prepared in partnership with the Urban Policy Unit, Planning and Development Department and the Cities Development Initiative for Asia by Finnish Consulting Group Asia Pte Ltd & FCG International Ltd (JV) with PITCO aug 2017 www.fcg. TA 8556 REG: Supporting the Cities Development Initiative for Asia PAKISTAN: P es haw ar, Ma r da n a nd Abbotta ba d Khyber Pakhtunkhwa Inclusive Urban Growth Program (47285-001) October 2017 Final Report Finnish Consulting Group Asia Pte Ltd & FCG International Ltd (JV) in association with PITCO TA 8556 REG - KHYBER PAKHTUNKHWA INCLUSIVE URBAN GROWTH PROGRAM (47285-001) CONTENTS ACRONYMS AND ABBREVIATIONS .............................................................................................................iii EXECUTIVE SUMMARY ................................................................................................................................. v MAP OF PROJECT CITIES ............................................................................................................................ 1 1 INTRODUCTION ...................................................................................................................................... 2 2 RATIONALE: SECTOR PERFORMANCE, PROBLEMS & OPPORTUNITIES ...................................... 3 2.1 Performance Indicators and Analysis ............................................................................................... 3 2.1.1 Overview of Macro Issues ......................................................................................................... 3 2.1.2 Overview of Micro Issues .......................................................................................................... 4 2.1.3 Meso-level approach ................................................................................................................. 5 2.2 Analysis of Key Problems ................................................................................................................. 5 2.3 Development Opportunities .............................................................................................................. 6 3 THE PROPOSED PROJECT ................................................................................................................... 8 3.1 Impact and Outcome ......................................................................................................................... 8 3.2 Outputs .............................................................................................................................................. 8 3.3 Special Features ............................................................................................................................. 12 3.4 Project Investment Plan .................................................................................................................. 13 3.5 Financing Plan ................................................................................................................................. 13 3.6 Implementation Arrangements........................................................................................................ 15 4 PROJECT BENEFITS, IMPACTS, ASSUMPTIONS AND RISKS ........................................................ 15 4.1 Major Benefits and Impacts ............................................................................................................ 15 4.1.1 Institutional and Policy ............................................................................................................. 15 4.1.2 Social ....................................................................................................................................... 16 4.1.3 Municipal and Project Financial Analysis and Project Sustainability ...................................... 16 4.1.4 Economic Analysis................................................................................................................... 19 4.1.5 Environmental Safeguards ...................................................................................................... 19 4.1.6 Social Safeguards .................................................................................................................... 20 4.2 Major Risks and Mitigation Measures............................................................................................. 20 APPENDICES APPENDIX 1 Design and Monitoring Framework APPENDIX 2 Urban Sector Analysis APPENDIX 3 Urban Resilience assessment APPENDIX 4a Project Preparation – Abbottabad APPENDIX 4b Project Preparation - Mardan APPENDIX 4c Project Preparation - Peshawar APPENDIX 5 Detailed Cost Estimates and Financing Plan APPENDIX 6 Implementation Arrangements APPENDIX 7 Implementation Plan APPENDIX 8 Institutional Development and Capacity APPENDIX 9 Financial Analysis APPENDIX 10 Economic Analysis APPENDIX 11 Environmental Safeguards/Impacts & sensitivity APPENDIX 12 Poverty, Gender and Social Impacts, Safeguards and Resettlement October 2017 page i TA 8556 REG - KHYBER PAKHTUNKHWA INCLUSIVE URBAN GROWTH PROGRAM (47285-001) SUPPLEMENTARY APPENDICES APPENDIX S1a Meeting Minutes with Chief Minister APPENDIX S1b Agreed IUGP Investment Priorities for USD 128M APPENDIX S1c Record of Note: Meeting with P&DD, 26 July APPENDIX S2a Urban Sector Analysis - Abbottabad APPENDIX S2b Urban Sector Analysis - Mardan APPENDIX S2c Urban Sector Analysis - Peshawar APPENDIX S3 Urban Resilience Assessment APPENDIX S4a Project Preparation - Abbottabad APPENDIX S4b Project Preparation - Mardan APPENDIX S4c Project Preparation - Peshawar APPENDIX S5 Abbottabad Investments Overlaid on Vulnerability Map APPENDIX S6 Mardan Investments Overlaid on Vulnerability Map APPENDIX S7 Peshawar Investments Overlaid on Vulnerability Map APPENDIX S8 Institutional Development and Capacity Building APPENDIX S9 Financial Analysis APPENDIX S10 Economic Analysis APPENDIX S11 Environmental Safeguards/Impacts & Sensitivity APPENDIX S12 Poverty, Gender and Social Impacts APPENDIX S13 Resettlement and Social Safeguards APPENDIX S14 Consultation Process APPENDIX S15a IDIA Abbottabad APPENCIX S15b IDIA Mardan APPENDIX S15c IDIA Peshawar APPENDIX S16a City Development Plan - Abbottabad APPENDIX S16b City Development Plan - Mardan APPENDIX S16c City Development Plan - Peshawar APPENDIX S17 PFS Investment Summaries Exchange Rate Assumed: USD 1.00 = PKR 105 October 2017 page ii TA 8556 REG - KHYBER PAKHTUNKHWA INCLUSIVE URBAN GROWTH PROGRAM (47285-001) ACRONYMS AND ABBREVIATIONS AC Asbestos Cement ADB Asian Development Bank ADP Annual Development Plan ADP Annual Development Program AFSD Abbottabad Fund for Sustainable Development AMC Ayub Medical College and Hospital Complex ASSD Abbottabad Strategy for Sustainable Development BADP Barani Area Development Project BOD Biochemical Oxygen Demand BRT Bus Rapid Transit CAGR Compound Average Growth Rate CBO Community-Based Organization CDIA Cities Development Initiative of Asia CDP City Development Plan CNG Compressed Natural Gas CPEC China-Pakistan Economic Corridor CRVA Climate Risk Vulnerability Assessment CSO Civil Society Organization DCO District Coordination Office DMA District Metering Area EDO Executive District Officer EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EOCC Economic Opportunity Cost of Capital EPA Environmental Protection Agency FCG Finnish Consulting Group FIRR Financial Internal Rate of Return FSA Financial Sustainability Assessment GDA Galliyat Development Authority GDP Gross Domestic Product GIS Geographical Information System GoKP Government of Khyber Pakhtunkhwa GoP Government of Pakistan IDIA Initial Development Impact Assessment IDS Integrated Development Strategy IEC Information, Education and Communication IR Involuntary Resettlement IRR Integrated Resource Recovery IT Information Technology ITH Integrated Transport Hub IUCN International Union for Conservation of Nature IUGP Inclusive Urban Growth Program KfW Kreditanstalt für Wiederaufbau (KfW Bankengruppe) KP Khyber Pakhtunkhwa L&DD Livestock and Dairy Development Department LGO Local Government Ordinance 2001 LGS Local Government School LPG Liquefied Petroleum Gas LRT Light Rail Transit MCU Motor Control Unit MCU Motor Control Unit MEL Monitoring, Evaluation and Learning MSU Multi-Donor Support Unit MSW Municipal Solid Waste MTR Mid-term Report NCS National Conservation Strategy (of Pakistan) NEQ National Environmental Quality Standards NGO Non-Governmental Organization October 2017 page iii TA 8556 REG - KHYBER PAKHTUNKHWA INCLUSIVE URBAN GROWTH PROGRAM (47285-001) NPV Net Present Value NRCP Natural Resource Conservation Project NSA Non-State Actors NSSD National Strategies for Sustainable Development O&M Operation and Maintenance OECD Organization for Economic Co-operation and Development OHR Overhead reservoir P&DD Planning & Development Department PATA Policy and Advisory Technical Assistance PDA (of ADB) Project Design Advance of the Asian Development Bank PDA Peshawar Development Authority PET Polyethylene Terephthalate (plastic) PFC Provincial Finance Commission PFS Pre-feasibility study PHED Public Health and Engineering Department PKR Pakistani Rupee PKR Pakistani Rupees PMD Pakistan Meteorological Department PPP Public-Private Partnership PPTA Project Preparatory Technical Assistance PRSP Poverty Reduction Strategy Paper PSC Program Steering Committee PSISUG Provincial Strategy for Inclusive and Sustainable Urban Growth PTA Parent-Teacher Association PTDC Pakistan Tourism Development Corporation