Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized FILE COPY Report No. 9806-PAK Report No . 9806-PAK Type: (S5AR) MOTHA, G. / X32265 / H-5243/ EMlAG STAFF APPRAISAL REPORT Public Disclosure Authorized PAKISTAN THIRD INCOME GENERATING PROJECT FOR REFUGEE AREAS Public Disclosure Authorized January 7, 1992 i Appraised on behalf of the United Nations High Commissionerfor Refugees Public Disclosure Authorized by the World Bank AgricultureOperations Division South Asia Country Department 3 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank and United Nations High Commissionerfor Refugees authorization. ABBREVIATIONS AND ACRONYMS ADP - Annual Development Plan AJK - Azad Jammu and Kashmir AZRI - Arid Zone Research Institute BKK - Bund Khushdil Khan CE - Chief Engineer CCF - Chief Conservator of Forests CF - Conservator of Forests C&W - Communications and Works DFO - Divisional Forest Officer DRIP - District Road Improvement Program ERR - Economic Rate of Return FATA - Federally Administered Tribal Areas GDP - Gross Domestic Product GOBAL - Government of Balochistan GONWFP - Government of North Western Frontier Province GOP - Government of Pakistan GOPUN - Government of Punjab GOProvince - Government of Province IDA - International Development Association IGPRA - Income Generating Project for Refugee Areas LG&RD - Local Government and Rural Development MSFP - Malakand Social Forestry Project NRC - Norwegian Refugee Council NWFP - North West Frontier Province PC - Planning Commission PCl - Planning Commission Proforma 1 PCU - Project Coordination Unit P&D - Planning and Development PE - Principal Engineer RDD - Rural Development Department RECO - Refugee Employment Coordination Officer SAFRON - States and Frontier Regions Division SOE - Statement of Expenditure SOP - Survey of Pakistan TMS - Technical Monitoring Specialist TST - Triple Surface Treatment UNHCR - United Nations High Commissioner for Refugees VDC - Village Development Committee FOR OFFICIAL USE ONLY PAKISTAN THIRD INCOME GENERATING PROJECT FOR REFUGEE AREAS Table of Contents I. INTRODUCTION ................................................ 1 II. BACKGROUND .................................................. 1 A. General . ................................................1 B. Refugee Situation ....................................... 2 C. Institutional Framework ................................. 2 D. Project Area .......... ..................................3 E. Project Related Subsectors .............................. 5 F. Bank Involvement ........................................ 7 G. Project Origin .......................................... 7 H. Donor Involvement ....................................... 8 I. Performance of the IGPRA-I and IGPRA-II Projects .... .... 9 J. Bridging Period between Second and Third Project .... .... 10 III. THE PROJECT .................................................. 1 A. Objectives and Subproject Selection ..................... 11 B. Main Features ........................................... 12 C. Detailed Features ....................................... 13 - Subprojects in NWFP ................................ 13 - Subprojects in Balochistan ......................... 20 - Subprojects in Punjab .............................. 24 - Technical Assistance ............................... 25 - Technical and Employment Monitoring .... ............26 - SAFRON Project Coordinating Unit ................... 27 D. Sustainability Considerations in Forestry Subprojects ... 28 IV. PROJECT COSTS, FINANCING AND COST RECOVERY .................. 30 A. Project Costs .......... .................................30 B. Financing ............ ...................................32 C. Procurement ........... ..................................34 D. Disbursements ........................................... 35 E. Flow of Funds ........................................... 36 F. Accounts and Audit ...................................... 36 G. Cost Recovery .......... .................................37 This report is based on the findings of an appraisal mission to Pakistan in April/May 1991. Mission members were G. Motha (Mission Leader), Ms. H. Lee and A. Qaiyum Sheikh (Bank), P. Economides and A. Penney (Bank Consultants), U. Schaffner (SDC Consultant), Ms. C. de Pater (Dutch Government Consultant), H. Monaghan (CIDA Consultant). Other Mission members were Ms. I. Huber (KfW), B. Strebel (SDC) and N. Ishak (UNHCR). Messrs. H. Hennes and H. Vahl (KfW) and S. Arif (Bank) assisted the mission part-time. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank and United Nations High Commissioner for Refugees authorization. - ii - V. ORGANIZATION AND IMPLEMENTATION ...... .......................38 A. Project Organization and Coordination ..... ..............38 B. Implementation ............. .............................38 C. Use of Contractors .......... ............................39 D. Maintenance . ............................................40 E Monitoring, Supervision and Evaluation ..... .............41 VI. BENEFITS, JUSTIFICATION AND RISKS ...... .....................43 A. Benefits ................................................. 43 B. Economic Analysis .......... .............................44 C. Employment and Income Effects ...... .....................45 D. Environmental Impact ......... ...........................46 E. Project Risks . ..........................................49 VII. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS .... ............50 TABLES Table 3.1 NWFP Forestry Subprojects Table 3.2 Summary of Irrigation Subprojects Table 3.3 Summary of Road Subprojects Table 4.1 Project Costs Summary Table 4.2 Project Financing Plan Table 4.3 Procurement Table 5.1 Government Contribution of Project Maintenance Costs Table 6.1 Economic Rates of Return and Sensitivity Analysis Table 6.2 Average Labor Content by Province and Subsector ANNEXES Annex I - Population of Registered Refugees on February 15, 1991 Annex II - Terms of Reference for Forestry and Watershed Management Specialist Annex III - Terms of Reference for Technical Monitoring Specialist Annex IV - Terms of Reference for Refugee Employment Coordination Officer Annex V - Reserved List of Subprojects Annex VI - Schedule of Disbursements Annex VII - Implementation Schedule Annex VIII - Economic Analysis PAKISTAN THIRD INCOME GENERATING PROJECT FOR REFUGEE AREAS I. INTRODUCTION 1.01 The project, the third of its type, is designed to create employment and income, principally for Afghan refugees,but also for local residents, and in the process develop economicallyviable assets for Pakistan. It will address some of the damage caused by the protracted presence in Pakistan of over three million Afghan refugees and their livestock. It will draw on the experience gained during the earlier two projects - First and Second Income Generating Projects for Refugee Areas (IGPRA I and IGPRA II) - in the implementationof numerous small-scale,labor-intensive subprojects. The project includes subprojectsprimarily of a public works nature, with emphasis on high labor intensity in order to provide direct income to Afghan refugees and the local residents. In the selection of subprojects,emphasis has been placed on restorationand/or improvementof the rural environmentand of physical infrastructureand is, therefore, consistent with the Bank's lending strategy.The subprojectsselected for implementationin various sectors in the provincial economies are in line with the overall development strategy of the Government of Pakistan (GOP). In this Third project, increased emphasis has been placed on training refugees in basic skills in anticipation of their return to their homeland, and on maintenance and sustainabilityof works completedunder the two earlier projects. The short implementation period, the simplicity of constructionand design, and the labor intensity of the selected subprojectswould ensure satisfactoryand timely completion,even if massive repatriationtook place in a short space of time. II. BACKGROUND A. General 2.01 The Islamic Republic of Pakistan covers about 217.0 M acres. Administratively,it is divided into four provinces, North West Frontier Province (NWFP), Balochistan,Punjab, and Sindh. In addition, there are the Federally AdministeredTribal Areas (FATA), Northern Areas, and the Islamabad Federal Area. NWFP, Balochistan,Punjab, and FATA contain areas affected by the Afghan refugees. The population of Pakistan is 113 million (January 1991) and growing at approximately3% per annum. About 70% of the population is rural. In addition, there are an estimated 3.24 million Afghan refugees. Agriculture accounts for 25% of GNP, followed by manufacturingwith 17%. During the 1980s, annual growth of GNP at constant prices was over 6%; in FY 1989, growth was estimated at 5%. The per capita GDP in 1989 was estimated to be only US$ 373. About one third of the population is estimated to have an income below the poverty level. Rural families were estimated to have an average annual income of Rs 8,265 (or about US$ 380) per capita in 1989-90. B. Refugee Situation 2.02 According to GOP records, the population of Afghan refugees as on February 15, 1991 was 3.24 million of which about 2.21 million were located in NWFP, 0.84 million in Balochistan,0.17