Completion Report

Project Number: 37003 Loan Number: 2211-PAK & 2212-PAK(SF) December 2011

Pakistan: Rawalpindi Environmental Improvement Project

CURRENCY EQUIVALENTS

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

At Appraisal At Project Completion 29 October 2005 30 November 2009

PRs1.00 = $0.0167 $0.0119 $1.00 = PRs60.00 PRs84.1

ABBREVIATIONS

ADB – Asian Development Bank

ADF – Asian Development Fund CBO – community-based organization CCB – Citizen Community Board CDA – Capital Development Authority CDG – City District Government CPS – country partnership strategy EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GIS – geographic information system GOP – Government of Punjab HUD&PHED – Housing, Urban Development, and Public Health

Engineering Department IEE – initial environmental examination m3/day – cubic meters per day MIS – management information system mld – million liters per day NGO – nongovernment organization NPV – net present value NRW – nonrevenue water O&M – operation and maintenance OCR – ordinary capital resources P&D – planning and development PHED – Public Health Engineering Department PIRC – project implementation review committee PLGO – Punjab Local Government Ordinance PMU – project management unit PPMS – project performance management system PPTA – project preparatory technical assistance PRS – poverty reduction strategy PSC – project steering committee QCBS – quality- and cost-based selection RDA – Rawalpindi Development Authority REIP – Rawalpindi Environmental Improvement Project RRP – report and recommendation of the President SDR – special drawing rights SEIA – summary environmental impact assessment

STP – sewage treatment plant SWM – solid waste management TMA – tehsil municipal administration WASA – Water and Sanitation Agency

GLOSSARY

district – A district as notified under the Punjab Land Revenue Act,

1967. Punjab province consists of 34 districts. katchi abadi – dwellings, without land rights or physical and social

infrastructure services and facilities nazim – Head of city district or a town, or tehsil, or union administration. tehsil – A tehsil as notified under the Punjab Land Revenue Act, 1967.

Punjab has 122 tehsils.

NOTES (i) The fiscal year (FY) of the government of Pakistan and its agencies ends on

30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 30 June 2009.

(ii) In this report, “$” refers to US dollars. (iii) For an explanation of rating descriptions used in ADB evaluation reports, see ADB. 2006.

Guidelines for Preparing Performance Evaluation Reports for Public Sector Operations. Manila.

Vice-President X. Zhao, Operations 1 Director General J. Miranda, Central and West Asia Department (CWRD) Sector Director R. Subramaniam, Urban Services Division, CWRD Country Director W. Liepach, Pakistan Resident Mission, CWRD Team leader M. Shafi, Project Implementation Officer, Pakistan Resident Mission,

CWRD Team member M. Bukhari, 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 6 D.  Disbursements 7 E.  Project Schedule 7 F.  Implementation Arrangements 7 G.  Conditions and Covenants 8 H.  Consultant Recruitment and Procurement 8 I.  Performance of Consultants, Contractors, and Suppliers 9 J.  Performance of the Borrower and the Executing Agency 9 K.  Performance of the Asian Development Bank 10 

III.  EVALUATION OF PERFORMANCE 10 

A.  Relevance 10 B.  Effectiveness in Achieving Outcome 11 C.  Efficiency in Achieving Outcome and Outputs 11 D.  Preliminary Assessment of Sustainability 12 E.  Impact 13 

IV.  OVERALL ASSESSMENT AND RECOMMENDATIONS 14 

A.  Overall Assessment 14 B.  Lessons 14 C.  Recommendations 15 

APPENDIXES

1. Status of Compliance with Government Policy 16 2. Project Design and Monitoring Framework 21 3. Utilization of Consulting Services Input 28 4. Project Costs at Completion 30 5. Projected and Actual Contract Award and Disbursements 33 6. Project Implementation Schedule 34 7. Status of Compliance with Loan Covenants. 36 8. Economic and Financial Analysis 46

BASIC DATA

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Pakistan 2211-PAK and 2212-PAK(SF) Rawalpindi Environmental Improvement Project Islamic Republic of Pakistan City District Government Rawalpindi 2211-PAK: $20,000,000 2212-PAK(SF): SDR27,727,000 PCR: PAK-1306

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan Special Funds Resources

– Interest Rate – Maturity (number of years) – Grace Period (number of years) Ordinary Capital Resources

– Interest Rate – Maturity (number of years) – Grace Period (number of years)

8. Terms of Relending Special Funds Resources

– Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

6 September 2005 16 September 2005 27 October 2005 28 October 2005 13 December 2005 22 December 2005 22 March 2006 27 February 2006 0 30 September 2011 31 December 2009 0 1% yearly during grace period and 1.5% thereafter 32 8 London interbank offered rate 0.75% commitment charge per annum 25 5 1% yearly during grace period and 1.5% thereafter 32 8 Government of Punjab

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Ordinary Capital Resources – Interest Rate

– Maturity (number of years) – Grace Period (number of years)

– Second-Step Borrower

London interbank offered rate 0.75% commitment charge per annum 25 5 Government of Punjab

9. Disbursements a. Dates

Loan 2211 Initial Disbursement

13 March 2006

Final Disbursement

23 December 2009

Time Interval

45 months

Effective Date

27 February 2006

Original Closing Date

30 September 2011

Time Interval

67 months

Loan 2212 Initial Disbursement

13 March 2006

Final Disbursement

23 December 2009

Time Interval

45 months

Effective Date

27 February 2006

Original Closing Date

30 September 2011

Time Interval

67 months

b. Loan No. 2211-PAK ($)

Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled Net Amount

Available

Amount

Disbursed

Undisbursed

Balance Civil Works 8,090,000 3,725,077 4,364,923 3,725,077 3,725,077 0.0 Equipment & Material

4,880,000 1,623,670 3,256,330 1,623,670 1,623,670 0.0

Consultants 2,000,000 1,464,579 535,421 1,464,579 1,464,579 0.0 Land 4,500,000 4,130,556 369,444 4,130,556 4,130,556 0.0 Interest 530,000 530,000 0 530,000 530,000 0.0

Total 20,000,000 11,473,882 8,526,118 11,473,882 11,473,882 0.0

c. Loan No. 2212-PAK(SF) - (SDR)

Category or Subloan

Original Allocation

Last Revised

Allocation Amount

Canceled

Net Amount

Available Amount

Disbursed

Undisbursed Balance

Civil Works 21,772,000 609,408 21,162,592 609,408 609,408 0.0 Equipment & Material

3,702,000 25,882 3,676,118 25,882 25,882 0.0

Consultancy 1,435,000 347,164 1,087,836 347,164 347,164 0.0 Incremental/ Administration Cost

444,000 475,845 (31,845) 475,845 475,845 0.0

Interest 374,000 27,649 346,351 27,649 27,649 0.0

Total 27,727,000 1,485,947 26,241,053 1,485,947 1,485,947 0.0

( ) = negative.

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10. Local Costs Financed ($ million)

- Amount ($ million) 11.83 - Percent of Local Costs 67% - Percent of Total Cost

60%

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost 12.5 1.9 Local Currency Cost 73.2 17.7 Total 85.7 19.6

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 21.4 5.9 ADB Financed 58.9 13.1 Rawal Town Water and Sanitation Agency

4.3 0.0

Total 84.6 19.0

IDC Costs Borrower Financed 0.0 0.0 ADB Financed 1.1 0.6 Other External Financing 0.0

Total 85.7 19.6

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Base Cost 1. Environmental Sanitation) 43.5 2.7 2. Water Supply Services 8.8 4.4 3. Institutional Development 0.5 0.0 4. Project Implementation Support a. Consultancy Services 4.1 2.0 b. Equipment & Vehicles 0.3 0.1 c. Incremental Administrative Support 0.8 0.7 5. Land Acquisition and Compensation 9.0 8.3 6. Taxes and Duties 9.4 0.5 Subtotal (A) 76.4 18.6 B. Contingencies 1. Physical 2.3 0.3 2. Price 5.9 0.1 Subtotal (B) 8.2 0.4 C. Interest During Construction 1.1 0.6 Total Cost 85.7 19.6

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4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultantsa Engineering Consultants Jun 2006 Mar 2006 Institutional Development Consultants Jun 2006 Mar 2006 Individual Consultants (Male Social Mobilizers) Jun 2006 Jun 2008 Individual Consultant (Female Social Mobilizer) Jun 2006 Oct 2008 Completion of Engineering Designs Jun 2007 Oct 2007a Civil Works Contract Date of Award Oct 2006–Jun 2007 Jul 2006–Mar 2009 Completion of Work Mar 2011 Jun 2009b Equipment and Supplies Dates First Procurement Jun 2006 Apr 2006 Last Procurement Jun 2007 Aug 2008 Completion of Equipment Installation Jun 2007 Jun 2008 Start of Operations Completion of Tests and Commissioning Jun 2008 Jun 2008 Beginning of Start-Up Jul 2008 Jul 2008

a This date is only for the works packages that were awarded during the project. Design work for the sewerage treatment plant, and outfall sewer was not carried out.

b All sanitation contracts were incomplete at the time of project closure.

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 30 Dec 2005 to 31 Dec 2007 S S From 01 Dec 2007 to 31 Aug 2008 S HS From 01 Sep 2008 to 28 Feb 2009 S S From 01 Mar 2009 to 30 Nov 2009 U U From 01 Dec 2009 to 31 Dec 2009 a U U

a The Project Performance Reports database is incorrectly reflecting a “PS” rating for development objectives, and an “S” rating for implementation progress. The correct rating is “U” for both.

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-finding 11–24 March 2004 4 32 a,b,c,d Pre-appraisal 21–29 Oct 2004 4 36 a,d,e,f Appraisal 6–16 Sep 2005 4 18 a,d,f,g Inception 28 Mar–6 Apr 2006 2 18 a,h Review 1 14–22 Nov 2006 2 10 a,d Review 2 30 July–02 Aug 2007 2 5 a,d Review 3 07–18 July 2008 2 13 a,d Review 4 Apr–Aug 20091 3 20 i, j, k Project completion review 22 Aug–9 Sep 11 3 20 l,m,n

a a = urban development specialist, b = environment specialist, c = counsel, d = project implementation officer, e = consultant/environmental specialist, f = consultant/resettlement specialist, g = program officer, h = assistant project analyst, i = senior project implementation officer, j = senior social development specialist, k = compliance officer, l = senior project officer, m = project analyst, n = consultant (economist/financial specialist).

1 Multiple visits under Review 4 on different dates between April–August 2009. Specific dates are not available.

I. PROJECT DESCRIPTION

1. In Rawalpindi, a major city in the Punjab Province in Pakistan, slow urban sector development, lack of resources, and inadequate institutional capacity resulted in uncontrolled urban sprawl—deteriorating urban environments. With 4% annual urban growth, 1 major deficiencies were visible in urban sanitation, water supply, sewerage, drainage, solid waste management, and community facilities. According to a 2003 study,2 water-related diseases had reached an alarming level. This particularly affected the urban poor and caused a considerably lower quality of life, including poor health and increased poverty. The incidence of poverty in Pakistan had increased from 20.0% to 32.1% in fiscal year (FY) 2004.3 Unemployment was 9.7% in urban areas and 7.7% nationwide during the same period.

2. To address these issues in the third largest city in Pakistan, the Government of Punjab (GOP) requested Asian Development Bank (ADB) assistance for the Rawalpindi Environmental Improvement Project (REIP). The project was the second phase of the proposed three-phase plan for improving water and sanitation services in Rawalpindi. The first phase for $72 million was approved in 1993 for the Rawalpindi Urban Water Supply and Sanitation Project.4 In the first phase, water supply was increased by 64,000 cubic meters per day (m3/day), with rehabilitation and extension of the water supply distribution network. Institutional and financial reforms were undertaken by Rawalpindi Water and Sanitation Agency (WASA)—supported by development of sewerage and drainage, and solid waste management plans for future investments.

3. The expected impact of the REIP was to improve the living conditions, quality of life, and health of the people of Rawalpindi by improving water supply and sanitation facilities, solid waste management (SWM), wastewater treatment, and slaughterhouses. The project was expected to result in sustainable reduction of environmental degradation and ensure sustainable operation of basic urban services.

4. The project components included (i) environmental sanitation including sewerage, sewage treatment, storm-water drainage, solid waste management, slaughterhouses, and public toilets; (ii) water supply services including operationalization of overhead reservoirs, replacement and rehabilitation of tube wells, rehabilitation and construction of distribution networks, water meter installations, and water supply and sanitation facilities for schools; and (iii) institutional development, including municipal management system development, environmental support services, asset management, urban development plans, project implementation assistance, and incremental administration support.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The project was consistent with ADB’s country strategy and program5 at appraisal. The focus of ADB’s country strategy and program update, 2006–2008 for Pakistan6 was on reducing poverty through good governance, sustainable pro-poor economic growth, and inclusive social development. ADB lending to devolved sectors was aimed at strengthening devolution consistent with the new governance structure under Punjab Local Government Ordinance (PLGO) 2001. The lending also supported increased public sector allocations, improved governance, sector

1 ADB. 2005. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Islamic

Republic of Pakistan for the Rawalpindi Environmental Improvement Project. Manila. 2 Institute of Public Health and National Institute of Health. 2003. Water Quality Status in Pakistan. Islamabad. 3 Government of Pakistan, Federal Bureau of Statistics. 2004. Pakistan Labour Force Survey 2003–04. Islamabad. 4 ADB. 1993. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Islamic

Republic of Pakistan for the Rawalpindi Urban Water Supply and Sanitation Project. Manila. 5 ADB. 2005. Country Strategy and Program Update: Pakistan, 2004–2006. Manila. 6 ADB. 2005. Country Strategy and Program Update: Pakistan, 2006–2008. Manila.

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administration, and financial management. The main focus of ADB assistance to the urban sector was on environmental aspects and needs of the poor, and broadly covered (i) institutional restructuring and devolution of service delivery; (ii) private sector involvement in the delivery of selected services; (iii) budgeting, finance, and increased cost recovery and municipal revenue; (iv) increased community participation; and (v) attainment of the Millennium Development Goals. The project—with focus on environmental sanitation, water supply improvement, institutional development, and policy reforms consistent with PLGO2001—was in line with ADB’s strategy in the sector.

6. The project was also consistent with the country’s development objectives at appraisal. Pakistan’s urban and housing policy, as reflected in the 10-Years Perspective Development Plan, 2001–2011, focused on supporting implementation of the PLGO 2001 by strengthening the role of the City District Government (CDG) in (i) planning, determining actual needs, preparing action plans, and enhancing capabilities for urban services; (ii) preparing or updating master plans; and (iii) providing water supply and sanitation. The plan encouraged private sector participation in environmental sanitation and water supply, and supported upgrading of the institutional capacity of service providers. In line with the goals of the national poverty reduction strategy (PRS), the Punjab PRS emphasizes good governance, improvement in service delivery for social sectors, and addressing environmental concerns to achieve poverty reduction in Punjab. The project focus—on expansion of municipal services, improving urban governance and the sustainability of services, and reducing urban environmental degradation—was in line with these strategies.

7. CDG was the executing agency for the Project. The Rawalpindi WASA and the Rawalpindi Development Authority (RDA) were the principal implementing agencies. Extensive consultations on the scope and design of the project were undertaken during formulation with other key agencies such as the Defence Housing Authority (DHA), Baharia Town and the Cantonment Board. The risk caused by institutional overlaps between key implementing agencies and these agencies, and the interdependency of the municipal services handled by different stakeholders, was identified in the project preparatory technical assistance (PPTA) report.7 However, the other agencies were not formally made part of any agreement or project implementation arrangements. Further, the administrative control over the major implementing agencies (WASA and RDA) and the project management unit (PMU) remained with the Housing, Urban Development and Public Health Engineering Department (HUD&PHED) at the provincial level. However, CDG legally reported to the Local Government, Elections and Rural Development Department. The potential for conflict between two major departments dealing with execution and implementation was overlooked at the design stage. Likewise, negative experience accumulated under phase one—such as delays caused by land acquisition, staff turnover and ownership issues of implementing agencies, and inconsistent and delayed application of policy reforms—was recognized at the PPTA stage but inadequately mitigated in the project design.

8. The urban policy actions agreed at appraisal (Appendix 1) were directly connected with the broader reforms agenda under the PLGO 2001, but the phasing of the urban sector reforms under policy actions of the project was only for Rawalpindi. The design also assumed that information generated from analysis related to the project area would influence or lead changes in urban, water, and sanitation policy across Punjab. Both these assumptions underestimated the risk associated with them. The urban sector reforms under the PLGO 2001 had differential ownership, and many reforms were not carried out for various reasons, including changes in the administrative controls and jurisdictions of tehsil municipal administrations (TMAs) and revival of the HUD&PHED. 8 Throughout implementation, the project struggled to mange overlaps and situations created by

7 ADB. 2003. Technical Assistance to Pakistan for Preparing the Rawalpindi Environmental Improvement Project,

Manila. 8 Originally, the PHED was dissolved and merged into the Local Government, Elections and Rural Development

Department under the LGO 2001, as part of the CDG.

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incomplete implementation and pace of the reforms under the PLGO 2001 and urban policy actions, which was outside its influence.

9. The project’s objectives have continued to remain relevant at completion, but the design has not sustained its relevance to ADB’s new country partnership strategy (CPS)9 and program, and the country’s development objectives. Urban services are one of the main strategic areas under the CPS, focusing on pivotal interventions in cities and secondary towns to improve basic services such as water, wastewater, waste, management, and urban transport. ADB’s approach towards urban sector operations in Pakistan has five strategic objectives: (i) economic growth, (ii) poverty reduction, (iii) human development, (iv) improved status of women, and (v) environmental protection. The reform agenda for the urban sector under the CPS and new operations focuses on developing clearer roles and stronger lines of accountability for urban services providers that are reoriented toward cost recovery and sustainability, corporatization, and professionalization of services, with incentives to perform. Many of these aspects are missing from the REIP project design.

10. The project’s objectives are in line with the Medium Term Development Framework, Pakistan’s Vision 2030, and Pakistan’s framework for economic growth—but the design is not. The frameworks consider urban areas as the engines of economic growth that strengthen trade and commerce with upgraded infrastructure and connectivity nationally and internationally. The frameworks aim to make cities and towns more efficient and competitive by strengthening the policy and regulatory role of the government and enhancing the role of the private sector in developing infrastructure and services. The implementation and operational arrangements of the project are still fully dependent on existing agencies that have failed to provide urban services.

11. No major effort was made to realign the project during implementation to address the design gaps, mainly because of lack of ownership of the project by key stakeholders, internal friction between the key implementing agencies, and diminishing political commitment to local government and urban reforms proposed under the project.

B. Project Outputs

12. The project comprised the following components: (i) part A—environmental sanitation; (ii) part B—water supply services; and (iii) part C—institutional development. The project outputs, as anticipated during appraisal and the extent to which they were achieved, are provided in Appendix 2 and briefly described in the following paragraphs.

1. Part A: Environmental Sanitation

13. The performance of this component was unsatisfactory. The scope of activities under this component were primary, secondary, and tertiary sewerage (new and rehabilitation) facilities of the city; environmental mitigation works upstream of Rawal Lake filtration plant; a sewage treatment plant (STP) of 199,000 m3/day capacity and outfall sewer catering for the city and suburban area; storm-water drainage through rehabilitation and improvement of five major drains; solid waste management of Rawal Town; slaughterhouse replacement; and 15 public toilets. The achievements against appraised targets are provided below.

a. Sewerage System

14. This subcomponent intended to install major sewerage networks, which included (i) laying (a) about 160 kilometers (km) of sewerage network (trunk and area sewers) within the boundary limits of Rawal Town over 384 hectares (ha), and (b) secondary and lateral sewers in the catchments of existing trunk sewers; (ii) construction of a transfer and outfall sewer to the STP;

9 ADB. 2009. Country Partnership Strategy: Pakistan, 2009–2013. Manila.

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(iii) replacement of undersized sewers in identified areas; (iv) environmental mitigation works upstream of Rawal Lake filtration plant; and (v) procurement of sewer cleaning equipment and machinery. The performance of this subcomponent was unsatisfactory. At completion, the project could only lay 11 km of sewerage network. Similarly, undersized sewers were replaced for a length of 5 km only. No work was undertaken on (i) secondary and lateral sewers in the catchment of existing sewers, (ii) a transfer/outfall sewer to the STP, or (iii) environmental mitigation.

15. The major reason for poor performance was the reduction in delivered scope. This was caused by confusion over the scope and alignment of this subcomponent with the Nullah Lai sewerage project started by the government. The Nullah Lai sewerage project overlapped in scope with the project and was conceived after the project was approved. The other reasons for underachievement on the few awarded contracts were as follows: (i) prequalification of contractors was weak; (ii) engineer’s estimates and contract awards of subprojects were based on outdated GOP schedule rates; (iii) contractors faced difficulties deploying in a congested urban environment; (iv) gaps in engineering designs, requiring time-consuming contract variations; and (v) the removal of services (gas, electricity, and telephone) was delayed by the concerned agencies. The reduction in scope of this component reduced health and environmental improvement benefits envisaged from the project.

b. Sewage Treatment Plant

16. The STP was to be constructed for treating projected flows of 199,000 m3/day. The performance of this subcomponent was unsatisfactory as no physical work could be undertaken except for acquisition of land for the STP. Lack of achievement was initially due to a major delay in land acquisition. This was followed by indecision on the alignment and size of the outfall sewer and the STP. The outfall sewer was passing through the domain of other agencies including the DHA, Baharia Town, and the Cantonment Board; and there was no formal agreement with these agencies on the alignment of the outfall sewer or inclusion of these agencies (conveyance and treatment of their sewerage) in the scope of the outfall sewer and STP. This resulted in extensive negotiation with these agencies in 2007 that did not conclude until the project closure in 2009. The absence of STP is expected to cause substantial downstream health and water pollution issues.

c. Storm Water Drainage

17. The scope of this subcomponent included (i) remodeling existing drains and construction of new drains in five selected areas; and (ii) carrying out (a) bank protection works at critical locations of Nullah Lai to mitigate negative impacts from floods, and (b) the necessary works for the protection of the rights-of-way of Nullah Lai.

18. The performance of this subcomponent was unsatisfactory as no physical work was undertaken. Contracts were awarded for the construction of the Asqhar Mall road drain from Murree road to Nullah Lai, and remodeling of the drain at Jamia Masjid. However, these were terminated without undertaking any works, as both sites were heavily encroached and their resettlement plans’ were neither updated nor implemented. The subproject for remodeling of Eidgah drain was funded through another federal government project. Nullah Lai improvement works were included in the scope of the GOP-funded Lai Expressway project. The remaining contracts were advertised several times, but no bids were received. In the absence of any drainage improvement the expected reduction in flooding or any increase in property values could not be achieved.

d. Solid Waste Management

19. This subcomponent comprised (i) institutional strengthening of Rawal Town; (ii) procurement of vehicles and equipment; (iii) construction of solid waste transfer stations and provision of garbage bins; (iv) development of a new lined uncovered sanitary landfill;

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(v) preparation and implementation of a community participation program; (vi) establishment of a solid waste recycling and composting program; (vii) licensing and institutionalizing scavengers for SWM; and (viii) privatization of SWM systems.

20. The performance of this subcomponent was partially satisfactory. In total, 12 contracts for procurement of solid waste collection equipment were awarded. The equipment supply included 100 skips for refuse collection and transport, four front-end loaders, one bulldozer, one recovery truck, five dump trucks, six skip-lifting trucks, one mechanical street sweeper and towing tractor, 12 refuse collection containers, one excavator, and 90 wheeled hand carts. The equipment was handed over to the CDG and union councils and is in their use.

21. The transfer station was not constructed as no suitable site could be finalized by project closure. The city’s solid waste is still being dumped untreated in an open landfill site that was fenced under the project. Landfill development could not be undertaken because of design and procurement delays.

22. Some initial work on community orientation using members of union councils was undertaken to increase their participation in solid waste collection. This activity was abandoned because of lack of PMU interest and lack of capacity of social organizers hired for this purpose. Similarly, no work was undertaken for establishing the solid waste recycling and composting program, introducing licensing for scavengers, and privatizing solid waste management systems. This was mainly due to the incapacity of the consultants and the PMU to guide and lead this effort. Lack of delivery on these outputs will impact sustainability of the solid waste services and quality of final disposal, affecting health and water quality of water sources for population living outside the city.

e. Slaughterhouse and Public Toilets

23. Under this subcomponent, the project had to build (i) hygienic and environmentally acceptable slaughterhouse facilities on the premises of the existing Sihala slaughterhouse, and (ii) about 15 public toilets. The operation and maintenance (O&M) of the public toilets had to be outsourced to the private sector and revenues collected through user fees.

24. The performance of this subcomponent was unsatisfactory. No work was undertaken for rehabilitation of the slaughterhouse because of a delay in the design of the facility by the consultant and lack of capacity of the CDG in operating this facility. Against a target of 15 public toilets, the project constructed 11 public toilets. Of these, seven were outsourced to the private sector and four remained in the public domain (in public schools and parks).

2. Part B: Improving Water Supply

25. This component included (i) replacement of about 29 contaminated and inefficient tube wells and rehabilitation of 32 existing tube wells; and (ii) construction or rehabilitation of distribution systems, including the rehabilitation of storage reservoirs and the supply and installation of 50,000 water meters. It also included a water quality monitoring program to be conducted by WASA and the private sector, review and finalization of the Rawalpindi master plan for water supply, and feasibility studies of additional water supply sources as part of the respective master plan. Under this component, the provincial water supply policy was to be updated following the water audit to be undertaken within a year of loan effectiveness. Health and hygiene promotion was also included in this component. The project also had to monitor the effects of improvements in water quality on health through a representative study and the project performance management system (PPMS).

26. The performance of this component was partially satisfactory. The achievement includes (i) replacement of 26 tube wells, (ii) rehabilitation of 25 old tube wells, (iii) replacement of about 9 km of water distribution network, (iv) laying of an additional 32 km of water distribution network,

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and (v) rehabilitation of two water storage reservoirs of 5 million gallon capacity. The contract for the supply of 6,000 commercial meters was awarded but meters were not procured as a result of controversy between WASA and the PMU regarding the need for these meters and their specifications. The works that could not be awarded include (i) replacement of trunk pipes, (ii) distribution networks in two underserved areas, and (iii) procurement and installation of 44,000 domestic and 6,000 commercial water meters. Some civil works were not completed because of a delay in design and procurement. Meters were not procured because interest in their installation was limited both within the public and WASA. About 16,000 meters procured during phase one of the project are still uninstalled. 27. A water audit was not carried out and the water supply master plan study is incomplete. The consultants did not initiate a water policy review because of limited capacity and disagreement with the client on the scope and quality of the initial work undertaken by consultants. Latrines were constructed in two schools. A health and hygiene promotion campaign by package C consultants was discontinued prematurely because of lack of consultant capacity and a limited response. The PPMS was not maintained or updated to capture the impact of this component. Without these outputs the water supply service improvement will not be sustainable.

3. Part C: Institutional Development

28. This component included support for development of (i) a municipal management system, (ii) environmental support services, (iii) asset management, and (iv) urban development plans. This component included project implementation assistance and incremental administration support.

29. The performance of this component was unsatisfactory. The support for development of systems and services was to be provided through package B consultants and partly through package A consultants. Some initial activities, like the base map and preliminary asset inventory of tube wells, were initiated by the consultants. However, all four tasks were left incomplete, mainly because of lack of capacity of the consultants and partly owing to disagreement between the client and consultants on the scope and quality of the initial work. The absence of these outputs will have serious implications for project sustainability. The hiring of consultant firms was done efficiently, but the staff turnover of the consultants’ team was high. The performance of package A (for design and construction supervision) and C (for community development) consultants was partially satisfactory and that of package B consultants was unsatisfactory (Appendix 3). The incremental administrative support was extended to meet PMU staffing and operational costs. The PMU was staffed mainly through deputations from within the HUD&PHED and operationalized efficiently but the turnover at project management level was high (4 project directors changed in 4 years).

C. Project Costs

30. The project’s appraised cost was $85.7 million, including taxes and duties, out of which ADB financed $40 million equivalent from the Asian Development Fund (ADF) and $20 million equivalent from ordinary capital resources (OCR) through two loans. The provincial government was to provide $21.4 million, and the remaining $4.3 million were to be contributed jointly by WASA and Rawal Town.

31. At completion, $19.6 million (23%) of the approved project cost of $85.7 million was utilized. ADB financed $13.7 million (70%) and the GOP financed $5.89 million (30%) of the utilized amount. Rawal Town and WASA did not contribute to the project cost. The project cost by component (appraised versus actual) is in Appendix 4. The funds were underutilized mainly because works could not be initiated on the major sewerage (STP and outfall sewer) and drainage infrastructure subcomponents (paras. 14–18). The funds for all other components were also underutilized due to delay in design and procurement and GOP’s indecision on project scope.

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D. Disbursements

32. The total disbursement against the two approved ADB loans was only $13.7 million10 or 23% of the loan amount. The imprest account procedures were used for small payments to the contractors (less than $100,000). Direct payments were made to the consultants, contractors, and suppliers for bills exceeding $100,000. The disbursement procedures were efficient and did not hinder project implementation.

33. The original disbursement schedule was not followed as major project components and activities could not be implemented as a result of project design and implementation issues. Lack of implementation of the outfall sewer and STP (about 37% of the total project cost) had a major impact on disbursements under the project. A comparison of actual and projected annual contract award and disbursements is in Appendix 5.

E. Project Schedule

34. The project commenced without any start-up delays, but its implementation was slow. The engineering designs of the initial package were completed on time and many water supply contracts were awarded according to schedule. However, the civil works contracts for many sewerage packages could not be awarded because of poor contractor response even after multiple re-advertisements. This was primarily due to congested site conditions and unrealistic cost estimates based on schedule rates published by GOP. The drainage subprojects were designed without revising the safeguard plans, so no work was undertaken even on the two awarded contracts for drainage improvement. Major design and implementation activities, related to the outfall sewer and STP, were not undertaken (paras. 14–16). This was the major reason for not following the project schedule.

35. Poor performance of civil works contractors, especially on sewerage and drainage contracts, was another important reason for not delivering according to the project schedule. As a result, many works were left incomplete at the time of closure. Many of the studies, plans, surveys, maps, and capacity building activities under the institutional development component were either left incomplete or not initiated at all. These activities were to feed into planning and guide the prioritization of investments—their absence disturbed the sequencing of activities. A comparison of the project implementation schedule (appraised versus actual) is in Appendix 6.

F. Implementation Arrangements

36. The CDG was the executing agency of the project. WASA was the implementing agency for the sewerage system and STP subcomponents, and water supply component. Rawal Town was the implementing agency for the storm water drainage, solid waste management, slaughterhouse, and public toilets subcomponents. RDA was responsible for implementing the environmental support services and urban development subcomponents. WASA and Rawal Town were the joint implementing agencies for the municipal management system development and asset management subcomponents. The PMU, comprising professional staff supported by a team of consultants, was to assist the CDG, Rawal Town, RDA, and WASA in providing policy guidance and implementing project components. A project implementation review committee (PIRC)—comprising officials of the CDG, Pothar Town, Rawal Town, RDA, WASA, union administrations, and community-based organizations—was to monitor the progress of all project components. A project steering committee (PSC) headed by the chairman of the provincial Planning and Development (P&D) Board, with members from the P&D, HUD&PHED, and finance department, as well as RDA, WASA, and CDG and Rawal Town heads (nazims), was notified to ensure smooth implementation, resolve interagency problems, and provide policy guidance.

10 Including $0.6 million interest during construction.

8

37. The implementation arrangements for the project remained as originally planned, and no changes were introduced during implementation. The PIRC and steering committee met regularly, but they were unable to resolve some of the major issues, including confusion regarding the project scope, settlement of issues with external agencies like the Cantonment Board, delays in implementation of the policy reforms, and increased friction between key project implementing agencies on activities and outputs and their ownership. The main reason for these weaknesses was: the absence of any formal agreement with key stakeholders like the Cantonment Board, Baharia Town, and DHA; their absence in the project implementation mechanism; and administrative control of the implementing agencies in the PIRC with multiple departments at the provincial level. The central PMU responsible for providing implementation support to all implementing agencies was also a cause of friction, again because of multiple administrative arrangements of the implementing agencies.

G. Conditions and Covenants

38. The borrower’s overall performance on compliance of loan covenants was partly satisfactory. Of the 45 loan covenants, only 16 (36%) were complied with, another 16 were partially complied with, eight (18%) were not complied with, and the remaining five (11%) were not applicable. The five covenants became inapplicable because the STP and outfall sewer to which they relate were not implemented under the project. No covenants were modified or waived during implementation. The status of the borrower’s compliance with loan and project covenants is in Appendix 7. 39. The project met the effectiveness condition before the deadline. Although the loan covenants were generally relevant, the borrower could not ensure that Punjab would implement the urban policy actions set out in Appendix 2 of the RRP (loan agreement, schedule 6, para. 17) simply because the government commitment to implementation of these reforms as well as the PLGO 2001 as a whole, deteriorated over the project period. Similarly, the organizational development program for WASA and Rawal Town could not be developed. This was a critical loan covenant (loan agreement, schedule 6, para. 35) to ensure the long-term sustainability and financial viability of these entities.

40. The PPMS was to be developed under the project to measure the performance and socioeconomic benefits of the project (loan agreement, schedule 6, para. 33), but no such system was developed. One major reason for the project delay was noncompliance with covenants related to timely acquisition of all land required for any subproject (loan agreement, schedule 6, para. 10), in accordance with the updated resettlement plan and ADB’s Involuntary Resettlement Policy (1995).

H. Consultant Recruitment and Procurement

41. The project provided for a total of 18 person-months of international and 1,460 person-months of national consultants under consulting services packages A, B, and C.11 The recruitment of consulting firms under packages A and B was done following quality- and cost-based selection (QCBS), whereas the package C consultants were hired as individual consultants. There was no deviation from the original procedure set out in Schedule 5 of the loan agreement concerning consultant recruitment.

42. Unlike the majority of projects in Pakistan, the consultant recruitment under this project was completed on time using advance actions. Consultants under packages A and B were recruited in March 2006, while the individual community mobilization consultants were recruited in June and November 2008. Package A and B consultants had inadequate capacity for their respective assignments, although there was reasonable completion for both packages. Cost was one criterion

11 Package A (engineering design and construction supervision consultancy), package B (institutional development

consultancy), and package C (community mobilization services).

9

for selection, and it overshadowed consideration of quality. Considering the complexity of the assignment in urban development projects, quality-based selection may have yielded better results for consultant selection.

43. The contracts for most water supply improvement works and solid waste equipment were procured on time. Civil works for sewerage and drainage works, on the other hand, were delayed and encountered a weak response from contractors, attributable to below-market engineers’ estimates based on GOP scheduled rates and the absence of any allowances for working in congested and encroached urban conditions. Major contracts for the outfall sewer and STP could not be awarded because of the delay in land acquisition, indecision about the scope of these components, and a delay in resolving issues with the Cantonment Board, Baharia Town, and DHA. The remaining contracts for the water supply, slaughterhouse, landfill site development, and sanitation could not be awarded because of a delay in the design of these subcomponents.

I. Performance of Consultants, Contractors, and Suppliers

44. The quality of work undertaken by package A consultants was partially satisfactory. Their scope of activities focused on design and construction supervision. Initial designs for water supply and some sanitation works were completed on time but they had quality issues that resulted in delays and variations during construction. The later designs were all delayed. The supervision quality was also marginal, with high staff turnover and lack of coordination with the implementing agencies. The design works for the outfall sewer and STP were delayed by issues beyond the control of consultants. Other designs, including the slaughterhouse, landfill sites, and some water supply schemes, were delayed because of consultants’ incapacity.

45. The outputs produced by package B consultants were unsatisfactory. The scope of activities included support for asset management, urban development, mapping, surveys, and improvement in municipal and financial management. Some initial works were started on three of the five activities to be delivered, but RDA’s and WASA’s comments on consultants’ initial reports were not addressed, and further work was discontinued. Most of the consultants working on the assignment were not the permanent staff of the consultancy firm and the firm was unable to retain them for the tenure of the assignments. As a result the quality of the few outputs produced was weak and not accepted by the implementing agencies.

46. The performance of individual consultants under package C was partly satisfactory. The consultants worked on community mobilization, health and hygiene education, and environmental sensitization. These individual consultants were to be guided by solid waste management and municipal management experts under packages A and B. However, the activities of these individual consultants were not well supervised either by the consultancy firms or the PMU staff. The piecemeal efforts to organize communities, undertake sensitization campaigns, and involve the union councils did not result in any tangible community participation or involvement in the project activities as envisaged at appraisal.

47. The performance of contractors and suppliers was mixed. The civil works contractors for water supply and the suppliers of solid waste equipment performed satisfactorily. However, most sewerage and drainage contractors won the contracts without understanding the complexity and cost implication of their bids. As a result, all contractors in these two sectors performed poorly and their contracts were either terminated or left incomplete at closure.

J. Performance of the Borrower and the Executing Agency

48. The performance of the GOP was partly satisfactory. Reporting on progress and procurements was undertaken according to the conditions of the loan agreement. The PSC and PIRC met regularly and provided direction and oversight on issues within their domain. However, many project issues and assurances in the loan agreement, which were within the purview of the GOP and the federal government, remained unmet or unaddressed. The policy for water supply

10

and sanitation was not implemented and updated within 1 year of loan effectiveness. The urban policy actions agreed at the design stage were not implemented. Implementation of a tariff revision in accordance with the tariff plan, agreed during the phase 1 project, did not take place. Solid waste collection, managed by Rawal Town, and related resources were not devolved to the union councils within 6 months after loan effectiveness as agreed at appraisal.

49. Most decisions on the size, scope, and cost-sharing arrangement for the outfall sewer and STP remained pending even at loan closure—a major reason for unsatisfactory performance of the project on many accounts. Parallel projects were started by the GOP after loan approval, which directly impacted the scope and activities of the project and resulted in its failure.

50. The performance of the executing agency was also only partly satisfactory. The hiring of consultants and procurement of initial contracts in water and solid waste were performed efficiently. However, the executing agency was not able to manage the poor performance of consultants and some contractors effectively. The indecisiveness of the executing agency in managing the outsourced activities resulted in continued weak performance by some of the contractors and consultants delivering these outputs. The resettlement plans were not updated and their implementation was piecemeal; hence, the GOP did not deliver on its assurance of timely land acquisition, resulting in a major delay in the implementation and cancellation of many contracts. Coordination issues between the PMU and some implementing agencies resulted in friction on the scope and ownership of the water meters component. This component was not delivered, even after the award of the contract.

K. Performance of the Asian Development Bank

51. ADB’s performance was partly satisfactory. The PMU staff was trained in procurement and disbursement, and received day-to-day guidance on the related ADB guidelines and procedures. Although ADB responded efficiently to the executing agency’s requests, the overall monitoring and administration remained inadequate, especially because of the large number of issues the project faced after the first year of implementation. The project envisaged semiannual reviews, but the review missions were fielded once a year. No midterm review was undertaken. The monitoring of urban policy compliance and safeguards was weak, which resulted in the policy actions not being implemented and the project implementation being delayed. ADB did not record any delays in disbursement. The project appraisal identified the risks associated with the project very well, but proposed mitigation measures in the project design to counter these risks—related to policy noncompliance, institutional challenges, and safeguards—were inadequate. Despite considerable delays in implementation, ADB review missions rated the project satisfactory throughout implementation. A complaint on safeguard non-compliance related to STP was also received by Office of the Special Facilitator in August 2008, which was later closed (para. 68). With serious implementation delays, indecision on the scope of major project components, and weak safeguard compliance, ADB first suspended and then closed the project prematurely on 31 August 2009—leaving most of the civil works contracts, (except the water subcomponent) and policy and institutional reforms, incomplete.

III. EVALUATION OF PERFORMANCE

A. Relevance

52. The project design was partly relevant. The project was designed to improve the living conditions of 1.4 million people living in Rawalpindi city through improvement in living conditions, quality of life, and health.

53. The focus of the sector and investment plans of the project was relevant and in line with the recommendations of the plan prepared during the first phase of the project. However, the institutional arrangements and design of the institutional development component and policy reforms did not fully capture the complexity of the institutional issues in urban governance and

11

service provision and their alignment with overall reform agenda under LGO 2001 (para. 8). The implementation of reforms required broader ownership across Punjab and was dependent on the quality, and pace of district, provincial, and federal reforms under PLGO 2001. The ownership and commitment to reforms deteriorated over the life of the project. No support or incentives were built into the project design for creating broader ownership (except as covenants of the loan agreement). As a result, the project activities could not influence the declining commitment for urban reforms.

54. The PPTA identified the key stakeholders—including the private sector developers (Baharia Town), DHA, and the Cantonment Board—and the interconnection of the project investments with these stakeholders (paras. 7 and 37). Extensive consultations were undertaken at the appraisal stage, but understanding of the project scope was not formalized with these stakeholders. This became a major obstacle in project implementation, cost sharing, and scope during implementation.

55. The PPTA clearly identified the interdependency of sectors, complex and overlapping administrative alignments, and the geographic areas of different implementing agencies (para. 7). However, no effort was made in the project implementation arrangement to address these overlaps, except for the joint PIRC which did not include some of the key stakeholders (para. 54). The project design included community and private participation in the delivery of urban services, supported by some concrete small-scale activities. However, there was no clear framework, resources, or guidance to undertake these activities.

B. Effectiveness in Achieving Outcome

56. The project was not effective in achieving its intended outcome of sustainable reduction of environmental degradation and sustainable operation of basic urban services. A substantial portion of the major project components related to environmental sanitation, and drainage remained undelivered. The project substantially increased the capacity of the implementing agencies to collect solid waste, without adding any sanitary landfill for safe disposal. The project reduced water wastage (leakages) and added additional water to the distribution system, but was unable to achieve a corresponding increase in the capacity of the sewage and drainage networks and wastewater treatment facilities to carry and treat the additional water—thus, the reduction in the environmental degradation of the city was marginal. A major part of the institutional development (para. 29) and policy reform (Appendix 1) components—to support sustainable operations through training, planning, management, and reforms—also remained incomplete. The minor improvement in WASA’s financial management capacities cannot be attributed to project interventions. C. Efficiency in Achieving Outcome and Outputs

57. The project was not efficient in achieving its outputs and outcomes. It was closed prematurely (para. 32) as it was facing serous implementation delays. Only 43% of contracts were awarded and 23% of disbursements were made at 61% of the elapsed project period—at closure. Out of the 63 subprojects identified, only 31 (49%) were completed, eight (13%) were ongoing, and the remaining 24 (38%) were not awarded at loan closure.12 These subprojects only covered a small part of the project scope. No subprojects were completed in the drainage and sanitation subsector at completion and no subproject was undertaken on the STP, outfall sewer, slaughterhouse, schools’ health and sanitation subsectors. The government also did not provide resources to undertake incomplete subprojects after loan closure.

58. An economic and financial reevaluation was done at completion, taking into account the delayed and partial completion, following the appraisal methodology and assumptions as much as possible. The overall results of the analysis are not comparable to the appraisal estimates because some of the components included in the appraisal estimates were either not delivered or partly delivered (Appendix 8). The economic and financial internal rates of return (EIRR and FIRR) for the 12 Borrower’s Project Completion Report for the Rawalpindi Environmental Improvement Project.

12

drainage subprojects could not be analyzed, as the drainage component was not delivered and no tariff was being collected for the drainage services. The solid waste collection and disposal capacity was increased, which significantly improved environmental health and sanitation within the city—with an increase in collection and disposal from 60% before the project to about 80% after the project. However, the disposal of this additional solid waste still does not follow the environmental and sanitary standards agreed during appraisal and could cause significant downstream environmental and health issues. As no tariff is being collected for solid waste management, there is no FIRR for SWM, however due to health benefit and increase in property values associated with improved collection and disposal it has an economic benefit.

59. For the water supply subprojects, an FIRR of 3.6% was estimated at completion, compared with 6.2% at appraisal. The low FIRR is due to a lower-than-projected net increase in water tariffs. The EIRR of water supply services at completion was 8.3% compared with 21.6% estimated at appraisal. Although the increase in tariffs was more than anticipated, the reason for the low FIRR and EIRR is the substantial increase in the cost of producing water and the level of service—the tariff increase did not keep pace with these increases. The benefit of improved services, and quality and quantity of water could not be determined as the baseline and project benefit monitoring study that was to be conducted by the project was not undertaken. However, based on a small sample of interviews conducted at completion, a substantial reduction was noted in waterborne diseases, expenditure on health, and time and cost spent on obtaining water from other sources. This impact has not been quantified in the EIRR.

60. No FIRR was estimated at completion for the sanitation subprojects. The increase in sanitation tariffs was substantial, but only a small portion could be attributed to the project because of very low investment in this sector. The EIRR of the solid waste component was 19.0% at completion compared with the appraisal estimate of 21.5%. The EIRR is low, but has a positive net present value of PRs22 million, since most of the benefits—a 20% increase in collection efficiency, a reduction in operating cost, and an increase in property values—were achieved.

61. The EIRR for the project was 10.0% compared with the appraisal estimate of 15.8% (the reasons are in paras. 57–60). The investment in water supply and solid waste was efficient because of the economic stream it generated, the reduction in operation costs, and the increase in property values. All other investments were inefficient because the level of improvement was much less than planned to generate the economic and financial streams envisaged at appraisal. D. Preliminary Assessment of Sustainability

62. The project interventions are not sustainable. The project was to undertake (i) a comprehensive water audit, (ii) environmental support services, (iii) urban development plans and base maps, and (iv) municipal management system development and asset inventory. These activities were expected to provide information on service coverage; identify the main source of revenues, nonrevenue water (NRW), asset life cycle, and contribute to the sustainability of facilities; identify options for improving service delivery and increasing revenues; improve municipal financial management, O&M of assets; and establish urban control regulations. All these activities were crucial for the sustained and long-term operation of services and investments. However, none of these activities were fully implemented, and the implementing agencies (perhaps except WASA) do not have the capacity, incentives, powers, or resources to sustain the improvements in service delivery, increase revenues, and effectively plan and control urban investments.

63. Although PLGO 2001 in theory empowers Rawal Town, Rawalpindi WASA and CDG to manage municipal services, the PLGO 2001 and urban reforms agreed under the project have not been implemented as intended. Local governments are not autonomous in practice; they are run by government-appointed administrators and no elections have been held since 2009. Interdependent services (such as water, sanitation, and solid waste) are handled by different agencies that work independently of each other. No overall control or development plan exists for

13

these agencies, that could guide and regulate investments. These agencies—including Rawal Town, WASA, RDA, and the CDG—have no control over the revision of urban property taxes or service charges. As a result these agencies were unable to raise service charges to sustain their operations.

E. Impact

64. The overall impact of the project is marginally positive. It was expected to improve the living conditions, quality of life, and health of the people of Rawalpindi by improving water supply and sanitation facilities, SWM, wastewater treatment, and slaughterhouses. Field and secondary data were used in the assessment in the absence of a benefit monitoring and evaluation system, which was to be developed for the project.

65. The project focus was on a sustainable reduction of environmental degradation (sanitation and wastewater treatment) and operation of basic urban services (institutional development). Although most sanitation and drainage subprojects and institutional development components were not initiated, the limited number of infrastructure subprojects completed have marginally improved sanitation and substantially enhanced solid waste collection and water supply in the project area in the short term. Nevertheless, the impact in all cases is much less than anticipated. 66. Secondary data show an overall improvement in the social statistics of Rawalpindi district. About 76%13 of the households have piped water supply, against 46% at appraisal (footnote 2). The population using the improved water supply services in the district increased from 73.0%14 to 83.0%15 compared with the Punjab average of 96.8%16. This improvement in water supply has contributed to a reduction in diarrhea cases (in children) from 16% (footnote 15) in 2004 to 11% in 2010. (footnote 16) The economic activities were enhanced with increase in industrial units from 200 to 32117 in the last four years and with employment levels of 90% in 2009. (footnote 16) 67. The project completion review mission also noted increased coverage of the population with safe drinking water, substantiated by statistics provided by WASA. The water supply, sewerage, and solid waste subprojects have reduced waterborne diseases, and curtail households’ health-related expenditures. However, with no contribution by the project for improving health and hygiene at schools, enrollment of 120% in 2005 (footnote 19) has almost remained the same—at 117% in 2009. (footnote 13) The sanitation, solid waste, and water subprojects reduced damage to property caused by leaking mains, sewer overflows, and litter in the streets; and increased the value of land.18 All these trends cannot be attributed to the project, though, as the CDG made a substantial investment in Rawalpindi during this period from provincial resources. However, the project contributed to these trends, although with much smaller investment than anticipated at appraisal.

68. The project involved resettlement and acquisition of about 285 hectares of land. A resettlement plan was developed for the STP, but it was not updated before implementation, and its monitoring remained weak because of capacity issues within the implementing agencies and the consultants. Land acquisition was delayed for the STP and the project ultimately dropped. The

13 Federal Bureau of Statistics, Statistics Division, Government of Pakistan, Islamabad: Pakistan Social and Living

Standards Measurement Survey (2010–11, September 2011. 14 Government of Pakistan, Federal Bureau of Statistics, Statistics Division. 2005. Pakistan Social and Living Standards

Measurement Survey (2004-05. Islamabad. 15 Federal Bureau of Statistics, Statistics Division, Government of Pakistan, Islamabad: Pakistan Social and Living

Standards Measurement Survey (2007, 08, 09, and 10), June, 2007, June 2009, and September 2011 16 Government of the Punjab, Bureau of Statistics, Planning and Development Department. 2009. Multiple Indicator

Cluster Survey, Punjab 2007–2008. Lahore, Pakistan. (Volume 29 – Rawalpindi). 17 Bureau of Statistics, Planning and Development Department, Government of the Punjab – Punjab Development

Statistics, Lahore, Pakistan. 2009. 18 Mission observation during the project completion review, and flood and rain damage assessment figures obtained

from the implementing agency during recent floods.

14

affected population also registered a complaint against unequal assessment of land values and missing data on non-land assets in the resettlement plan. ADB intervened and most of the non-land asset issues were resolved, but the case for unequal land evaluation is still pending in court. The resettlement plan prepared for the drainage subprojects was inadequate and underestimated, so only two out of the eight identified subprojects awarded for drainage improvement; but those too were not implemented. Most of the subprojects had a positive direct environmental impact on the city population, as they improved disposal of sewage and the quality and quantity of water, and improved solid waste collection. However, all these subprojects had negative downstream impacts. Sewerage collected through the sewerage system is still being disposed of untreated in natural drains. Additional water has been added to the system, with no proportional increase in the sewerage network or wastewater treatment capacity. Similarly, the solid waste collection capacity has increased but disposal is still through open dumping, impacting groundwater and air quality.

69. The project investments may not be financially and operationally sustainable without the institutional strengthening measures, urban planning and management improvement, and policy reforms that could not be implemented in the project executing and implementing agencies.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

70. The project was unsuccessful. Its investment components were relevant, but the institutional arrangements, design of the institutional development component, and policy reforms were partly relevant (para. 53). The outputs were delayed and only partially delivered (Appendix 2), making them ineffective (para. 56) and inefficient (para. 57) in achieving the outputs and outcomes. Many policy reform and capacity development measures were agreed but not implemented (Appendix 1), making the physical interventions and long-term provision of services unsustainable (para. 62). Secondary data show (paras. 66 and 67) only marginal short-term improvements in the quality of services, not directly attributable to the project in the absence of disaggregated data. The major reasons for project failure were initial design gaps, new projects with overlapping scope initiated by the GOP after project approval, overall external resistance to reforms, weak consultants’ capacities and implementation arrangements, and indecision regarding the scope of the project.

B. Lessons

71. Alignment with overall reforms: The project only supported implementation of reforms in the participating towns and WASA in line with PLGO 2001 and urban policy actions agreed with the government for the project (para. 53). Ownership and commitment to reforms deteriorated in general and project implementation was adversely affected. Although these risks were identified in the project design, no flexibility was built into the design to respond to these external factors. Major urban reforms cannot be undertaken in isolation from the external environment; they require political will, incentives, flexibility in design, and critical mass within the system to champion such reforms. 72. Clarity of roles and responsibilities: The PPTA and the RRP identified overlap in administrative and geographic alignments of agencies such as WASA, town administrations, RDA, the Cantonment Board, and the CDG responsible for municipal and other urban functions (para. 55). The policy actions, PSC and PIRC established for the project were unable to address these gaps. Clarity of roles, and geographic, administrative, and sector alignment are prerequisites for effective urban governance and need to be addressed at the planning stage or should be part of project readiness checklist.

73. Inclusive implementation arrangements: The PPTA also identified and consulted key stakeholders, including private sector developers, DHA, and the Cantonment Board—accepting their role in influencing project scope and cost. However, no formal agreement was signed with

15

these stakeholders (para. 54). Formal arrangements with key stakeholders on the scope and cost-sharing arrangement should be part of the design and planning stage, to avoid delays and confusion at the project implementation stage.

74. Addressing the fundamentals reforms upfront: Major governance issues of autonomy and incentives to perform, which plagued the key implementing agencies that were the urban service providers, were only captured piecemeal in the policy framework. This allowed these issues that were fundamental for the success of the project to be addressed (or not be addressed) during project implementation. The design also allowed major investment subprojects to be implemented without addressing these fundamental issues. All critical conditions that are fundamental to project success should be part of project readiness at entry.

75. Provision of optimal environment for change: The project design included community and private sector participation in the delivery of urban services, supported by some concrete small-scale activities. However, the project did not provide clear direction and adequate resources to deliver these activities (para. 46). Flexibility is important in the design of complex loans, but for this flexibility to be used effectively, additional capacity, a guiding framework, and resources should be included in the sector loan, with supporting technical assistance to guide the use of the resources. Secondly, private sector participation requires professional management at both public and private sector ends and economies of scale rather than a piecemeal approach in a few areas.

76. Ensuring quality in complex reform oriented projects: The consultants under the loan were hired through QCBS. The staff costs in the bids were inadequate for quality staff. This hiring process allowed weak firms to bid low and win the bids, without fully appreciating the tasks ahead. The request for proposal for complex sector loans should either be quality-based or include a bid rejection option in case of underbidding in QCBS. C. Recommendations

1. Project Related

77. Future monitoring. PLGO 2011 was not implemented as envisaged. Most of the reforms initiated under it are currently being reviewed and some have already been reversed. The overlapping function of urban institutions, both geographic and sectoral—with no overarching framework guiding their investments—has led to uncoordinated and unplanned urban development. As a result, the delivery of urban services through public sector institutions has remained inefficient. Addressing these problems requires the creation of autonomous institutions that are professionally managed and have the right incentives to guide and deliver quality urban services. This can only be achieved if local government reforms and urban policy continues to support these options, including engagement of private sector operators for delivery of services, supported by the optimal regulatory environment. The federal government, under the urban growth strategy, has already subscribed to such changes that have yet to be implemented. ADB should gauge the readiness for future urban investments by the direction of policy and regulatory reforms at the provincial level, and how these are being translated into concrete changes at the city level. 78. Covenants: All covenants in the loan and project agreements related to sewerage treatment should be waived as both these investments were not made under the loans. All other covenants should be maintained in their existing form and monitored during quarterly portfolio reviews for 2 years. 79. Timing of the project performance evaluation report (PPER). As majority of the project components were not delivered, there is very little value addition in conducting the PPER. However, PPER may be conducted after the LGO 2001 has been revised and the expected local government elections in 2013 have been held, so that impact of these changes on the urban governance in Rawalpindi can be evaluated.

16 A

ppendix 1

STATUS OF COMPLIANCE WITH GOVERNMENT POLICY

Sector Objectives Policy Measures Compliance Status at Project Completion

Water and Sanitation Objectives Water Supply and Sanitation Policy (i) Piped water supply services

and adequate sanitation for all people in Rawalpindi maintained in a sustainable manner through sound financial and human resources management

Water Supply and Sanitation Policy Rawalpindi Water and Sanitation Agency (WASA) will be staffed with competent trained management and employees committed on a long-term basis to providing services to the public. WASA management will be given autonomy to manage and operate the water supply and sanitation services without outside interference. WASA shall publish for the public an annual report on its operations and development each year. A structured and systematic program of organization development will be implemented for WASA.

Partially complied with WASA has qualified and trained staffed. WASA management is not independent in taking decisions necessary for its sustainable operations. Political and government interference compel WASA management to take actions that are not suitable for WASA’s sustainable operations. WASA does not publish annual reports on its operations and development every year. No structured and systemic program for organizational development of WASA is ongoing.

(ii) Long-term planning and development of water resources for water supply purposes

The long-term goal is that tariffs will cover the operation and maintenance (O&M) costs plus capital costs plus debt servicing for all water supply, and the O&M costs of all sewerage. WASA will meet O&M costs for water supply and sanitation through enhancement of collection efficiency and increase in tariffs as per already agreed tariff plan, which require not to impose the tariff beyond the affordability of the consumers and increase it gradually with increase in the level of service. WASA will become a self-sustainable organization. Collection efficiency of tariffs must exceed 80% by March 2006 and non-revenue water should decrease from the existing estimated 40% to less than15% by September 2006. Disconnections for nonpayment, presently enforced, will be further strengthened. WASA has computerized its revenue and accounting system and computerized bills are being issued to the consumers. Privatization of billing and collection will be introduced to improve the revenues and the billing will be conducted on a monthly basis. All complaint offices will be functional and WASA will maintain a management information system (MIS) to record and monitor the status of registered complaints.

Partially complied with Since 1998, WASA has revised its tariff structure five times. However, WASA cannot revise its tariffs independently according to its needs because of political pressure from the elected representatives. The last revision in WASA’s tariff was approved in 2011, but it was later reversed as a result of political pressure on the Government of Punjab. WASA is not fully sustainable, as a result of an increasing gap (ranging from –4% in 2009 to 29% in 2011) between revenue and expenditure related to water supply and sanitation services. The average collection efficiency of WASA since 2005 is 72%; it was 81% only in 2009. Nonrevenue water is also about 40%. WASA is imposing its disconnection policy for defaulters, though not very effectively. WASA has tried to outsource water billing and collection, but no expression of interest was received.

A

ppendix 1

17

Sector Objectives Policy Measures Compliance Status at Project Completion

WASA has established a good complaint tracking system, where the complaints are registered and addressed in a systemic way. The complainant can track the status of its application on WASA’s web portal.

Operation of delivering and selling water through the tankers (bouzers), currently facing financial loss shall be privatized by June 2006. Stand-posts shall be provided at identified locations and the O&M of these posts shall be handed over to the union administrations (UAs). Rawalpindi Development Authority (RDA) on 15 March 2004 reduced the water connection fee from PRs1,500 to PRs500 for domestic consumers and from PRs3,500 to PRs1,500 for commercial consumers, effective 20 March 2004. This step helped to expand the consumer network and reduce the illegal connections.

Partially complied with WASA tried to privatize the sale of water through tankers, but no expression of interest was received. Standposts have been provided where required.

(iii) Conservation of water All water supply services will be metered and payment for water use will be made on the basis of the volume consumed. No flat rate tariffs will be allowed. The tariff structure will reflect government policies on water conservation and lifeline rates for the urban poor. These reforms will be fully implemented by end of 2007.

Not complied with Meters were not installed. Billing is being done on flat rates, not on volume consumed.

Installation of water meters is in progress and out of 19,000 domestic and commercial meters procured under phase-I project, 10,000 water meters have already been installed. WASA has started billing on meter reading for metered supply. However, all the connections will be completed on procurement and installation of another 50,000 meters under the proposed project.

Not complied with WASA’s experience on water meters did not prove a success. As a result, no more meters were installed under this project.

Non-revenue water, which includes both physical and commercial losses, shall be measured and reduced progressively each year.

Not complied with Nonrevenue water is still about 40% of the total water supply.

WASA is making all efforts to minimize non-revenue water and this will be reduced to less than 15% by September 2006.

18 A

ppendix 1

Sector Objectives Policy Measures Compliance Status at Project Completion

(iv) Equitable access to and use of water

Service levels shall, wherever possible, be a household connection. If this is not possible, it shall be no less than a standpipe within 100 meters of any dwelling. Increase in service connections will be closely monitored and reported to the public each year.

Partially complied with Service levels are at household level, but information on the increase in service connections is not made public.

Every school in Rawalpindi shall be provided adequate piped water supplies and toilets (latrines). Public toilets maintained by user charges shall be constructed in all high density public locations.

Partially complied with Almost 99% of schools in Rawalpindi have a piped water supply and toilets facility. A total of 11 out of the target of 15 public toilets were constructed; seven were outsourced for operation and maintenance.

(v) Awareness of the public and government about the facts of water supply services in Rawalpindi.

A comprehensive water audit will be undertaken in 2005 to verify coverage, examine the way all people get water, how much they get, and how much they pay; and to explore the use of non-revenue water. After analysis, the findings of this audit will be discussed at a stakeholder consultation and this will be the basis for formulation of new government policy. This will be conducted under the proposed Project.

Not complied with No water audit was conducted. However, WASA carried out a consumer survey in 2008 that included some of the information to be gathered through the water audit. However, the consumer survey was just a tool to increase the revenue base of WASA and identify and regularize the illegal connections. Its findings did not feed into any policy at the government level.

Community awareness and community development will be promoted through WASA. It is already holding regular meetings with UA’s heads (nazims) and naib nazims. However, in the future, nongovernment organizations (NGOs) will be involved to promote community awareness. Print and electronic media are also being used for this purpose.

Not complied with No comprehensive community awareness program was undertaken in print or electronic media.

(vi) Sustainable use of

groundwater

All groundwater use other than that for one household shall be registered as to owner, type of installation, location, volume extracted, and use of water.

Partially complied with The owner’s name, type of installation, and location is recorded, but the volume extracted is not recorded.

(vii) Optimum utilization of

sewerage network

Sewerage connection fee will be reduced from PRs500 to PRs250 as an incentive to encourage consumers.

Not complied with

A

ppendix 1

19

Sector Objectives Policy Measures Compliance Status at Project Completion

Prior to laying any new sewer in any UA, the communities will sign a memorandum of understanding with the project management unit (PMU), where a 50% connection fee will be collected by the UAs in advance and the PMU will commence the work in those UAs where at least 80% of people have deposited the connection fee to their UAs.

Complied with

Payment of recurrent sewerage charges will be added to the water supply bill. Failure to pay the water and sewerage bill may then result in disconnection of the water supply.

Complied with

Those connecting to the sewerage network will no longer pay for the cost of periodic desludging of their septic tank or latrine.

Complied with

Civil society and community-based organizations (CBOs) would be involved in the monitoring and reporting regarding the O&M of sewers.

Not complied with

Solid Waste Management Objectives are 100%

collection and disposal of solid waste in Rawalpindi; and the cost of solid waste collection and disposal be borne by the creator of the waste

Long-term objective is to

maintain efficient solid waste management in a sustainable manner through sound financial and human resources management

Solid Waste Management Policy Center Introduce public–private partnerships for collection. UAs, with the help of experienced NGOs, CBOs, and private partners, will collect solid waste in their respective constituencies and dispose of it at designated transfer stations. Rawal Town, with the assistance of private agencies, will be responsible for final disposal of solid waste at the landfill.

Not complied with Out of 54 UAs in Rawalpindi, collection of solid waste was started in three UAs through public–private partnership.

Develop a new landfill site with transfer stations.

Partly complied with Only fencing, security, and electrification works done for landfill site. No work was done on transfer stations.

Full cost recovery for solid waste management. Not complied with

Introduce sorting and recycling of materials. Not complied with

Rawal Town will be staffed with competent trained management and employees committed on a long-term basis to providing services to the public.

Not complied with

20 A

ppendix 1

Sector Objectives Policy Measures Compliance Status at Project Completion

Rawal Town management will be given autonomy to manage without outside interference.

Not complied with

Rawal Town shall publish for the public an annual report on its operations and development each year.

Not complied with

A structured and systematic program of organization development will be implemented for Rawal Town.

Not complied with

Urban Development Objectives Preparation, approval, and

implementation of land use plans, including adequate open areas, parks, playgrounds, and graveyards

Urban Development Policy Center Implement land use planning and zoning.

Ongoing Land use planning and zoning is being done by Rawalpindi Development Authority (RDA).

This will also include the base mapping/geographic information system (GIS) and manual with legal backup of each category.

Ongoing

Coordinate infrastructure and services development.

Ongoing

Introduce public asset management.

Not complied with

Target housing and services for the poor. Ongoing

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21

PROJECT DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

Impact Living conditions, quality of life, and health of 1.4 million people in Rawalpindi improved

People’s perception improved for better quality of life

Quality of drinking water improved,

Number of household connections to sewers and lush latrines increased

Average monthly medical expenditures per household reduced from PRs510 to PRs350 per month

Citizen score cards PMU reports

Water quality surveys WASA reports

Annual Report of Economic Survey, Government of Pakistan

35% sewer connection Water related diseases decreased from 17% in 2004 to 2.7% in 2009

Outcome Sustained reduction of environmental degradation Sustained operations of basic urban services

Water supply coverage improved from 46% to 70% by end of 2010.

Drinking water and sanitation facilities in all schools in Rawalpindi ensured.

Sanitation coverage improved from 30% to 75% by end of 2010.

Sewage treated from the existing no treatment to 199,000 m3/day by 2015.

Frequency of solid waste collection and disposal to landfill sites improved significantly.

Annual Report of Economic Survey, Government of Pakistan

ADB review mission reports

Project completion report

PPMS reports

Financial records and MIS of Rawal Town and WASA

Assumption Future legislation continues to support consistency of the PLGO 2001 and CDR sustainability

Risks Land acquisition may delay the implementation of STP and outfall sewer components

Efforts for enhancement of the revenue base and institutional strengthening of Rawal Town and WASA may not give sufficient and sustainable results.

Frequent turnover of trained staff and delayed decision making on critical issues by Rawal Town, WASA, and RDA may delay project implementation.

Water supply coverage has been increased up to 90% in WASA jurisdiction area, with the installation of tube wells and rehabilitation and/or refurbishment of existing tube wells. Latrines were constructed only in two schools. GOP has taken up a project for providing missing facilities in schools in the entire project area. Sanitation coverage enhanced to 35%.

STP was not constructed. Solid waste collection and disposal significantly improved with the procurement of solid waste machinery and equipment.

22 A

ppendix 2

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

Actions taken regarding capacity building of Rawal Town and WASA as proposed under component C

Assumption Autonomy extended to Rawal Town and WASA will help them manage their own affairs and positively affect organizational development

A little work (mainly providing some orientation and training) was done for capacity building of Rawal Town and WASA under component C.

Outputs Infrastructure developed for environmental sanitation

(i) Sewerage System

About 160 km sewerage network of trunk and area sewers laid in the West 1 Sewerage District. Transfer/outfall sewer to the sewage treatment plant constructed.

All undersized sewers in the city replaced. Environmental mitigation works undertaken upstream of Rawal Lake filtration plant. Sewer cleaning equipment and machinery procured for WASA (ii) STP of 199,000 m3/day capacity constructed with:

Inlet and outlet structures, forestation, laboratory,

PMU monthly progress reports ADB review mission reports Project completion report PPMS reports MIS of Rawal Town and WASA Environment and resettlement monitoring reports

Risk Land acquisition for STP may delay execution of key project components Assumptions Water supply and sewerage customers are willing to pay more for better services.

Local communities are interested and respond positively.

Continued government support for a comprehensive and consistent devolution policy.

Provincial governments and CDR remain committed to actions on institutional policy reforms.

Risks

Efforts to enhance the Rawal Town revenue base may not be successful, thus affecting the sustainability of improvements in financial management and resource generation.

(i) Sewerage System

10.73 km (mainly lateral to exiting trunk) contract for new trunk sewer (SW-01) awarded but left incomplete (1 km laid) and not in use

No outfall sewer constructed. No transfer station constructed.

5.36 km of undersized sewer replaced—western side (of Khayaban-e-Sir Syed and parts of Satellite Town). Requirement for replacement was large throughout the city; scope covered was less than 10% of requirement.

The scope of environmental mitigation works upstream of Rawal Lake was deleted as CDA is conducting a study for environmental mitigation works undertaken upstream of Rawal Lake filtration plant.

Three sewer cleaning machines was procured for WASA

(ii) STP of 199,000 m3/day capacity:

Only land acquired No work executed on STP

Appe

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23

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

administration buildings, and protection bunds against the Soan River. 4.0 m deep anaerobic ponds, 2.5 m deep facultative ponds, and 1.5 m deep maturation ponds (iii) Storm Water Drainage

Existing drains remodeled and new drains constructed at Asghar Mall Road, Jamia Masjid Road, the general bus stand, Nia Mohallah, and Eidgah Road. Bank protection works undertaken at all critical locations of Lai Nullah

(iv) Solid Waste Management

About 47 Rawal Town staff trained for improved solid waste management. 6 trucks, 3 dumpers, and 6 tractors procured. Solid waste transfer stations constructed and 100 refuse collection containers provided throughout the city.

Frequent turnover of trained staff and delayed decision making on critical issues by Rawal Town, WASA, and RDA may jeopardize project benefits.

Rawal Town staffs respond positively to training, and successfully use new skills and facilities.

(iii) Storm Water Drainage

No storm water drain constructed—drainage only. Two contracts were awarded but terminated without any work done as a result of heavy encroachments on the project sites.

Lai Nullah improvement work was not undertaken because of the planned scope of Lai Expressway Project.

(iv) Solid Waste Management

No Rawal Town staff trained in solid waste management—the training plan of the consultant was not approved.

In total, 4 front-end loaders, 1 bulldozer, 3 skip-lifting trucks with 9 arm role containers, 5 dumpers, 1 recovery truck, 1 excavator, and 1 mechanical street sweeper with tractors procured.

No solid waste transfer stations were constructed. However, 12 refuse collection containers or skips and 90 wheeled hand carts

24 A

ppendix 2

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

A lined uncovered sanitary landfill site of 30 ha developed with a leachate collection system. A community participation program prepared and implemented. A solid waste recycling and composting program prepared and implemented. Scavengers licensed and institutionalized

(v) Slaughterhouse and Public Toilets

Additional hygienic, environmentally acceptable slaughterhouse facilities provided within the premises of the existing Sihala slaughterhouse.

About 15 properly designed, suitably located public toilets constructed and connected to nearby sewer network

were procured. The procured solid waste equipment was handed over to city district government, Rawalpindi CDGR and union councils and is in use by them.

Only fencing, security, and electrification works done for landfill site without any site development. Land was already available. Community participation program for awareness on solid waste collection and recycling prepared and implemented. No further hardcore work done on recycling or composting at community level. No licensing regime put in place for solid waste collection, including informal collectors of waste. (v) Slaughterhouse and Public Toilets

No work undertaken on rehabilitation of slaughterhouse. Contracts for 15 public latrines awarded. Only 11 public latrines completed, out of which 7 have been outsourced to private sector for operations.

Appe

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25

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

Water Supply System rehabilitated and improved

About 29 contaminated and/or inefficient tube wells replaced and existing 32 tube wells rehabilitated. About 71 km of existing water pipeline rehabilitated and about 24 km added, with the rehabilitation of 2 storage reservoirs of 5 million gallon capacity, and about 50,000 water meters supplied and installed. Water quality and monitoring program established and implemented. Latrines and safe drinking water connections provided to all schools in the project area.

In total, 26 out of 29 tube wells were constructed as replacement wells. Similarly, 25 out of 32 existing tube wells were rehabilitated. About 9 km of existing water pipelines rehabilitated and about 32 km added, with the rehabilitation of 2 storage reservoirs of 5 million gallon capacity. No water meter supplied, although the contract was awarded. Water quality plan has been prepared and is implemented by WASA. No water connection was provided to any schools in the project area. However, two sets of latrines have been constructed only in two schools.

Institutional capacity of Rawal Town and WASA strengthened

47 Rawal Town staff and 57 WASA staff provided training in technical and financial management, mapping, and asset management Public awareness program conducted on urban issues, water quality, and sustainability of facilities. Improved accounting, management, and budgeting systems implemented by 2005, and

One training session for asset management conducted for Rawal Town and WASA, but the number of participants is not available. The training plan was not approved for any further training. Public awareness conducted under component C, mainly focusing on solid waste collection, reuse, water conservation, and personal hygiene practices. No improved accounting, management, and budgeting systems implemented. Collection

26 A

ppendix 2

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

over 80% collection efficiency of water and sanitation revenues achieved by WASA Regulatory systems established and implemented An environmentally sound urban development plan developed with base maps and GIS mapping of the specified area. Land use, zoning, and building laws revised and legislated A separate asset management section set up in WASA and Rawal Town to maintain, update, and record assets for greater transparency and sustainability

efficiency of WASA reached 81% in 2009. The average collection efficiency since 2005 is about 72%. No urban regulation was developed under the project. Initial work on an urban development plan was started, and a base map was developed. No work was done on the GIS and the plan was left incomplete. Initial proposal for land use was developed but left incomplete. No legislation was undertaken on zoning. Initial work on the design of asset management was done but not implemented. The asset inventory only for tube wells was developed by WASA on its own.

Activities with Milestones Inputs ($ million)At appraisal At completionADB 60.0 GOP 21.4 Rawal Town/WASA 4.3 Total 85.7

ADB 13.7 GOP 5.9 Rawal Town/WASA 0.0 Total 19.6

1.1 PMU established and fully staffed by end of January 2006 Established and fully staffed in March 2006

1.2 Consulting firms and individual consultants recruited by March 2006 Consulting firms for packages A and B recruited in March 2006. NGOs were not recruited for package C; instead, individual consultants were hired in June 2008.

2.1 Surveys conducted and detailed designs and tender documents prepared for components A and B by June 2007

Most of the activities were completed by July 2008.

2.2 Community participation ascertained Community participation ascertained through regular meetings with union council nazims and the local community.

2.3 Land acquired for STP by end of 2006 Land acquisition for STP completed in 2009.

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27

Design Summary

Performance Indicators/Targets Monitoring Mechanisms Assumptions

and Risks Status at Completion

2.4 Tendering completed and contracts awarded for all components by end of 2007 Contract award completed in October 2008.

2.5 Construction supervision conducted and implementation of all civil works completed by 2010 Construction supervision of awarded civil works continued until July 2009.

3.1 Training to WASA and Rawal Town staff completed by end of 2006 A training program was carried out in 2009. No further training was imparted because the training plan developed by the consultants was not approved by the RDA and/or WASA.

3.2 Design and implementation of public awareness program by end of 2006 Design and implemented by package C consultant; completed in 2009.

3.3 Establishment of urban development plan and GIS mapping by mid-2007 Not done.

3.4 PPMS update and regular quarterly reports prepared by PMU implementation Some preparatory work was done on PPMS but it was not updated periodically.

3.5 Loan covenants monitored and respective actions taken by GOP and CDR with regular follow-up by ADB during project

Mostly complied with

ADB = Asian Development Bank, CDA = capital development authority, CDR = city district, Rawalpindi, GIS = geographic information system, GOP = government of Pakistan, ha = hectare, km = kilometer, m = meter, m3/day = metric ton per day, MIS = management information system, NGO = non-government organization, PLGO = Punjab local government ordinance, PMU = project management unit, PPMS = project performance monitoring system , RDA = Rawalpindi development authority, STP = sewerage treatment plant, WASA = water and sanitation agency Source(s): Borrower’s project completion report,, Asian Development Bank project completion review mission estimates, PMU records

28 Appendix 3

UTILIZATION OF CONSULTING SERVICES INPUT (person-months)

At Appraisal At Completion Consultancy Packages Intl. Domestic Intl. Domestic Package A. Engineering Services

1. Technical Staff

Team Leader/Urban Development Specialist

0.0 60.0 0.0 24.8

Water Supply Specialist 0.0 30.0 0.0 24.0

Sewerage/Sewage Treatment Specialist

6.0 48.0 0.0 41.5

Drainage Specialist 0.0 12.0 0.0 12.0 Hydrologist 0.0 12.0 0.0 0.0 Hydrogeologist 0.0 10.0 0.0 7.5 Mechanical Engineer 2.0 12.0 0.0 0.0 Electrical Engineer 0.0 12.0 0.0 0.0

Solid Waste Management Specialist

2.0 12.0 0.0 12.0

Waste Management Policy Specialist

1.5 3.0 0.0 0.5

Structural Specialist 0.0 24.0 0.0 4.5 Geo-Tech Engineer 0.0 6.0 0.0 0.0 Ground Water Modeling Specialist 1.5 9.0 0.0 10.0 Environmental Specialist 0.0 20.0 0.0 15.0 Contracts Management Specialist 0.0 36.0 0.0 16.6 Digitization – GIS Specialist 0.0 8.0 0.0 11.0 Subtotal 13.0 314.0 0.0 179.3 2. Construction Supervision Inputs Construction Specialist- CRE 0.0 36.0 0.0 22.9 Resident Engineers (6) 0.0 208.0 0.0 80.8 Construction Supervisors (18) 0.0 540.0 0.0 166.3 Inspectors 176.0

Materials/Quality Assurance Engineers (2)

0.0 54.0 0.0 15.0

Subtotal 0.0 838.0 0.0 461.0 Total Package A 13.0 1152.0 0.0 640.2 Package B. Institutional Development Consultant Urban Development Specialist 5.0 24.0 0.0 19.8

Institutional Development Specialist

0.0 18.0 0.0 10.7

Asset Management Specialist 0.0 15.0 0.0 14.9 MIS Database Specialist 0.0 18.0 0.0 16.9 Financial Management Specialist 0.0 18.0 0.0 7.3 Resettlement Specialist 0.0 12.0 0.0 6.5 Social Mobilizer/Gender Specialist 0.0 12.0 0.0 11.0 Water Quality Monitoring Specialist 0.0 8.0 0.0 8.0 Infrastructure Management Trainer 0.0 6.0 0.0 0.0

Appendix 3 29

At Appraisal At Completion Consultancy Packages Intl. Domestic Intl. Domestic TQM Specialist 0.0 12.0 0.0 8.7 Municipal O&M Specialist 0.0 12.0 0.0 0.0

Transportation and Land Use Specialist

0.0 5.0 0.0 5.3

Urban Development Legal Expert 0.0 4.0 0.0 2.5 Total Package B 5.0 164.0 0.0 111.6Package C. Community Development and Participation Social Mobilization Specialists 0.0 144.0 0.0 60.0 Total Package C 0.0 144.0 0.0 60.0 Total Consulting Services Input 18.0 1460.0 0.0 811.9

CRE – chief resident engineer, GIS = geographical information system, Intl. = international, MIS = management information system, O&M = operation and maintenance, TQM = total quality management. Source: Asian Development Bank project completion review mission estimates

30 Appendix 4

PROJECT COSTS AT COMPLETION

Table A4.1: Project Cost by Financier ($ million)

Source

ADB 12.50 47.50 60.00 70% 1.87 11.83 13.70 70%

GOP 0.00 21.40 21.40 25% 0.00 5.89 5.89 30%Rawal Town/ WASA 0.00 4.30 4.30 5% 0.00 0.00 0.00 0%

Total 12.50 73.20 85.70 100% 1.87 17.72 19.59 100%

At Appraisal At Completion

Foreign Exchange

Local Currency Total %

Foreign Exchange

Local Currency Total %

ADB = Asian Development Bank, GOP = government of Punjab, WASA = Water and Sanitation Agency. Source: Asian Development Bank project completion review mission estimates, Loan Financial Information System.

Appendix 4 31

Table A4.2: Project Cost by Component ($ million)

At Appraisal At Completion

Item FEx LCu Total FEx LCu Total

A. Civil Works

1. Environmental Sanitation

a. Sewerage network 0.41 5.79 6.20 0.07 1.02 1.09

b. Sewage Treatment Plant

(i) Sewage treatment plant 1.02 9.41 10.43 0.00 0.00 0.00

(ii) Outfall sewer 2.14 14.81 16.95 0.00 0.00 0.00

c. Storm Water Drainage

(i) City drains 0.00 1.66 1.66 0.00 0.11 0.11

(ii) Lai Nullah improvement 0.00 0.84 0.84 0.00 0.00 0.00

d. Solid Waste Management

(i) Landfill site 0.00 0.05 0.05 0.00 0.08 0.08

(ii) Transfer station 0.00 0.17 0.17 0.00 0.00 0.00

e. Slaughterhouse and Toilets

(i) Slaughterhouse 0.00 0.25 0.25 0.00 0.00 0.00

(ii) Public toilets 0.00 0.08 0.08 0.00 0.15 0.15

2. Water Supply Services

a. Repair of WWI and II 0.00 0.36 0.36 0.00 0.42 0.42

b. Provision of Water Supply 0.90 4.52 5.42 0.40 1.99 2.38

c. Activation of OHR 0.00 0.52 0.52 0.00 1.31 1.31

d. Environmental Mitigation of Rawal Lake 0.00 0.51 0.51 0.00 0.00 0.00

e. Installation of Water Meters 0.00 0.42 0.42 0.00 0.00 0.00

3. Institutional Development

a. Sub-office and Complaint Office 0.09 0.36 0.45 0.00 0.00 0.00

Subtotal (A) 4.56 39.75 44.31 0.47 5.08 5.54

B. Equipment and Material

1. Environmental Sanitation

a. Sewerage Network 0.42 0.18 0.60 0.03 0.01 0.04

b. Sewage Treatment Plant

(i) Sewage treatment plant 0.68 0.17 0.85 0.00 0.00 0.00

(ii) Outfall sewer tunneling 2.45 0.73 3.18 0.00 0.00 0.00

c. Solid Waste Management

(i) Equipment and vehicles 0.44 1.53 1.97 0.27 0.93 1.19

(ii) Transfer station 0.08 0.08 0.16 0.00 0.00 0.00

d. Slaughterhouse and Toilets 0.09 0.00 0.09 0.00 0.00 0.00

2. Water Supply Services

a. Repair of WWI and II 0.00 0.17 0.17 0.00 0.00 0.00

b. Provision of Water Supply 0.16 0.12 0.28 0.17 0.13 0.30

c. Supply of Water Meters 1.16 0.00 1.16 0.00 0.00 0.00

32 Appendix 4

At Appraisal At Completion

Item FEx LCu Total FEx LCu Total

3. Institutional Development 0.04 0.09 0.13 0.00 0.00 0.00

Subtotal (B) 5.52 3.07 8.59 0.46 1.06 1.52

C. Project Implementation Support

1. Consultancy Services 0.55 3.52 4.07 0.26 1.69 1.95

2. Equipment and Vehicles 0.12 0.16 0.28 0.06 0.08 0.14

3. Incremental Administrative Support (PMU) 0.00 0.85 0.85 0.00 0.71 0.71

Subtotal (C) 0.67 4.53 5.20 0.32 2.47 2.80

Land Acquisition and Compensation 0.00 9.00 9.00 0.00 8.26 8.26

Taxes and Duties 0.00 9.37 9.37 0.00 0.49 0.49

Total Base Cost (A+B+C) 10.75 65.72 76.47 1.25 17.36 18.62

Physical Contingencies 0.32 1.97 2.29 0.04 0.26 0.30

Price Contingencies 0.38 5.50 5.88 0.01 0.09 0.10

Total Contingencies 0.70 7.47 8.17 0.05 0.35 0.40

Interest During construction 1.07 0.00 1.07 0.57 0.00 0.57

Total Cost 12.52 73.19 85.71 1.87 17.72 19.59 FEx = foreign exchange, LCu = local currency, OHR = overhead reservoir, PMU = project management unit, WW = water works. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank project completion review mission estimates, Loan Financial Information System.

Appendix 5 33

PROJECTED AND ACTUAL CONTRACT AWARD AND DISBURSEMENTS ($ million)

Year Quarter Contract Awards Percent Disbursements Percent

Projected Actual Projected Actual

2006 Jan–Mar 3.500 1.934

64.80

3.000 3.000

88.58

Apr–Jun 0.000 0.000 0.000 0.446

Jul–Sep 0.250 0.921 0.500 0.074

Oct–Dec 0.750 0.061 0.800 0.289

Total 4.500 2.916 4.300 3.809

2007 Jan–Mar 3.450 1.792

97.44

2.000 0.214

51.33

Apr–Jun 0.900 0.720 1.100 0.635

Jul–Sep 3.250 5.326 2.500 2.270

Oct–Dec 1.400 0.932 2.500 1.039

Total 9.000 8.770 8.100 4.158

2008 Jan–Mar 1.350 0.373

5.66

1.850 0.828

46.52

Apr–Jun 6.750 0.254 3.700 1.459

Jul–Sep 5.590 0.245 3.100 2.715

Oct–Dec 5.800 0.232 2.350 0.115

Total 19.490 1.104 11.000 5.117

2009 Jan–Mar 1.510 0.339

3.52

0.700 1.286

6.24

Apr–Jun 1.390 0.000 1.110 0.000

Jul–Sep 3.440 0.000 3.240 0.000

Oct–Dec 3.290 0.000 4.870 (0.667)

Total 9.630 0.339 9.920 0.619

Grand Total 42.620 13.129 30.80 33.320 13.703 41.13 ( ) = negative. Source: Asian Development Bank Loan Financial Information System.

34 A

ppendix 6

PROJECT IMPLEMENTATION SCHEDULE (appraised versus actual)

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36 Appendix 7

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenant

Reference in Loan

Agreement

Status of Compliance 1 In the carrying out of the Project and operation of the

Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 6 to this Loan Agreement.

Loan Agreement (LA),

Article IV, Section 4.01

Partially complied with.

The borrower did not meet obligation related to project scope and safeguards as set forth in the Loan Agreement.

2 The Borrower shall enable ADB’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

LA, Article IV, Section 4.02

Complied with

3 The Borrower shall take all actions, which shall be necessary on its part to enable Punjab to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

LA, Article IV, Section 4.03

Not complied with

The drainage and STP subcomponent was badly affected due to linking of this work with the Lai Express way subproject sfatrted after project approval, and later on Government’s indecision on the fate of the Lai Express way and inclusion of other agencies like the cantonment board in the STP scope .

4

The services of consultants shall be utilized in the carrying out of the Project, particularly with regard to (a) Project management and implementation support to PMU; (b) Institutional development; and (c) Community development and participation.

LA, Schedule 5, para 1

Complied with.

5 The selection, engagement and services of the consultants shall be subject to the provisions of this Schedule and the provisions of the "Guidelines on the Use of Consultants by Asian Development Bank and Its Borrowers" dated dated January 2005 (hereinafter called the Guidelines on the Use of Consultants), as amended from time to time, which have been furnished to Punjab.

LA, Schedule 5, para 2

Complied with

6 For the consulting services under paragraph 1(a) and (b) above, the consultants shall be selected and engaged either as a firm or as individual consultants. In the case of a firm, it shall be selected and engaged by Punjab using the quality-and-cost-based selection (QCBS) method.

LA, Schedule 5, para 3

Complied with

7 For the consulting services under paragraph 1(c) above, the consultants shall be selected and engaged either as a firm or as individual consultant. In the case of a firm, it shall be selected and engaged by Punjab using the quality based selection (QBS) method.

LA, Schedule 5, para 4

Complied with

8 Individual consultants shall be selected and engaged by Punjab in accordance with the following procedures. (a) A list of the candidates together with their

qualifications and a draft contract shall be furnished to ADB for approval before the selection of consultants.

LA, Schedule 5, para 5

Complied with

Appendix 7 37

Covenant

Reference in Loan

Agreement

Status of Compliance (b) Promptly after the contract is signed ADB shall

be furnished with the evaluation of the candidates and a brief justification for the selection, together with three copies of the signed contract.

(c) (c) If any substantial amendment of the contract is proposed after its execution, the proposed changes shall be submitted to ADB for prior approval.

9 The Borrower and Punjab shall ensure that all Bank-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

LA, Schedule 5, para 6

Complied.with

10. The CDR shall be the Project Executing Agency and responsible for overall Project implementation.

LA, Scheudle 6, para 1

Complied with

11. WASA shall be the Project implementing agency for subcomponents 1(a) and (b) and Component 2. RT shall be the Project implementing agency for subcomponents 1(c), (d) and (e). RDA shall be the Project implementing agency for subcomponents 3(b) and (d). WASA and RT shall be the joint Project implementing agencies for subcomponents 3(a) and (c).

LA, Scheudle 6, para 2

Complied with

12. Within three months of the Effective Date, the Borrower shall ensure that RDA, WASA and RT shall have appointed all key qualified staff required for the strengthening of their capacity to ensure smooth implementation of the Project.

LA, Schedule 6, para 3

Partially complied with Not all positions were filled in RDA, WASA and RT.

13. The PMU shall be established by the Project Executing Agency and to be located at WASA. It shall be headed by a Project director to be assisted by (a) the deputy Project director for Water Supply, (b) deputy Project director for sewerage & drainage and solid waste management, and (c) deputy Project director for finance. The Project director and the deputy Project directors shall be deemed as the core staff of the PMU. They will be further assisted by the assistant managers for (a) monitoring & evaluation, (b) water supply, (c) solid waste management, (d) sewerage & drainage, (e) finance, and (f) administration. The PMU shall be supported by a team of consultants. The PMU shall provide assistance to CDR, RT, RDA and WASA in the implementation of the Project and provide support for the monitoring and evaluation of the Project implementation.

LA, Schedule 6, para 4

Complied with

14. Within three months of the Effective Date, the PIRC shall be established at the city-district level. It shall be headed by the CDR nazim and comprise the director general of RDA, managing director of WASA, the RT and Pothar town nazims, a city district officer of CDR and one elected female representative from the district council. The PIRC shall review the implementation progress of all the Project components. It shall meet at least once every three

LA, Schedule 6, para 5

Complied with

38 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance (3) months.

15. Within three months of the Effective Date, the PSC shall be established at P&D Board in Lahore and chaired by the Chairman of the P&D Board, with members comprising of senior officers from the P&D Board, HUD&PHED, the Department of Finance, the nazims of CDR and RT, the director general of RDA and a senior representative from WASA. Its tasks shall be: (a) to ensure smooth and orderly implementation of the Project, (b) provide policy guidance on the ongoing and new initiatives by the Borrower, and (c) resolve inter-agencies problems. The PSC shall hold meetings at least once every six months. The decisions of the meetings shall be reported to ADB.

LA, Schedule 6, para 6

Partly complied with

PSC was established but it did not add much value to the project. It could not help project to successfully overcome the implementation problems faced from time to time.

16. Prior to the implementation of subcomponents 1(c), (d) and (e) of the Project, the RT shall be required to undertake the following actions:

(d) elect members to the monitoring and house committees and the passage of the bye-laws for the operations of these committees, as required under PLGO 2001;

(e) strengthen the tehsil council secretariat with appointment of the required staff, procurement of the necessary equipments and allocation of proper budgets as required under PLGO 2001;

(f) organize the RT office in accordance with the requirements under PLGO 2001 and the TMA rules of business. Where required, suitably qualified and trained engineering and technical staff may be provided for provision of municipal services. The staff in RT shall be designated to meet their specific job responsibilities and job descriptions;

(g) establish the executive committee, as required under the TMA rules of business;

(h) carry out discussions and prepare action plans for the transfer of functions to the union administration as required under PLGO 2001;

(i) allocate 25% of the development budget for CCB projects;

(j) disseminate widely the recently developed rules for registration of CCBs to ensure public awareness;

(k) prepare details of documents and other information that shall be made available to the public together with the procedures for dissemination of such information, including on how it can be obtained from RT;

(l) initiate baseline survey to determine revenue potentials of items such as licensing, parking stands, and transport

LA, Schedule 6, para 7

Partly complied with.

RT did not do anything for information dissemination to public that could be of public interest. Similarly, no baseline surveys for determining its revenue potential were carried out by RT. Similarly action plans, and rules of business for different committees were also not completed.

Appendix 7 39

Covenant

Reference in Loan

Agreement

Status of Compliance stands;

(m) develop a program to conduct regular surveys to keep the revenue database updated; and

(n) comply with budget rules regarding arrears. The arrears shall be detailed in the budget format with reasons for non-recovery of arrears given.

17 The Borrower shall ensure that Punjab shall transfer adequate counterpart funds under the Project to CDR for the effective implementation of the Project, and that these funds are released in a timely manner.

LA, Schedule 6, para 8

Complied with

18. The Borrower shall cause Punjab to update (a) the EIA, the SEIA, and the EMPs, based on detailed engineering design, and (b) the draft resettlement plan (RP), based on final detailed design.

LA, Schedule 6, para 9

Partly complied with. The safeguard plans were updated but

with many gaps in quality.

19. The Borrower shall cause Punjab to ensure that (a) all land, rights-of-way and other rights required for any Project shall be acquired or otherwise made available in a timely manner, and (b) any involuntary resettlement is carried out in accordance with the updated resettlement plan agreed upon between the Borrower and ADB, the Borrower’s land acquisition and resettlement laws and regulations, and ADB’s Policy on Involuntary Resettlement (1995).

LA, Schedule 6, para 10

Partly complied with. The land acquisition was not fully in accordance with ADB’s Policy on Involuntary Resettlement. In some drainage subproject resettlement plans were not updated before the subprojectawards.

20. The Borrower shall cause Punjab to ensure that the design, construction, operation and implementation of all Project facilities is carried out in accordance with the agreed upon EIA between the Borrower and ADB, and complies with the Borrower’s environmental laws and regulations, and ADB’s Environment Policy (2002).

LA, Schedule 6, para 11

Partially complied with.

EIAs where not undertaken or were not compliant with ADB safeguard policies for many subprojects including disposal stations, landfills and drainage subprojects.

21. The Borrower shall cause Punjab to further ensure that any adverse environmental impacts arising from the construction, operation and implementation of the Project facilities shall be minimized by implementing the EMPs and associated monitoring plans. Furthermore, Punjab shall implement all mitigation and monitoring measures specified in the EIA and SEIA.

LA, Schedule 6, para 12

Partially complied with.

EIAs and EMP were not undertaken for many subprojects

22. Prior to undertaking any construction activities, Borrower shall cause Punjab to undertake consultation with the local communities on environmental issues and obtain all necessary environmental clearances for any applicable Project activities from EPD.

LA, Schedule 6, para 13

Complied.

23. The Borrower shall cause Punjab to ensure that the bidding documents and civil works contracts under the Project shall incorporate the environmental requirements under paragraphs 11 – 13 of this Schedule.

LA, Schedule 6, para 14

Partially complied with. Some bidding documents for subprojects related to drainage and sewerage did not incorporate these requirements.

24. The Borrower shall cause Punjab to ensure full and equitable participation of women in Project implementation in accordance with the gender

LA, Schedule 6, para 15

Partially complied with.

Women were involved in Project

40 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance strategy as agreed between the Borrower and ADB and set out in Appendix 11 of the RRP.

implementation, however, the gender strategy was not fully implemented. Status of implementation of the gender action plan is provided in an attachment to this Appendix.

25. The borrower shall cause Punjab to ensure that the project shall not negatively impact the vulnerable groups and be carried out in accordance with ADB’s policy on indigenous people (1998) and ADB’s policy on Gender and Development (2003)

LA, Schedule 6, para 16

Complied with

26. Within one year of the Effective Date, the Borrower shall cause Punjab to ensure that the policy for water supply and sanitation, solid waste management, and urban development, as set out in Appendix 2 of the RRP, shall have been implemented, and updated following the water services survey, which shall be undertaken within six months of the Effective Date.

LA, Schedule 6, para 17

Partially complied with

All policy actions were not complied. Details are provided in Appendix 1.

27. The Borrower shall cause Punjab to ensure that the contractors recruited under the Project shall provide OHSP for all construction activities. An OHSP shall also be developed and implemented as part of the operation of slaughterhouse, landfill site and sewerage treatment plant.

LA, Schedule 6, para 18

Not complied with. No such plans were provided by the contractors.

28. Within three months of the Effective Date, the Borrower shall cause Punjab to ensure that the bills for water supply and sanitation issued at the Project area shall have used the updated consumer survey data.

LA, Schedule 6, para 19

Partly Complied.

Consumer survey was carried out only in 2008, not covering thw hole project area.

29. The Borrower shall cause Punjab to guarantee that the detailed design of the sewerage treatment plant shall be subject to approval of ADB and incorporate all environmental mitigation measures proposed in the EIA.

LA, Schedule 6, para 20

Not applicable. STP could not be constructed.

30. The Borrower shall cause Punjab to ensure that a historical flood study shall be conducted to determine the height and structural resistance required for the construction of embankment and sewerage treatment plant protection bunds.

LA, Schedule 6, para 21

Not complied with.

31. The Borrower shall cause Punjab to ensure that aqueous effluent from the sewerage treatment plant shall be treated prior to discharge. All discharges must be compliant with NEQS municipal wastewater discharge standards. The Borrower shall also cause Punjab to agree to undertake firm control of aqueous effluent discharges through enforcing point source self-monitoring, and through EPD quarterly inspections. The environmental compliance officer in the sewerage treatment plant management unit shall provide the records of the self-monitoring testing.

LA, Schedule 6, para 22

Not applicable.

STP could not be constructed.

32. The Borrower shall cause Punjab to ensure that sludge disposal from the sewage treatment plant shall be done in a safe and environmentally friendly manner, which may include the use of fertilizer strictly for the sludge from domestic non-contaminated sludge and landfilling and incineration for the sludge not meeting agricultural standards or containing toxicants, respectively. If incineration facilities are required, the Borrower shall cause

LA, Schedule 6, para 23

Not applicable.

STP could not be constructed.

Appendix 7 41

Covenant

Reference in Loan

Agreement

Status of Compliance Punjab to agree to ensure that all air emissions from incinerators shall strictly meet NEQS point source air emission standards. The Borrower shall cause Punjab to undertake firm control of air emissions.

33. The Borrower shall cause Punjab to appoint an environmental engineer and an environmental scientist for the operation of the sewerage treatment plant. The environmental engineer shall perform the environmental compliance and day-to-day running of the wastewater treatment plant. The environmental scientist shall perform the effluent discharge analysis and general environmental on-site monitoring. The appointment of the engineer and scientist must be made effective 6 (six) months prior to initiating operation of the wastewater treatment plant.

LA, Schedule 6, para 24

Not applicable.

STP could not be constructed.

34. The Borrower shall cause Punjab to ensure the development of a detailed waste management plan prior to the commencement of operation of the slaughterhouse constructed under the Project.

LA, Schedule 6, para 25

Not applicable

No slaughterhouse was constructed under the Project.

35. The Borrower shall cause Punjab to privatize the operation of the water bouzers to the most qualified and efficient private operator through a fair and transparent mechanism.

LA, Schedule 6, para 26

Not Complied with

WASA attempted to outsource sale of water through bouzers but no private sector entity showed any interest.

36. The Borrower shall cause Punjab to ensure that depletion of surface and groundwater resources within the vicinity of the Rawalpindi shall be minimized through the provision of a study to establish (a) the current groundwater baseline and (b) seasonal variations in surface water and groundwater. The study shall be completed by June 2006 and shall be carefully considered in future planning of any water extraction.

LA, Schedule 6, para 27

Not complied with.

A ground water study was conducted not covering the whole scope envisaged at appraisal, however, the water extraction is not planned in the light of the findings of the study.

37. Within six months of the Effective Date, the Borrower shall cause Punjab to ensure that the solid waste collection presently managed by the RT shall be devolved to the union administration (UA). Such devolution shall be followed by the proper allocation of resources to the union administration.

LA, Schedule 6, para 28

Partially complied with

Out of 54 UAs of Rawalpindi, only three are doing solid waste collection using the public-private partnership model. Resources for this activity have also not been transferred to the union level.

38 The Borrower and Punjab acknowledge that ADB, consistent with its commitment to good governance, accountability and transparency, shall reserves the right to conduct audits (including non-financial procurement audits) of any possible financial or management impropriety in the conduct of the project. The borrower and Punjab shall agree to cooperate fully with any such audit and extend all necessary assistance, including access to relevant books, records and personnel.

LA, Schedule 6, para 29

Complied with

39 The Project Executing Agency shall maintain records and accounts adequate to identify works, goods, and services financed by the loan proceeds. Furthermore, the Project Executing Agency shall (a) maintain separate accounts for the Project; (b) ensure that Project accounts and financial statements are audited annually in accordance with

LA, Schedule 6, para 30

Complied with

42 Appendix 7

Covenant

Reference in Loan

Agreement

Status of Compliance sound accounting principles by independent auditors acceptable to ADB; and (c) submit to ADB, not later than 6 months after the close of each fiscal year, certified copies of audited accounts and financial statements and the auditor’s report on them. The audit of the Project accounts shall include an audit of the use of the imprest account and the statement of expenditure procedures and the annual audit report will have a separate audit opinion on the use of these procedures.

40 Without limiting the generality of Section 6.05 of the Loan Regulations, the PMU shall prepare monthly progress reports, in a format acceptable to ADB, with information on (a) progress made against established targets, including pre-identified monitoring indicators; (b) delays and problems encountered, and actions taken to resolve them; (c) work done by the consultants; (d) updated results of water quality monitoring and action taken on the encountered problems; (e) progress made on PPMS; (f) compliance with the loan covenants; (g) proposed program of activities for the next month; and (h) progress expected during the next month. The monthly report shall be submitted to ADB by the end of the first week of the following month. Within 3 months of the physical completion of the Project, the Project Executing Agency shall prepare and submit to ADB a Project completion report on the execution of the Project including costs and compliance with the loan covenants.

LA, Schedule 6, para 31

Partially complied with. Monthly progress reports were prepared and sent to ADB, however, such reports did not include all required information as outlined in this covenant.

41 The Borrower and ADB shall undertake semi-annual review to assess the Project progress. In addition, the Borrower and ADB shall also undertake a mid-term Project review at the third year of Project implementation to: (a) evaluate the scope, design, and implementation arrangements of the Project; (b) evaluate the progress of the institutional reform, and infrastructure development components; (c) identify changes needed in any or all of the above areas; (d) assess implementation performance against agreed targets in the Project framework; (e) identify critical issues and constraints, if any; and (f) recommend adjustments to the Project design and/or implementation arrangements, if required.

LA, Schedule 6, para 32

Partly complied with.

Only five Review Missions were fielded after the Inception Mission. No mid-term review was carried out.

42 Within nine months of the Effective Date, the Borrower shall ensure that a comprehensive Project Performance Management System (PPMS) shall have been established and maintained to monitor and evaluate the technical performance and social and economic benefits of the Project, especially on the poor and women. The performance monitoring indicators and procedures shall be tested with respect to data availability and other constraints, revised if necessary, and institutionalized as part of the Project’s management information system. The PMU shall be responsible for the establishment of the PPMS and shall, within every six months, conduct monitoring and assessment of the performance of each of the Components.

LA, Schedule 6, para 33

Not complied with

Some work was done on development of indicators, data was also collected but a full fledge PPMS was never established. No compiled PPMS reports were prepared and submitted to ADB.

Appendix 7 43

Covenant

Reference in Loan

Agreement

Status of Compliance

43 The Project Executing Agency shall continue to update and submit to ADB, the PPMS and management information system on semi-annual basis for at least 3 years after Project completion.

LA, Schedule 6, para 34

Not complied with.

The PPMS for the project was not developed and the project was closed in 2009,

44 Within six months of the Effective Date, the Borrower shall carry out a comprehensive organization development program for RT and WASA.

LA, Schedule 6, para 35

Partially complied with Study was conducted by the consultants on organizational development and extensive discussion held with WASA and RT. However no program for implementation was developed.

45 The Borrower shall ensure the implementation of a tariff revision in accordance with the tariff plan earlier agreed under the Urban Water Supply and Sanitation Project.

LA, Schedule 6, para 36

Partly complied with. Since 2005, WASA revised the tariff three times. In 2011 the tariff was revised again however, later on it was reversed by the provincial government as a result of political pressure.

44 Appendix 7

Table A7: Update on Gender Action Plan

Sr.No. Agreed Action Status of Compliance

Community Level

1 Women groups will be formed at the ward/neighborhood level by participant NGOs/CBOs for social mobilization activities.

NGOs were not hired under the Project. However, the social mobilization was done by the individual consultants. Women Groups were also formed at ward level.

2 Women councilors from wards/communities will be involved with the PMU in planning infrastructure for water and sanitation services,

Women councilors were involved in planning process for infrastructure of water supply and sanitation services.

3 Women from poor households will be encouraged to introduce recycling and composting.

Not complied with.

4 Local sanitation groups will be formed with women from the community.

Sanitation groups were formed representing women of local community.

5 Employment opportunities will be created in civil works for interested poor women.

No particular action was taken to comply with this requirement.

6 Women’s groups will be represented in managing new facilities.

Women do not have any role in management of facilities.

7 Women will be the primary beneficiaries of the public health and hygiene campaign.

Complied with. Women were specifically targeted in public health and hygiene campaigns.

8 Women community volunteers will be developed for the health and hygiene campaign.

Not complied with. No volunteers were developed.

9 Employment will be created for poor women (at least 20%) in the community-based solid waste management program.

Not complied with. No community-based solid waste management program was carried out.

Local Governance

10 Capacity building training will be provided to the elected women representatives of RT and UAs on their role and responsibilities and planning community water and sanitation facilities.

No such trainings were conducted.

11 A gender sensitization training workshop will be provided for men and women councilors from UAs for better collaboration in preparing the plan of activities for their ward, UA, and RT.

Complied with.

12 Community women leaders and women councilors in their ward/community-level planning committee will be involved in ward level planning.

Complied with.

Appendix 7 45

Sr.No. Agreed Action Status of Compliance

13 Women councilors will be included in various users groups, such as lane-level sewerage management committees, solid waste management groups, and public health awareness groups.

Complied with.

14 In the PMU, women officials will be recruited as professional staff.

Not complied with. PMU employed only three females as support staff. No females were appointed against any professional position.

15 A national consultant on gender and development will be included in consulting services to develop a detailed gender action plan to operationalize the gender plan.

Complied with. Recruited under Package B consultancy.

16 The detailed gender action plan will include budget, implementation schedule, and resource requirement.

Some preparatory work was done by the Gender Specialist, however, the plan was not finalized.

17 Gender disaggregated monitoring indicators and a database will be developed (i) for the management information system (MIS) and; (ii) at the UA and RT level (a) to monitor men and women beneficiaries of the Project and, (b) participation of men and women councilors of local bodies in planning and implementation of the Project.

Not complied with. No database and MIS was developed at any level. No monitoring indicators were developed for gender disaggregated data.

46 Appendix 8

ECONOMIC AND FINANCIAL ANALYSIS

A. Economic Analysis 1. Economic costs are derived from the financial estimates of capital and operation and maintenance (O&M) costs after excluding all duties and taxes and using appropriate price conversion factors. Traded and nontrade components are estimated from the project cost estimates of the subproject. The shadow exchange rate factor for traded goods is 0.909, and the conversion factor for non-traded components is 1.0. The analyses were undertaken over a 20-year period, even though the economic lives of most investments extend beyond this time. Costs and benefits were quantified in constant 2010 prices. The economic viability of the subprojects was determined by computing their economic internal rate of return (EIRR) and comparing it with the assumed economic opportunity cost of capital of 13.5%, all in real terms. 2. Benefits from the project are better health and quality of life as a result of improved water supply, improved property value, and cost saving in disposal of waste. They are estimated based on customers’ willingness to pay for a higher quality of water and better sanitation facilities. Economic benefits are based on a survey conducted in the project service area by visiting a hospital, private clinics, interviewing medical professionals, registered property ventures, residents, and desk review. The health impact of the investments is based on avoided medical costs caused by reduced morbidity rates and improved quality of life. 3. The EIRR estimated at project completion is lower than the value at appraisal. An overall EIRR of 10.0% (15.8% at the time of appraisal) is attained. Similarly, the project has an economic net present value (NPV) of PRs–68.0 million (compared with PRs1.1 billion at the time of appraisal). The lower than appraised EIRR is due to non-realization of health benefits as assumed at the time of appraisal, especially in the case of the water supply component which has an EIRR of 8.29% (lower than appraised) and a negative NPV of PRs–90 million. At the time of appraisal, economic analysis was based on the premise that all subcomponents of projects would be completed and as a result would complement each other in terms of accruing health benefits for individual subcomponents and the project as a whole. However, not all subcomponents were completed (no EIRR is calculated for sewerage, the sewage treatment plant, and drainage), thus depleting the health benefit for the water supply component. In the case of solid waste management (SWM), the EIRR is 19% with a positive NPV of PRs22 million. The EIRR is slightly lower than the appraised estimate (21.5%) as most of the assumed benefits, such as the increase in collection efficiency up by 20% and the reduction in the O&M cost, were achieved. The results are in Table A8.1.

Table A8.1: Results of Economic Analysis at Project Completion

Economic Indicators Water Supply SWM Net present value (PRs million) (90.00) 21.46 Benefit–cost ratio 0.65 0.96 EIRR 8.29% 19.10%

Sensitivity Analysis 10% decrease in project benefits 6.76% 5.93% 10% increase in project cost 7.31% 17.05% Simultaneous 10% reduction in benefits and 10% cost overrun

5.83% 4.37%

Benefits delayed for 1 year 6.59% 6.39% ( ) = negative. EIRR = economic internal rate of return, PRs = pak rupees, SWM = solid waste management

Appendix 8 47

Source: Asian Development Bank project completion review mission estimates

a. Basic Assumptions

4. The underlying assumptions for the above economic analysis are as follows:

(i) The standard conversion factor (SCF) for capital investment and operating cost is 0.909 in accordance with planning commission guidelines.

(ii) The SCF for cashed saved (health cost saved) is 1.

(iii) For the NPV calculation, the latest State Bank of Pakistan Policy discount rate is used, which is 13.5%.

(iv) The health cost includes transportation cost, doctor/hospital fee, and medicine cost.

(v) As a first step, the decrease in patients with waterborne diseases from 2009 and 2010 is calculated (from hospital data). Then, a one-time weighted average cost to recovery for each waterborne disease is calculated (categorized in four types) for 2009 and 2010.

(vi) The cost saving is calculated as the difference in total cost for 2009 and 2010. The outcome is then averaged out to arrive at the cost saving per household. In the end, cost savings attributable to the project have been obtained using an incremental approach:

Incremental household/connection * Average Cost saving per

household/connection

(vii) All data are taken from hospital statistical departments, interviews with doctors, and medical professionals (primarily Holy Family Hospital, which is used by people in the project’s service area, and private clinics in the same area).

(viii) The cost saving in the disposal cost of solid waste is taken from the last 5-year trend in the annual expenditure of the solid waste management wing of Rawalpindi City District Government (CDG).

(ix) Improvement in property value is calculated by ascertaining the property value and annual rental value in control groups identified in the inside and outside project service area It is assumed that people are willing to pay for better health and sanitation facilities.

(x) In the case of SWM, capital reinvestment is taken after 5 years, reflecting the actual useful life of machinery and equipment provided for the subcomponent.

B. Financial Analysis

5. The financial internal rates of return (FIRRs) were calculated for the water supply and sewerage subcomponents. Projected income and expenditure statements and cash flows were prepared and the FIRR is calculated over 20 years. No FIRR is calculated for the solid waste subcomponents (7.33% at the time of appraisal) as there is no revenue stream—no-one pays for the service. Drainage work completed by the loan closing date is insignificant, so it does not warrant an FIRR calculation.

48 Appendix 8

a. Financial Internal Rate of Return

6. The FIRR was calculated by taking into account the incremental net cash inflows in nominal terms. The FIRR of the overall project is 1.67%. The FIRR of the water supply subcomponent is 3.62% and for the sewerage subcomponent it is –2.88%. One of the reasons for a lower overall project FIRR is that capital investment up to 70% in the sewerage subcomponent was cancelled. The reasons for the lower actual FIRR for water supply are as follows:

(i) Tariff rates were not structured, as envisaged in the project design. It was agreed at the time of project planning that water supply services would be metered rather than having flat fixed charges. However, some serious issues in the procurement of water meters lingered until project closure. The Water and Sanitation Agency (WASA) did not have other resources to continue with the planned metering of the water services. During 2007–2010, the volume of water supplied and consumed increased. Nevertheless, since the tariff rate structure is flat, a related increase in the cost to provide this additional water is not fully compensated by the increased revenue.

(ii) The collection efficiency of WASA (defined as revenues in a given period as a percentage of the amount billed for the respective period) is 72%, including arrears of about 22%. At the time of appraisal, it was assumed to be 80%. Consumers receive water bills quarterly and it is normal for most consumers to pay these bills after two or even three quarters—the late payment penalty is very low. If we remove arrears from the analysis, the collection efficiency for recovery from current-year bills averages 50%. Although WASA has improved its collection efficiency, and the annual rate of arrears accumulation has decreased, the timing of cash inflow is delayed, which has contributed toward lowering the FIRR.

(iii) The number of domestic and commercial water connections increased at a very low rate as WASA is already covering 83% (91,155) of its total existing service area (110,000). The number of domestic connections increased only by 1% annually and the number of commercial connections remained at the same level from 2007 to 2011.

b. Water Supply

7. The water supply subcomponent comprises water source development (tube wells and pumps), water transportation and communal water points, transmission mains, distribution systems, and storage. The new connection charges for water supply range from PRs3,425 for residential consumers to PRs6,425 for commercial consumers.

8. At the planning stage of the project, it was assumed that all water supply services would be metered and payment for use would be made on the basis of the volume consumed. However, WASA was unable to implement the planned tariff structure and is charging flat tariff rates for residential and commercial consumers on the basis of plot size. The flat monthly tariff rates for residential consumers range from PRs108 for 5 Marla (or 0.0030 hectares plot to PRs1,104 for 2 kanal (or 0.1012 hectares) plots; for commercial users, rates start at PRs88 and increase to PRs7,500. There are 152 different categories for commercial users, depending on their nature of business. Out of a total of 91,155 existing water supply connections, 83,000 are domestic connections and 8,155 are commercial. For the purpose of the FIRR, a weighted average tariff rate is used.

Appendix 8 49

9. Only incremental revenues and O&M expenditure are included in calculating the FIRR. Water supply tariff rates, which vary directly with an increase in O&M costs, are assumed to increase by 10% per annum, which is the same as projected at the time of appraisal. Collection efficiency is assumed to be 72% (actual) against 80% assumed at the time of appraisal. O&M includes expenditure for salaries, power, chemicals, spare parts, and miscellaneous expenses. In cash flow projection, the O&M cost is assumed to increase by 5%, which is higher than the 2% used at the time of appraisal. The labor cost and energy rate have risen more than expected since 2008. Given the current fiscal scenario and inflation, it is safe to assume that the O&M cost will increase at a rate higher than 2%.

c. Sewerage Component

10. Weighted average monthly sewerage charges per household have been assumed at PRs192. These have been increased by 10% every fifth year to cover O&M of the sewerage system. The FIRR is estimated to be –2.88% compared with 2.72% at appraisal. One of the main reasons for this is the much lower-than-planned investment of $172.6 million (almost 70% of the project investment was cancelled, including the outfall sewer and sewage treatment plant). Out of the total cost, PRs129.5 million was incurred on procurement of equipment and replacement of undersized sewers. This has slightly improved the sanitation system, but has not contributed to an increase in new sewerage connections. On the other hand, only PRs43.2 million was spent on laying of lateral sewers that directly reached new consumers and resulted in 359 new connections during 2007–2011.

11. In the FIRR calculation, sewerage charges are assumed to increase at the rate of 10% and O&M cost at 5%. Currently, sewerage covers only 35% of the existing service area and there is a lot of room to increase the coverage provided that new investment is available. At the current level, it is assumed that new connections will increase at a rate of 10% per annum (36 new connections each year).

d. Notes on Financial Internal Rate of Return Calculation

12. The revenue and costs are in constant 2009 prices, the year in which the project becomes functional and are on an incremental basis. The investment cost is derived from actual project accounts until August 2009. Revenue estimates are based on the latest consumer charges and their willingness to pay for improved service delivery as a result of the better availability of water supply and generally enhanced sanitation facilities. It has also been assumed that better facilities will help RASA to bring illegal connections into its revenue net. As a result of WASA’s surveys, the annual rate of legalization of illegal connections has improved. During 2007–2010, the rate was about 450–600 connections per annum; according to WASA officials, this may be increased to 1,500–1,800 connections per annum. The FIRRs have been calculated on the basis of actual collection efficiency for 2007–2011. Sensitivity tests were undertaken to assess the robustness of the FIRR calculation.

e. Basic Assumptions

13. The underlying assumptions on which FIRR calculation is based, are as below:

(i) Weighted average units/selling prices (tariff rates) are used for the FIRR calculation. They were taken from the WASA billing database and were based on historic trends and the current economic scenario, projected to have a real increase of 10% annually after FY2011.

50 Appendix 8

(ii) Project investment during the construction period (2006–2009) was taken on an actual basis. Interest and service charges were not included.

(iii) Project investment after the construction period represents replacement/ rehabilitation costs that are 10% of the initial investment and were calculated based on the useful lives (20 years) of proposed facilities.

(iv) The incremental revenues were calculated as below:

y = Number of new connections each year * new connection fee + weighted average tariff rate * total new connections

(v) Collection efficiency is assumed to be 72%, including arrears, based on the

historic data of WASA since inception.

(vi) The number of new connections is projected by applying a 1% annual increase. In the case of water supply, during 2006–2011, new connections grew at an annual rate of 0.9%. In the case of sewerage, new connections grew at a rate of 10% (during this project, most of the laterals have been laid and replacement was carried out; now WASA only has to connect end consumers with these laterals). Further, the existing coverage of sewerage is just 35% of the total service area, which can be increased substantially with additional investment. For our analysis, we have taken only the increase that is attributable to the project—estimated at about 36 connections for the first year (10% of 359 connections) and then increased by 10% annually.

(vii) O&M costs of the different facilities were taken on an actual basis from WASA records (Revenue Department) for 2007 to 2011, and were projected by using a 5% annual increment based on historic trends and the current economic scenario.

f. Sensitivity Analysis 14. The FIRR ranges from –2.88% for sewerage and drainage storm water to 3.62% for the water supply subcomponent. In the case of water supply, if revenue decreases by 10% the FIRR will drop to 2.3%; had the capital cost increased by 10%, the resulting FIRR would have been 2.90%. The FIRR for sewerage will reduce to –3.23% if revenue decreases by 10%. Table A8.2 shows the FIRRs under various scenarios.

Table A8.2: Financial Internal Rate of Return Sensitivity Analysis (%)

Item Water Supply Sewerage

At project closure 3.62 (2.88)

Sensitivity Analysis

Revenue decreased by 10% 2.30 (3.23)

Capital cost increased by 10% 2.90 (3.17)

Revenue + capital cost 1.61 ( ) = negative. Source: Asian Development Bank project completion review mission estimates.

Appendix 8 51

15. Further analysis for the water supply component was undertaken to move two significant variables—i.e., the rate of change in the tariff rate (at current prices) and the collection efficiency of WASA—to arrive at the FIRR of 3.62%, as calculated at project closure.

(i) Scenario 1: If the collection efficiency of WASA becomes 80% from 2011 onward, and all other factors move in the same manner as calculated in this analysis, the tariff rate will need to be increased by 9% annually to arrive at the FIRR of 3.62% calculated at the time of appraisal.

(ii) Scenario 2: If WASA maintains its collection efficiency at 90% from 2011 onward, and all other factors move in the same manner as calculated in the analysis at project completion, the tariff rate will need to be increased by 7.85% annually to arrive at the FIRR of 3.62%.

(iii) Scenario 3: If the collection efficiency of WASA is increased to 100% from 2011 onward, and all other factors move in the same manner as calculated in the analysis at project completion, the tariff rate will need to be increased by 6.8% annually to arrive at the FIRR of 3.62%.

Table A8.3: Required Increase in Water Supply Tariffs

at Various Collection Efficiency Levels

Assumptions Tariff Rate to be

increased by

At project closure

Collection efficiency at 72% 10.00%

Sensitivity Analysis

Collection efficiency at 80% 9.00%

Collection efficiency at 90% 7.85%

Collection efficiency at 100% 6.80% Source: Asian Development Bank project completion review mission estimates. E. Financial Position of Rawalpindi Water and Sanitation Agency 16. WASA started functioning in 2001–2002. Its staff was trained and a management information system (MIS) was established under phase 1 of the Project. The MIS is fully functional. An enforcement wing was later created within WASA, because of sharply increasing amount of default in receipt of water charges from water users. However, no significant improvement in collection efficiency of water charges by WASA could be made. Although the water connections have consistently increased, the recovery percentage has not increased as planned—it increased to 80% in FY2009 but dropped to 66% in FY2011. The average collection efficiency stood at 72% during the project period.

17. WASA continues to face many of the weaknesses, especially in relation to the quality of human resources. At present, there are only two engineers in whole of WASA against the six budgeted positions. For most of the time these positions remained vacant.

18. Frequent changes in management, inconsistency in policies, and weak collection efficiency have led to piling up of arrears. The arrears for FY2005 were PRs121.5 million, which rose to PRs476.85 million in FY2011. WASA could not improve its collection efficiency to 80% and decrease nonrevenue water to 15% as agreed. The hiring of qualified staff, outsourcing of bill collection, and a more aggressive disconnection policy have not been implemented.

52 Appendix 8

19. Out of the agreed three complaint cells, two have been set up and the response time of complaints has decreased. The billing system has been automated, which has decreased bill-related complaints by 45%.

20. Under the agreed policy, the installation of water meters was proposed. This was intended to conserve water and all payments of water were to be made on the basis of water consumed. Some meters were installed but were found to be faulty, as the water supply was not continuous, so they were removed and the flat rate tariff continues.

21. The financial analysis of WASA indicates that its cash flows are volatile since a major portion of its expenses are fixed. A slight change in revenue receipts causes a considerable change in surplus and/or deficit. FY2011 has also witnessed a sharp decline in the Government of Punjab’s grant through a provincial finance commission (PFC) award. The financial results from 2008 to 2011 are in Table A8.4 below.

Table A8.4: Financial Results of WASA

(Pak Rupees)

Head of Account Year 2008 2009 2010 2011 Income A. FROM OWN SOURCES 1. Water supply (Consumers) a. consumer Water and Sewerage charges 134.900 152.282 169.573 176.980 b. Consumer arrears Recovery 0.000 0.000 0.000 0.000 Sutotal 134.900 152.282 169.573 176.980 2. Bulk Water Sales a. MES 62.224 71.096 74.715 79.605 b. NIH & NARC 1.770 1.320 1.631 2.716 Subtotal 63.994 72.416 76.346 82.321 3. New connection Fee 3.962 2.529 3.249 3.163 4. Water supply through water Bouzers 2.054 2.642 4.440 4.930 Total from Water supply 204.910 229.869 253.608 267.394 5. Income from Other Sources a. Contractor enlistment/renewal Fee 0.180 0.307 0.296 0.289 b. 50% share of UIP tax 111.806 79.959 177.922 183.426 c. Others 49.384 31.262 51.027 42.992 Subtotal 161.370 111.528 229.245 226.707 Total from Own sources 366.280 341.397 482.853 494.101 B. GOVERNMENT OF PUNJAB GRANT 327.710 359.164 402.445 53.520 Total Income for the Year 693.990 700.561 885.298 547.621

Appendix 8 53

Head of Account Year 2008 2009 2010 2011 Expenses A. FROM OWN SOURCES 1. Original Work and O&M Expenses a. Filtration Plant including Sowan Tubewells 12.950 20.108 16.686 33.922 b. Water supply 133.592 173.506 205.066 280.090 c. Sewerage 4.499 14.916 17.374 24.902 d. Cost of treated water supply from Khanpur dam 30.163 29.757 59.685 35.542 Subtotal 181.204 238.287 298.811 374.456 2. Establishment Charges a. Pay and allowances (existing staff) 105.565 123.697 136.376 170.095 b. Pay and allowances (additional staff) 0.000 0.000 0.000 0.000 c. Pay of upgraded posts 0.000 0.000 0.000 0.000 d. Contingent Expenses 14.364 12.074 15.006 20.643 Subtotal 119.929 135.771 151.382 190.738 Total Expenses from Own Source 301.133 374.058 450.193 565.194 B. FROM GOVERNMENT FUNDS 342.677 359.164 397.514 49.550 Total Expenditure for the year 643.810 733.222 847.707 614.744 Surplus/Deficit 50.180 (32.661) 37.591 (67.123) Opening Retained Earnings 312.772 362.952 330.291 367.882 Closing Retained Earnings 362.952 330.291 367.882 300.759

( ) = negative, MES = military engineering services, NARC = national agriculture research council, NIH = national institute of health, UIP = urban immovable property tax Source: WASA’s audited financial statements