachers salaries and the operations and maintenance of schools. Through the last 15 years, there has been a steady increase in the expenditure share of the current budget and an increase in the share of primary in total current expenditure. The development budget includes over 100 projects, of which the largest are for the provision of textbooks (Rs 700m), stipends for girls students (660m), construction and reconstruction of classrooms (2315m), establishment of colleges (620m) and capacity building for teachers (214m).
Table 11 NWFP Expenditure on Education

Current Development

Rs m 06/07 Actual 23,975 1,325

07/08 29,213 3,265

08/09 Budget 32,399 5,892

as % total NWFP 06/07 07/08 Actual 51.8% 52.4% 5.6% 9.3%

08/09 Budget 48.1% 14.2%

Objectives. The Governments education strategy is defined in full in the Education Sector Plan 2006/07 to 2014/15 (ESP) prepared in June 2008 by the Elementary & Secondary Education Department (ESED). The vision of the ESP is to: ensure quality education, enabling all citizens to reach their maximum potential; to produce responsible, enlightened and skilled citizens; and to integrate Pakistan into the global framework of human centred economic development The strategy reflects the mission in the national Education Sector Reforms of: developing human resources in Pakistan as a pre-requisite for global peace, progress and prosperity. It also sets objectives that are consistent with the Millennium Development Goals. The ESP sets three top priority objectives: universal primary education; gender equality at all education levels; and improved educational attainment by strengthened teachinglearning quality. There are also three additional objectives: increased participation at middle and secondary grades; increased adult literacy; and access for all to early childhood education at age 4. Priorities. To achieve these objectives, the Education Sector Plan Improved education is a Government priority in both the short and long mid term. Particular priority is given in the short term to policies that help to build community confidence. 30

NWFP Comprehensive Development Strategy

Short Term Bigger roles for communities in management, rehabilitation and motivation, including expanded financial and technical support for Parent Teacher Councils. Ensure sufficient teachers available, with better coordination between provincial and district levels and use of local contracts, community monitoring of attendance and incentives for difficult areas, especially for female teachers. Improved temporary accommodation in isolated areas, especially for female teachers. Locate new schools only where there are major gaps, especially for girls. Prioritise reconstruction on objective criteria. Utilise low cost local building materials where possible. Involve Parent Teacher Councils in management and funding. Introduce second shifts where possible. Greater collaboration with and regulation of the private sector, building especially on the roles of the various Education Foundations active in NWFP. Mid Term Build enrolment is all sectors, including public, private, community, NGO & mosque schools. Provide government support to NGOs schools. Identify certain areas within districts education cities where private schools would be requested to take the lead, to minimise duplication with the public sector. Initiate innovative programme for areas without schools (eg mobile schools). Improve teaching quality through the NWFP Institutional Framework for Teacher Development (IFTD) programme to: develop new teaching curricula to move from knowledge based to skill based learning; improve teacher training institutes and coordination of training; set up teacher support programmes, including Local Circle Offices for cluster training; setting up Katchi education in all public primary schools; piloting on-site teacher development; special support for school heads; and improving class room assessment. Make teacher training available to teachers in private schools. Review of supervision of the schools system, including introducing a centralised exam system and improving the monitoring of exam standards. Strengthen the utilisation of the management information system to provide clearer information on the performance of schools and involve Parent Teacher Councils in the review of performance information. Review free textbook programme to improve availability of books. Continue to improve the quality of textbooks to reflect improvements in the teaching curricula. Organise workshops for private publishers of school books. Expand the girls stipend scheme and voucher and scholarship schemes. Give communities more involvement in non-formal education and adult literacy. Improve Early Childhood Education through improved training and materials and provision of a pool of ECE experts to support teachers.
Table 12 Priority Measures in Education (Rs m) Y1- Y3- Y6- Total Notes Y2 Y5 Y7 2,944 16,298 10,866 30,108 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education

Measures

Incremental teacher salaries

31

NWFP Comprehensive Development Strategy

Provision of free textbooks

2,785 5,784 3,856 12,425 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education Rent to communities or schools 113 454 303 870 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education In-service training for teachers 1,272 2,371 1,580 5,223 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education O&M budget through District Non- 171 946 631 1,748 all items taken from costing Salary work done by E&SE on the basis of simulated model for projections of demand for education Girls stipend for secondary education 299 1,847 1,231 3,377 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education School construction and furnishing 10,839 24,963 16,642 52,445 all items taken from costing work done by E&SE on the basis of simulated model for projections of demand for education Rehabilitation of schools, with 9,230 13,718 9,146 32,094 all items taken from costing community contributions work done by E&SE on the basis of simulated model for projections of demand for education Expand adult literacy activities 10 9 6 25 25% increase in 08/09 budget Grants to NGO schools 20 24 16 60 ??? College Sector Development 2,000 1,000 1,000 4,000 Total 29,683 67,415 45,277 142,374

8.

Health

Current Situation. The health situation in NWFP is mixed, but marked improvements have been made in recent years. Infant Mortality Rate (IMR) and Total Fertility Rate (TFR) have been declining steadily. IMR and U5MR for NWFP in 2006 / 07 are 63 and 75 per 1000 live births as compared to national average of 78 and 94 per 1000 live births respectively. The first ever estimation of Maternal Mortality Rate for NWFP is 275 deaths per 100,000 births as compared to national average of 276. TFR declined at a slower pace than nationally from 5.1 in 2000 to 4.3 in 2006/07. Antenatal coverage in NWFP as per the demographic health survey is 51% which is well below national 32

NWFP Comprehensive Development Strategy average of 61%. The deliveries by skilled birth attendance are 38% which is also below the national average. Despite recent improvements in outcomes, there is space for a lot more to be done. With judicious use of available resources and provision of adequate per capita funding, the health indicators can be improved remarkably. The situation becomes more challenging and complex because of the existing law and order situation. The Health Department (HD) on one hand has to respond to any manmade or natural disaster and on other hand has a major challenge of keeping routine services in the affected districts in place. The situation is further aggravated by the internally displaced population in which the HD has to focus on routine services as well as on prevention of epidemics.
Table 13 Health Status (in %) Measures

Y1- Y3- Y6- Total Notes Y2 Y5 Y7 Standardization / Up-gradation of 8,138 12,207 8,138 28,483 health facilities Recruitment of staff for service 6,000 9,000 6,000 21,000 delivery (both out reach and static) Special repairs of health facilities 3,000 Adequate provision of supplies and 4,286 drugs. Better accessibility to Essential 0 Minimum Health Services Package through Private sector. Governance, Stewardship and 543 Management Availability of skilled human 314 resource for service delivery To initiate the culture of informed 357 decision making Regulation / Quality Assurance Emergency response Achievement of MDGs Total 4,200 2,800 10,000 6,429 4,286 15,000 0 814 471 536 0 543 314 357 0 1,900 1,100 1,250 all levels all levels

mobility, materials and expenses for consultation and meetings 861 1,292 862 3,016 infrastructure and services 7,800 11,700 7,800 27,300 technical assistance and equipment 0 0 0 0 double the level in the 08/09 ADP 31,300 46,649 31,100 109,049

Source: Pakistan Social Living Standards Measurement Survey

In the Pakistan constitution, health is a provincial matter and the Federal level is concerned mainly with establishing standards and building capacity at provincial levels. In practice, the Federal level has initiated and funded a number of vertical health programmes that are funded by the Federal level and implemented by the provincial level. The devolution process should strengthen the role of districts in providing health services. However, the capacity to design, deliver and supervise health programmes in districts in limited and hampers the ability to put the devolution programme into place. There are particular problems in finding female health workers, especially in rural areas. 33

NWFP Comprehensive Development Strategy The most effective primary health care is now provided by vertical programmes funded from Federal level. Due to the constraints on primary health care delivery in rural areas, the demands on secondary health institutions in urban areas are high. However, lack of funds and skilled people means that facilities and standards are difficult to maintain. There are 5 tertiary hospitals in NWFP and all but one of the 24 districts in NWFP have a district hospital. There are 132 Rural Health Centre (RHC), covering most of the tehsils in NWFP. RHCs also have the capacity to provide limited inpatient services, with up to 10 beds. The tehsils are further divided into areas of approximately 10,000 people and the HD aims to provide a Basic Health Unit (BHU) in each of these at present, there are nearly 1500 BHUs. The private sector provides between 70% and 80% of all healthcare services in NWFP. Although this is high by international standards, it is lower than other areas of Pakistan, perhaps because private health operators find it difficult to operate profitably in the highly dispersed rural areas. As a result, those private facilities that do operate in rural areas are often of very low quality and the population in rural NWFP is more dependent on public health services than in other areas of the country. There are several different models of public-private partnerships operating in NWFP, but these have yet to be evaluated to provide a coherent and consistent model for the province. A survey of the quality of health care was completed in 2007, which included assessment by trained assessors and patient satisfaction surveys. The assessors gave primary health facilities an average score of 1.8 on a scale of 1 to 4 and secondary health facilities a score of 1.3. Performance was poorer in management than in health delivery. Key problems included: hygiene, staff availability, access, referrals, complaint management, treatment guidelines and the availability of information to patients. The only aspects that were considered good, on average, were: patient registers, staff attitude, medication information, vaccine cold chain and sharps disposal. Patients gave primary health care a higher score than assessors, with 2.8 on a scale of 1 to 4. Many aspects were considered good and patients main concerns were with equipment, toilets, complaints, affordability and information material. Responses on secondary care followed similar patterns to those on primary care. Existing Activities. The provincial Government is hampered in its health planning activities by a lack of information about health service activities and about the impact these have on the health status of the population. The Health Department (HD) has initiated a series of reforms over the last 10 years. In 1998, an initiative was launched, with assistance from ADB that included focus on improving the quality of health care. This included measures to improve quality management, including the establishment of the Health Regulatory Authority in 2002 and the definition of health standards in 2006. Renewed momentum in health reform was provided by a 10 year programme of reform starting in 2006, with assistance from GTZ. The objectives of this reform programme are to strengthen the management of health services in districts as well as to reform health financing.

34

NWFP Comprehensive Development Strategy

Table 14 NWFP Expenditure on Health

Health Current Development

Rs m 06/07 07/08 Actual 2,276 3,210 656 1,870

08/09 Budget 2,711 2,203

as % total NWFP 06/07 07/08 08/09 Actual Budget 4.9% 5.8% 4.0% 2.8% 6.9% 5.3%

In addition, in 2005, the Federal Government decided to extend a pilot programme of strengthened Basic Health Units to the whole country under an initiative known as the Peoples Primary Healthcare Initiative (PPHI). The PPHI covers curative, preventive and promotional primary health services, including: hygiene, health awareness, organisation of appropriate treatment, maternal and child care, nutrition, immunisation, other preventive services, curative services and promotional health. In NWFP, the PPHI started in 2007 and is being gradually expanded to cover all the NWFP, with 11 districts involved during the first year. The first budget transfers were made in November 2007, initially allowing Rs 100,000 per BHU for the improvement of facilities. The PPHI is also improving staff recruitment, initially using techniques of clustering to allow available medical staff to service several BHUs, where there are gaps. Over 100 medical officers have been recruited to work in BHUs, of which 10 are female, and over 200 paramedics to support the BHUs. The PPHI also spent about Rs 100 m in 2007/08 on medicines and equipment for BHUs. This has allowed the recurrent expenditure in BHUs to increase by over 50% in real terms. Over a million vaccinations were funded under PPHI, and nearly 40,000 deliveries attended, either in BHUs or at home. PPHI has been successful in introducing community participation and broader support groups, to ensure ownership of BHUs and to improve the effectiveness of awareness programmes. Other programmes include: implementing a set of programmatic interventions (eg National Programme for FP & PHC and MNCH Programme, TB control and AIDs control activity); management interventions at PHC level; improving quality of care at primary and secondary care level; rationalization and standardization of district hospitals; restructuring of autonomy of tertiary care hospitals; creation of management cadre and strengthening stewardship functions; strengthening M&E capacity and working with the private sector. In addition there is large development program on up gradation of primary care facilities and establishment of new medical colleges. Goals. The NWFP Health Department (HD) in partnership with stakeholders will improve the health of the population of NWFP and will ensure access to a high quality, responsive health care delivery system through acceptable and affordable mechanism throughout their lifetime in an equitable manner. The HD aims to provide an essential basic healthcare package including preventive, curative and promotive health services to the community. It will use available resources as efficiently and effectively as possible to provide a high standard of care based on research, evidence and relevant international best practices. It will make health affordable and accessible with preference to the poor and marginalized. These goals reflect the priorities in the National Health Policy (2001), which stresses the importance of good governance, healthcare quality, equity of access and reducing the burden of disease. 35

NWFP Comprehensive Development Strategy

Priorities. The NWFP priorities in health are designed to achieve the MDG targets and are as follows. Improve accessibility to health care. Standardization and up-gradation of health facilities Recruitment of staff for service delivery (both out reach and static), including lady health workers and midwives, with a particular emphasis on promotive and preventive health Adequate provision of supplies and drugs, through adequate funding, monitoring of the performance of partners and improved management systems Better accessibility to Essential Minimum Health Services Package from the private sector, through strengthening of the Health Foundation and better coordination with the private sector and NGOs. Improve governance, stewardship and management, with a focus on equitable financing and promoting accountability. Development of Comprehensive Health Strategic Plans for next 5 years and Business Plans on regular basis. Implementation of Health Management Cadre as per approved rules. Encouraging decentralization of authority and responsibility using various models to provide autonomy of District Head Quarter Hospitals. Encouraging the public private partnerships and improving the contracting processes. Organizational restructuring of HD and a strengthening role of Provincial Health Services Academy and Directorate General Health Services Office. Availability of skilled human resource for service delivery Induction and on the job trainings for each cadre of health care providers on regular basis according to the needs identified through a prior study. Human resource information system and mechanisms to ensure that the right person is found for the right job. Strengthening of Provincial Health Services Academy (PHSA), Paramedic Institutes and Nursing Colleges to develop appropriately skilled Human resource. Initiate the culture of informed decision making, by obtaining evidence and using it to improve policy & practice. Regular analysis of Health Department on its performance outcomes in national and international identified priority areas. Implementation of District Health Information System. Improving the planning process through provision and utilization of appropriate information and analysis provided from different sources from time to time. Strengthening of monitoring and evaluation mechanisms. Encouraging regular research culture mainly focusing on health system and operational issues. Improve regulation and quality assurance Ensuring the implementation of quality standards in Primary & Secondary Health Care Facilities through tied grant mechanism 36

NWFP Comprehensive Development Strategy Development & implementation of strategic plan for Health Regulatory Authority including human resource and financing needs. Encouraging community involvement for effective service delivery and planning Implementation of a comprehensive communication strategy. Improve emergency response Develop pre-hospital emergency medical services in line with Rescue 1122 Develop emergency response mechanism / plan at provincial & district level and its implementation Develop the capacity of the province and districts to respond to all the emergencies, epidemics and disasters in appropriate manner. Cope with additional burden from FATA in the form of emergencies and IDPs.
Table 15 Priority Measures for Health (Rs m) Measures Y1- Y3Y2 Y5

Y6Y7

Total

Notes

Standardization / Up-gradation of 8,138 12,207 8,138 28,483 health facilities Recruitment of staff for service 6,000 9,000 6,000 21,000 delivery (both out reach and static) Special repairs of health facilities 3,000 4,200 2,800 10,000 6,429 4,286 15,000 0 814 471 536 0 543 314 357 0 1,900 1,100 1,250 3,016 all levels all levels mobility, materials and expenses for consultation and meetings infrastructure and services Adequate provision of supplies and 4,286 drugs. Better accessibility to Essential 0 Minimum Health Services Package through Private sector. Governance, Stewardship and 543 Management Availability of skilled human 314 resource for service delivery To initiate the culture of informed 357 decision making Regulation / Quality Assurance Emergency response Achievement of MDGs Total 861

1,292 862

7,800 11,700 7,800 27,300 technical assistance and equipment 0 0 0 0 double the level in the 08/09 ADP 31,300 46,649 31,100 109,049

In addition to the above costs, there are major programmes of support for the achievement of MDGs covering; TB Project; MNCH Programme; HIV/AIDS Control Program; National Programme for FP & PHC; Roll back Malaria; EPI Programme; and Hepatitis Control Programme. These will cost about Rs 10.5bn and will be funded from the Federal budget. Programme of social health insurance and voucher schemes for access to health for vulnerable groups will also be run with a cost of Rs 16.6bn. This is accounted for under the Social Protection Sector. 37

NWFP Comprehensive Development Strategy

9.

Social Protection

Social Protection programmes in the province are guided by the NWFP Social Protection Strategy, prepared in 2007 by the Social Protection Reform Unit in the Social Welfare and Women Development Department (SWWDD). The strategy reflects the National Social Protection Strategy, also prepared in 2007. The high level and depth of poverty in NWFP (see chapter 1) means that social protection alone cannot lift all people out of poverty, given the limited resources available. The Government therefore places a high priority on getting the greatest possible efficiency from the funds that are available. The Social Protection Reform Unit has the task of designing new schemes for vulnerable groups that will help protect them from the increased costs of living that will arise from the upward trends in world food and fuel prices. Most social protection in Pakistan is organised through schemes that are designed at the national level. The Benazir Income Support Programme is the largest social protection programme providing cash transfers. Support is also provided through the Zakat and Bait-ul-Mal. In addition, there are: a number of exit policies, including training, micro finance (mainly Khushali Bank and Pakistan Poverty Alleviation Fund) and workfare; policies that deal with specific risks (the wheat subsidy and rehabilitation programmes); and care services. Spending on social transfers is dominated by pensions, which are not targeted on the poor. The Benazir Income Support Programme (BISP) is the largest programme of support to the poor in Pakistan and is currently being expanded to cover 7.5 million families. The BISP was launched in 2008 with a budget of Rs 34bn. Under the scheme, families having income less than Rs 6000 per month would be paid Rs. 2000 every two months. Support is also provided in the form of technical training and small loans. The BISP will soon introduce a free health and life insurance facility to redress the problems being confronted by the masses. The programme is particularly focused on womenfolk. Zakat is funded by contributions from private savings. NWFP receives 13.8% of Zakat funds and allocated 45% to the Guzara allowance (which provides 670 Rs/month to adult Muslims, with preference given to widows, disabled and unemployed), 35% to education allowances and 4.5% for provincial health care. Funds are allocated to districts by the province on the basis of population and are then distributed by local committees. There are about 158,000 beneficiaries in NWFP, but the coverage and targeting are both poor. Bait-ul-Mal (PBM) also a Federal institution supporting about 273,000 beneficiaries in NWFP. Over 70% of the support is for the Food Support Programme, allocated by the District Food Support Steering Committee. In addition, there are programmes of special financial assistance, child support and support to special institutions and NGOs. Although the PBM programme is highly targeted, the funding is limited and the programme fragmented. All cash benefit programmes suffer from limited funds. An increase in funding for the PBM has not been enough to offset a decline in Zakat. The two programmes combined 38

NWFP Comprehensive Development Strategy now reach 2m out of the 8m households that are vulnerable to chronic poverty. There are problems with irregular, delayed and lumpy payments. Both programmes aim to target the poor, but there are problems with selection: many non-poor households receive benefits and many poor households are excluded. The benefits received provide 5% to 8% of the income of poor beneficiaries and up to 15% of the income of the ultra poor. Support for microfinance is an important element of exit policies. The Khushali Bank was established as a national institution in 2000 to provide micro finance to the poor. It is currently operating in 14 district of NWFP with 21,000 active clients and an average loan size of Rs 7900. The First Microfinance Bank Ltd as set up in 2001 and offers a variety of individual and group loan options, mostly targeted at the poor. It has 4,700 active clients with an average loan size of Rs 1000. There are also several NGOs working in microfinance, including the National and Sarhad Rural Support Programmes. Although the microfinance institutions have had some success and expanded operations whilst remaining financially viable, it is a major challenge to extend microfinance to reach the poorest of the poor and they are most effective as a tool for economic growth than targeted poverty reduction. Funding is limited and microfinance schemes reach only 2% of the poor. In addition to the Federal schemes, the NWFP Department of Social Welfare and Women Development has an annual budget of Rs 108m which is used mainly for providing homes, centres and schools for vulnerable groups (beggars, children, drug addicts and destitute women) and for registering and guiding NGOs. The Department of Food spends Rs 350m on wheat subsidies, although the impact of this on market prices is unclear and the benefits are spread across the whole population. The Elementary and Secondary Education and Health Departments also have some programmes designed to make their services more accessible to the poor and these are described in other chapters. The national Government also run a number of labour safety nets, including the Worker Welfare Fund, Worker Profit Participation Fund, Employee Social Security Institutions Scheme, Education Cess Fund and the Employee Old Age Benefits. These programmes account for about 25% of total federal expenditure on social protection. They are only available to support those in formal wage employment and are not available to farmers. As a result, they do not benefit the existing poor in NWFP, although they may help to prevent unemployment leading to new poverty.
Table 16 NWFP Expenditure on Social Protection

Social Protection Current Development

Rs m 06/07 07/08 Actual 628 2,103 48 134

08/09 Budget 318 100

as % total NWFP 06/07 07/08 08/09 Actual Budget 1.4% 3.8% 0.5% 0.2% 0.5% 0.2%

International organisations also provide substantial humanitarian support, with WFP programmes benefiting about 114,000 people, including 19,000 from UNICEF and 5,000 from the International Labour Organisation. In addition, there are strong traditions of 39

NWFP Comprehensive Development Strategy charitable activity in Pakistan, both from companies and individuals, and it is likely that these provide support that is of roughly equivalent scale to that provided by Government. There are currently no public works programmes in the NWFP that aim to provide employment for the poor. Goals. The NWFP Social Protection Strategy aims to help the vulnerable groups in the province to NWFP to fight the rising cost of living, bringing them into the safety net and thus reducing their vulnerability. It aims to support chronically poor households and protect them from adverse shocks whilst also promoting investment in human and physical assets that will ensure greater resilience against these shocks. It reflects the National Social Protection Strategy, which aims to: a) to achieve distributive justice and social equity for the very poor and vulnerable by means of income transfers and other social assistance; b) to compensate the poor and vulnerable for market failures which leave them with insufficient insurance and risk pooling mechanisms; and c) to achieve greater social cohesion and social capital and to fight against social exclusion. Priorities. The GoNWFP will develop a coordinated and comprehensive approach to social protection, with improved funding and more transparent management. In addition to the complementary activities in health and education, the social protection priorities are: scale up and streamline the existing income support programmes, with improved targeting, eligibility and selection, but without conditionality consolidation and expansion of the BISP a pilot programme of cash transfers in five districts, with effective and transparent targeting on the poorest segments of the population, including the disabled, people on incomes of less than Rs 6000 per month, elderly female headed households, orphans, widows, unemployed and unskilled household heads with large families to scale up child support programmes and measures for vulnerable children improved stipends for postgraduates undertaking teachers duties and for senior citizens in the most vulnerable regions grants, vocational training and micro-finance for income generation, including for vulnerable women, managed by local cooperative groups shelters, centres and refuges for vulnerable groups and displaced people, including orphans, destitute women and the disabled improvements in the efficiency of workers protection schemes, extending support to informal employment reforms to the wheat subsidy to ensure that benefits are felt mainly by the most vulnerable groups, either through direct distribution or through price controls improved protection from disaster management through better coordination and linkages to other services, such as fire, civil defence, rescue and medical services improvements in administrative arrangements, institutional coordination and cabinet leadership, including the introduction of a management information system to monitor transfers and other schemes In addition to the above programme of priorities, the Government will also implement new workfare schemes targeted at the unemployed youth. These will be designed to provide sustained employment for at least one year, to enable the youth to save sufficiently to become more established members of society. 40

NWFP Comprehensive Development Strategy

Table 17 Priority Measures for Social Protection (Rs m) Measures Y1- Y3- Y6- Total Notes Y2 Y5 Y7 Health Insurance and Voucher 4,734 7,101 4,734 16,569 double the level in the 08/09 Schemes ADP Stipends for postgraduate and seniors 659 988 659 2,305 from the NWFP Social citizens Protection strategy Grants, training and micro-finance for 100 income generation, managed by local cooperative groups Training and grants for income start-up 500 for vulnerable women Expand child support schemes 100 120 600 150 6 214 80 400 100 4 142 300 technical assistance, training and loanable funds

1,500 technical assistance, training and loanable funds 350 15 498 increase 08/09 budget by 25% technical assistance from the NWFP Protection strategy Social

Technical assistance for design of new 5 labour protection legislation Expand budget for shelters, centres and 142 refuges for the most vulnerable Total

6,240 9,179 6,119 21,538

10.

Local Development and Poverty Alleviation

In addition to the Government investment in roads, water and sanitation and urban development, the NWFP Government currently operates a number of regional and local development programmes with a budget of about 8.0bn. The Tameer-e-Sarhad programme (TSP) was launched by the NWFP Government in 2002/03 to provide equal opportunities for better physical infrastructure facilities throughout NWFP at the grass roots level. Eligible works include water supply, roads, sanitation, waste collection points, irrigation, flood protection, schools, civic amenities and gas and electricity to rural areas. Projects must have a cost of between Rs 30,000 and Rs 2m. The programme requires all recurrent cost implications to be met by local government. Project management is preferably to involve local communities. Proposals are submitted by the Member of the Provincial Assembly to the DCO and include a feasibility report. The districts prepare and how this standard PC1 forms for all applications and decisions are made at the District Development Committee. Implementation is undertaken by the relevant public agency, monitored by the DCO and audited by the Director General Audit of NWFP. Overall coordination is provided by a Provincial Steering Committee which holds quarterly meetings. Poverty Alleviation Description Oil and gas regularity, NWFP profits and tobacoo cess Other multisectorial projects. Goals. The objective of the Government in local development and poverty alleviation is to provide increased employment opportunities through community infrastructure 41

NWFP Comprehensive Development Strategy schemes, self employment through microfinance and cash transfers, and skills development for future development of the communities. Priorities. The role of local development will be boosted through the following priorities: a range of funding will be provided to implement small improvements in road maintenance, small water supply projects and local sanitation programmes, through community organisations, building on the experience of RSPs maintenance of spending the current project initiatives supporting local development Provision of at least 100 days work of all the able looked to ensure in the t.... area.
Table 18 Priority Measures in Infrastructure and Local Development (Rs m) Measures Social Mobilization & HRD Y1Y2 Y3Y5 Y6Y7 Total Notes

Investment in Destitute

Investment in Very Poor

Investment in Poor

Community Physical Infrastructure

Access to Health Access to Education

Capacity building of Community and Womens Organisations and Local Support Organisations and Capacity building of service provider at least 30 in a union council 327 731 488 1,546 Income Generating grants, support in technical skills to siblings and linkages with Social Safety Nets, 515 1,153 769 2,437 CIF, Short term employment, Support in technical skills to siblings, Linkages with Social Safety Nets 2,603 5,827 3,885 12,315 Micro Credit, self employment, small scale enterprise development and technical and vocational skills 9,747 21,821 14,547 46,114 Small scale infrastructure schemes built and maintained by communities, integrated projects 251 562 375 1,187 Linkages and referral to BHUs and Micro Insurance 2,409 5,393 3,595 11,398 Improving schools facilities, teacher training and districts education plans 4,702 10,526 7,017 22,245 Improved Seeds, Fertilizers, trainings, equipments 120 80 300 training

1,074 1,612 1,074 3,761

Improvement in NRM

Capacity building support for local 100 implementation

42

NWFP Comprehensive Development Strategy

Total

21,727 47,745 31,830 101,302

43

NWFP Comprehensive Development Strategy D 11. INFRASTRUCTURE Access and Roads

Roads account for over 91% of passenger transport and 96% of freight transport in NWFP. Demand for transport has been exceeding GDP growth rates. At present 20% of people have no access to an all-weather road (compared with 15% in all Pakistan) and 40% have no access to any form of passenger services (compared with 30% for the country as a whole. Poor households are more likely to live in areas with no access to transport, seriously limiting their prospects for improving their livelihoods and their access to key social services. Road construction typically receives between 10% and 15% of the development budget, which is relatively low by international standards. There are about 25,000km of roads in NWFP, with 2,173km of national roads, 1,450km of provincial roads, 18,711km of district roads and 2,624 of other roads. About 44% of the roads maintained by the province are in poor condition and 78% of the roads maintained by the districts are in poor or bad condition. This has arisen as a result of inadequate funding for road maintenance over many years and because of a failure to enforce rules on axle-loads. To restore all non-national roads to good or fair condition would require an about Rs 114bn, in addition to the normal annual requirement of about Rs 1.4bn. The current budget allocation for road maintenance is Rs 250m.
Table 19 NWFP Expenditure on Roads

Roads Current Development

Rs m 06/07 07/08 Actual 510 542 2,895 7,201

08/09 Budget 1,182 6,991

as % total NWFP 06/07 07/08 Actual 1.1% 1.0% 12.3% 26.4%

08/09 Budget 1.8% 16.8%

The role of railways and air transport in NWFP is limited and does not need priority attention in the short or medium term. Goals. The objective of the Government is to improve the quality of the existing road network to reduce the costs of transport and to add new connections to high priority areas where roads will contribute to welfare and to reduced conflict. Priorities. highest priority to optimal utilization of existing capacity through rehabilitation and upgrading innovative private public financing mechanisms in construction and maintenance sustainable maintenance with a major increase in funding through: a road asset management system; user pays principle; and a road maintenance fund adequate incentive-based funding for districts to maintain roads involve communities in road development and maintenance strengthen provincial and district road institutions ensure effective coordination between FHA and NHA priorities for new roads include: Peshawar Northern and Southern Bypasses and improved road links to industrial zones, such as Gadoon-Amazai 44

NWFP Comprehensive Development Strategy longer term planning for improved regional transport links
Table 20 Priority Measures in Access and Roads (Rs m) Measures Y1- Y3- Y6- Total Notes Y2 Y5 Y7 for 1,891 2,400 1,600 5,891 double current budget assuming 80% of road recurrent budget spent on district/provincial roads Investment in rehabilitation of 5,141 7,196 4,798 17,135 double current budget district and provincial roads assuming 50% of road development budget spent on district roads Improvement of district and 10,028 14,038 9,359 33,425 double current budget provincial roads assuming 50% of road development budget spent on provincial roads Programmes of institutional 40 60 40 140 technical assistance, strengthening and promotion of training, field expenses, community participation grants Assetts management system 100 150 100 350 Development of New Roads 1,000 2,500 1,500 5,000 Total 18,200 26,345 17,396 61,941 Increase maintenance funds district and provincial roads

12.

Irrigation and Water Resource Management

The Irrigation Department has recently produced a paper which defines vision and mission for the Department. The Department has a Business Plan for Integrated Water Resources Development that identifies constraints and priorities covering irrigation, water resources, environment, flood protection and rainwater harvesting and small dams. The Irrigation Department has also produced a list of key larger projects. The national Food Security Task Force also includes important statements on irrigation priorities. The allocation of Pakistans water resources to provinces was agreed in the Water Apportionment Accord 1991. About one quarter of the area of NWFP is irrigable, with about one third of this potential currently utilised. More than 50% of the land that could be irrigated, but is not yet irrigated, is in the southern districts of Lakki Marwat, D.I.Khan and Tank. Construction is currently taking place on 14 new schemes, half of which will be completed during the current financial year. The minimum requirements for maintenance of the irrigation system are between RS 600m and 900m per year. The budget allocation in the last 5 years has varied between RS 160m and Rs 300m. As a result of the shortfall in funding for routine maintenance, the Irrigation Department relies on funding from the development budget for large rehabilitation projects, to rescue the infrastructure from disrepair. Unless facilities are due for major upgrading, this is not usually the most efficient way of keeping the system in operation.

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NWFP Comprehensive Development Strategy

Table 21 NWFP Expenditure on Irrigation

Irrigation Current Development

Rs m 06/07 07/08 Actual 1,114 1,180 2,077 6,148

08/09 Budget 2,320 3,603

as % total NWFP 06/07 07/08 08/09 Actual Budget 2.4% 2.1% 3.4% 8.8% 22.5% 8.7%

The Irrigation Department is also responsible for the collection of Abiana. This is assessed on the basis of expected crop production and the total assessment value has increased from about Rs 200m in 2002/03 to Rs 341m in 2007/08, which is an increase of 20% in real terms. The actual collection of Abiana has varied from 50% to 60% of assessed value. Constraints. Integrated water resources management suffers serious technical challenges arising from increasing demand for water from all users. As a result, the quality of water is declining and groundwater reserves are falling. Storage capacity is not increasing fast enough to deal with this situation and the losses in the system are growing because of deferred maintenance. In addition to the problems arising from the security situation, the main operational constraints facing water resources in NWFP are associated with lack of funding, inadequate cost recovery, capacity constraints, limited stakeholder participation and poor awareness and information. In water resources, there have been problems with the slow growth of interest, with project implementation and with financing. In irrigation and drainage, there is now a scarcity of water and a lack of effort in water conservation. Water supply distribution is inequitable and cost recovery is low, which has resulted in deferred maintenance. There is limited institutional capacity to manage irrigation systems, inadequate information and a lack of consensus and cooperation. Procurement and project implementation are also a problem. Environmental standards are hampered by low political priority, inadequate institutional capacity, governance problems and low stakeholder and private sector participation. Funding is limited and the existing legislation in punitive, rather than supportive. Planning can be over ambitious. Flood protection suffers from the lack of a realistic and holistic approach. There are also problems with encroachment due to urbanisation and limited financing available. Rainwater harvesting also suffers from limited finances and implementation capacity and a lack of stakeholder participation. Goals. The Governments goals in irrigation are to provide adequate water for irrigation both through conservation and development to meet the food and fibre requirements of the growing population. This is consistent with the National Water Vision, which states: By 2025, Pakistan should have adequate water available, through proper conservation and development. Water supplies should be of good quality, equitably distributed and meet the needs of all users through an efficient management, institutional and legal system that would ensure the sustainable utilisation of the water resources and support 46

NWFP Comprehensive Development Strategy economic and social development with due consideration to the environment, quality of life, economic value of resources, ability to pay and participation of all stakeholders. Each subsector as the following objectives In water resources development: to provide sufficient water supply for all users and promote water conservation through effective planning and decision making; to regulate groundwater extraction and improve water quality; and to develop an information base and increased public awareness of the importance of water. In irrigation and drainage: to increase efficiency from 40% to 45%; to achieve equity in water distribution; to increase the irrigated area; to achieve financial sustainability; to promote stakeholder participation; to reduce water logging; and to improve the capacity and introduce an asset management system. In environment, the objective is to improve the quality of surface and ground water to acceptable standards by 2025. In flood protection: to focus attention on areas of highest population and economic importance, preparing flood and drought management strategies for major cities, towns and water infrastructure with clearly delineated risk zones. In rainwater harvesting and small dams: to harness unused flood water and run off from hill torrents; to conserve rainwater and to improve watershed management and flood mitigation. Priorities. The short term strategic priorities are: upgrading capacity of integrated water resources management and produce a water resources master plan and MIS promoting water conservation expand large and medium water storage capacity develop a water quality monitoring programme update the feasibility study on groundwater potential and regulatory mechanism prepare a plan for the financial sustainability of irrigation and drainage actions to improve farmer participation and cost recovery in irrigation and drainage prepare a plan to expand irrigated area at all scales rehabilitate and improve existing irrigation schemes undertake a feasibility study for an Asset Management System plan a comprehensive water quality management programme, including specific actions, studies, awareness raising and legislation requirements implement the Third Flood Sector Project and the 10 Year Comprehensive Flood Protection Plan Conduct feasibility studies into and implement small dams, rainwater harvesting ponds and actions to harness hill torrent Many of the short term priorities will need to be sustained into the medium term. Additional medium term priorities are: implementation the plan to increase the irrigated area improve the integration of different aspects of water resources management implementing a water quality improvement programme implement a regulatory framework for groundwater use 47

NWFP Comprehensive Development Strategy

pilot modern irrigation technologies modernise barrages support municipal waste water control measures implement the national water quality monitoring programme capacity building in government institutions

In addition to these short and medium term priorities, there are longer term priorities including: developing improvements in rain fed farming systems; developing new cultivars; and building capacity to respond to climate change, including the ability to optimise water use when supplies are variable. Many of these require a significant increase in spending on research. There are 5 major irrigation investment projects in NWFP that are large enough to require national approval. These including: The CRBC Lift and Gravity system in D.I.Khan; the Gomal Zam Dam in S Waziristan, Tank and D.I.Khan; the Kurram Tangi dam in N Waziristan; the Munda dam in Swat; and the Warsak Canal system in Peshawar and Nowshera districts. These projects would involve over 1 million acres of new or improved irrigated area, with 840MW electricity generation. Total cost is estimated at Rs 100bn.
Table 22 Priority Measures in Irrigation (Rs m) Y6- Total Notes Y7 Flood Protection 747 5,606 studies and construction Works on small dams 2,120 15,900 plans, feasibility studies, construction Irrigation works, including dams and 1,100 13,120 8,747 22,967 studies and construction canals Capacity building for Dept Irrigation 267 80 53 400 capacity building, training, procedures, logistics Measures Y1- Y3Y2 Y5 3,737 1,121 10,600 3,180 MIS, GIS and asset management and 833 quality assurance system Urgent waste management systems 272 Rainwater harvesting feasibility 100 study, pilots and upscaling Total 250 82 400 167 54 200 1,250 studies 408 700 studies and construction

16,909 18,233 12,089 47,231

13.

Energy and Power

Pakistan is blessed with a tremendous hydel potential of more than 40,000 MW. However, only 15% of the hydroelectric potential has been harnessed so far. The remaining untapped potential, if properly exploited, can effectively meet Pakistans ever-increasing demand for electricity in a cost-effective way. Pakistan currently has a total installed power generation capacity of about 20,000MW, of which about 30-35 % comes from hydro and balance from thermal generation. Electricity distribution in Karachi is managed by KESC, whereas in the rest of the country by WAPDA except some part in Chitral, Kohistan by SHYDO. Since October 2007, 48

NWFP Comprehensive Development Strategy WAPDA has been bifurcated into two distinct entities i.e. WAPDA and Pakistan Electric Power Company (PEPCO). WAPDA is responsible for water and hydropower development whereas PEPCO is vested with the responsibility of thermal power generation, transmission, distribution and billing. PEPCO has been fully empowered and is responsible for the management of all the affairs of the nine corporatized Distribution Companies (DISCOs), four Generation Companies (GENCOs) and a National Transmission Dispatch Company (NTDC). National Electric Power Regulatory Authority, NEPRA was established under ACT No. XL of 1997. Its function is to provide for the regulation of generation, transmission and distribution of electric power. WHEREAS it is expedient to provide for the regulation of generation, transmission and distribution of electric power and matters connected therewith and incidental thereto; it is hereby enacted as follows charged with supervising the new structures. NEPRA's main responsibilities are to: Issue Licences for generation, transmission and distribution of electric power; Establish and enforce Standards to ensure quality and safety of operation and supply of electric power to consumers; Approve investment and power acquisition programs of the utility companies; and Determine Tariffs for generation, transmission and distribution of electric power. A Private Power and Infrastructure Board (PPIB), Ministry of Water & Power was established to promote and facilitate private sector participation in the Pakistan Power Sector in an efficient, fair and transparent manner, with coherent efforts of key stakeholders, in line with the Private Power Policies of GOP and the electricity demand/supply projections after taking into account the planned public sector power projects. PPIB dealt with private sponsor for generation of power irrespective of its sources. The total hydro generation capacity in NWFP is estimated to be more then 25,000MW. WAPDA and private sponsors are exploiting this potential. In order to tap the indigenous available resources in Hydel sector, provincial Govt has established full-fledged department under name of Energy & Power Department. Energy & Power Department is administrative department of Sarhad Hydel Development Organisation (SHYDO). SHYDO framed a power policy for NWFP in 2006. SHYDO is responsible for the management and development of Hydro power generation plants in NWFP. Electricity supply in NWFP is provided mainly by the Peshawar Electric Supply Company and NTDC is looking after the transmission and distribution network. The Government introduced a power policy in 2001 that concentrated on plants of up to 20MW that were intended to supply captive industrial customers. This provided limited incentives and placed unrealistic constraints on investors. The 2006 Power Policy supplemented this. To exploit Pakistans hydel resource productively, huge investments are necessary, Considering the limitations and financial constraints of the public sector, the Government of Pakistan announced its Policy for Power Generation Projects 2002 package for attracting overseas investment, and to facilitate tapping the domestic capital market to raise local financing for power projects. The main characteristics of this package are internationally competitive terms, an attractive framework for domestic investors, 49

NWFP Comprehensive Development Strategy simplification of procedures, and steps to create and encourage a domestic corporate debt securities market. The national policy on power was defined in 2002 and provided a clear set of incentives to attract investment. The policy allows provinces to manage investments of up to 50MW capacity. The Government of NWFP has responded to the opportunities provided in national policy by offering additional incentives to attract private investment in smaller hydropower plants up to 50 MW. The Government invites investors to invest in the hydel power sector and assures them its fullest possible support in implementation of their projects. Objectives. The main objectives of the NWFP power policy are: to provide sufficient opportunities for power generation at the least cost to encourage and ensure exploitation of indigenous resources, which include renewable energy resources, human resources, participation of local engineering and manufacturing capabilities to ensure that all stakeholders are looked after in the process to be attuned to safeguarding the environment to encourage the private sector to develop hydel potential and utilize the power generation for the industry as well as sale to other entities. Priorities. For hydro facilities between 1MW and 50MW, the procedures to be used in developing these sites are defined in the 2006 policy and including the following: all new projects will be on a Build-Own-Operate-Transfer basis All projects above 5 MW will be offered for tender on a competitive basis. SHYDO will also welcome interest from private investors at sites that do not yet have official feasibility sites A twin pricing policy for tariff determination is applied including a fixed and a variable element. NWFP will not impose taxes or levies on power generation companies promotion of alternative energy sources The policy defines the rules that will apply during the transition period, whilst full privatisation is achieved. Large hydro facilities are governed by the Hydropower Development Plan Vision 2025 prepared by WAPDA. This is kept updated with potential projects for the short, medium and long term. The plan envisages a combination of public investment, private investment and public-private partnership. There are 7 large hydro schemes in the process of commissioning in NWFP (Allai Khwar, Duber Khwar, Khan Khwar, Keyal Khwar, Golen Gol, Kurram Tangi, Gomal Zam and Tarbela 4th Extension Hydropower Project) and these will add about 1,500 MW in the national system to strengthen the economy and enhance hydropower generation share to national grid latest by October 2010 (if completed by that time). SHYDO is not constructing small scale Hydro projects and are trying to award the same to private sponsors as per NWFP Power Policy 2006. SHYDO is constructing medium size projects, including Malakand-III HPP, Pehur HPP, Daral Khwar etc. The following 50

NWFP Comprehensive Development Strategy medium size projects are in the pipeline, with a total potential contribution of 565.5 MW capacity and a total cost of US$ 1246m. The Government is budgeting on a contribution of 10% of total cost.
Table 23 Priority Hydroelectricity Projects in NWFP No Name of District Potential Cost 10 % Scheme Govt share MW US$ US$ m m Programme Y1-Y2 1 Koto HPP Dir 18 38 3.8 (Lower) 2 Korara New Shangla 7.5 20 2.0 3 Matiltan HPP Swat Total US$ m Total Rs m Programme Y3-YY 1 Jabori HPP Manshera 2 3 4 5 6 7 8 9 10 Batakundi HPP Shigo Kach HPP Barikot Patrik Patrak Shringal Serai Karora Manshera Dir (Lower) Dir(Upper ) Dir (Upper) Shangla 84 109.5 180 238 18.0 23.8 1904 2 16.0 9.0 7.5 4.5 3.1 2.2 6.5 8.0 42.0

Remarks1

Feasibility study progress. Feasibility study progress. Construction

in in

8 65 38 34 21 13.5 8.1 26.4 32 210

20 160 90 75 45 31 22 65 80 420

Bhimbal Manshera Khatta Arkari Gol Chitral HPP Dongaigah Kohistan Naran Dam Manshera

Feasibility study in progress. Feasibility study in progress. Pre Feasibility in progress Pre Feasibility in progress Pre Feasibility in progress Pre Feasibility in progress Pre Feasibility in progress Planning (capacity RAW site) Planning (capacity RAW site) Planning (capacity RAW site)

Total US$ m 456 1008 100.8 Total Rs m 8064 1 All costs include construction costs. For pre-feasibility status, costs also include feasibility study

The total costs to government of the priority measures are therefore just under Rs 10 bn.
Table 24 Priority Measures in Energy and Power (Rs m) Measures Y1- Y3- Y6- Total Notes Y2 Y5 Y7 Public sector joint financing for hydro 1,904 4,838 3,226 9,968 10% of total estimated cost investment of Rs 35 bn?

51

NWFP Comprehensive Development Strategy

Promotion of Altenate energy Total

500

1,500 1,000 3,000

2,404 6,338 4,226 12,968

14.

Water and Sanitation

About 71% of the NWFP has access to improved water supply, with 92% of the population having access in urban areas. The rate of access varies greatly within NWFP and falls to only 11% in the worst-off areas, such as Kohistan. Most rural supplies are managed privately or by NGOs, whilst the Government is the main supplier of water in urban areas. Many improved water supplies are not considered safe for human consumption. Access to sanitation is also poor: only 66% of the population has access to sanitation and only 39% of the latrines are considered sanitary. Access to sanitation in urban areas is much higher, at over 90%, but the majority are not connected to sewage treatment plants and the standards of sewage treatment are mixed and there are many areas where poor sanitation is creating serious public health risks. Many donors have supported improved sanitation in NWFP, but awareness of the importance of safe sanitation is still limited. About 15% of children suffer from diarrhoea in any one month. The recent conflicts in NWFP have led to large numbers of internally displaced people (IDPs) who have settled in camps or with host families. This has added to the workload of local councils and municipalities. Watsan and Hygiene Promotion (WASH) support is provided to IDPs by the WASH Cluster, which is chaired by the Department of Local Government and Rural Development Department (LGRDD) in collaboration with UNICEF. To support this WASH cluster, the Government of NWFP has created in March 2009 a dedicated Watsan Cell in the LGRDD. As part of the devolution policy in 2001, water supply and sanitation services, including sewerage and drainage, (Watsan) were transferred from the Public Health Engineering Department to municipalities. Administrative control is vested in Tehsil Municipal Officers and the Tehsil Officers (Infrastructure and Services) now have responsibility for watsan, in addition to roads, streets, lighting, fire and park services. Because of the importance of watsan services, some monitoring and mentoring support is provided at the provincial level by the Local Government and Rural Development Department (LGRDD). Government support for sanitation is guided by a Provincial Sanitation Strategy. This reflects the National Sanitation Policy prepared in 2006. Under the decentralisation policy, Tehsil local governments have the responsibility for sanitation and are expected to prepare Implementation Plans detailing how they will deliver the sanitation outcomes defined in the strategy, bearing in mind the regulations and support provided by the provincial level in the strategy. The National Water Policy establishes a number of principles, including: a) that water is a basic human right; b) that domestic water takes precedence over other uses of water; c) that existing disparities in access to water need addressing; d) that women, as the main users of water, need special roles in planning water supply; and e) that local authorities will take the lead responsibility in water supply. 52

NWFP Comprehensive Development Strategy

In sanitation, the NWFP policy recognises three principles: a) that households are already meeting the high costs of poor sanitation through very high expenditure on health services; b) that there is growing experience in Pakistan and elsewhere in South Asia that communities are capable of building and maintaining sanitation systems, given the right facilitation and support from NGOs and government; and c) local governments are the right level for sanitation improvements to be managed. The strategy adopts a total sanitation approach, covering hygiene, excreta, drainage and solid waste, with the most urgent priorities being on hygiene and excreta. Again building on international experience, the strategy adopts an outcome based approach relying on the declaration of Excreta Safe Unions, Litter Free Unions, Foul Water Free Unions and the Cleanest Unions. Funding will be linked to rewards for achieving outcomes using a number of different models, to be determined at local level by TMAs. It relies on popular participation and changed perceptions. The new Watsan Cell in LGRDD will: i) build capacity of local councils; ii) optimise the impact of WASH services by improving the responsiveness of local councils; and iii) enhance capacity for emergency preparedness and response. Goals. Governments strategic goals in water and sanitation are to expand the availability of clean water, especially in areas threatened by conflict, and to ensure that all people in NWFP have access to safe sanitation. The strategy for water supports the National Water Strategy, prepared in 2007 with participation from all levels of government. This stresses the importance of reducing death and illness through the provision of safe drinking water in an equitable, efficient and sustainable manner. Priorities. Provide new access to safe drinking water, with appropriate supervision of quality, especially in areas that are current un-served or under-served, and improve maintenance and reliability of existing supplies. Introduction of user charges for water supplies, with some cross-subsidisation to benefit low income water users. Stronger regulation of groundwater use. Water saving measures will be promoted and local water harvesting schemes will be encouraged. New arrangements for collaboration with communities and for public-private partnership in water supply will be promoted. Refinement and finalisation of Provincial Sanitation Strategy and preparation for its implementation. Education and awareness building in water and sanitation, through an integrated, holistic and consistent Behavioural Change Communication Plan. Encouragement of community action and management of resources, including the creation of cohorts of Municipal Volunteers. Improved local government, particularly at the tehsil level, including: a) preparing Water and Sanitation Programmes; b) especially in the promotion of Community Led Total Sanitation (CLTS); and c) financial management. Development of improved institutional structures for water and sanitation, including regulations, institutions, social conventions and public health attitudes. 53

NWFP Comprehensive Development Strategy Improved coordination and networking amongst departments and with the private sector. Improved monitoring and evaluation to ensure results-based municipal projects with the development of a Watsan Management Information System. Coordination and facilitation of Emergency Preparedness and Response (EPRP).
Table 25 Priority Measures in Water and Sanitation (Rs m) Measures Y1- Y3Y2 Y5 Y6Y7 Total Notes

Supply of water and sanitation to new 2,000 3,000 2,000 7,000 areas Stronger regulation of groundwater use 10 12 8 30 TA, procurement, out reach, mobility, expenses Water saving measures (reducation of 50 unaccounted for water, promotion of metering etc) Preparation/finalisation of Provincial 5 Drinking Water Supply Strategy Outcomes incentives programme for 50 implementation of Provincail Sanitation Policy/ Strategy Sector capacity building, including 16 Performnace Benchmarking, Customers/Civic Education, Behavioural Change Communication Plan, municipal volunteers, local government training and Watsan MIS Emergency Preparedness Response 5 Total 100 0 213 32 50 0 142 16 200 5 405 64 Promotion, media technical assistance 20% match funding for GoP support to NWFP strategy technical training, equipment assistance, consultancy,

10

technical assistance, office, expenses

2,136 3,360 2,218 7,714

15.

Housing and Public Building

The Housing Department was established in 2004 to implement the National Housing Policy announced by the Federal Government in 2001. The main theme of the policy is to regulate the housing related activities in a proper well coordinated manner to encourage systematic growth in the housing sector in collaboration with government as well as private sector and to encourage public private partnership for providing housing facilities to general public as well as to government employees on affordable prices. For this purpose, the Provincial Housing Authority in NWFP was created in 2005. Goal. The objectives of the Provincial Housing Authority are to establish a comprehensive system of town planning at different levels in the province to ensure systematic integrated growth of urban and rural areas and to achieve the object of "Housing for All" including housing for shelter less Government servants. Priorities. The Governments short term priorities are as follows. Fast track construction of Flats in Hayatabad. 54

NWFP Comprehensive Development Strategy Immediate starting feasibility study / planning of Rukhzadani at D.I.Khan. Provision of essential staff for Housing Department/ Provincial Housing Authority. Jurisdiction of Local Area Authorities. In the medium term, the priorities are. Reconsideration on hiring of consultants for selection / planning of six sites in six districts within six months. Housing for All programme, to guarantee civil servants a house in retirement, with the costs of the housing recovered through deductions from civil servants pay Provision of housing plots for the poor whose certified income is less than Rs 5000 per month, through public auction. Acquisition of land for housing, both for government officials and for the poor, funded both by government and by banks and IFIs Construction and reconstruction of flats for existing civil service employees. Partnership with the banks, Development Finance Institutions and private developers.
Table 26 Priority Measures in Housing and Public Building (Rs m) Measures Strengthening of PHA Y1- Y3Y2 Y5 10 12 Y6Y7 8 Total Notes 30

Housing schemes for all government 375 officials in their retirement, starting with 6 pilot districts Housing plots for the poor 400 Acquisition of land for housing for 375 civil servants and for the poor Construction of 216 flats at Nasapa 200 Payan for civil servants in Peshawar

TA, capacity building, equipment 2,183 1,455 4,013 improving living conditions for officials 600 929 0 400 619 0 1,400 1,923 land purchase 200 construction

Reconstruction of flats at Kohat Road, 0 120 80 200 Peshawar Total 1,360 3,844 2,562 7,766

55

NWFP Comprehensive Development Strategy E 16. ECONOMIC MANAGEMENT Agriculture and Livestock

The strategy of GoNWFP is based on the Agricultural Policy 2005 prepared by the Agriculture, Livestock and Cooperatives Department, supplemented with the report of the national Task Force on Food Security, published in Feb 2009 by the Planning Commission. A Livestock Development Plan has recently been approved. An earlier NWFP Agricultural Strategy was produced in 2003 and provides some useful context. Context. Agriculture is critical for NWFP as over three quarters of the population of NWFP are at least partly dependent on agriculture for their livelihood. In addition, the high levels of poverty in rural areas mean that agricultural growth is a very effective way of reducing poverty. There are just over a million farms with 60% less than 2.5 acres and 37% less than 1 acre. Table 27 presents the land use in NWFP, showing that about 16.6% of land is cultivable, of which over half is already irrigated, about 15% is used for rain fed crops and about 30% is fallow. Nearly 40% of NWFP is uncultivated, but used productively, mainly for livestock. A further 12.6% is forested, with the remainder currently being wasteland.
Table 27 Land Use in NWFP

Irrigated crops Un irrigated crops Fallow Uncultivated area, including pasture Forest Culturable waste Not available for cultivation Other Total
Source: NWFP Development Statistics 2007

Area (m ha) 0.88 0.28 0.52 3.94 1.28 1.04 1.61 0.62 10.17

% 8.7% 2.8% 5.1% 38.7% 12.6% 10.2% 15.8% 6.1% 100%

Table 28 presents the main agricultural activities in NWFP. The table suggests that crops and livestock are of roughly equivalent importance to the economy of NWFP. The most important crops are wheat, maize and sugar cane, whilst cattle and buffalo are the most important livestock.
Table 28 Agricultural Activity in NWFP (2006/07) Area Indicative yield Crops Wheat Maize Sugar cane Tobacco Rice (000 hectares) 754 516 10l.8 30.8 60 000 tonnes 1160 918 4645 78.2 123 t/ha 1.5 1.78 45.0 2.5 2.02

Indicative price (per 40 kg) Rs 425 450 65 61000 (PT) 460

Estimated value Rs bn 12.3 10.3 7.5 4.8 1.4

56

NWFP Comprehensive Development Strategy

Gram All other Pulses Total Livestock

49 68

21 33 '000 head

0.42 0.48 '000 slaughtered 190 190 160 170

22000 ( PT) 40000 (PT) Rs/head 20,000 25,000 3,500 3,500

0.5 2.7 39.5

Cattle
Buffalo Sheep Goats Milk, eggs etc Total

5,970 1,930 3,360 9,600

3.8 4.8 0.6 0.6 6.2 16.0

Source: NWFP Development Statistics 2007, with indicative figures taken as rounded averages for 2004/05 2006/07 1 Indicative prices based on NWFP statistics for crops and FBS meat prices for livestock, with assumptions for average livestock weight and killing out percentages 2 Based on HJP survey in Kohistan

Growth in agriculture for Pakistan averaged over 4% per annum between 1970 and 2000, but has slipped to less than 3% since 2000. This pattern reflects the changes in the terms of trade through these periods and the lack of any technical advance in recent decades that can match the impact of the Green Revolution of the 1960s. The terms of trade are influenced by the national system of intervention buying that provides a floor price for the main agricultural products. The Government also operates policies of keeping input prices for agriculture low. Intervention buying has been important in the past, but has not been active from most crops in recent years, although the floor price may help some farmers in negotiations with traders, in areas where trade competition is low. The index of agricultural terms of trade rose from 100 in 1990/91 to 132 in 1998/99, and then fell back to 97 by 2005/06. The large increase in world food prices in 2007/08 has helped to reverse this decline, pushing the index back up to 114, with food price rises more than offsetting the large rise in input prices, especially for fertiliser and fuel. The high demand for food products from Afghanistan has contributed to the high food prices and fostered a strong transit trade in food products. An impact assessment by UN agencies in July 2008 concluded that the price changes in Pakistan that following the increase in world prices pushed about 10 million people below 1700 calories per day. Although the advances in agronomy in recent years have not matched those of the green revolution, there are still many opportunities to improve agricultural production. This is illustrated in Table 29, which applies to Pakistan as a whole. Key technical solutions to bridging this gap include: increased use of certified seed; balanced use of fertiliser; farm mechanisation; water use efficiency and expansion; and increased livestock productivity.
Table 29 Progressive and Average Yields (tons/hectare over last 3 years)

Crop Wheat Sugarcane Maize Rice

Progressive Farmer Yield 4.6 200.0 6.9 3.8 57

Average Yield 2.6 55.0 2.9 2.1

Source: NWFP Development Statistics 2007

NWFP Comprehensive Development Strategy Key problems in agriculture include: Natural resources pressures: rain fed agriculture; inefficient use of irrigation; ecological fragility of uncultivated land. Fragmentation of holdings. Low productivity: low quality of seed and fertiliser; low livestock productivity; post harvest losses of more than 10%; and an irrigation system which has received inadequate maintenance for several decades. Limited government institutional capacity, especially for extension and research. Economic disincentives: non existence of regulated markets; poorly developed regulated markets; low agri-processing activity; and high tax burden. Low and declining access to credit, with only 4% of total institutional credit going to agriculture. and loans falling 36% below the targets set in MDGs, at a national level High spread between savings and lending rates of over 7%, nationally Social constraints: limited cooperative activities; and low attention to the role of women in agriculture. The recent increase in world food prices reverses a period of nearly ten years during which food prices rose only slowly, whilst input prices were rising more sharply. Governments Role. Governments role in agriculture is different to its role in other economic activities, as a result of: a) the disbursed nature of agricultural production; b) the volatility of markets and critical importance of food prices to basic welfare; and c) the needs for cooperation over natural resource use and disease and pest control. Existing government activity focuses on the construction and maintenance of irrigation infrastructures, along with support for extension, veterinary services and research. The total budget for agriculture is Rs 7.8bn, of which 7.0bn is for development, mainly for the construction of irrigation (5.8bn). There are also over 60 smaller projects in the ADP providing support for specific initiatives, costing a total of 0.7bn. In addition to the agriculture budget, there are about 80 forestry, fisheries and wildlife projects with a total value of 0.5bn.
Table 30 NWFP Expenditure on Agriculture, Forestry, Fisheries and Environment

Rs m Agriculture and NRM 06/07 07/08 Actual Current 984 1,044 Development 3,099 3,988

08/09 Budget 2,053 3,489

as % total NWFP 06/07 07/08 Actual 2.1% 1.9% 13.1% 14.6%

08/09 Budget 3.1% 8.4%

Goals. The NWFP strategy aims to address these constraints through: improved and integrated public support; private-public partnerships; community participation; conservation; tax relief and gender mainstreaming. Priorities. The strategy defines the following short term priority policies: improving extension and research services, with rationalisation to allow greater independence to research institutes and introduction of a performance monitoring system 58

NWFP Comprehensive Development Strategy expanding the availability of certified seed to the private seed companies that supply most of the improved seed in NWFP higher priority to provide foreign exchange for the import of fertiliser and rationalisation of the cooperation between government and private fertiliser distributors, to reduce distortions in distribution improving the efficiency of agricultural markets and maximising incentives for farmers, with prioritised public-private investment in market, processing and storage facilities strengthening the ability of government financed procurement, storage and distribution, to provide timely purchase and efficient and equitable distribution increasing farmer cooperation and participation in government services facilitating private investment in livestock, fruit, water management and dairy expansion of agricultural credit, with the introduction of the passbook system in northern areas diversification to higher value products, with investment in post-harvest handling, and diversification into non-farm employment in rural areas to facilitate consolidation of holdings greater attention to the efficiency of water use bringing culturable waste land in to farming through provision of irrigational water and land development with the help of bulldozers and tractors The Government recognises that the livestock sector contributes about half of total agricultural GDP and will: rationalise research and extension, improve coordination and strengthen capacity get rid of repeated funding get receipts in an un-interrupted manner and establish sustainable revolving funds get rid of establishment charges in a phased manner get an efficient and clean livestock sector increase commercialisation of the sector through establishment of joint ventures with the private sectors and establishment of milk, meat and eggs processing industries through local and foreign investment Enhancing livestock productivity through improved breeding programme and conservation of indigenous breeds.
Table 31 Priority Measures in Agriculture (Rs m) Measures Y1- Y3Y2 Y5 Y6Y7 Total Notes 3,000 increase of 20% on 08/09 levels of Rs 220m? 1,500 costs of promoting & facilitating supply production or distribution done by private seed companies 700 additional costs to extension services of more visits to farmers 10 technical assistance costs on new legislation

Extension, seeds, fertiliser, machinery 1,000 1,200 800 Research 500 600 400

Expanding farmer participation in 200 extension and research Revising legislation covering markets, 10 input quality and international trade

300 0

200 0

59

NWFP Comprehensive Development Strategy

Exemption or reduction from taxes, 737 affecting land tax, inheritance tax and Abiana Livestock Commercialisation Board 10 and Network Dairy development 600 Horticulture development 600 Land development 5,550 Water harvestg 500 Total 9,707

1,105 737

15 1,200 1,200 1,710 900 8,230

10 800 800 1,140 600 5,487

2,579 50% reduction on 08/09 budget levels of Rs 87m for agri income tax and Rs 650m for land tax 35 2,600 2,600 8,400 2,000 23,424

Monitoring. The target set by the national Food Security is to achieve real agricultural growth of at least 4% per year over the next decade and NWFP aims to match this target. The Task Force called for the compilation of a Food Security Index, to cover the various factors influencing food security and the Agriculture Department in NWFP will cooperate in providing agricultural data to feed into this index. The Task for also called for the compilation of an index of the terms of trade in agriculture (i.e. weighted average ratio of output price to input prices) and NWFP will request that this is compiled in a way that allows provincial trends to be identified. 17. Reconstruction Opportunity Zones

The US Government has recently passed the bill that will enable parts of Pakistan to benefit from Reconstruction Opportunity Zones (ROZs). These were pioneered in Jordan and Egypt and allow businesses in the defined zones to export duty free to US markets, for specified eligible products. In Pakistan, the ROZs are defined to include the whole of NWFP, as well as the tribal agencies and parts of Baluchistan within 100 miles of the Afghan border. The ROZs are not associated directly with any form of technical or financial assistance, nor do they guarantee sales in the US markets. The NWFP Government response to the opportunity arising from ROZs is involving a range of provincial and federal ministers, politicians and officials as well as trade and commercial bodies. A committee of 11 people has been formed to coordinate further work. Goals. The NWFP Government sees ROZs as a major opportunity to boost growth in the Province. The objective is to create employment, hence diverting people away from activities associated with the conflict and reducing poverty. Priorities. In the short term, the Government will establish a dedicated Programme Management Office (PMO) in the Sarhad Development Agency, with experienced staff. The PMO will be responsible for regulatory activities, coordinating infrastructure development and all facilitation and marketing functions. In the first phase, all industrial estates in NWFP and FATA will be designated as ROZs. The zones currently identified include 10 industrial estates and 11 Small Industries Estates. A second phase will involve the creation of new estates. Preference will be given to estates that are close to FATA and these estates will include quotas for the proportion 60

NWFP Comprehensive Development Strategy of employees that must come from FATA. The ROZs will act as a focus for a range of support activities for businesses, including: infrastructure improvement removal of administrative barriers support for promotional activities, including advice on succeeding in US markets technical support to firms

In addition, all incentives that are currently available in Export Processing Zones will be available to businesses in ROZs, including: simplified procedures; full repatriation of profits; duty free import of machinery, vehicles, equipment and materials and ability to sell in local market after a set period and payment of duty equivalent; no sales tax on inputs including utilities; freedom from any national important restrictions and from foreign exchange regulations; duty and tax free trade within zones; ability to sell in Pakistan on the same terms as any importer; production oriented labour laws; and unlimited subcontracting within and outside the zones.
Table 32 Priority Measures in ROZs (Rs m) Measures Y1- Y3Y2 Y5 PMO costs 20 48 Up-gradation of existing Industrial 320 660 Estates Establishment of new Estates / Economic Zones

100 staff, offices and expenses 1,420 up-gradation, innovation and standardization to the level of ROZs on international standard Industrial 1,300 1,944 1,296 4,540 development of new estates / ROZs / Economic Zones at various locations in NWFP 1,500 smooth running of manufacturing units and timely availability of basic facilities to the investors 1 2 2 5 travel, marketing 2 2 2 6 technical assistance 20 48 32 100 1,963 3,425 2,283 7,671 720 480

Y6Y7 32 440

Total Notes

Joint Venture schemes on Public- 300 Private-Partnership basis Promotional activities Technical support to firms Establishment of SDA Complex Total

18.

Minerals

NWFP has important resources of dimensional stones (especially marble and granite), precious stones and metals, some industrial minerals, fuel/energy minerals and salt. Dimensional stones are of particular importance: there are six different types of marble block with known reserves of more than 100m tonnes and two of more than 1bn tonnes; and granite resources are widespread in the northern districts of NWFP. There are currently nearly 900 prospecting licences granted and about 430 mining leases. Industrial rocks and minerals account for just over half the licences, with dimensional stone account for nearly a third.

61

NWFP Comprehensive Development Strategy Mineral extraction has been one of the sectors that have grown in recent years, despite the security constraint, partly because it is highly concentrated and thus easies to protect from disturbances. Its contribution to GDP is still relatively small (at 0.1% of GDP) but it has the potential to grow rapidly. Furthermore, most of the mineral resources are located in relatively poor areas of the province and mineral extraction is therefore likely to benefit the poorest members of society, both through direct employment and through the spill over benefits of the infrastructure provided for quarrying and mining. It is also a sector in which government can provide strong support without undermining private sector activity. At the Provincial level, the Directorate General of Mines and Minerals (DGMM) is responsible for the management of mineral resources in the province in terms of: regulating the grant of Licences and Mining leases; exploration & development of mineral resources, including assessment and evaluation of granted area of minerals; welfare of mine workers & enforcement of laws related to safety of mines and workers. The DGMM also provides facilitation activities including: laboratory facilities in mineral sample testing, analysis and processing; environmental management of mines sites; and information services to facilitate and attract investment in mineral sector.
Figure 2 Directorate General of Mines and Minerals, NWPF

Licensing Division

Exploration Division

Inspectorate of Mines Labour and Welfare

Welfare of Mining Community & safety of mine workers Enforcement of Mining Labour Laws Conduct competency examinations of mine supervisors & workers Collection of excise duty on minerals Training of mine workers

Grant of prospecting /exploration licenses and mining leases Collection of Rents and Royalties on minerals Control unauthorized excavation & transportation of minerals. Compilation of Mineral Production Data

Plan & implement mineral projects Mineral Resource Mapping (Remote Sensing) Provide information services (Geo Info System) Promote exploration of minerals Provide mineral testing facilities

DGMM is also responsible for R&D projects, technical support for smaller mining concessions and evaluation of mineral tenement for possible grant of licenses. There are 10 minerals projects in the current Annual Development Plan, including 4 surveys, 2 training programmes, 2 research and development projects and 2 Geographical Information Systems. Since the formation of DGMM, it has created new concession rules, established a safety and rescue training centre, supported small-scale gemstone prospecting and has raised awareness about mining issues in the district legal system. Exploration work has covered dimensional stones, gemstone resources and gold and related minerals and work is ongoing on various mapping activities. It has overseen an increase in mining revenue from Rs 100m to Rs 265m in 2006/07.

62

NWFP Comprehensive Development Strategy

Box 3 the PASDEC Public Private Partnership The Pakistan Stone Development Company provides a range of publicly funded services that aim to improve the production and reduce the wastage of dimensional stones, so that Pakistan can achieve international standards of efficiency by 2015. The partnership will implement a total of 43 projects, of which 11 will be in NWFP. These will include model quarries, upgrading of selected quarries, a machinery pool, training centres and programmes, warehouses for key materials and marble cities. In NWFP, PASDEC are already established a machinery pool, upgraded one quarry and trained 10 quarry masters. There are also plans to establish a Pakistan Gem and Jewellery Development Company, along similar lines.

The key challenges to the sector are: lack of capacity building of the DGMM in management of mineral resources including regulations lack of mining skills & mine management leading to wastage of mineral resources and making the mineral reserves irrecoverable lack of investors having the requisite financial and technical soundness problems associated with obtaining permission from local communities and land owners creating difficulties in access to land/ mineral bearing areas court litigations amongst mineral licensees / mining lessees low level of value addition to mineral commodities e.g. dimension & gemstone persisting production and supply of minerals according to the market demand creating periods of low and high prices lack of coordination between environment and mineral department in declaring reserved forest in areas of mineral potential Goals. The strategic objective of government in the minerals sector is to facilitate a rapid increase in mining activity that uses natural resources efficiently, whilst providing employment to local people and revenue to government. Priorities. The DGMM will champion the development of the minerals sector, and will pursue the following priorities: strengthening of institutional set-up of the DGMM, including logistic support in capacity building Establish an Institute of Mineral Management for training of professionals (geologists, mining engineers & other geoscientists as well as IT & legal and regulatory experts etc.) to cater the need of DGMM and the private sector. Provision of roads and electricity in selected mineral bearing areas also of importance to local population. discouraging the parties in grant of licenses and mining leases to applicant with limited financial resources and with no experience of mining business and technical resources legislative measures to resolve problems with land owners and local communities representatives encouraging value addition to indigenous mineral commodities as substitute of import and enhancement of export value added minerals incentives in transportation of mineral products to cover the location disadvantage incentives in obtaining foreign technical assistance and mine machinery 63

NWFP Comprehensive Development Strategy formalisation of gemstone business and support and training for investment in value addition of gemstones
Table 33 Priority Measures in Minerals (Rs m) Measures Y1- Y3Y2 Y5 Strengthening of institutional setup of 50 75 Minerals Deptt Regional mineral exploration of NWFP 150 to facilitate mineral development and private sector development Provision for construction / 600 improvement of roads in mineral bearing areas Provision for establishment of model 50 ropeways in rugged terrains for transportation of minerals to road side Establishment of an Institute of Mineral 150 Management for training of mineral related professionals Total 210

Y6Y7 50

Total Notes 175 logistic support, capacity building, technical assistance, training, developing new procedures consultancy and expenses for DGMM staff

140

500

840 90

560 60

2,000 infrastructure contracting 200 equipment, assistance technical

210

140

500

buildings, equipment, staff, expenses

1,000 1,425 950

3,375

19.

Facilitating Private Sector Development in NWFP

NWFP has a long and distinguished tradition as a centre of international trade. It has valuable natural resources, notably for hydropower and mineral development and it has well established agricultural traditions. The structure of economic activity reflects these assets and is presented in for the period 1996 to 2005. Agriculture accounts for between 20% and 25% of economic activity and, whilst there was some tendency for this to decline between 2000 and 2005, this is likely to have been reversed in the last year, when prices have increased substantially. The share of industry in economic activity has remained at roughly 25% through the period. This is comprised of minerals (0.1% of GDP in 2005), large scale manufacturing (9.5%), small scale manufacturing (6.9%), construction ( 3.7%) and utilities (3.4%). The share of large scale manufacturing has been growing in recent years. Services account for just over half of economic activities, with transport (10.9%), trade (17.1%) and public administration (11.1%) being the largest elements. Challenges. Economic development faces a number challenges in NWFP. Firstly, the skills of the population are adapted to local activities and not to the sorts of modern economic activities that are likely to provide the main sources of economic growth in the province. Secondly, many parts of the region are isolated, as a result of the difficult terrain and inadequately maintained infrastructure. Thirdly, there is a strong tradition of informal economic activity and little respect for the potential benefits of formalisation, 64

NWFP Comprehensive Development Strategy including access to formal sources of finance. Fourthly, the recent increase in insecurity has undermined confidence amongst entrepreneurs. The most recent survey of investment climate was undertaken in 2004 and covered the whole of Pakistan. The survey reported on seven categories of obstacles to growth. The most important obstacle to growth in NWFP, according to respondents in the survey, was policy uncertainty. This concern focused particularly on the role of the state and the possibility that state owned operations could compete unfairly with the private sector. There is a long history of state ownership in NWFP, reflecting the longstanding policy of the Federal government to promote new industry in the remoter areas of Pakistan. Sectors in which state ownership may concern the private sector include: trading and transport, banking, real estate and tourism. Nearly 60% of businesses considered policy uncertainty to be a problem in NWFP, compared with less than 40% in Punjab, reflecting the smaller market and relatively large involvement of government in commercial activities in NWFP. Nearly 60% of businesses reported that tax administration was a major or severe obstacle to business. Although many of the tax rules are set at Federal level, they were still considered major or severe by a much higher proportion of businesses in NWFP than in Punjab. Business registration in NWFP is, in fact, efficient, compared to other provinces, both in terms of cost and speed. However, the number of firms that register is relatively low and the level of informal business is high. This reflects the major problems that exist with taxation, where a typical business will face nine different taxes. Problems related to tax administration were also considered severe in Punjab, but the situation in NWFP was worse, suggesting that the administration of the rules in NWFP needs to be improved. Access to electricity supply and corruption were considered major or severe by about 50% of respondents and were worse in NWFP than in Punjab, especially for electricity. Access to finance was considered a major or severe obstacle to growth by only about 25% of respondents. For smaller and medium sized enterprises, the rapid growth of remittances will help to reduce finance constraints. Finance is still a constraint for larger businesses, especially in view of the poorly developed mortgage market. However, the constraint may only be felt not because banks do not have the resources but because banks are not prepared to lend whilst the other obstacles are so severe. The cost of enforcing contracts is higher in NWFP than in other parts of Pakistan, which affects the ability of medium sized companies to grow and to obtain finance. In 2004, concerns about insecurity were relatively minor and only about 15% of respondents considered them major or severe, compared with 20% in Punjab. This demonstrates that the current insecurity situation is a relatively recent phenomenon and that the NWFP has traditionally been a relatively safe place to live and work. Transportation was considered the least significant constraint in NWFP, perhaps reflecting the fact that many businesses are located around Peshawar, which has good links to the national road network. However, even in rural areas, a survey of rural enterprises in 2006 suggested that transportation is not the most significant constraint, particularly in comparison to Sind. However, four years of neglected road maintenance 65

NWFP Comprehensive Development Strategy has increased the costs of transport in NWFP substantially and this is now a more serious constraint. Goals. Halting the tendency of local enterprises to relocate outside the province and creating a spirit of confidence amongst entrepreneurs in NWFP which will also attract outside investors. Priorities.. cooperate with Federal level institutions involved in the promotion of exports and foreign investment highlight the success of NWFP in establishing business registration systems that are the easiest to use in Pakistan simplify the administration of taxation to reduce the red tape and other obstacles from inefficient taxation mobilising savings and investment within NWFP develop a strong brand image for products from NWFP, with high quality raw materials and dynamic modern processing build interest in the growth of manufacturing, trade and tourism businesses from all members of communities improving facilities across the whole province, not just in ROZs, and enabling small businesses outside ROZs to benefits from contracting to ROZ businesses
Table 34 Priority Measures in Private Sector Development (Rs m) Measures Y1- Y3Y2 Y5 0 Y6Y7 0 Total Notes 0 no additional costs

Programme of more proactive 0 collaboration with national bodies responsible for export and investment promotion Promoting the ease of setting up 1 businesses in NWFP Simplify the tax administration system 2 Marketing the NWFP as an excellent 5 place to do business in the rest of Pakistan, in neighbouring countries and internationally Support business networks, such as 2 chambers of trade, in local communities Total 10

0 0 3

0 0 2

1 2 10

publicity media

campaigns

in

study to highlight key areas for simplification marketing material, fairs, website small incentives expenses for events trade

1 4

0 2

3 16

and

20.

Technical Education

Technical education and vocational training (TEVT) is provided largely by 12 polytechnic institutions, one college of technology and 38 vocational training centres. This provides a low coverage of TEVT opportunities, compared with other provinces. In addition, there is a need to include new subjects in the options offered, to reflect current 66

NWFP Comprehensive Development Strategy opportunities, including, for example, in mining and quarrying. Most of the TEVT institutions were established between 20 and 40 years ago and few have had significant maintenance and updating of equipment.
Table 35 TEVT Facilities in NWFP Institution No. Major courses, technologies, trades GCTs GPIs GVTCs (male/female) GCMSs/ GCCs Apprenticeship units Employment exchanges 9 11 42 electrical, civil, mechanical

Level

18 27 9

Btech Hons 4yr Diploma: 3yr electrical, civil, mechanical, chemical, Diploma: 3yr autos, electronics, telecom, food, IT, RAC, architecture electricians, RAC, machinist, welding, Certificate level 7500 plumber, carpentry, tailoring, fancy training (6 months, leather work, embroidery, secretarial, 1 yr, 2 yrs) beautician, fabrication D.Com, B.Com, BBA, M.Com and DIT Degree and 11500 diploma As per available facility Industrial workers 1500 Registration of job seekers

Seating Capacity 240 9500 15000

Source: NWFP TEMPD Notes: GCT = Government Colleges of Technology; GPI = Government Polytechnic Institutes; GVTC = Government Vocational Training Centres; GCMS = Government Colleges of Management Sciences; GCC = Government College of Commerce

TEVT institutions have traditionally been supply oriented, delivering a centrally determined range of subjects and curricula. In a bid to improve linkages with industry and the TEVT institutions, Centre Management Committees have been established to allow the end users of TEVT to influence the courses offered. However, to date, these committees have been largely ineffective and require training and promotion to function. To address this weakness and undertake more structured labour market analysis, the Technical Education and Manpower Training Department (TEMPD) established a Research and Development Cell. This has had some success but has limited experience and funding. Funding for TEMPD is severely constrained: it accounts for only 7% of education funding and over 90% is required just to meet salaries. This means that there is very little scope for developing new courses and for training staff. Many courses require equipment and materials to be effective and are therefore unable to offer a satisfactory level of practical experience. User charges are less than 10% of recurrent costs and are not expected to make a contribution to investment. The key challenges in the TEVT system are: The scope of the TEVT system in NWFP is very narrow and does not cover the sectoral needs. The existing TEVT system has hardly any relevance with the local, regional or international labour market. The system is unable to create enough employment and self employment opportunities to overcome the un-employment situation in the Province. 67

NWFP Comprehensive Development Strategy The existing system is supply based and not demand driven. The system is not facilitating to improve economic and social condition of the pass out trainees. Lack of labour market information. Old skill standards and curricula. Old and obsolete machinery/equipment. Lack of coordination amongst the training providers and end users of the products. Ill trained instructional staff. No facilities for on the job training Lack of public private partnership Lack of financial and administrative autonomy Financial constraints to meet the training requirements. Skill evaluation and examination system is not up to the mark Goal. The national policy in technical education is described in Skilling Pakistan: A Vision for the National Skills Strategy, 2008-12. This defines three main objectives: providing relevant skills for industrial and economic development; improving access, equity and employability; and assuring quality for skills development. This is matched in NWFP which aims to increase the income levels of the poor population of NWFP enabling them to earn their livelihoods through decent means as a result of human resource development and skills training. Particular emphasis is placed on exploring the potential of disadvantaged people in NWFP, including women. There is also a strong emphasis on meeting the employment needs in key growth sectors, such as industry, timber, electrical, mechanical, IT and construction. Priorities. The following priorities are being pursued to revamp, expand and strengthen the existing TEVT system in NWFP: Establishment of Technical Education and Vocational Training Board NWFP to ensure public private partnership. Strengthening the Technical Education Examination Board and establishing an IT Examination Board to award certificates and diplomas and to assure quality. Labour Market Indicators Analysis (LMIA) System to be placed to determine sector wise needs of training, level and modules. Old and obsolete machinery/equipments to be replaced according to the market needs. Skills standards and curricula to be revised to ensure relevant skill training and technical education. Introduce new trades/technologies and courses according to the requirement of ROZs and other sectors. Introduce a system for capacity building of the teaching and management staff. Income generated schemes introduced in TEVT institutions to overcome financial constraint and ensure 100% supply of consumable training material An academic audit system to ensure proper monitoring of the TEVT system. Extended apprenticeship training system to small and medium enterprises. Expansion of Technical Education & Vocational Programme to un covered parts of the Province especially rural and disadvantaged areas. Regulate, supervise and prescribe skill standards/curricula and its evaluation based on local, Regional and International Labour Market requirements. 68

NWFP Comprehensive Development Strategy Introduction of public-private partnership in TEVT sector. DTEMP will promote the interests of NWFP in benefiting from the national commitment to expand access to technical education for women and for disadvantaged regions.
Table 36 Priority Measures in Technical Education (Rs m) Measures Y1- Y3- Y6- Total Notes Y2 Y5 Y7 Expansion and restructuring of TEVT 500 system Rehabilitation and strengthening of 400 the existing TEVT system Total 900 1,500 1,000 3,000 960 640 2,000

2,460 1,640 5,000

69

NWFP Comprehensive Development Strategy F URBAN DEVELOPMENT AND TRANSPORT

There are 46 towns and cities in NWFP. Peshawar has a population of about 1.5m and there are 8 larger towns, with populations of between 100,000 and 300,000. About 20 towns have between 25,000 and 100,000, with the reminder between 5,000 and 25,000. The growth of urban population is much higher than average, which is partly a reflection of the larger number of people displaced by the insecurity. High urban growth, combined with slow development of the urban sector, has resulted in uncontrolled and unplanned development of the cities and towns, deteriorating urban environment, and deficiencies in all forms of urban services, including water supply, sewerage, roads, drainage, solid waste management, bus terminal, slaughter house & market. Levels of urban services within NWFP urban centres can be generally characterized as low, especially in comparison with many other South Asian countries. Coverage and service levels vary greatly from town to town. Due to lack of maintenance and poor initial construction, water losses in existing piped systems. Service levels in the sanitation sector are low. However, a large percentage of households have individual sewage disposal systems, consisting mainly of pit latrines, and to a lesser extent, septic tanks. These systems are often in poor condition with overflows discharged into open canals and drainage networks, and infiltrating the surrounding groundwater aquifers. Drainage systems in the towns are dependent on open canals serving as both drainage and sewage collection points. Secondary and tertiary drainage systems are virtually nonexistent. While limited solid waste collection systems exist in most of the towns, waste is commonly disposed of in open fields and unsanitary dump sites. While urban road networks are reasonably extensive, they are all in extremely poor condition and maintenance is totally inadequate. Municipal facilities such as public markets, bus shelters, slaughterhouses, and community buildings are inadequate to meet the demands of the public. The existing standards and provision of urban infrastructure and services are generally insufficient to support sustained human development and economic growth in the urban centres. Outline Structure Plan. The structure plan is a written statement accompanied by necessary diagrammatic illustrations and is designed to introduce a large measure of flexibility into the system as well as illustrate the spatial implications of the policy proposals. The structure plans also translates national and regional economic, social and ecological policies into a local context and while doing so provide a framework for the implementation of the local plans. While establishing the general aims and proposals for the area it also contains the overall development control policy that can then be applied in particular circumstances at the more detailed and specific local/subject plan stage. Thus, the structure plan, with its focus on policy issues, is a flexible and dynamic framework for channelizing development at the urban scale. In the back drop of above background the Provincial Government realize the urgent need for the strategy to improve the urban environment of the province through the Outline Structure Plans (urban development plan). In 1999 the Government of NWFP conceive the NWFP Urban Development Project (NUDP) with the assistance of ADB (TA-2940PAK) and ADB Loan 1854-Pak (SF) under which the Outline Structure Plan (OSP) of 27 urban centres were prepared, wherein the priorities for infrastructure need / urban 70

NWFP Comprehensive Development Strategy services were prioritised by the town. The primary aim of the outline structure plans (OSPs) are to guide the future land development with prioritising the infrastructure need of the urban centre in NWFP. Goals. The objective of GoNWFP in urban planning is to improve the quality of life of urban residents and the facilities for the growth of businesses and industry. Priorities. improved spatial planning and management of urban land organisation of municipal financial systems improve planning for urban transportation systems explore options for public-private partnerships and community involvement updating of the Peshawar Urban Plan

Table 37 Priority Measures in Urban Development and Transport (Rs m)

Measures Water Supply Sewerage/ Sanitation Drainage Solid Waste Management Road/ Street Bus Terminal Market Slaughter House Peshawar Urban and fringe Devt Peshawar Mass Transit Total

Y1Y2 665 520 465 645 1,235 295 90 130 1,000 300 5,345

Y3Y5 36 864 90 129 1,914 300 462 330 1,200 1,500 6,825

Y6Y7 24 576 60 86 1,276 200 308 220 800 1,000 4,550

Total Notes 725 1,960 615 860 4,425 795 860 680 3,000 2,800 16,720

71

NWFP Comprehensive Development Strategy G 21. IMPLEMENTING THE CDS Managing the Strategy

Coordination of the Strategy. The implementation of the CDS will be carried out by the concerned line departments, using their normal procedures and benefiting from the reforms and institutional strengthening included in the CDS. Annual and medium term budgeting will refer to the CDS for strategic orientation of resources. In many sectors, implementation will benefit from cooperation with the private sector and with civil society, building on existing experience, as defined in the sectoral policies. The programming of the CDS has allowed for a phased build-up of implementation capacity and the rate of increase of funding has generally been limited to 100% in one year in each sector. The coordination and monitoring of implementation of the CDS will be done by a Special Development Unit located in P&DD, as part of the continuing strategic management of government policy. The annual MTBF process will use the CDS as the basis for definition and prioritisation of the budget. The identification of priority measures in the CDS will also provide guidance for priorities within sectors, at least during the next few years. The MTBF will then lead into the budget cycle and guide the detailed preparation of annual budgets. The first important output of the budget cycle will be the Budget Strategy Paper, which will provide the broad strategic orientation of the budget in November. The Budget Strategy Paper will also serve as a summary Progress Report of the CDS and will include references to the progress in matching expenditure commitments on priority measures and well as progress with the key indicators. Priority Cross-sectoral Concerns. The Government gives high priority to a number of cross-sectoral areas, including: gender equality and, in particular, the equal access of women to employment and to social services environment, with particular emphasis on the conservation of water resources community participation in government programmes, building on the successes achieved with Rural Support Programmes strengthening provincial and district capacity and promoting transparency youth employment The Government will appoint Task Forces to raise the profile of each of these crosssectoral initiatives. The Task Forces will report to the Chief Secretary and will be empowered by the Chief Secretary to obtain the collaboration of all government departments. Membership of the Task Forces will include representatives from relevant Departments as well as a number of representatives from the private sector and civil society. The Task Forces will be headed by a Supremo who will lead the work and ensure that it has high public visibility. The Supremo will draft a progress report every 6 months, which will be authorised by the Task Force, the Chief Secretary and the Chief Minister and will be publicised in the press.

72

NWFP Comprehensive Development Strategy 22. Financing the Strategy

Revenue Projections. The Government assumes that provincial receipts will grow in line with the growth of the provincial GDP and that receipts from the Federal divisible pool will grow in line with Federal GDP. In the first two years, this provincial GDP growth will be below the national average, whilst the province recovers from the effects of insecurity. However, from 2011/12, economic growth in the province will rebound in response to the substantial opportunities that exist and the ability to catch up from several years of neglected investment. The Government expects grant in aid to decline as the situation improves. However, it expects this to be more than offset by a substantial increase in the revenue from hydel royalties, currently being negotiated. In addition, the Government believes that donors will increase their grants and loans to take advantage of the improvement in the security situation and the policy reforms that government have introduced. As a result, the Government projects that total revenue will grow faster than GDP, thus enabling the CDS programme commitments to be met.
Table 38 Domestic Revenue Projection (Rs bn) 08/09 Budget Provincial Receipts 8,212 Share of Federal Divisible Pool 67,016 Transfers on Oil and Gas 4,429 Grant in Aid 14,432 Net Profit from Hydel 6,000 Foreign Grants 780 Federal Grant for PSDP 8,215 Foreign Loans 4,183 Total 113,267 as % of GDP 10.6%

09/10 10/11 Projections 9,065 9,899 77,548 85,904 3,475 3,850 15,439 15,000 6,000 20,000 1,000 1,500 9,316 10,320 6,000 6,000 127,842 152,472 11.1% 12.1%

11/12 10,913 95,611 4,285 10,000 20,000 1,500 11,486 6,000 159,795 11.5%

12/13 12,146 106,917 4,792 5,000 20,000 1,500 12,844 6,000 169,199 10.9%

In 2009 prices, the additional income raised through the next two years will be about Rs 33 bn, with a further additional Rs 174 bn being raised in the following 5 years. Expenditure Projections. The costs of implementing the CDS have been presented in the chapters above. The costs are presented as the additional costs required above the current levels, and are expressed in prices of 2009. These are summarised below:
Table 39 Costs of Full Implementation of the CDS above Current Costs (Rs bn) Sector Current Development Total Governance 1,110 700 1,810 Security 0 13,340 13,340 Education 53,836 88,538 142,374 Health 61,916 47,133 109,049 Social Protection 19,788 1,749 21,538 Local Development 42,622 58,680 101,302 Access and Roads 14,459 47,483 61,941 Irrigation 0 47,231 47,231 Energy 0 12,968 12,968 Water and Sanitation 572 7,142 7,714

73

NWFP Comprehensive Development Strategy

Housing Agriculture ROZs Minerals Privates sector Development Technical Education Urban Development Total

8 14,672 211 963 16 5,000 2,345 217,516

7,759 8,753 7,460 2,413 0 0 14,375 365,723

7,766 23,424 7,671 3,375 16 5,000 16,720 583,239

Priority Programmes with Funding Gaps. The priority measures with total costs of more than Rs 5 bn are listed in Table 40 below and account for over 87% of the additional spending required.
Table 40 Priority Measures with Total Costs of over Rs 5bn Sector Short Y1-Y2 Educ School construction and furnishing 10,839 Local Community Physical Infrastructure 9,747 Improvement of district/provincial Roads 10,028 roads Educ Rehabilitation of schools 9,230 Educ Incremental teacher salaries 2,944 Standardization / Up-gradation of Health 8,138 health facilities Health Emergency response 7,800 Irrigation works, including dams and Irr 1,100 canals Local Improvement in NRM 4,702 Recruitment of staff for service Health 6,000 delivery Rehabilitation of district/provincial Roads 5,141 roads Health Insurance and Voucher Social 4,734 Schemes Irr Works on small dams 10,600 Adequate provision of supplies and Health 4,286 drugs. Educ Provision of free textbooks 2,785 Local Investment in Poor 2,603 Local Access to Education 2,409 Health Special repairs of health facilities 3,000 Energy Large scale hydro investment 1,904 Agric Land development 5,550 Maintenance for district and provincial Roads 1,891 roads Irr Flood Protection 3,737 Educ In-service training for teachers 1,272

Y3-Y5 24,963 21,821 14,038 13,718 16,298 12,207 11,700 13,120 10,526 9,000 7,196 7,101 3,180 6,429 5,784 5,827 5,393 4,200 4,838 1,710 2,400 1,121 2,371

Y6-Y7 16,642 14,547 9,359 9,146 10,866 8,138 7,800 8,747 7,017 6,000 4,798 4,734 2,120 4,286 3,856 3,885 3,595 2,800 3,226 1,140 1,600 747 1,580

74

NWFP Comprehensive Development Strategy Financing the CDS. The CDS priorities have been calculated as the requirements that will be needed in addition to the current allocations. They are calculated in real terms in 2009 prices. Some of the added costs will be met from the increase in revenue that will arise from GDP growth. A further part will result from the resolution of the current negotiations on hydel royalties. The Government expect that the remainder will be met from a major programme of foreign grants and loans. Table 41 presents the planned sources of funding for the implementation of the CDS.
Table 41 Funding for Full CDS Implementation (Rs bn)

Additional CDS Expenditure Added Revenue from GDP growth Added Revenue from hydel Foreign Grants and Loans in US$m

Y1-Y2 158 34 10 114

1422

Y3-Y5 255 86 15 154

1930

Y6-Y7 170 82 10 78
975

Total 583 202 35 346

4328

Affordability of the CDS. About 60% of the CDS costs are investment costs (see Table 42) and these amounts to about Rs 334bn over the whole 7 year period. This investment has significant implications for operation and maintenance costs. For health and education, the recurrent costs are already included in the estimates of the costs of the policy commitments to improve services. Local development and poverty alleviation involves investments that will be largely maintained by communities. The roads sector policy commitments include a major increase in commitment to maintenance of roads within the CDS. The irrigation, energy and housing sector strategies have not included any recurrent costs because the costs of maintenance will be born by users through cost recovery charges.
Table 42 Recurrent and Development Costs (Rs m) Recurrent Governance 1,110 Security 0 Education 53,836 Health 61,915 Social Protection 19,203 Local Development 42,622 Access and Roads 14,459 Irrigation 0 Energy 0 Water and Sanitation 464 Housing 8 Agriculture 14,152 ROZs 211 Minerals 963 Privates Sector Development 16 Technical Education 5,000

Development 0 7,340 84,538 47,133 264 58,680 42,133 46,631 9,968 34 7,359 8,570 7,460 2,413 0 0

Total 1,110 7,340 138,374 109,048 19,468 101,302 56,591 46,631 9,968 497 7,366 22,722 7,671 3,375 16 5,000

75

NWFP Comprehensive Development Strategy

Urban Development Other Total

2,345 9,433 216,302

11,575 21,328 334,097

13,920 30,761 550,399

The total recurrent costs are about Rs 216bn, which compares with a total additional domestic revenue of about Rs 237bn. The CDS does not assume that donors will be limited to funding investment costs, but the analysis demonstrates that the additional recurrent costs could be met by domestic revenue if necessary. By year 7, the recurrent costs of the CDS have grown to about Rs 40m, whilst additional domestic revenue has grown to about Rs 44bn, demonstrating that the CDS is affordable and sustainable, even with a decline in donor funding after 2015. Focus for International Support. Table 41 demonstrates that international support for the NWFP Comprehensive Development Plan is expected to total about US$ 3.9 bn over the 7 years, in addition to the ongoing international support. Table 43 gives some indication of the programmes where government feels that international funding has the highest comparative advantage. This assessment is based on the NWFP Governments assessment of the programmes that would benefit most of donor expertise and from the ability to combine funding with technical support. The Government believes that project support will continue to be an important method of donor support. However, we also believe that some international assistance is best provided through budget support, with associated phasing and links to target sectoral and general indicators.
Table 43 Indicative Sectoral Use of International Support (Rs m) Sector Total Foreign Governance 1,810 555 Security 13,340 3,670 Education 142,374 73,576 Health 109,049 63,166 Social Protection 21,538 14,740 Local Development 101,302 52,753 Access and Roads 61,941 26,823 Irrigation 47,231 24,143 Energy 12,968 4,984 Water and Sanitation 7,714 5,929 Housing 7,766 2,922 Agriculture 23,424 10,423 ROZs 7,671 5,726 Minerals 3,375 769 Privates sector Development 16 7 Technical Education 5,000 3,750 Urban Development 16,720 6,960 Total 583,239 300,893

% 30.7% 27.5% 51.7% 57.9% 68.4% 52.1% 43.3% 51.1% 38.4% 76.9% 37.6% 44.5% 74.6% 22.8% 40.6% 75.0% 41.6% 51.6%

76

NWFP Comprehensive Development Strategy 23. Risk Management

The management of security risks is central to the CDS. It runs throughout the strategy. Key features include: strong priority in community participation activities, including engagement of local leaders from all backgrounds programme of community grants to provide high profile small scale local infrastructure projects importance given to labour intensive capital works programme to raise employment in young men and women In addition to the security risks, there are a number of other risks, which are described in Table 44 below, along with the measures to address the risks.
Table 44 Main Risks and Measures to Reduce Risk

Risks Measures to Manage Risks The security situation takes longer The Comprehensive Development Strategy is than expected to improve. designed to provide a rapid improvement in employment and living standards in NWFP as the most effective solution to reduce conflict. The methods used stress the involvement of communities in improvements in public services, to maximise ownership and minimise the risks of local disruption from insecurity. The large increase in government There will be a substantial increase in spending spending leads to blockages and and delivery of services. At the same time, the delays in Government service Government will not be able to increase delivery and increases the risks of employment dramatically. The CDS envisages that services will be outsourced wherever possible, mismanagement. especially for development activities. World food shortages inflate It will not be possible to protect NWFP from high prices and create severe poverty. world food prices. The importance of agriculture in NWFP means that many people will benefit from higher food prices. However, the urban poor will be hard hit. The CDS will help to counteract this as much of the benefits of employment generation will be felt in on near towns. Large increase in donor support The Foreign Aid Wing of P&DD will be leads to duplication and strengthened to provide a central source of information to international partners and strong inconsistency. cooperation with the national DADPAK aid coordination activity will be maintained. Climate change leads to increased Improved disaster management capabilities will flooding and drought creating help manage displaced people as efficiently as hardship in some areas and large possible and the Department of Agriculture will displacements of people. assist farmers with technologies that allow them to deal with increased rainfall variability. Decentralisation and local Social services, including education, health and solutions to social tensions lead to social protection, are all introducing programmes 77

NWFP Comprehensive Development Strategy

wide variations in the standards of that aim to improve collaboration with civil living and access to services. society and the private sector to allow for diversity of service delivery whilst also promoting consistency.

24.

Monitoring and Evaluating Progress under the CDS

The Government of NWFP is currently engaged in a programme to strengthen monitoring and evaluation work which will affect all the main departments and will be linked to the reforms in budgeting. Current M&E activities are focused primarily on monitoring the outputs of projects and schemes. The new system will introduce a more comprehensive system that includes a wider group of indicators covering all elements of services provided. It will also include greater use of evaluations, both of projects and of policies. The framework will define target levels for the indicators that are related to the policies of government and that will help assess the effectiveness of government intervention The progress of the CDS will be monitored through a small number of indicators, selected from the more detailed indicators being developed in the M&E framework. The CDS indicators will be selected by the Government as part of the process of designing the M&E framework. A preliminary list of 16 indicators is presented in Table 45. Where possible, these indicators have been selected to monitor the impact of government intervention. However, this is not possible in all the major sectors and some compromises are made to ensure that the indicators used can also be collected without investing in additional primary data collection, specifically for the CDS. The preliminary list of indicators also aims to include indicators that reflect the key MDG indicator groups, as described in the table.
Table 45 Preliminary CDS Monitoring Indicators

Indicator Poverty rate Roads in good condition Area of land bought into cultivation (ha) Literacy rate Primary net enrolment rate Ratio of girls: boys in primary school Infant mortality Proportion of fully immunised children Maternal mortality rate per 100,000 Contraceptive prevalence rate Access to drinking water Access to sanitation Aid as a % of GDP . 78

MDG MDG 1 MDG 1 MDG 1 MDG 2 MDG 2 MDG 3 MDG 4 MDG 4 MDG 5 MDG 5 MDG 7 MDG 7 MDG 8

Latest 39% 24% 0 47% 49% 0.52:1 6.3% 47% 275 31% 71% 66% 0.4%

2010 Target 30% 30% 20000 55% 60% 0.70:1 6.0% 60% 250 45% 75% 72% 5.0%

2015 Target 20% 45% 70000 75% 80% 1:1 5.5% 75% 200 70% 85% 85% 3.3%

NWFP Comprehensive Development Strategy

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