Completion Report

Project Number: 29603 Loan Number: 1672-PAK(SF) December 2010

Pakistan: Malakand Rural Development Project

CURRENCY EQUIVALENTS

Currency Unit – Pakistan rupee/s (PRe/PRs)

At Appraisal At Project Completion (15 February 1997) (30 June 2008) PRe1.00 = $0.0195 $0.0147 $1.00 = PRs51.30 PRs68.19

ABBREVIATIONS

BADP – Barani Area Development Project BAP – best agriculture practice BME – benefit monitoring and evaluation BOK – Bank of Khyber CADP – Chitral Area Development Project CWD – Communication and Works Department EIRR – economic internal rate of return FFS – farmers field school FHA – Frontier Highway Authority GDP – gross domestic product HRD – human resource development IPM – integrated pest management MRDP – Malakand Rural Development Project NGO – nongovernment organization NWFP – North-West Frontier Province O&M – operation and maintenance PEDD – Planning, Environment and Development Department PMU – project management unit PRB – Project Review Board ROSCA – rotating savings and credit association RRP – report and recommendation of the President RSP – rural support program SOU – social organization unit SRSC – Sarhad Rural Support Corporation TA – technical assistance TOP – terms of partnership UNDCP – United Nations Drug Control Programme

NOTES

(i) The fiscal year (FY) of the government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends on 30 June 2000.

(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations 1 Director General J. Miranda, Central and West Asia Department (CWRD) Director D. Kertzman, Financial Sector, Public Management and Trade Division, CWRD Country Director R. Stroem, Pakistan Resident Mission, CWRD

Team leader M. Abro, Project Implementation Officer, Pakistan Resident Mission, CWRD Team member N. Islam, Associate Project Analyst, Pakistan Resident Mission, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 3 C. Project Costs 9 D. Disbursements 10 E. Project Schedule 10 F. Implementation Arrangements 10 G. Conditions and Covenants 11 H. Related Technical Assistance 11 I. Consultant Recruitment and Procurement 11 J. Performance of Consultants, Contractors, and Suppliers 12 K. Performance of the Borrower and the Executing Agency 13 L. Performance of the Asian Development Bank 13 III. EVALUATION OF PERFORMANCE 13 A. Relevance 13 B. Effectiveness in Achieving Outcome 14 C. Efficiency in Achieving Outcome and Outputs 14 D. Preliminary Assessment of Sustainability 14 E. Impact 14 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14 A. Overall Assessment 14 B. Lessons Learned 15 C. Recommendations 15

APPENDIXES 1. Project Framework 16 2. ADB's Sector Strategy and Government Policies and Plans 19 3. Agriculture and Livestock 20 4. Community Managed Infrastructure Schemes 22 5. Gender and Development 24 6. Rural Financial Services 25 7. Road Development 26 8. Equipment Procured 27 9. Project Cost 30 10. Contract Awards and Disbursements 31 11. Project Implementation Schedule 33 12. Status of Compliance with Loan Covenants 35 13. Consulting Services 42 14. Asessment of Overall Project Performance 43

BASIC DATA

A. Loan Identification

1. Country Pakistan 2. Loan Number 1672-PAK(SF) 3. Project Title Malakand Rural Development Project 4. Borrower Islamic Republic of Pakistan 5. Executing Agency Planning, Environment, and Development Department, Government of the North-West Frontier Province 6. Amount of Loan SDR30,852,000 7. Project Completion Report Number PCR: PAK 1192

B. Loan Data 1. Appraisal – Date Started 2 December 1997 – Date Completed 17 December 1997

2. Loan Negotiations – Date Started 20 July 1998 – Date Completed 22 July 1998

3. Date of Board Approval 18 March 1999

4. Date of Loan Agreement 23 April 1999

5. Date of Loan Effectiveness – In Loan Agreement 22 July 1999 – Actual 20 July 1999 – Number of Extensions 0

6. Closing Date – In Loan Agreement 31 December 2006 – Actual 1 July 2008 – Number of Extensions 1

7. Terms of Loan – Interest Rate 1.0% – Maturity (number of years) 35 years – Grace Period (number of years) 10 years

8. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval

8 August 2000 1 July 2008 95 months

Effective Date Original Closing Date Time Interval

20 July 1999 31 December 2006 89 months

ii

b. Amount (SDR million) Category or Last Revised Net Amount Subloan Original Allocation Available Amount Undisbursed Allocation Disbursed Balance 01A 10.351 10.351 10.351 3.555 6.796 01B 6.618 1.868 1.868 1.764 0.104 01C 0.000 0.217 0.217 0.299 (0.082) 01D 0.000 1.436 1.436 2.390 (0.954) 01E 0.000 3.097 3.097 2.221 0.876 02 0.301 0.301 0.301 0.143 0.158 03 0.399 0.399 0.399 0.181 0.218 04 2.212 2.212 2.212 1.251 0.961 05 1.663 1.663 1.663 3.604 (1.941) 06 3.371 3.371 3.371 1.221 2.150 07 4.041 4.041 4.041 0.370 3.671 08 0.850 0.850 0.850 0.416 0.434 09 1.046 1.046 1.046 0.000 1.046

Total 30.852 30.852 30.852 17.415 13.437 ( ) = negative. The amount of SDR13.437 was cancelled on 1 July 2008 and the loan account was closed on the same day.

9. Local Costs (Financed) - Amount ($ million) 17.6 - Percent of Local Costs 52.0 - Percent of Total Cost 42.0

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 15.4 8.1 Local Currency Cost 47.5 33.9 Total 62.9 42.0

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 12.1 13.1 ADB Financed 39.9 25.1 Bank of Khyber 1.0 0.5 Beneficiaries Financed 8.8 2.7 Total 61.8 41.4 IDC Costs Borrower Financed 0.0 0.0 ADB Financed 1.1 0.6 Total 62.9 42.0 ADB = Asian Development Bank, IDC = interest during construction.

iii

3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual

A. Base Cost 1. Village Development Services a. Agricultural Support Services 4.0 3.1 b. Community-Managed Infrastructure 17.2 15.4 c. Women's Health 0.6 1.0 2. Rural Financial Services 6.1 1.5 3. Road Development 19.8 13.8 4. Project Implementation Support a. Project Management 3.1 3.7 b. Community Mobilization 2.4 2.8 Subtotal (A) 53.2 41.4

B. Contingencies 1. Physical Contingencies 1.8 0.0 2. Price Contingencies 6.8 0.0 Subtotal (B) 8.6 0.0

C. Service Charge During Construction 1.1 0.6 Total 62.9 42.0

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants Sep 2000 Community Development NGOs 16 Jan 2002 Design and Construction Supervision 25 Jan 2002 Rural Financial Services 10 Sep 2002 Benefit Monitoring and Evaluation 25 Jun 2002 Capacity Building of District Implementing NGOs 19 Aug 2003 Completion of Engineering Designs Jun 2002 30 Sep 2003 Civil Works Contract Date of Award Jul 2003 29 Aug 2003 Completion of Work Jun 2005 31 Dec 2007 Equipment and Supplies Dates First Procurement Jan 2000 15 Sep 2000 Last Procurement Sep 2001 10 Jun 2007 Other Milestones

iv

5. Project Performance Report Ratings Ratings

Development Implementation Implementation Period Objectives Progress From 30 May 1999 to 29 Mar 2001 S S From 30 Mar 2001 to 28 Jun 2001 S PS From 29 Jun 2001 to 28 Sep 2001 S S From 29 Sep 2001 to 28 Apr 2002 S PS From 29 Apr 2002 to 29 Jan 2006 S S From 30 Jan 2006 to 29 May 2006 S PS From 30 May 2006 to 27 Feb 2008 S S From 28 Feb 2008 to 29 Mar 2008 S U From 30 Mar 2008 to 30 Jun 2008 S S

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members TA Fact-Finding 25 Feb–9 Mar and 2 34 a, i 17–19 Mar 1996 Loan Fact-Finding 17 Sep–8 Oct 1997 5 98 a, c, d, f, i Loan Appraisal 2–17 Dec 1997 6 96 a, c, d, e, f, i Consultation 1 1–4 Jun 1999 3 12 f, f, h Consultation 2 12 Jun 1999 2 2 b, f Consultation 3 29 Nov 1999 2 2 f, f Consultation 4 20 Jan 2000 1 1 f

Inception 15–19 Aug 2000 4 20 b, f, h, j Review 1 11–16 Dec 2000 1 6 f Review 2 18–30 Mar 2002 4 20 f, g, h, j Review 3 01–13 Nov 2002 3 30 b, f, h Review 4 25 Aug–08 Sep 2003 3 34 f, h, k Midterm Review 17 May-05 Jun 2004 3 80 f, h, i, k Special Loan Administration 20–25 Jun 2005 2 12 f, h Review 1 4–13 Aug 2005 2 20 f, h Special Loan Administration 1–6 May 2006 2 12 f, h Review 2 8–12 Oct 2006 1 5 f Project Completion Review 16–24 Jun 2008 2 18 f, h 10–14 May 2010 2 10 f, h a = rural development specialist, b = country director, c = project economist, d = programs officer, e = counsel, f = project implementation officer, g = control officer, h = project administration staff, i = staff consultant, j = TA consultant, k = head, portfolio management unit.

I. PROJECT DESCRIPTION

1. Khyber Pakhtunkhwa, formerly the North-West Frontier Province, the smallest of Pakistan’s four provinces, has an estimated population of over 20 million, of which more than 80% is rural. It is estimated that poverty in Khyber Pakhtunkhwa is higher than the national average of 40%, especially in the remote areas of the northern parts of the province—such as Malakand Division, where at the time of project appraisal, 72% of the rural population lived below the poverty line of $150 per capita. 1 Poverty is likely to increase because of the recent floods and the ongoing armed conflict between security forces and the Taliban.

2. In 1995, the Government of Pakistan requested the Asian Development Bank (ADB) to provide financial assistance for a development project in Malakand Division. The project aimed to reduce rural poverty and bring remote and backward areas of Malakand to a level of development commensurate with the rest of the province. In response, a proposal for the Malakand Rural Development Project was prepared under an ADB project preparatory technical assistance (TA).2 ADB’s fact-finding mission reviewed the proposed project from 17 September to 8 October 1997. The appraisal mission that visited Pakistan from 2–17 December 1997 finalized the scope, size, and financing arrangements of the project in discussion with the borrower and other funding agencies.

3. The overall goal of the project was to reduce poverty in Malakand Division—comprising four administrative units: Malakand Agency and the districts of Swat, Buner, and Shangla—by raising per capita income of the beneficiaries to reach or exceed the poverty line. Human resource development for women and improvement of their income-earning potential were specific targets. At the same time, by helping to create community organizations in the villages, and by providing assistance for their capacity building and training, the project aimed to contribute to institutional reforms for devolution of powers to the local level.

4. The project had four components: (i) village development services, including agricultural support services (agricultural, horticultural, and livestock development activities), community- managed infrastructure development (drinking water and sanitation schemes, jeepable tracks, micro-hydropower schemes, and irrigation improvements), and development of community- based health services for women; (ii) rural financial services—development of self-sustaining rotating savings and credit associations (ROSCAs) and linking them with the formal banking system; (iii) road development—improvement and expansion of the road network in the project areas and introduction of a toll management and road maintenance system for annual maintenance and repair of the road network; and (iv) implementation support and capacity- building services. Performance targets are in the updated project framework (Appendix 1).

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. This project was consistent with ADB’s poverty reduction strategy 3 and country assistance plan for Pakistan (Appendix 2). It was also consistent with government policies and plans (report and recommendation of the President [RRP]4, paras. 12–15).

1 The national poverty average, as per Pakistan’s Economic Survey 1997/98, for rural areas was 30%. 2 ADB. 1996. Technical Assistance to the Islamic Republic of Pakistan for Malakand Rural Development Project. Manila. (TA 2604-PAK, for $700,000, approved on 9 June). 3 ADB. 1991. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy. Manila.

2

6. The project’s intended goals were relevant, but given the weak capacity of implementing agencies (IAs), and the widespread and difficult terrain of the project area, they were difficult to achieve. The multifaceted project design, with multiple line departments, made implementation and coordination complex. The following factors undermined project implementation: (i) lack of coordination between a wide range of line departments—e.g., Communication and Works Department (CWD), Frontier Highway Authority (FHA), Department of Agriculture and Livestock, Department of Education, Department of Health, Department of Women Development, Bank of Khyber (BOK)—and district-based nongovernment organizations (NGOs) as well as the project management unit (PMU); (ii) multiple players within and outside the line departments with varied private interests;5 (iii) unavailability and in some cases unwillingness of experienced staff to serve in the remote and difficult project area; (iii) political interference in the selection of staff for the social organization units (SOUs) resulting in substandard recruitments; 6 (iv) undefined authority lines at various IAs resulting in frequent turf battles; and (v) weak accountability mechanisms and absence of a fiduciary risk mitigation framework. The project procurement- related audit (PPRA) conducted jointly, in March 2007, by ADB’s Office of Anticorruption and Integrity (OAI), formerly Integrity Division, and Pakistan’s Auditor General’s Office noted in its report that the project had a complex execution and management framework involving various implementing agencies, and that the executing agency and the PMU did not seem to be in control of the project affairs. It further noted that the complex implementation structure also contributed to the significant delays in project implementation. The underlying assumptions of the project design generally lacked cultural and local context.7 For example, the design did not include criteria for the distribution of rams, bulls, and chicks, and these stocks ended up either in the hands of inexperienced acquaintances or locally connected persons, undermining the sustainability of these investments. Also, the agriculture and livestock menu in the design lacked context, as activities included in this sector were generally traditional and not innovative.

7. Moreover, soon after the project's design was completed, the governance structures changed substantially under the Devolution Plan, which devolved responsibility for most of the community development activities from the provincial to the district governments, effective August 2001. No formal arrangements were worked out by the project with the newly established district governments to ensure coordinated development in the project area. As a result, the project’s vertical interventions ran parallel to the developmental works commissioned by the district governments. The project design did not provide sufficient monitoring tools to avoid duplication and ensure uniform development among the communities; hence, disproportionate development took place in the communities that were closely linked with the then ruling party.

8. Overall, project preparation and formulation were adequate. Under the project preparatory TA (footnote 2) and during project processing, ADB held consultations with stakeholders. The views of local communities and elected public representatives were obtained through consultations during the TA, and also by the project processing mission; including

4 ADB 1999. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Islamic Republic of Pakistan for Malakand Rural Development Project. Manila. (Loan 1672-PAK for $41 million, approved on 18 March). 5 For example, the chief executive of an NGO hired for social mobilization was a candidate of a political party for a National Assembly seat. Also, the midterm review mission noted in the aide-mémoire that “special interest groups were more vocal and powerful within project teams.” 6 The mission for this report was informed that generally, the high-ups conveyed the names of favorites and/or predetermined candidates for recruitment in the SOUs and the PMU. 7 For example, the assumption made regarding coordination between all line departments proved faulty as the local organizational culture and behavior did not support effective coordination between key players—not a single meeting of all line departments was held under the aegis of the PMU during the project.

3 separate consultations with women (RRP, para. 2). However, the FHA viewed the consultation process for the roads component as superficial; it told the mission for this report that it did not view the provincial roads as relevant to the goals of this rural development project.

9. At the request of the executing agency (EA), the implementation arrangements were slightly changed early in the project by replacing a project-area-wide rural support program (RSP) designed for community mobilization activities with district-based NGOs. Instead of boosting the relevance of the design, this change exposed it to private interests, particularly those of local NGOs. Issues were raised regarding the transparency of the NGO recruitment process. Since the NGOs lacked the requisite experience, a consulting firm was hired to build their capacity. However, the consulting firm did not effectively deliver its terms of reference and the NGOs did not mature. The EA’s project completion report records the NGO experience in the following words: “Some of the NGOs remained a permanent headache for the project due to nonprofessional culture and politically motivated staff especially in Malakand and Buner districts.” This change in design undermined the project's goal to create a self-sustaining and semi-permanent structure to support village development, and the project's sustainability. NGO support to communities evaporated as soon as project funding ended. Moreover, there are numerous complaints on record about the NGOs’ wrongdoings. Hence, the project design is assessed as partly relevant.

B. Project Outputs

10. The scope and outputs of the project are discussed by component, as sequenced in the RRP. Appendixes 3–8 summarize the quantitative outputs of the project.

1. Village Development Services

a. Agricultural Support Services

11. The scope and outputs under this subcomponent included (i) better production practices for wheat and maize, and introduction of seed multiplication by the farmers themselves; (ii) demonstration activities focusing on greater vegetable varieties, and production practices such as integrated pest management (IPM); (iii) development of private fruit-seeding nurseries to increase the availability of quality, true-to-type fruit trees; and (iv) promotion of horticultural activities by women. Links with and one-time support of the Potato Research Center, Abbottabad, and the Agriculture Research Station (North), Mingora; and the training of staff at the Agricultural Extension and Fruit and Vegetable Development Board were included. The project was also to link interested farmers with activities of the seed production and certification program of the ongoing Malakand Fruit and Vegetable Development Project.

12. Owing to poor extension services, rural farmers had only traditional knowledge and skills in agriculture practices. To improve their production practices, consulting services of an international NGO, the Center for Agricultural Bioscience International (CABI), were hired in 2004. Against the appraised target of establishing 500 demonstration and seed multiplication farms each for wheat and maize, 573 farms were established for wheat, and 524 for maize. Demonstration activities aimed at greater vegetable variety were conducted in different villages, during which 1,024 farmers were provided with good-quality vegetable seeds (against an appraisal target of 375); and fodder seeds, mott grass plugs, and fertilizers were distributed to 416 farmers (against a target of 374). CABI organized four “training of facilitator” (TOF) workshops, one each in four project districts, in which 130 facilitators (35 in Shangla district, 36 in Swat, 36 in Malakand, and 23 in Buner) were trained. An innovative approach of “farmers field school” (FFS) was used to impart hands-on training to farmers through a group-based

4 learning process to promote IPM. In all, 225 FFSs were established for different crops, spread across the project area, and about 9,000 farmers were reported to have received IPM training. The Agriculture Extension Department (AED), however, did not endorse the FFS and TOF approach, as it found the methodology highly resource-intensive and unsustainable. The department opined that such an intervention was possible only when there were no financial constraints and extension workers were dedicated to FFS work only. The AED found the FFS approach ineffective and of limited use. The extension workers also complained of delays and in some cases nonpayment of travel and subsistence allowance by CABI, which led to strained relations between CABI and the AED. While the FFS activities benefited a few farmers, it did not effect the substantive change that had been anticipated.

13. A biological laboratory known as “insects' zoo” that was established at Matta (Swat district) was completely destroyed during the conflict between security forces and the Taliban. All equipment—refrigerator, microscopes, computers, etc.—was reportedly taken away by the Taliban. This laboratory provided about 29 million Trichogramma parasitoids and 2 million Chrysopa parasitoids to interested farmers. Similarly, a tissue culture laboratory for potato established by the project in Agriculture Research Station (North) Mingora was destroyed and all equipment was reportedly taken away. The project did not help develop fruit-seeding nurseries and promote women's horticulture activities as envisaged in the original design. Links with the Potato Research Center, Abbottabad, and the Malakand Fruit and Vegetable Development Project, and training of staff at the Agricultural Extension and Fruit and Vegetable Development Board were also not implemented.

14. The raising of livestock was appraised as an integral part of the rural economy in the project area. However, the productivity of livestock activities was found to be very low, and the livestock production extension services reached only a fraction of small farmers. The problems faced by this subcomponent included lack of breeding bucks and rams, low price for wool, lack of communal land for grazing, high prices for veterinary medicines, and lack of knowledge about modern animal husbandry practices. The project aimed to (i) disseminate good-quality fodder seeds and better production and pest management practices, including IPM; (ii) improve animal husbandry practices and services available to remote villages; and (iii) boost the sheep and cow populations. Project activities were also to include introduction of better fodder mixtures, training of livestock workers in more efficient animal husbandry practices, and distribution of poultry to women. Local sheep and cow populations were to be boosted by distributing Rambouillet rams and Holstein-Friesian and Jersey breeding bulls through community organizations.

15. Under the livestock subcomponent, the project established 208 fodder demonstration plots and provided good-quality fodder seeds, mott grass plugs, and fertilizer to 416 farmers against the target of 374. The selection of demonstration plots and the farmers who benefited from the project supplies was generally done without observing the set criteria. With the technical assistance of the Animal Husbandry In-Service Training Institute, Peshawar, the project also provided training to 340—against the target of 475—field staff of the Livestock Research and Development Department and the Livestock and Dairy Development Department (Extension Wing). Through CABI, 100 FFSs on livestock, 25 in each district, were established in which about 2,000 farmers were trained in IPM and animal husbandry practices. Against the target of 1,440, a total of 924 female villagers were provided chicks (about 80,000) for poultry rearing. The Livestock and Dairy Development Department (LDDD) did not approve of the way these chicks were distributed without any set criteria under the project–the chicks were generally distributed as a favor to local community leaders or given to acquaintances. The LDDD viewed this investment as wasteful because the majority of chicks were given to inexperienced women villagers and did not survive due to poor rearing practices. The project

5 also distributed 78 rams, 99 bucks, and 62 bulls without any set criteria. There was no data available from the project staff about the breed of these animals, so it is difficult to establish if they were the best breeds.

b. Community-Managed Infrastructure

16. A variety of community-managed infrastructure (CMI) schemes were included in the project. The appraised scope of CMI schemes comprised the following: i) The project was to build drinking water and sanitation schemes to provide clean water and better sanitation for communities in remote parts of the project area. ii) Jeepable tracks were to be constructed to develop a low-cost road network for remote villages and settlements that lacked vehicular access. Tracks were to have a minimum carriageway of 3.0 meters (m) with general improvement in gradient so that light vehicles could negotiate the slopes. iii) Micro-hydropower schemes were to be constructed to provide electricity through micro-hydropower units (hydels) to villages in remote hill areas where high head- flow discharge was available throughout the year. The electricity was to be used for domestic lighting, agro-processing, and small-scale cottage industry activities during the day. iv) Small irrigation schemes were to be provided for developing new community- managed irrigation infrastructure and improving existing facilities to increase agricultural production. Groundwater was to be used through the installation of tubewells and dug wells, and surface water resources through pumps. v) As the success and sustainability of many of these interventions depended on the continuous flow of water and recharge of the watershed, efforts were to be made to maintain the watershed, and to reduce runoff and erosion by instituting community-based reforestation, rehabilitation, and social forestry programs.

17. As per project design, the CMI schemes were to be implemented by village organizations and women’s organizations with the technical assistance of their respective SOU. According to the signed contract, these SOUs were to be established and supervised by the district-based NGOs. However, the project staff told the mission for this report that the recruitment of NGOs was directly influenced by the then provincial government; and in turn SOU staff were recruited in the same way, which compromised both their neutrality and merit. SOUs were thus expected to organize the village and women’s organizations to serve the interests of both the community and the ruling party. The foundations of the edifice so created were very weak, as the motive behind this effort was generally to serve private interests more than the community interests. All totaled, 1,492 village and 896 women’s organizations were formed, with an average membership of 20 members each. At a cost of $15.4 million (versus the appraisal estimate of $17.2 million), 1,074 CMI schemes were completed—163 in Shangla district, 261 in Malakand, 231 in Buner, 220 in Lower Swat, and 199 in Upper Swat. The 1,074 schemes comprised: 290 (versus the targeted 480) farmer-managed irrigation or water storage schemes; 67 jeepable track schemes that built 331 kilometers (km) versus the targeted 105 km; 641 (versus 160) water supply and sanitation schemes; and 76 (versus 120) micro-hydropower units. The CMIs are detailed by district and type of scheme in Appendix 4, Table A4.1 and Table A4.2. Since the mission for this report could not visit the project area due to the conflict between the security forces and the Taliban, the numbers given by the project staff of the CMI schemes completed by the loan closing date could not be verified. Some major discrepancies were found in the numbers provided at the time of the project’s closing date and the numbers given in the executing agency’s project completion report. During the mission for this report, the project staff claimed that they had completed, during the 3-month grace period allowed for accounts

6 reconciliation, all schemes previously reported as “incomplete”. The mission found this unconvincing, as it would have been difficult to increase the physical progress, reported as 10%–20% in 2 years for many CMIs, to 100% in 3 months, particularly when the armed conflict had already begun. Moreover, the post-conflict condition of the completed and allegedly completed CMI schemes could not be verified due to the security situation in the project area. Because of considerable use of heavy artillery during the conflict, massive collateral damage to life and property was reported. According to the post-conflict damage and needs assessment8 conducted jointly by ADB and the World Bank, total losses to public and private assets were assessed at $2.8 billion. Thus, there is reason to believe that the gains achieved in village development through the CMI schemes have been substantially lost as a result of more than 3 years of armed conflict in the project area; and whatever might have remained intact during the conflict is likely to have been washed away or irreparably damaged by the recent torrential rains and heavy floods. The post-flood damage and needs assessment9 estimated the losses for Khyber Pakhtunkhwa at $1.2 billion, of which more than 50% is estimated to have occurred in and around the project area.

c. Community-Based Health Services for Women

18. The project aimed to introduce a community-based healthcare program to build the capacity of the beneficiaries to meet their basic health and nutritional needs, and sustain the benefits accrued through the project. Activities included (i) training of 1,000 lady health workers (LHWs) through the National Lady Health Workers Program; (ii) introducing health and nutrition awareness to the communities through the LHWs; and (iii) promoting a social safety net to assist very poor households in evacuating pregnant women for emergency treatment.

19. The project framework set the following two targets for this subcomponent: (i) training of 1,000 LHWs or traditional birth attendants (TBAs); and (ii) training of 12 female social organizers as supervisors. However, this subcomponent went beyond its scope and ventured into different directions of women’s development, ranging from financing of girl students' bachelor degree programs to providing sewing machines and furniture to women. A wide range of activities at a cost of $1.0 million (against the appraisal estimate of $0.6 million) was implemented. Initially, project staff designed the new activities on their own, but they were later included in the revised PC-I in 2006. ADB did not process nor approve this change in scope.

20. The project staff, instead of collaborating with the LHW program as envisaged in the project design, came up with their own approach in the health sector and delivered training to 1,230 TBAs, 172 female health visitors, 141 midwives, and 15 field supervisors. Another 68 trainings were organized on public health; and 43 awareness campaigns were arranged for village and women’s organizations. The project distributed about 1,500 delivery sets and 1,132 disposable delivery kits among the TBAs, and another 404 kits to midwives. In the education sector, 1,057 girls were provided with basic computer training; 985 were financed for a primary teaching certificate course; 469 for a certificate in teaching course; 192 for a bachelor of education degree program; 83 for a matriculation certificate course; 222 for an intermediate certificate course; and 391 for a bachelor degree program. Financial support was also given to various public and NGO-run educational institutions. For income generation, 1,402 women were given sewing machines and furniture. No criteria were developed or followed for providing the

8 Asian Development Bank, European Union, United Nations, and World Bank. 2010. Post Crisis Needs Assessment, Khyber Pakhtunkhwa and Federally Administered Tribal Areas. Islamabad. ADB, European Union, United Nations and the World Bank. 9 Asian Development Bank and World Bank. 2010. Pakistan Floods 2010: Preliminary Damage and Needs Assessment. Islamabad: Asian Development Bank and World Bank.

7 above from the project funds. The wide range of activities contributed to women’s empowerment and gender development. Appendix 5 details the gender development activities by district.

2. Rural Financial Services

21. The project aimed to build on past experiences in the area of microfinance under various projects and initiatives, and to establish a mechanism to provide financial services from the formal banking sector to the rural poor in the project area. If successful, the institutional arrangements were to be replicated and expanded to cover other districts of the province. Assessed as a suitable financial institution, Bank of Khyber (BOK), as a participating credit institution, was to give beneficiaries access to credit. The project was to support the formation and development of self-sustaining ROSCAs with links to the formal banking sector. Substantial training and capacity building was to be provided to BOK, the rural support organization, and the ROSCAs. A credit line was to be established on a revolving fund basis for short- and medium- term loans to sub-borrowers for (i) agricultural production; (ii) purchase of farm implements; (iii) tree crop cultivation (orchards and woodlots, including establishment of nurseries); (iv) livestock production (including bulls for breed improvement); (v) micro-enterprises; and (vi) community infrastructure development. The project was to introduce loan packages to help the village organizations procure the capital investment items such as pumps, engines, pipes and buildings for the community infrastructure schemes. The use of credit to fund community development activities was expected to change the village organizations’ reliance on project grants for infrastructure development, and to boost community ownership and reduce investment waste.

22. The rural financial services subcomponent was considered an innovation for the project area, as no such structured intervention had been tried in the past. A subsidiary loan agreement (SLA) was signed with BOK to implement this subcomponent. BOK was to advance a credit line of $6.1 million (approximately PRs280 million). BOK started its lending operation from project funds in February 2001, but in September 2004 it decided to back out of the SLA citing the following reasons: (i) the rate of borrowing from the provincial government against the credit line was much higher than the cost of BOK's own deposits (approximately 3%–4%); (ii) BOK had only one branch at Mingora, whereas lending operations were to be carried out all over the project area; and (iii) the microfinance operation of BOK was making losses on its microlending due to the subsidized lending rates and the fact that the provincial government did not agree to an increase. BOK disbursed 1,409 microcredit loans worth PRs58.5 million to about 1,636 villagers for various small enterprises such as auto workshop, furniture shop, internet café or vegetable shop. The recovery rate of these loans was reported at above 95%. After BOK withdrew, the project tried to enter into an SLA with another participating credit institution, but it took almost 2 years to identify the National Rural Support Program (NRSP). By the time an SLA was negotiated, the loan-closing extension was about to end. Under this proposed SLA, the NRSP planned to lend to 6,000 clients (50% women) over 2 years, but because ADB had decided not to extend the loan again, the request by the EA was declined. Hence, the objective of this component was marginally achieved.

3. Road Development

23. This component included improving and expanding the road network in the project area to provide all-weather access to the project villages. The component was to assist (i) rehabilitation of up to 150 km of major provincial roads in Malakand Division, (ii) upgrading of about 100 km of paved and unpaved roads to rural access-road standards, and (iii) introduction of a toll collection and management system in the project area based on the recommendation of a study that was to be carried out during the first year of project implementation. Three

8 provincial roads—Dargai to Landaki (35 km), Fatehpur to Kalam (70 km), and Khawazakhela to Bisham (60 km)—and a rural access road from Barikot to GS Marble (55 km) were specified as the original scope of this component.

24. In line with the original project scope, three provincial highways were selected for rehabilitation: Dargai–Landaki (35 km), Khawazakhela–Bisham (60 km), and Fatehpur–Kalam (70 km). While the Dargai–Landaki section was awarded as one package, the Khawazakhela– Bisham section was broken into two parts—Khawazakhela to Alpuri (31.5 km) and Alpuri to Bisham (29 km)—due to difficult terrain and in a bid to better manage the contract. The first part was awarded in February 2004, but the second part (Alpuri–Bisham) could not be awarded because during the bidding process, OAI established collusion between bidders that resulted in the sanctioning of two bidders. The bidding process was repeated, but the bids received were priced exorbitantly and the loan funds were no longer sufficient. Given the lack of funds, the Fatehpur–Kalam section was dropped from the project scope; it was later taken over by the provincial government for construction from its own resources.

25. Work on the Dargai–Landaki provincial highway was underway when the federal government declared the provincial roads Nowshera–Chakdara–Dir–Chitral, including the one falling into the project’s scope, as national highways. Construction was assigned to the National Highway Authority (NHA) in March 2004, resulting in the need to reduce the contract scope from Dargai–Landaki (35 km) to Chakdara–Landaki (12 km). In early 2007, the federal government declared all three roads of the original project scope as national highways. NHA took over completion using federal resources. Meanwhile, the OAI conducted the PPRA from March–May 2007 with the assistance of Pakistan's Department of Auditor General and a team of consultants. The OAI found serious irregularities and noncompliance issues relating to the road component. Findings included possible fraudulent practices by contractors in executing contracts; substandard materials and poor work quality for roads; and lack of due diligence and supervision by the consultant engineer. The OAI recommended that the ADB suspend disbursements on the project's road contracts and cancel the remaining portion of the road financing, which was done. The OAI further said in its report that ADB had extended the contract closing dates three times since project inception, but none of the road contracts was completed. The OAI planned to further investigate allegations of possible fraud and corruption that emerged during the audit, but the eruption of armed conflict between the security forces and the Taliban stopped that plan. After the change of government, the FHA, which endorsed the findings of the audit, took action against three road contractors and blacklisted them indefinitely. The road component became a source of bad repute for the project and its suspension meant that almost half the project’s scope (the component accounted for 45% of project costs) was dropped.

4. Project Implementation Support

26. This component provided for (i) the establishment, staffing, office equipment, service vehicles, and operational expenditures of the PMU; (ii) the services of an RSP to undertake community mobilization; (iii) various staff and beneficiary training programs—including training of the staff of the IAs in participatory work techniques for interaction with communities, and for promotion of rural credit and savings activities; and (iv) consulting services for environmental management and training, benefit monitoring and evaluation (BME), women's development, road construction and maintenance, and rural financial services.

27. It took about 1 year for the provincial government to establish the PMU; the project director was appointed in March 2000, and three program managers and skeleton support staff

9 were appointed by June 2000. The PMU achieved its full strength of 105 staff 2 years after loan effectiveness (July 1999). The project was initially given five used vehicles from recently completed projects, but only two of these vehicles were operational. Subsequently, a fleet of 32 vehicles was provided or procured (Appendix 8, Table A8.2). A wide range of equipment and furniture (Appendix 8, Table A8.1) was also procured for the PMU. However, there have been reports of misuse of vehicles and no proper logbooks were kept for them. Although more PMU staff were recruited than needed, coordination with and monitoring of SOUs and community activities remained weak—almost all CMI schemes and other project activities suffered substantial completion delays. Also, project staff were generally demoralized and lacked motivation, which also caused implementation delays. The midterm review mission (MTR) noted that the organizational structure of the project was highly centralized and formal, and lacked horizontal communication, coordination, and integration. The mission also found the PMU staff unhappy with the centralized authority and the overall work environment. The MTR, based on SWOT analysis, cited four factors as slowing the progress of the project: (i) acceptance of incompetence, (ii) cumbersome administrative procedures, (iii) special interest groups that were more vocal and powerful, and (iv) unfavorable conditions for innovation. The MTR also found that the institutional arrangements did not sufficiently meet the project’s requirements and that there was a need for reorganizing the institutional setup. It recommended early revision of the PC-I document to bring structural changes in the implementation arrangements, but this remained unheeded. The PC-I was revised in 2006, but without introducing structural changes in the implementation arrangements. Another concern raised related to the role of program managers, who spent most of their time in the office instead of being in the field providing support and leadership for their components.

28. The recruitment of consulting services to support implementation was delayed by 2 years (Appendix 13) and the quality of their inputs was generally unsatisfactory. For example, a consultant firm was hired to establish a BME system, but except for conducting a rudimentary baseline survey, the firm did no major work on BME. This work would have helped monitor the benefits to the community and evaluate the outcomes. An M&E coordinator was later hired on a regular basis but, according to the EA’s project completion report, “the person employed did not have the relevant background and experience; hence, the BME system could not be developed.” Overall, project implementation support was very weak.

C. Project Costs

29. At appraisal, the project’s total cost was estimated at $62.9 million equivalent, including taxes, duties, service charges during construction, and physical and price contingencies. Of this, $15.4 million (24%) was in foreign exchange, and $47.5 million equivalent (76%) was in local currency. ADB’s share of the project cost—$41 million (65%)—came from its Special Funds resources. It included $15.4 million for the foreign exchange cost (100%), and $25.6 million equivalent for the local cost (54%). The share of the government was $12.1 million, that of BOK $1.0 million, and that of the communities and/or beneficiaries $8.8 million.

30. At loan closing, the overall actual utilization amounted to $42 million. Of this, ADB financed $25.7 million (61.2%), comprising $8.1 million in foreign currency (19.3%) and $17.6 million in local currency costs (42%). The government contributed $13.1 million (31.2%), which is 108% of its appraised share i.e., $12.1 million; BOK contributed $0.5 million (1.2%); and the communities contributed $2.7 million (6.4%). The details of appraised and actual costs are in Appendix 9, and in the basic data.

10

D. Disbursements

31. A total of SDR17,414,868.05 was disbursed from the loan account, equivalent to 56% of the original loan amount of SDR30,852,000. Loan savings of SDR13,437,131.95 were cancelled on 1 July 2008. The first disbursement of $500,000 was made on 8 August 2000 as an imprest advance, and the final disbursement on 1 July 2008. During appraisal, no disbursement schedule was developed. In the first 4 years, the cumulative disbursement was only 5%, and it moved very slowly until the 7th year of the project, the cumulative disbursement being only 25% of the loan amount. The disbursement moved quickly only in the last 2.5 years of the project— 59% of the total disbursed loan. Three major amounts—two of $500,000 each in August 2000 and February 2003, and one of $1.0 million in August 2005—were advanced to the PMU in the imprest account. The imprest account was optimally utilized with a turnover ratio of 2.46. The projected and actual contract awards and disbursements by year are in Appendix 10.

E. Project Schedule

32. Compared with the project's appraised schedule, the execution of the project activities was delayed considerably. A comparison of the appraisal and actual implementation schedule is in Appendix 11. The targets envisaged in the project document were realistic. However, owing mainly to start-up delays—but further compounded by an inordinate delay in the procurement process and recruitment of consultants, weak capacity of the PMU and line departments, inexperienced NGOs, lack of confidence and ownership among the communities, etc.—almost all the timelines were missed. The community mobilization was originally planned during the first year of implementation, followed by planning and execution of the CMI schemes; but it started much after the NGOs were recruited in January 2002. Implementation of the CMI schemes was delayed by almost 4 years and the completion of schemes took years instead of months, as planned. Important activities like establishing ROSCAs and mobilizing savings under the rural financial services component were not implemented, and the implementation progress of the road component was also dismal. Despite many extensions, no road had been completed by the project’s closing. The original closing date of the project was 31 December 2006, but ADB, on request from the provincial government, gave a 1-year extension to 31 December 2007. The provincial and the central government requested another extension, but given the serious violations cited in the PPRA report and project’s overall poor performance, ADB did not agree.

F. Implementation Arrangements

33. Project implementation arrangements evolved from those of the successfully implemented, ADB-funded Chitral Area Development Project and Barani Area Development Project. The Planning, Environment, and Development Department (PEDD) of the provincial government was the EA responsible for overall supervision and strategic guidance to the project. A Special Development Unit (SDU) of the PEDD stationed at provincial headquarters was responsible for coordination on behalf of the EA. A PMU established at Mingora in the Swat district was responsible for the project's planning, implementation, administration, monitoring, and reporting. The PMU had a project director and program managers for agriculture and livestock, HRD and rural financial services, women’s development program, village infrastructure, and road development. As per original design, the PMU was to contract an NGO or consultants experienced in community-based rural development projects for the first 2 years of implementation, to establish a rural support program (RSP) for Malakand Division. But the provincial government and ADB during the inception mission agreed on two minor changes in the implementation arrangements. These were (i) establishment of a project coordination committee (PCC) in each of the project districts, instead of one PCC for the whole project area, and (ii) engagement of local NGOs for community mobilization, instead of establishing a new RSP for the project. In place of a consulting firm for establishing the RSP, an NGO was to be

11 recruited to build the capacity of the local NGOs. ADB approved these minor changes in November 2000.

34. The district-based NGOs, per contract, established a social organization unit (SOU) in their district and staffed it with a male and a female social organizer and a field engineer. Staff were responsible for mobilizing communities, coordinating integrated village planning and implementation, reviewing and reporting on progress, and recommending release of funds to implementing agencies, i.e., village organizations. All up, 1,492 village and 896 women’s organizations with an average membership of 20 persons were formed. The outreach of the program covered almost all the union councils in the project area, but village coverage was only about 35% and highly scattered. The village organizations covered only 21% of the targeted households. The MTR mission noted considerable weaknesses in the social mobilization process. For example, given the scattered presence of village and women’s organizations, the spin-off effect was minimal; since village and women’s organizations were incentive-oriented, their interest generally faded once the incentive ended; and lack of coordination between PMU, SOUs, and line departments, and infrequent visits of social organizers to communities caused frustration among organizations.

35. Moreover, the PMU could not ensure joint planning and proper field monitoring. Consulting services could not make up for the professional deficiencies at the IAs, communities, and district-based NGOs. Such deficiencies were also noticed among the PMU's technical staff. Because of these shortcomings, the objective of the project to build an integrated team and to foster a sense of belonging among the stakeholders was unrealistic.

G. Conditions and Covenants

36. Of the 42 loan covenants, 32 were fully complied with; 3 were partly complied with; and 6 were not complied with (Appendix 12). The covenants not complied with generally related to the rural financial services component; the partly complied covenant to the road component.

H. Related Technical Assistance

37. A project preparatory technical assistance (TA) was approved on 8 July 1996 for $700,000. The TA became effective on 9 July 1996. A consulting firm, M/s Enterprise and Development Consultants (EDC), was hired to assist ADB staff in preparing the project. The contract was signed on 6 November 1996 for $690,000. The contract provided a team of four international (16 person-months) and nine domestic (27 person-months) experts. The draft final report by the consultant was submitted on 30 May 1997; the final report on 17 July 1997. The TA was financially closed on 30 April 2000. The overall performance of the TA was satisfactory.

I. Consultant Recruitment and Procurement

38. Consultant recruitment for all components of the project was delayed considerably, by between 15 months and 27 months. Consulting service details are in Appendix 13. A brief account of major consulting services is given in the following paragraphs.

39. Environmental management and training consulting services. The RRP provided for 4 person-months of international and 18 person-months of domestic consulting services to assist the project staff and village organizations in designing and executing the schemes in an environmentally beneficial manner. No firm was recruited to provide the services; thus, schemes were designed and executed without technical assistance of consultants.

40. Benefit monitoring and evaluation. Against an appraised 70 person-months of domestic consulting services, a firm named Semiotics Consultant was recruited for 60 person- months of inputs at a contract value of $216,883 in June 2002. Against the appraised target of

12

10% of total project villages, the firm conducted a baseline study covering 85 villages (8.5%), followed by an impact evaluation. ADB found major gaps in the impact report and requested a revision, which the consultants failed to produce. The consultants’ contract ended without further work on impact evaluation. Thus, benefit monitoring and evaluation was very weak throughout the implementation of the project.

41. Women development. On 27 October 2000, the PMU advertised the need for an internationally reputed consultant for 12 person-months to assist the project staff and other line departments in improving their service delivery to women and develop a training package on women’s legal rights, and provide necessary training for the social organizers and project staff. Despite multiple advertisements no international consultant could be recruited. Finally, services of a domestic consultant were sought, but the recruitment was made impossible by delayed processing—ADB did not approve the recruitment since the project was near its closing.

42. Road consulting services. A consulting firm, M/s ACE Transportation Engineering Services, was recruited in June 2002 to conduct a feasibility study on rural access roads, and on a road toll and road maintenance system. The consulting firm was also required to prepare engineering design, construction, supervision, and compilation of reports. The total contract amount was $0.231 million in foreign currency and PRs62.770 million in local currency. The amount disbursed was $0.225 million in foreign currency and PRs61.77 million in local currency. The original contract period expired on 30 September 2004, but the firm continued its work until the road component was suspended on the recommendation of the OAI. The firm claimed an additional amount in the shape of an addendum to the contract, but ADB did not approve it based on the firm’s poor performance.

43. Rural financial services. A Manila-based firm, M/s MADECOR Group, was recruited in September 2002 at a cost of $344,010 to assist in planning, coordinating, and managing the component. The firm developed a model of wholesale lending through SOUs, but it could not be implemented because the provincial government declined to provide a guarantee to BOK.

44. Best agriculture practice. For best agriculture practice (BAP) in the project area, a contract was awarded in October 2004 to CABI at a cost of PRs49.4 million plus a foreign exchange component of $95,802; PRs45.2 million and $34,297 were disbursed. The organization introduced the innovative concept of the farmers field school (FFS) for training of farmers in the project area. An addendum to the contract was signed between the PMU and CABI for the introduction of cashmere goats in the project area under the livestock component. However, this did not materialize and this component was later converted to livestock FFS.

J. Performance of Consultants, Contractors, and Suppliers

45. The performance of the road consultants (M/s ACE) and the contractors was poor. The consultants made frequent staff changes and maintained poor staff presence on the project sites. The OAI found lack of due diligence and supervision on the part of M/s ACE. The audit team reviewed and inspected all six road contracts and found serious irregularities in contract implementation, quality of road works and materials; and the consultant engineer’s performance. The team also found instances of noncompliance with ADB’s procurement guidelines. In reviewing bid documents, the team noticed that the project had awarded three contracts to the lowest responsive bidders, and upon further review of the bill of quantities in one of the contracts, it was noticed that the contractor had intentionally quoted unreasonably low prices on certain line-item civil works, such as road drains, to be the lowest-priced bidder and win the contract. The team inspected the road in question and noted that the contractor never progressed on the side drains and had no plans to complete the works. The contractor selectively performed the works that were more profitable and intentionally left the low-priced works undone, leading to a significant project loss. The audit recommended that a penalty be

13 imposed on the contractor for breach of contract, but since the contractor was then a federal minister, the project staff and the FHA did not take any action. In another case, an ICB contractor went through the procurement process and won a provincial highway contract. After the contract award, the ICB contractor turned over the contract to a disqualified LCB contractor for execution, which the contract provisions did not permit. Although the LCB contractor had poor performance records in other FHA projects, the audit team was informed that FHA had accepted the arrangement because of external political pressure. In view of the above, the OAI planned to further investigate indications of possible fraud and corruption in the project, but the plan was stymied by the armed conflict in the project area.

46. The audit team also found that the road consultant did not fulfill its roles and responsibilities under the contract. The road consultant (i) endorsed contract extensions without a sound basis, even when it was obvious that the contracts could not be completed within the allocated time; (ii) provided weak resident engineers, leading to poor and ineffective supervision of contractors; (iii) failed to take action against the contractors over poor quality of road works and long implementation delays; and (iv) failed to hand over original survey records, key procurement documentation, and construction schedules to PMU and the audit team.

47. The contractors’ selection also lacked transparency. The audit team found that the financial status of some ICB and LCB contractors fell short of the set criteria. For this reason, none was able to complete the contracted work, not even when granted multiple extensions. Overall, the performance of the consultants and contractors was unsatisfactory.

K. Performance of the Borrower and the Executing Agency

48. The project suffered start-up delays because of the EA’s inability to appoint PMU staff, late approval of PC-Is, and weak follow-up by ADB. The implementation of components generally lacked proper planning and effective coordination. The apparent lack of leadership, commitment, and involvement, as well as the absence of an institutional anchor for the PMU, contributed to significant delays in mapping out effective implementation plans and strategies. The PMU focused disproportionately on physical inputs, such as procurement of goods and civil works, without linking them to outputs and outcomes. Weak links between inputs and outputs and corresponding outcomes meant that EA and IAs could not deliver high-value dividends to the project communities. Hence, the performance of the borrower and the EA is rated unsatisfactory.

L. Performance of the Asian Development Bank

49. While the work relationship between ADB and the EA and IAs was good throughout the project, ADB offered insufficient guidance from the EA’s perspective. Requests for procurement and disbursement were approved with significant delays. Despite the complexity of the project design, it seems that no serious effort was made to help the EA and IAs solve implementation problems. Despite prolonged and frequent reviews and special administration missions, no significant progress in project implementation was achieved. Many of the irregularities pointed out by the audit went unnoticed at ADB, which shows lack of due diligence on its part. Therefore, ADB’s overall performance is rated unsatisfactory.

III. EVALUATION OF PERFORMANCE A. Relevance 50. While project objectives were commendable, outcomes and outputs defined at the time of project preparation were somewhat misguided and only partly relevant. Although the project’s technical design contained a strategy for reducing poverty in the project area, it erred in assessing the capacity of the EA and IAs to carry out the innovative but highly complex project.

14

The multifarious nature of the implementation arrangements, turf battles between PMU and line departments, lack of incentives for the project staff, etc. weakened the relevance of the project design. If these aspects had been properly considered in the design, the project would have had the potential to be relevant. However, because of this and many other weaknesses, the project is rated partly relevant.

B. Effectiveness in Achieving Outcome

51. The project failed to achieve its two main outcomes: (i) improve the income and living conditions of poor households, and (ii) boost the human resources and income-generating potential of the women in the area. Insignificant physical progress in the project communities hardly amounted to an improvement in the living conditions of the households and women. Except for minor achievements in the village development component, the effectiveness of the interventions under the other components was minimal. The project is therefore rated ineffective.

C. Efficiency in Achieving Outcome and Outputs

52. No financial or economic analyses could be done because of the continued conflict between the security forces and the Taliban. Given the poor performance of the project in its major component (roads) and unsatisfactory performance in other components, and even if the economic and financial internal rates of return were computed, it is unlikely that high economic and financial returns could have been obtained. Thus, the project is assumed to be inefficient.

D. Preliminary Assessment of Sustainability

53. Taking into account the findings of the preceding paragraphs, it is unlikely that the activities implemented under the village development component will be sustained. The armed conflict between security forces and the Taliban, and recent torrential rains and massive floods have undermined the chance of sustainability of works completed under the project. Prospects for sustaining the limited benefits achieved under the project over the medium to long term appear uncertain, so the project interventions are rated unlikely to be sustained.

E. Impact

54. The project was expected to have a major impact on poverty but in view of the implementation problems discussed earlier, no substantial change in the overall poverty profile of the project area could be achieved. The CMI schemes and the rural financial services component had direct bearing on poverty reduction and, based on the partial success of these interventions, it can safely be assumed that their impact must have been positive in improving the incomes of the beneficiaries. However, the armed conflict and recent floods in the project area are likely to have added to the poverty. The project contributed considerably to gender development by implementing various women-focused activities (Appendix 5). The audit team found several instances of negative environmental impact in the road sector, and recommended evaluation and fixing of environmental and road safety aspects, and related risks that arose from serious irregularities and violations.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

55. Despite being consistent with the country’s development strategy as well as its needs, the project failed to achieve its objectives. Overall, the project is rated unsuccessful

15

(Appendix 14). It was partly relevant, ineffective, inefficient, and unlikely to be sustained. With 30% physical progress, the project was unable to employ the inputs required for producing the desired outputs and outcomes. It performed poorly on procurement of goods, services, works, and implementation of soft components such as capacity building. ADB gave little support and guidance to solve the perennial problems caused by weak capacity of the EA and IAs.

B. Lessons Learned

56. One of the principal lessons from this project is that before a similarly complex and ambitious project is prepared, particularly in a country with difficult socioeconomic conditions and generally weak implementation and coordination capacity, a detailed and objective analysis of implementation risks (especially the strengths and weaknesses of EA and IAs) should be carried out and all necessary mitigation measures built into the project design.

57. A well-thought-out conceptual design is key to the success of any project. In this case, the project design had commendable objectives, but it overestimated the capacity of the EA and IAs. The scope of the project was too broad—provincial roads should not have been included in a rural development project.

58. In demand-driven, community-based project design it may be helpful to follow a supply- driven approach at the start, to be able to demonstrate the dynamics of different types of community subprojects; communities can then make informed choices about their priorities.

C. Recommendations

1. Project Related

59. Future monitoring. The project has laid the foundation for further economic and social development in the project area. There is a need to further develop the capacity of village and women’s organizations through training and encouragement to continue their community development and income-generating activities. The provincial government should develop a framework to enable line agencies to continue to work effectively with village organizations and other stakeholders in a multidisciplinary and integrated manner. A strategy also needs to be prepared to initiate a rural microfinance program in the project area to build upon the foundation laid by the project’s rural financial services component.

60. Further action and additional assistance. Further investment of a similar nature is very much required to redress the extreme poverty in the project area. To bring the backward and remote areas of the Malakand Division into the mainstream, there is a need to further expand the transport sector and improve access to social and financial services.

61. Timing of the project performance evaluation report. Although it would be desirable to assess the impact of the project’s interventions, due to the precarious security situation in the project area, no mission could be fielded to conduct an evaluation in the foreseeable future.

2. General

62. The project was ADB’s first major investment in the project area involving communities in planning, implementing, and organizing rural development activities. The provincial government overestimated the capacity of the local NGOs recruited for social mobilization and community development. Future project design should specify the requirements for community mobilization, and involve only reputable NGOs that have a demonstrated commitment to developing institutions and could eventually take charge of local development initiatives.

16 Appendix 1

PROJECT FRAMEWORK

Design Performance Indicators/Targets Monitoring Status Summary Mechanisms 1. Goal 1.1 Poverty reduction in the Raise per capita income of the project Annual impact Given the precarious project area area beneficiaries to reach or exceed assessments, security situation in the the poverty line midterm, and final project area, no impact evaluation assessment/evaluation could be undertaken. Project completion Poverty is likely to have report increased because of the armed conflict between security forces and the Taliban, and recent devastation caused by floods. 1.2 Women's human resource Improve the human resources and Annual impact As above development income-generating potential of the assessments, women in the project area midterm and final evaluation

Project completion report 2. Purpose Improve the incomes and The project will reach 1,000 villages Annual impact The project reached living conditions of poor and settlements, and benefit 77,000 assessments, 1,235 villages and households households. midterm and final benefited 135,457 evaluation households

Improve the human resources The project will provide small, Project completion The project provided and income-generating community-managed infrastructure report 1,074 small community- potential of the women of the (jeepable tracks, irrigation and managed infrastructure area drinking water schemes, and micro- Quarterly and annual schemes. hydropower). progress reports

Physical and financial progress reports The project will provide short-term 2,409 loans worth and medium-term loans for PRs58.5 million were agriculture and enterprise disbursed to development. 1,636 villagers. However, the component was discontinued after BOK pulled out. 20% increase of income of farmers No data is available. from sales of vegetables Increase on demonstration plots: Wheat yield to 3 tons/ha on 500 Due to the precarious farms in irrigated areas, and security situation in the 2.4 tons/ha on 2,000 farms in project area, no impact rainfed areas assessment/evaluation could be undertaken. Maize yield to 2.7 tons/ ha on 500 As above. farms in irrigated areas, and to 2.1 tons/ha on 500 farms in rainfed areas Provide rural access roads By loan closure, no road work was completed.

Appendix 1 17

Design Performance Indicators/Targets Monitoring Status Summary Mechanisms Achieve an EIRR of 19% For security reasons, no data could be gathered for EIRR computation. 3. Outputs The project is planned and implemented with community participation. Annual allocation and targets will be considered as tentative, subject to yearly review and modification. However, for cost-benefit purposes, targets have been given. 3.1 Community-managed Physical and financial The project provided infrastructure developed progress reports, 1,074 small community- PCR, and review managed infrastructure missions schemes. Farmer-managed irrigation Construct 480 farmer-managed 290 schemes schemes irrigation schemes completed Jeepable tracks Construct 105 km of jeepable tracks 67 schemes (331 km) of jeepable tracks completed Water supply schemes Construct 160 drinking water supply 641 schemes schemes completed Micro-hydropower units Construct 120 micro-hydropower 76 micro-hydropower units units completed 3.2 Rural credit provided Provide short- and medium-term Physical and financial 1,409 loans worth loans worth $5.8 million (base cost) progress reports, PRs58.5 million PCR, and review ($0.97 million) missions. disbursed to Progress report of the 1,636 clients. PCI PCI. discontinued operations after disbursing loans in the first 2 years. 3.3 Rural income-generating Physical and financial services provided progress reports, PCR, and review missions Agriculture and horticulture Establish 500 demonstration and 1,097 demonstration multiplication farms each for wheat and multiplication farms and maize established Provide high-quality vegetable seed High-quality vegetable of the recommended varieties, seed provided to fertilizer/pesticides to 375 farmers. 1,024 farmers Increase availability of true-to-type fruit plants for men and women. Make available commercial, certified potato seed to potato growers in mid- Fodder seeds, mott to high-altitude areas grass plugs, and Distribute quality fodder seeds/ mott fertilizer provided to grass plugs/fertilizer to 374 farmers 416 farmers Livestock Distribute 240 Rambouillet rams. 78 rams distributed; Train 475 village livestock extension 340 village livestock workers and 1,440 women villagers in extension workers and poultry rearing and enterprise 924 women villagers development trained 3.4 Women's health improved Train 12 female social organizers as Physical and financial 15 female social supervisors progress reports, organizers, 172 LHWs, Train 1,000 LHWs or TBAs PCR, and review 123 TBAs, and 141 missions midwives trained

18 Appendix 1

Design Performance Indicators/Targets Monitoring Status Summary Mechanisms 3.5 Rural access roads Upgrade 100 km of roads Physical and financial By loan closure, no road constructed progress reports, and work was completed. review missions 4. Activities 4.1 Community-managed Total base cost – $13.2 million Physical and financial Actual cost – infrastructure developed progress reports, $15.4 million Agree on villages' need PCR, and review Conduct feasibility study missions Release payments to village organizations for work done Monitor O&M 4.2 Rural credit provided Total base cost – $6.4 million Physical and financial Actual cost – Obtain demand for credit progress reports, $1.5 million from villagers PCR, and review Process loan applications missions Advance loans Monitor implementation Ensure regular recovery 4.3 Rural income generation interventions provided Agriculture/horticulture Total base cost – $2.7 million Physical and financial Actual cost – Select farmers for demo progress reports, $2.4 million plots PCR, and review Provide inputs missions Monitor results Ensure multiplication Livestock Total base cost – $1.6 million Physical and financial Actual cost – Provide training progress reports, $0.7 million Facilitate the access of PCR, and review villagers to rams and bulls missions Monitor results 4.4 Women's health improved Total base cost – $1.6 million Physical and financial Actual cost – Train LHWs and TBAs progress reports, $1.0 million Monitor performance PCR, and review missions 4.5 Rural roads constructed Total base cost – $12.1 million Physical and financial Actual cost – Prepare detailed feasibility progress reports, $13.8 million study of roads to be PCR, and review constructed missions Award contracts Monitor work Ensure proper O&M 4.6 Project management Total base cost – $6.0 million Project's physical and Actual cost – including community financial records $6.5 million mobilization Incorporate and staff RSP PCR Execute activities with community participation in Monthly, quarterly, planning and and annual progress implementation reports Coordinate activities with line departments Monitor and report progress BOK = Bank of Khyber, EIRR = economic internal rate of return, ha = hectare, km = kilometers, LHW = lady health worker, O&M = operation and maintenance, PCI = participating credit institution, PCR = project completion report, RSP = rural support program, TBA = traditional birth attendant. Source: Project completion review data.

Appendix 2 19

ADB’S SECTOR STRATEGY AND GOVERNMENT POLICIES AND PLANS

1. The country operational strategy of 1995 specified sustained economic growth and simultaneous poverty reduction as the objectives of assistance by the Asian Development Bank (ADB) to Pakistan. The strategy emphasized (i) human resource development, with particular emphasis on women; (ii) stronger natural resource management; (iii) capacity building, particularly in the social and agriculture sector; (iv) greater efficiency of public sector investment and management; and (v) better domestic resource mobilization. The objectives of this strategy remained important, especially for poverty reduction, in the wake of the nuclear test (May 1998) and the severe economic downturn that followed in the second half of 1998. ADB aimed to reduce poverty in the rural areas through rural development projects targeting more backward areas of relatively high poverty incidence. The strategy relied on poverty reduction by greater productivity of natural resources. It was, however, recognized that success in poverty reduction also required specific measures, such as better targeting, better rural financial policies, and mechanisms to enable small farmers and the landless to access financial services to boost their income, and stronger participation by beneficiaries. In addition, capacity building for the key agencies was recognized as an area requiring attention for greater success in the sector.

2. The key elements in ADB’s governance strategy were concerned with the devolution of power to command economic and social resources. The modalities that ADB was to follow for rural development were essentially the same as those that ADB and the government were adopting for governance in development management in most sectors. Beneficiary initiation and collaboration in projects was to be encouraged to increase the role of civil society in the management of economic resources. Advances in devolution of government authority to development management, and community involvement at all levels of project activities were central to the government and ADB’s strategy.

20 Appendix 3

AGRICULTURE AND LIVESTOCK

Table A3.1: Project Outputs (Appraised versus Actual) Sr. No. Activity Unit Appraised Actual A. Agriculture 1. Wheat demo plots in irrigated areas farms 500 375 2. Wheat demo plots in rainfed areas farms 2,000 900 3. Increase in wheat yield in irrigated areas tons/ha 3 3.7 4. Increase in wheat yield in rainfed areas tons/ha 2.4 2.29 5. Maize demo plots irrigated areas farms 500 325 6. Maize demo plots in rainfed areas farms 500 375 7. Increase in maize yield in irrigated areas tons/ha 2.7 4.1 8. Increase in maize yield in rainfed areas tons/ha 2.1 2.4 9. Establish demo seed multiplication farms for wheat farms 500 573 10. Establish demo seed multiplication farms for maize farms 500 524 11. Provide high-quality vegetable seeds, and other farmers 375 1,024 agriculture inputs to farmers B. Livestock 12. Disseminate good-quality fodder seeds, mott grass farmers 374 416 plugs, and fertilizers to farmers 13. Distribute Rambouillet rams No. 240 78 14. Distribute bulls No. 62 15. Distribute bucks No. 99 16. Distribute chicks No. 80,000 17. Train village livestock extension workers No. 475 340 18. Train women villagers in poultry rearing and women 1,440 924 enterprise development ha = hectare, No. = number, Sr. = serial. Source: Borrower's project completion report.

Appendix 3 21

Table A3.2: Summary of Trainings Provided Sr. Appraised Actual Activity No. (No.) (No.) 1. Train village livestock extension workers 475 340 2. Train women in poultry rearing and enterprise development 1,440 924 3. Train farmers - 9,142 4. Train professionals - 200 5. Train facilitators - 4 6. Farmer field schools - 256 7. Farmer field days - 180 8. Train female poultry entrepreneurs - 1,000 No. = number, Sr. = serial. Source: Borrower's project completion report.

COMMUNITY MANAGED INFRASTRUCTURE SCHEMES 22

Table A4.1: Summary of Achievement on Community Managed Infrastructure Schemes Districts

No. Type of Schemes Unit 4 Appendix Shangla Malakand Buner Lower Swat Upper Swat Total A. Farmer-Managed Irrigation Schemes / Water Storage Pond (All types) 1 Tubewell irrigation Nos. 0 5 23 45 1 74 Cost of schemes PRs 4,547,837 10,688,203 48,911,696 462,266 64,610,002 2 Dug well Nos. 0 11 3 12 4 30 Cost of schemes PRs 6,941,154 2,017,259 10,467,547 2,051,887 21,477,847 3 Gravity irrigation Nos. 21 69 5 47 34 176 Cost of schemes PRs 9,652,449 65,812,381 2,015,192 38,637,705 20,788,226 136,905,953 4 Lift irrigation Nos. 0 1 3 3 1 8 Cost of schemes PRs 860,861 1,871,739 8,011,925 271,648 11,016,173 5 Water pond Nos. 0 0 0 2 0 2 Cost of schemes PRs 897,406 897,406 Subtotal Nos. 21 86 34 109 40 290 PRs 9,652,449 78,162,233 16,592,393 106,926,279 23,574,027 234,907,381 B. Jeepable Tracks 1 Number of schemes Nos. 17 6 28 9 7 67 Cost of schemes PRs 84,252,400 18,835,864 87,046,301 33,864,589 10,973,332 234,972,486 C. Drinking Water Supply Schemes / Sanitation (All types) 1 Spring-based Nos. 38 3 52 24 34 151 Cost of schemes PRs 17,793,340 1,799,881 54,561,792 12,027,236 22,046,962 108,229,211 2 Handpump Nos. 47 98 59 52 69 325 Cost of schemes PRs 1,966,855 6,849,518 2,060,346 2,851,669 3,751,647 17,480,035 3 Sanitation Nos. 2 68 38 36 21 165 Cost of schemes PRs 569,398 53,277,548 29,223,270 38,676,224 14,469,008 136,215,448 Subtotal Nos. 87 169 149 112 124 641 PRs 20,329,593 61,926,947 85,845,408 53,555,129 40,267,617 261,924,694 D. Micro Hydel Schemes 1 Number of schemes Nos. 38 0 4 6 28 76 Cost of schemes PRs 25,084,909 2,632,749 2,893,331 22,983,600 53,594,589 Grand Total Nos. 163 261 215 236 199 1074 Cost of schemes PRs 139,319,351 158,925,044 192,116,851 197,239,328 97,798,576 785,399,150

No. = number. Source: Borrower's project completion report

Appendix 4 23

Table A4.2: Details of Community Managed Infrastructure Schemes Districts No Type of Schemes Unit Lower Upper Shangla Malakand Buner Total Swat Swat A. 1 Total Number of Schemes Completed Nos. 21 86 34 109 40 290

2 234.906 Total cost of Schemes Completed PRs Mn 9.652 78.162 16.592 106.926 23.574 3 Population Benefited (Male) No. 4,446 53,780 2,933 55,118 9,648 125,925 4 Population Benefited (Female) No. 4,817 58,353 2,707 50,881 10,453 127,211 5 Total Households Benefitied No. 926 10,630 564 10,600 2,010 24,730 6 Total Villages/Settlements Benefited No. 25 93 27 114 60 319 B. 1 Total Number of Schemes Completed No. 17 6 28 9 7 67 2 Length of Awarded Tracks Schemes km 103 27 129 42 30 331

3 234.972 Total cost of Schemes Completed PRs Mn 84.252 18.836 87.046 33.865 10.973 4 Population Benefited (Male) No. 44,025 9,254 27,128 14,866 10,584 105,857 5 Population Benefited (Female) No. 47,694 10,024 25,042 13,729 11,466 107,955 6 Total Households Benefitied No. 9,172 1,920 5,217 2,692 2,205 21,206 7 Total Villages/Settlements Benefited No. 35 15 26 10 15 101 C. 1 Total Number of Schemes Completed No. 87 169 165 96 124 641 2 261.925 Total cost of Schemes Completed PRs Mn 20.330 62.127 85.845 53.355 40.268 3 Population Benefited (Male) No. 9,769 96,723 88,000 63,934 33,710 292,136 4 Population Benefited (Female) No. 7,581 104,809 81,230 59,093 36,458 289,171 5 Total Households Benefitied No. 2,036 19,540 19,923 11,917 7,023 60,439 6 Total Villages/Settlements Benefited No. 120 190 157 116 130 713 D. 1 Total Number of Schemes Completed No. 38 - 4 6 28 76 2 53.595 Total cost of Schemes Completed PRs Mn 25.085 - 2.633 2.893 22.984 3 Population Benefited (Male) No. 14,592 119,413 2,087 12,931 149,023 4 Population Benefited (Female) No. 15,809 110,227 2,003 14,009 142,048 5 Total Households Benefitied No. 3,040 22,964 384 2,694 29,082 6 Total Villages/Settlements Benefited No. 56 4 6 36 102

Grand Total 1 Total Number of Schemes Awarded No. 163 261 231 220 199 1,074 2 Length of Awarded Tracks Schemes Km 103 27 129 42 30 331 3 Total cost of Schemes Completed PRs Mn 139.319 159.125 192.116 197.039 97.799 785.398 4 Population Benefited (Male) No. 72,832 159,757 237,474 136,005 66,873 672,941 5 Population Benefited (Female) No. 75,901 173,186 219,206 125,706 72,386 666,385 6 Total Households Benefitied No. 15,174 32,090 48,668 25,593 13,932 135,457 7 Total Villages/Settlements Benefited No. 236 298 214 246 241 1,235 Km = kilometer, No. = number. Source: Borrower's project completion report. .

24 Appendix 5

GENDER AND DEVELOPMENT

Completed District wise Gender No. Description Lower Upper Total Duration Shangla Malakand Buner Female male Swat Swat A. Women's Health Component 3 days 1 Master trainers 2 2 2 2 2 10 46 15 days to 2 Trainers 5 5 5 5 6 26 18 8 24 months 3 Supervisory training of FSOs 3 3 3 3 3 15 15 0 one week 4 TBAs training 284 100 285 240 321 1230 1230 one month 5 LHV 21 47 21 40 43 172 172 0 24 months 6 Midwifery 15 45 22 25 34 141 141 0 12-18 months 7 Public health training 9 17 14 20 8 68 68 0 12-15 months 8 Refresher course for TBAs 284 85 204 83 60 716 716 0 15 days Awareness campaign/medical camp for 9 10 4 4 12 13 43 1 day VOs/Wos 10 TBAs kits 320 192 328 305 355 1500 11 Consumable kits 329 194 261 168 180 1132 12 Community midwifery/ LHW kits 45 109 70 95 85 404 0 B. Female Education 0 900 1 Computer training 0 121 227 469 240 1057 1057 0 1 month 2 PTC training 98 278 145 163 301 985 985 0 12 months 3 CT training 67 133 58 130 81 469 469 0 12 months 4 B.Ed training 16 73 13 51 39 192 192 0 18 months 5 Reopened school 12 0 0 12 6 Community schools 4 4 5 8 7 Additional support 5 76 10 13 8 Feeder schools 23 18 23 41 9 Government feeder schools 0 0 0 12 10 Vocational/skill development training 331 304 367 387 319 1708 1708 0 1 month 11 Internees 0 Educational cross visits, workshops 12 and conferences 13 Matric /SSC 26 2 8 11 36 83 83 24 months 14 FA 80 19 31 50 42 222 222 24 months 15 BA 33 56 58 150 94 391 391 24 months 16 Vocational/mobile centres 1 1 1 1 1 5 5 Non-formal school/additional support to 17 44 98 38 46 40 266 266 government schools 18 Incentive/stipend for deserving students 2752 1257 2784 2000 2000 10793 5757 5036 12 months

19 Furniture and goods 22 3 4 12 9 50 20 Sewing machine and furniture 326 299 250 324 203 1402 1402 Sewing machine and furniture issued to community development office for 21 35 28 15 10 10 98 establishment of mobile women industrial training centres BA = bachelor of arts, B. Ed = bachelor of education, CT = certificate of teaching, FA = faculty of arts, FSO = female social organizer, LHV = lady health visitor, LHW = lady heatlh worker, PTC = primary teacher's course, SSC = secondary school certificate, TBA = traditional birth attendant, VO = village organization, WO = women's organization Notes Total number of students = 15,103. out of these, approximately 8,000 are girls and 7,103 are boys. Total beneficiaries from 43 medical camps are 19,350 (Average 450 male/female and children per medical camp). Four workshop on gender awareness and sensitization for 2 weeks, two exposure visits to Aga Khan Rural Support Program by project management unit, community social organization staff and community activist of WO/VO, four workshop on basic health Out of 650 midwifery kits, 404 were distributed among trainees while the remaining 246 would be issued to health department as institutional support Source: Borrower's project completion report.

RURAL FINANCIAL SERVICES

Details of Credit Provided in the Project Area (PRs’000) District Sector Swat Buner Shangla Malakand Total No of No of No of No of No of Amount Amount Amount Amount Amount Loans Loans Loans Loans Loans

Agriculture 93 11,298 12 595 50 1,305 12 770 167 13,968 Auto 9 740 0 1 25 7 430 17 1,195 Engineering 11 1,000 0 3 90 5 245 19 1,335 Furniture 7 255 1 20 4 85 3 65 15 425 Leather/Textile/Garments 95 4,530 1 20 7 235 3 70 106 4,855 Manufacturing Goods 11 1,010 0 2 45 3 70 16 1,125 Manufacturing Miscellaneous 10 730 0 1 10 4 210 15 950 Professionals 6 445 0 0 0 6 445 Services 99 5,495 18 450 48 1,360 23 770 188 8,075 Tourism 6 1,155 1 15 3 70 1 20 11 1,260 Trading 393 13,600 81 1,855 308 7,720 67 1,670 849 24,845

Total 740 40,258 114 2,955 427 10,945 128 4,320 1409 58,478

Source: Bank of Khyber, participating financial institution.

Appendix 6 Appendix 25

26 ROAD DEVELOPMENT (Rupees million)

Sr. Name of Road Package LengthAmount of Contract Date of Completion Date Physical Expenditure Remarks 7 Appendix No. (km) Original Revised Award Original Revised Completion ADB GoKPK A. Provincial Roads

1. Khawaza-khela Alpuri Road 31.5 344.10 387.17 11-Feb-04 10-Feb-06 09-Oct-06 158.13 80.92 Transferred to National Highway 2. Chakdara Landaki Road 12.0 143.47 143.47 12-Feb-04 11-May-05 30-Jun-06 42.48 37.57 Authority on 31 Mar 07.

B. Rural Roads (Marble-Barikot) Due to poor performance of contractor, contract terminated 1. Marble to Daggar (Section 1) 10.0 64.71 68.99 25-Sep-03 24-Sep-04 31-May-06 30-Apr-09 27.59 28.70 at 70% physical progress. Subsequently completed through government financing. Due to poor performance of contractor, contract terminated 2. Daggar - Jawar (Section 2) 17.0 89.01 98.62 25-Sep-03 24-Dec-04 30-Jun-06 30-Apr-09 30.70 42.41 at 76% physical progress. Subsequently completed through government financing. Due to poor performance of contractor, contract terminated 3. Jawar - Karakar Police Station 13.8 85.30 97.67 24-Sep-03 24-Dec-04 30-Jun-06 30-Apr-09 29.60 29.83 at 77% physical progress. (Section 3) Subsequently completed through government financing. 4. Karakar Police Station to 13.8 103.00 113.41 24-Sep-03 24-Dec-04 30-Jun-06 31-Dec-06 60.17 33.46 Barikot (Section 4)

C. Other Roads not Financed by ADB 1. Khwazakhela - Fatehpur 16.5 71.28 71.28 22-Jun-04 21-Jun-06 47.12 (Section 1) Transferred to National Highway 2. Fatehpur - Behrain (Section 2) 19.5 95.03 95.03 22-Jun-04 21-Jun-06 28.52 Authority on 31 Mar 07. 3. Behrain to Asrait (Section 3) 16.0 85.11 85.11 22-Jun-04 21-Jun-06 40.86 4. Asrait - Kalam (Section 4) 17.0 94.47 94.47 22-Jun-04 21-Jun-06 26.04

ADB = Asian Development Bank, GoKPK = Government of Khyber Pakhtunkhwa. Source: Borrower’s project completion report.

Appendix 8 27

EQUIPMENT PROCURED

Table A8.1: List of Equipment Procured Date of Purchase Cost Unit No. Description Quantity Purchase (Rupees) 1. Computer P-III, 866 Mhz with Accessories 17.11.2000 9 40,000 2. Computer P-IV, 1.4 Ghz with Accessories. 04.09.2001 8 59,000 3. Computer P-IV, 2.4 Ghz with Accessories. 17.5.2003 7 53,875 4. Computer P-IV, 3.0 Ghz 02.03.2007 11 32,285 5. Laptop computer P-III, 700 Mhz 17.11.2000 1 198,000 6. Laptop computer P-III, 600 Mhz 17.11.2000 1 160,000 7. Laptop computer P-III, 700 Mhz 13.06.2001 1 198,000 8. Laptop P-IV Model 2.4 Ghz 26.06.2003 2 82,666 9. Portable printer 11.07.2000 1 15,000 10. Printer Laserjet 1100 11.07.2000 2 23,000 11. Printer Laserjet 1200 04.09.2001 7 26,000 12. Printer Laserjet 1200 26.05.2003 8 27,000 13. Printer Laserjet 1020 02.03.2007 2 8,900 14. Printer Diskjet Color Printer 1220 11.07.2000 1 30,000 15. Printer Laserjet 5000 111.07.2000 1 137,000 16. Color printer 2310 Series 31.03.2004 1 30,000 17. Zip drive with Accessories 17.11.2000 1 15,600 18. CD writer external 17.11.2000 1 14,000 19. Fax modem card external 17.11.2000 1 9,000 20. Scanner, Hp 2300 S 12.05.2003 2 5,150 21. Photostat machine 28.11.2000 1 393,000 22. Photostat machine 25.06.2001 6 174,000 23. Air conditioner 17.12001 3 62,100 25. Still camera 26.06.2003 4 24,950 26. Digital still camera 08.02.2007 5 19,421 27. Digital video camera 08.02.2007 3 46,421 28. Telephone exchange 28.10.2000 1 49,512 29. Telephone exchange 19.06.2007 1 4,500 30. Stabilizer 3000 W 31.05.2006 1 3,000 31. Stabilizer 2000 W 24.04.2002 1 2,500 32. Stabilizer 1000 W 25.03.2002 8 2,500 33. Stabilizer 1000 W 14.04.2002 4 2,500 34. Stabilizer 1000 W 11.09.2002 4 3,000 35. Stabilizer 2000 W 11.09.2002 1 3,000 36. Stabilizer 7000 W 12.07.2005 1 6,000 37. Ceiling fan 12.06.2001 2 1,100 38. Ceiling fan 29.06.2001 6 1,360 39. Ceiling fan 08.01.2001 8 1,770 40. Exhaust fan 08.01.2001 6 1,177 41. Ceiling fan 2002 13 1,300 42. Ceiling fan 21.07.2005 1 1,200 43. Pedestal fan 12.07.2005 1 1,600 44. Exhaust fan 2002 1 900 45. Exhaust fan 31.05.2007 1 700 46. Electric heater 19.1.2002 6 300 47. TV (Color) 22.02.2000 1 22,500 48. TV (Color) 02.09.2000 1 22,500 49. TV (Color) flat screen 26.03.2003 5 40,530 50. Video camera recorder 26.03.2003 5 12,950 51. Overhead projector with screen 14.12.2000 1 37,000

28 Appendix 8

Date of Purchase Cost Unit No. Description Quantity Purchase (Rupees) 52. Overhead projector with screen 26.06.2003 3 29,950 53. Dish antenna with accessories 02.09.2001 1 18,500 54. Dish antenna with accessories 07.06.2007 1 4,500 55. Multimedia projector 14.12.2000 1 319,000 56. Multimedia projector 08.02.2007 1 136,000 57. DV VCR 15.03.2007 1 145,000 58. Deep freezer 02.09.2000 2 27,200 60. Fax machine 26.06.2003 7 22,100 61. Water pump with motor 10 HP 11.01.2001 1 15,000 62. Water pump with motor 15 HP 15.05.2003 1 18,000 63. Vacuum cleaner 02.09.2000 1 14,700 64. Vacuum cleaner 07.01.2007 1 5,500 65. Revolving chair 01.12.2000 8 3,175 66. Sofa chair 08.11.2001 12 750 67. Office chair 08.11.2001 20 400 68. Office chair 18.06.2004 130 450 69. Office chair (fancy) 08.11.2001 10 4,500 70. Office table 2000–2003 85 3,748 71. Computer table 2000–2003 23 5,565 72. Computer revolving chair 01.12.2000 1 1,100 73. Computer revolving chair 01.06.2002 8 1,100 74. Computer revolving chair 26.08.2003 15 1,100 75. Sofa set (7-piece) 01.12.2000 1 19,000 76. Sofa set 02.03.2001 1 5,000 77. Sofa set (3-piece) 12.05.2003 1 16,000 78. Cupboard steel 2000–2004 30 3,750 79. Wooden cabinet/cupboard 2000–2004 17 3,000 80. Steel cabinet 2000–2004 30 10,500 81. File side rakes 2000–2004 20 32,000 82. Carpet 25.07.2000 2025 140,047 83. Gas cylinder with accessories 02.09.2000 5 14,466 84. Gas cylinder with regulator 13.12.2002 1 2,000 85. Single bed with side table 2000–2003 10 2,720 87. Electric generator 3 kV 09.08.2003 5 185,000 88. UPS with batteries 2000–2004 15 10,457 89. Binding machine 11.09.2002 1 16,000 90. Palm tools 17.05.2003 2 43,470 91. Total station, model SET 500, 30.06.2001 4 370,000 92. Automatic level, B 20 30.06.2001 6 49,000 93. Scientific calculator Casio China 09.08.2006 6 700 94. Scientific calculator FX 880-P 17.05.2003 1 7,590 95. Current meter 17.05.2003 4 11,730 96. Engg stop watch PRT-40 02.06.2003 6 10,350 97. Automatic Level with Ranging Rod 09.08.2006 5 41,500 98. Vernier calliper 19.08.2006 2 1,300 99. Staff rod 19.08.2006 8 13,500 100. Hat for field staff 19.08.2006 30 150 101. Digital distance meter 09.08.2003 4 1,645 Source: Project completion review data.

Appendix 8 29

Table A8.2: List of Vehicles

No. Type of Vehicle Quantity Allocation

1. Pick-up, twin-cabin 4 Project management unit 2. Pick-up, single-cabin 8 Project management unit 3. Van, Hiace 1 Project management unit 4. Pajero, Mitsubishi 4 Project management unit 5. Land Cruiser 3 Project management unit 6. Pick-up, single-cabin 2 CABI 7. Pick-up, twin-cabin 1 SOU Lower Swat 8. Pick-up, single-cabin 1 SOU Lower Swat 9. Pick-up, twin-cabin 1 SOU Buner 10. Pick-up, single-cabin 1 SOU Buner 11. Pick-up, twin-cabin 1 SOU Malakand 12. Pick-up, single-cabin 1 SOU Malakand 13. Pick-up, twin-cabin 1 SOU Upper Swat 14. Pick-up, single-cabin 1 SOU Upper Swat 15. Pick-up, twin-cabin 1 SOU Shangla 16. Pick-up, single-cabin 1 SOU Shangla

CABI = Center for Agricultural Bioscience International, SOU = social organization unit. Source: Project completion review data.

30 Appendix 9

PROJECT COST

($ million)

Item As Appraised As Completed FE LC Total FE LC Total A. Base Cost 1. Village development services a. Agricultural support services 0.300 3.700 4.000 0.034 3.050 3.084 b. Community-managed infrastructure 3.600 13.600 17.200 4.280 11.096 15.376 c. Women's health 0.100 0.500 0.600 1.038 1.038

2. Rural financial services 1.600 4.500 6.100 0.230 1.294 1.524 3. Road development 5.900 13.900 19.800 2.697 11.059 13.756 4. Project implementation support a. Project management 0.400 2.700 3.100 0.206 3.517 3.723 b. Community mobilization 0.300 2.100 2.400 2.840 2.840 Subtotal (A) 12.200 41.000 53.200 7.447 33.894 41.341

B. Contingencies 1. Physical contingencies 0.500 1.300 1.800 2. Price contingencies 1.600 5.200 6.800 Subtotal (B) 2.100 6.500 8.600

C. Service Charge During Construction 1.100 - 1.100 0.626 - 0.626

Total 15.400 47.500 62.900 8.073 33.894 41.967 Percent 24% 76% 100% 19% 81% 100%

FE = foreign exchange, LC = local currency Source: Borrower's project completion report.

Appendix 10 31

CONTRACT AWARDS AND DISBURSEMENTS

Table A10.1 Contract Awards and Disbursements ($ million)

Year Quarter Contract Awards Disbursements Projected Actual Projected Actual

2000 I 0.000 0.000 0.000 0.000 II 0.000 0.000 0.000 0.000 III 0.250 0.000 0.732 0.500 IV 0.697 0.000 0.620 0.000 2001 I 0.200 0.000 0.200 0.003 II 0.200 0.000 0.100 0.000 III 2.150 0.000 0.350 0.002 IV 0.200 0.000 0.200 0.000 2002 I 0.000 0.482 0.000 0.247 II 0.500 2.049 0.500 0.233 III 1.500 1.274 0.500 0.004 IV 0.500 0.561 0.500 0.379 2003 I 1.000 0.604 1.000 0.649 II 2.000 0.000 0.500 0.152 III 0.500 0.501 1.000 0.421 IV 0.500 2.453 0.500 0.350 2004 I 4.000 2.464 1.000 0.991 II 9.000 2.127 2.000 1.113 III 1.000 0.000 2.000 1.368 IV 1.000 0.783 3.000 1.368 2005 I 2.000 1.969 2.000 0.594 II 1.000 0.000 3.000 2.094 III 1.000 0.000 2.000 2.846 IV 0.000 0.000 1.000 0.403 2006 I 2.000 3.601 3.000 1.471 II 2.000 0.000 3.000 1.214 III 1.000 0.000 2.500 1.369 IV 1.000 0.154 2.000 1.859 2007 I 0.300 3.466 0.800 1.738 II 0.300 0.000 1.000 1.592 III 0.400 0.000 1.000 0.392 IV 0.400 0.000 0.700 0.978 2008 I 2.680 2.588 3.210 0.168 II 0.000 0.000 0.000 1.039 III 0.000 0.000 0.000 0.163 Source: ADB loan financial information system

32 Appendix 10

Source: ADB loan financial information system

PROJECT IMPLEMENTATION SCHEDULE

Appraised Versus Actual

Major Activities by Component Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Year 7Year 8Year 9 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

A. Village Development Services 1. Agricultural and Horticultural Development Activities 2. Livestock and Fodder Development Activities

3. Community Infrastructure Development Activities

4. Women's Health Program a. Training of LHWs, TBAs

b. Village Health Care Aw areness Raising etc.

5. Supervision guidance by PMU, MRSP and Participating Agencies B. Rural Financial Services 1. Organization and Strengthening of ROSCAs

2. Savings Mobilization

3. Credit Disbursement and Management Services. C. Rural Roads 1. Design by PMU and Consultants

2. Road Maintenance and toll collection Study

3. Construction/Improvement of Roads

4. Supervision and Guidance by C&WD, PMU, and Consultants D. Implementation support 1. Project Management

a. Recruitment of Consultants 11 Appendix

b. Procurement of Equipment and Vehicles

33

34

Major Activities by Component Year 1 Year 2 Year 3 Year 4 Year 5 Year 6Year 7Year 8Year 9 1999 2000 2001 2002 2003 2004 2005 2006 2007 A

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 pp

c. Establishment and Operation of BME System 11 endix and Conduct Studies 2. Community Mobilization

Organization and Strengthening of Vos and WOs 3. Capacity Building a. NGO Services to Establish and Train MRSP

b. Other Training, Seminars, Study Tours etc.

BME = Benefit Monitoring and Evaluation, C&WD = Communication and Works Department, PMU = Project Management Unit, ROSCA = Rotate Savings and Credit Associations, TBA = Traditional Birth Attendant, LHW = Lady Health Worker, VOs = Village Organizations, WO Continues Activities (Appraised) Continuous Activities (Actual) Intermittent Activities (Appraised) Intermittent Activities (Actual) Source: Borrower’s project completion report

Appendix 12 35

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant Reference in Status of Loan Agreement Compliance NWFP, through PEDD, shall be the Project Executing agency L.A. Schedule 6, Complied with. and shall provide overall project guidance and coordination. para. 1 PEDD’s principal responsibilities shall include (i) providing policy coordination and guidance in the implementation of the Project, (ii) selecting and supervising the PMU staff, (iii) establishing and convening a PRB at the provincial level and the PCC at the divisional level, (iv) coordinating and submitting timely and accurate reports to the Bank and the Borrower, and (v) entering into a subsidiary loan agreement with BOK, and other PCIs acceptable to the Bank, as the case may be, for execution of Part Two of the Project. PEDD shall delegate all necessary responsibilities in project administration to the PMU and supervision shall be exercised through PRB meeting.

The PMU shall be responsible for planning, management and L.A. Schedule 6, Complied with. coordination of the Project. para. 2

PMU shall consist of a Project Director and of Program L.A. Schedule 6, Complied with. Managers for agriculture, livestock and natural resource para. 3 management, human resource development and rural financial services, women’s development, village infrastructure and road development and staff for administrative tasks.

The Project Director shall have qualification acceptable to the L.A. Schedule 6 Complied with. Bank and shall be a full time contract employee. His para. 4 performance shall be monitored on an annual basis and extension of contract (initially for three years) shall be based on satisfactory performance. PIU shall be located at Saidu Sharif and PEDD shall ensure that PMU is adequately staffed by suitably qualified and experienced personnel.

NWFP shall establish the PRB (Project Review Board) which L.A. Schedule 6 Complied with. shall be the overall, senior oversight body for project para. 5 implementation. The PRB shall be headed by the Additional Chief Secretary of NWFP and shall include the Secretary Finance, the Secretary Food, Agriculture, Livestock and Cooperatives, the Secretary Forest, Fisheries and Wildlife, the Secretary Health, the Secretary Education, the Secretary Planning, Environment and Development, the Director General, Special Development Unit, the Project Director and representatives of the RSP. The PRB shall meet twice a year, once to approve the annual work plan and budget before the start of the fiscal year and once to review progress in implementation during the fiscal year.

NWFP shall establish the PCC at the divisional level to deal with L.A. Schedule 6 Complied with. PCCs operational and implementation matters and progress. The PCC para. 6 notified on 28.10.2002 shall be chaired by the Commissioner, Malakand Division and include relevant Deputy Commissioners and the Political Agents for Malakand Agency, the Project Director, the representatives from the departments of Agriculture, Livestock, Forests, Roads, Health and Education, the Agricultural Research Station (North), Mingora, the potato research center at Abbotabad, and the RSP. The PCC shall meet quarterly to review project progress and remove all such bottlenecks in implementation, which are within the powers of divisional authorities.

36 Appendix 12

Covenant Reference in Status of Loan Agreement Compliance The PMU and the VOs shall undertake the execution of the L.A. Schedule 6 Complied with. following schemes in accordance with the responsibilities and para. 7 the financing arrangements set out in the terms of partnership (TOP).

Women shall be consulted during the deign stage to ensure that L.A. Schedule 6 Complied with. their concerns are reflected in the design. The VO shall para. 8 contribute 20 percent of the cost of the materials for the watercourse.

For ground water and lift schemes, the VO shall undertake the L.A. Schedule 6 Complied with. development of the source. For this, the PMU and RSP shall para. 9 provide technical assistance and assist in arranging credit from PCIs for the procurement of equipment. The VO shall be responsible for the digging of the well and the installation of the equipment. The PMU shall provide technical assistance for the construction of the new watercourse and land leveling, where necessary. The PMU shall also arrange for the skilled labor for the construction of the watercourse, the VO shall provide the land for the right of way, procure the materials and arrange for the unskilled labor. The members of the VO shall carry out the land leveling thorough their own arrangements.

For surface schemes, the DOFWM shall provide technical L.A. Schedule 6 Complied with. assistance to the VO for the improvement of existing channels para. 10 and construction of new channels and arrange the skilled labor. The VO shall provide the right of way in the case of new channels or an extension of an existing channel, procure materials and arrange for the unskilled labor. The PMU and DOWFM shall provide technical assistance for land leveling while the members of the VO shall carry out the land leveling through their own arrangements.

The PMU and Pakistan Council of Appropriate Technology shall L.A. Schedule 6 Complied with. provide technical assistant to the VO for the planning, design para. 11 PCAT did not have and construction of the micro hydropower scheme (hydels), capacity to support assist in arranging credit from BOK for the procurement of the project activities in a plan, and arrange the skilled labor. The PMU shall also train the timely manner. PMU VO in the operation and maintenance of the hydels’ plant. The made arrangements VO shall provide land, procure the plant and materials for the with Pakistan Council civil works and the distribution system, and arrange for the for Renewable Energy unskilled labor. The VO shall provide 20 percent of the cost of Technology. the materials required for the civil works. The VO shall bear the full cost of the distribution system.

The PMU and RSP shall provide technical assistance to the VO L.A. Schedule 6 Complied with. for the planning, design and construction of the schemes and para. 12 arrange for the skilled labor. To facilitate the involvement of women in the planning and design of the drinking water supply and sanitation schemes, the PMU and RSP shall work through WOs in the initial contact with the communities. The VO shall provide land, procure the materials and arrange for unskilled labor for the construction of the water supply and sanitation systems. The VO members shall construct latrines through their own arrangements. The PMU/RSP shall train the VO in maintenance and repairs, and train VOs and WOs in hygiene. The VO shall provide 10 percent of the cost of the materials.

Appendix 12 37

Covenant Reference in Status of Loan Agreement Compliance The PMU and RSP shall provide technical assistance to the VO L.A. Schedule 6 Complied with. for the planning, design and construction of the tracks, arrange para. 13 for skilled labor, and assist in the rental of drilling plant and bulldozers. The VO shall provide land, procure the materials, rent drilling plant and bulldozers and arrange all unskilled labor. The VO shall arrange 10 percent of the cost of the materials and the plant/equipment rental.

BOK and any other PCI acceptable to the Bank shall implement L.A. Schedule 6 Not complied with. the rural financial services component. BOK shall provide overall para. 14 BOK, despite entering supervision of the credit activities through its branch at Saidu into SLA, suspended Sharif. PCIs shall operate the credit program (i) as direct lending lending operations. by such PCIs to sub borrowers and (ii) at wholesale bankers to the RSP.

NWFP shall have the authority to allow, subject to the Bank’s L.A. Schedule 6 Not complied with. prior concurrence, suitable credit institution other than BOK to para. 15 No PCIs other than become eligible to participate as PCIs for purposes of BOK was involved. implementing Part Two of the Project, provided that each such credit institution meets the following eligibility criteria; (i) is established and operating under the laws of the Borrower; (ii) has financial and organizational capabilities which satisfy the requirements prescribed by the State Bank of Pakistan; (iii) has adequate experience in providing and monitoring loans; (iv) areas to provide staff to ensure the required level of sub-loan appraisal and supervision, including an adequate number of loan officers trained in term lending, supported by an adequate number of field staff; (v) is prepared to continue to promote and develop their capabilities in lending through staff training; and (vi) has experience of group-based rural financial services and is willing to cooperate with RSP or any other organization specialized in rural support services.

Prior to the participation of any such PCI under Part two of the L.A. Schedule 6 Not complied with. Project and subject to such other arrangements as the Bank may para. 16 No PCIs other than approve, NWFP and such PCI shall enter into a PCI Subsidiary BOK was involved. Loan Agreement, in form and substance and on terms and conditions satisfactory to the Bank. Each PCI subsidiary loan agreement shall be submitted to the Bank for its prior approval and shall include terms and conditions specified in paragraph 17 to 21 of this schedule.

In addition to Section 3.01 of this Loan Agreement, the Borrower L.A. Schedule 6 Not complied with. specifies that except as the Bank and the Borrower shall para. 17 No PCI involved in the otherwise agree, it shall make the proceeds of the Loan activities. allocated for part Two of the Project available to NWFP on the same terms and conditions as this Loan. NWFP shall enter into a PCI Subsidiary Loan Agreement with each PCI which shall include terms and conditions satisfactory to the Bank.

38 Appendix 12

Covenant Reference in Status of Loan Agreement Compliance NWFP shall cause the PCIs to onlend the proceeds of the Loan L.A. Schedule 6, Not complied with. allocated for Part Two of the Project to the beneficiaries, on para. 18 terms and conditions satisfactory to the Bank. The terms and conditions for onlending shall include an interest rate which shall cover the cost of funds and administration, adequate provisions for expected loan losses as prescribed by the State Bank of Pakistan’s prudential regulations and a reasonable margin of profit. The interest rate shall be reviewed and agreed by the Bank and NWFP during the annual review during project implementation.

A minimum of 10% of full cost of a project shall be required to be L.A. Schedule 6, Partly complied with. contributed directly by sub-borrowers (equity contribution) for all para. 19 first-time subloans made under the Project, except for short-term agricultural production loans. For each subsequent loan, the equity contribution shall be increased by 5% to a maximum of 30% of full cost of a project. At least two percent of the repayments (on full recovery) shall be provided by BOK/RSP as an incentive to the VO and WO activities.

There shall be no collateral required under the Project for short L.A. Schedule 6 Partly complied with. term agricultural production loans. The VOs and WOs may para. 20 devise suitable mechanism (using a portion of the compulsory VO and WO savings) to enable members to meet their commitments. For all other credit categories items financed by PCIs can be taken as collateral, if practical, and without increased cost to the sub-borrowers. Insurance, where available, shall be effected. All short term agricultural credit shall be channeled through the L.A. Schedule 6 Not complied with. No RSP which shall onlend to the VOs and WOs as group loans. To para. 21 group lending. ensure timely availability of credit to VOs and WOs, the RSP shall prepare an annual credit plan, which shall be submitted to PCIs at the beginning of each year.

The PMU and CWD shall jointly implement the road L.A. Schedule 6 Complied with. development component para. 22

The Project Director shall be assisted by a Program Manager L.A. Schedule 6 Complied with. (Roads). Consulting services to carry out feasibility study, para. 23 detailed engineering design, reparation of bid documents and supervision of construction shall be engaged by the PMU. The Program Manager (Roads) shall be responsible for supervising the work of consultants, providing technical guidance and coordinating CWD during the design and pre-construction phase. CWD Executive Engineers in the Project area shall be responsible for awarding all construction works, which shall be supervised by the consultants.

The rural access roads shall be selected by the PRB from a list L.A. Schedule 6 Complied with. of rural access roads agreed upon by NWFP and the Bank. para. 24

A detailed study on toll collection and management shall be L.A. Schedule 6 Partly complied with. carried out during the first year of project implementation and para. 25 Study completed but not reviewed and approved by PCC, PRB and the Bank for this implemented. purpose.

PMU shall engage the services of an NGO, or consultants L.A. Schedule 6 Complied with. experienced in community-based rural development projects, to para. 26 assist in establishing an RSP for the Malakand Division.

Appendix 12 39

Covenant Reference in Status of Loan Agreement Compliance The RSP shall have a small central management cell, while L.A. Schedule 6 Complied with. female and male social organizers and engineering staff shall be para. 27 attached to social organization units.

Up to 10 SOUs shall be established, each staffed with a female L.A. Schedule 6 Complied with. Five and male social organizer (SO) and a field engineer. They shall para. 28 SOUs established. (i) identify village activists for community development, (ii) train and support village activists in community mobilization, (iii) identify community needs and project responses through dialogue with each community, (iv) prepare village development plans through dialogue with each community, (v) appraise the village development plan through dialogue with each community (vi) assist in implementing the village development plan and (vii) monitor and evaluate village development. The VO and WO shall be formed after the identification of community needs. At that time, TOP are signed between heads of participating households of VOs and PMU in the case of VOs and between women members and the PMU in the case of WOs.

The maintenance of the infrastructure improved or constructed L.A. Schedule 6 Complied with. under part one of the Project shall be responsibility of VOs that para. 29 contributed to their construction.

CWD shall be responsible for the maintenance of roads L.A. Schedule 6 Complied with. improved under Part three of the Project. CWD shall carry out para. 30 the O&M of the rural roads.

NWFP shall provide sufficient funds for adequate maintenance of L.A. Schedule 6 Roads were not the roads to be rehabilitated or improved under the Project. If para. 31 completed by the feasible, and taking into account the results of the study on toll closing of the project. collection and management, NWFP shall introduce a toll collection system in the Project area for maintenance of the Project roads.

The PMU with the assistance of the BME consultants shall L.A. Schedule 6 Complied with. establish a BME system to monitor implementation progress of para. 32 the Project, based on a set of indicators acceptable to the Bank, and shall assess the impact of the Project on the beneficiaries.

The Bank shall conduct annually two progress reviews on the L.A. Schedule 6 Complied with. implementation of the Project. In addition, a comprehensive para. 33 review shall be conducted at the end of the second year of project implementation and at the end of the fourth year of project implementation by the Bank and PEDD.

Sample environmental impact assessment report of the L.A. Schedule 6, Complied with. environmentally sensitive road development and community para. 34 management infrastructure schemes shall be reviewed and cleared by the Bank prior to their execution. Schemes with a negative environmental impact that cannot be mitigated shall not be included in the Project.

Without limiting the generality of section, 4.02 of this Loan L.A. Schedule 6, Complied with. Agreement, the Borrower hereby confirms to the Bank that the para. 35(a) annual budget requirements of NWFP for the Project, currently estimated by the Bank to vary between a minimum of 42 million rupees and a maximum of 175 million rupees can be accommodated in future NWFP’s annual budgetary allocation for development.

40 Appendix 12

Covenant Reference in Status of Loan Agreement Compliance The Borrower shall keep the Bank advised of the progress in L.A. Schedule 6, Complied with. budgetary allocations and releases of the funds for the Project para. 35(b) and shall take into account the Bank’s comments on the adequacy of such allocations and releases for the carrying out of the Project

Prior to the start of each fiscal year during project L.A. Schedule 6, Complied with. implementation, the Borrower shall furnish to the Bank a draft- para. 35(c) financing plan for the Project in respect of NWFP’s annual budgetary allocation for development.

In the carrying out of the Project, NWFP shall employ competent P.A. Section 2.03(a) Complied with. and qualified consultants, NGOs and contractors, acceptable to the Bank to an extent and upon terms and conditions satisfactory to the Bank.

NWFP shall maintain, or cause to be maintained, records and P.A. Section 2.06 Complied with. accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

NWFP shall ensure that PMU Coordinates with the participating P.A. Section 2.08(b) Complied with. agencies on their respective components of the Project before furnishing to the Bank, through NWFP, consolidated QPR on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as the Bank hall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

NWFP shall ensure that PEDD and the participating agencies (i) P.A. Section 2.09(a) Complied with. have such accounts and related financial statement (balance sheet, statement of income and expenses and related statements) audited, annually in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank, and (ii) furnish to the Bank promptly after their preparation but in any event not later than twelve months after the close of the fiscal year to which they related certified copies of such audited accounts and financial statements and the report of auditors relating thereto(including the auditor’s opinion the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language, NWFP shall furnish to the Bank such further information covering such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

Appendix 12 41

Covenant Reference in Status of Loan Agreement Compliance Except as the Bank may otherwise agree, NWFP shall not sell, P.A. Section 2.12 Complied with. lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactory any of its obligations under this Project Agreement

BME = benefit monitoring and evaluation, BOK = Bank of Khyber, CWD = Communication and Works Department, DOFWM = Department of On-Farm Water Management, LA = loan agreement, NGO = nongovernment organization, NWFP = North-West Frontier Province, O&M = operation and maintenance, PCAT = Pakistan Council of Appropriate Technology, PCC = project coordination committee, PCI = participating credit institution, PEDD = Planning, Environment and Development Division, PMU = project management unit, PRB = project review board, RSP = rural support program, SO = social organizer, SOU = social organization unit, TOP = terms of partnership, VO = village organization, WO = women's organization. Source : ADB project completion review data

42 Appendix 13

CONSULTING SERVICES

Table A13.1: Consulting Services Person-months Sr. Description As Appraised Actual No. Int'l Dom. Total Int'l Dom. Total

1. Environmental management and training 4 18 22 0 0 0 2. Benefit monitoring and evaluation 0 70 70 0 51 51 3. Women's development 12 0 12 0 0 0 4. Road development 76 130 206 10 1,108 1,118 5. Rural financial services 24 84 108 12 34 46 6. Community development NGOsa - - - 0 6,7456,745 7. Integrated pest management 6 151 157 6 151 157 dom. = domestic, int'l = international, NGO = nongovernment organization. a Included after approval of change in implementation arrangements. Sources: Borrower’s project completion report, and ADB loan financial information system

Table A13.2: Consulting Services Statistical Data Sr. Name of Consulting Nature of Services Contract Contract Date No. Firm Value ($) Signing Completion 1. Environmental Protection District NGO – Swat (Lower) 362,999 16 Jan 02 31 Dec 06 Society 2. SAHAR District NGO - Buner 363,892 16 Jan 02 15 Feb 05 3. EPS and Lasoona District NGO - Swat (Upper) 293,091 16 Jan 02 31 Dec 06 4. Lasoona-EPS-ROAD District NGO - Shangla 372,477 16 Jan 02 31 Dec 06 5. Youngblood Welfare District NGO - Malakand 362,228 16 Jan 02 31 Dec 06 Organization 6. ACE Transportation Road Development 1,273,992 25 Jun 02 30 Sep 04 Engineering Services 7. MADECOR Group Rural Financial Services 344,010 10 Sep 02 31 Dec 06 8. Semiotics Consultant Benefit Monitoring and 216,883 25 Jun 02 31 Dec 06 Private Limited Evaluation 9. Anjum Asim Shahid Capacity Building of District 501,268 19 Aug 03 14 Sep 05 Associates NGOs 10. Center for Agricultural Integrated Pest Management 783,223 16 Oct 04 31 Dec 06 Bioscience International NGO = nongovernment organization. Sources: Borrower’s project completion report, and ADB loan financial information system

Appendix 14 43

ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Weighted Criterion Assessment Rating (0–3) Weight (%) Average

Relevance Partly relevant 1 20 0.2

Effectiveness Ineffective 0 30 0.0

Efficiency Inefficient 0 30 0.0

Sustainability Unlikely 0 20 0.0

Overall Rating Unsuccessful 100 0.2 Highly successful: Overall weighted average is greater than 2.7. Successful: Overall weighted average is between 1.6 and less than 2.7. Partly successful: Overall weighted average is between 0.8 and less than 1.6. Unsuccessful: Overall weighted average is less than 0.8.