programme supporting community governance and · pdf fileinitially contained to the federal...

of 35

ANNEX 1

1. Identification Title/Number Khyber Pakhtunkhwa District Governance and Community

Development Programme - DCI-ASIE/2012/023-634 & 24-349 Total cost EUR 80,000,000 (36% of MIP)

All EU Contribution 2012 Budget: EUR 51,300,000 2013 Budget : EUR 28,700,000 (subject to adoption of the 2013 budget by budgetary authority)

Aid method/ Management mode

Sector Budget support - Sector Reform Contract (Centralised Management)

DAC-code 43040 Sector Rural Development

2. Rationale and country context The Government of Khyber Pakhtunkhwa province in the north-west Pakistan is responding to unprecedented levels of destruction and disruption caused by militancy and civil unrest resulting from the Afghan war and the 2010 monsoon floods. The insurgency spill-over, initially contained to the Federal Administered Tribal Areas (FATA) along the Afghan border, expanded into Khyber Pakhtunkhwa province by the end of 2007, severely affecting the northern mountainous and predominantly rural Malakand division. The military offensive in spring 2009 to re-establish the State's writ displaced some 2,300,000 people and resulted in severe losses of infrastructure. Large parts of the Malakand division were further devastated by flash floods in August 2010, virtually wiping out the entire local economy. Whilst the provincial government re-established administrative control over all seven districts of the Division, socio-economic situation of the approximately 6,300,000 inhabitants remains precarious and fragile. Cognisant of the root causes that triggered the extremist forces to build a foothold in the area, the Government of Khyber Pakhtunkhwa seeks to consolidate and stabilize the current transition process of post-crises measures and to overcome the trust deficit with its citizens. Building on a successful provincial budgetary reform programme, the Government of Khyber Pakhtunkhwa, therefore, proposes to prioritise Malakand division for a roll-out of an innovative results-based approach to district budget management, governance and community driven development. The approach entails implementation of a local development strategy that combines restoration and enhancement of frontline public services and livelihood opportunities across all 238 union councils1 of the division. The EU intends to support this intervention, through a Sector Reform Contract in accordance with the objectives defined for rural development as one of the focal sectors under the Multi-annual Indicative Programme 2011 – 2013.

2.1. Country Context and National Policy and Strategy

2.1.1 Economic and social situation and poverty analysis Pakistan’s GDP growth has been lower and more volatile when compared to other regional economies. Structural problems, including shortage of energy, decline in investments and persistent high inflation and security issues, have been exacerbated by the global financial and 1 The administrative organisation of Pakistan is composed of provinces, divisions, districts, tehsils and union councils

of 35

food commodity crises in 2008 and the impact of unprecedented monsoon floods in 2010 and 2011. Poverty levels reported in 2008 having previously declined to 17.2 per cent2, are widely perceived as to be on the increase. Food insecurity and malnutrition are high in rural areas and progress in key sectors, such as education and health, has slowed down in recent years. Pakistan ranks 145th out of 187 countries on the United Nations (UN) Human Development Index3 and has gradually fallen behind its neighbours. Within the national context, the economic situation and prospects in Khyber Pakhtunkhwa province have been chronically constrained by difficult geography, years of regional instability, natural disaster, poor governance, limited investment in human capital and a policy environment that has not been conducive to private sector growth. With its economic potential largely unexploited, especially in mining and hydro-power, the province has consistently underperformed compared to the rest of Pakistan. The latest Millennium Development Goals (MDGs) data for the province are bleak, with progress against most targets being off-track4. Between 31 per cent and 50 per cent of children are underweight compared to an MDG-1 target for the eradication of extreme poverty and hunger for Pakistan of < 20 per cent. The 10+ literacy rate is 50 per cent, 7 per cent less than the national average, compared to an MDG-2 target to achieve universal primary education for Khyber Pakhtunkhwa and Pakistan of 75 per cent and 88 per cent, respectively. The gap is especially pronounced for female literacy, which is estimated at 31 per cent for Khyber Pakhtunkhwa (compared to a national average of 45 per cent). Gender disparity is endemic and is evident in health, education, employment and political representation. Most districts have a primary education gender parity index of less than 0.7 (MDG-3). Security issues in general and more specifically the Malakand insurgency, have significant impact on the provincial economy through direct losses in private assets, decrease in investments and drastic increase of public spending on law enforcement. No suitable statistics are available on the post-crisis situation, but estimates for some of the affected areas suggest 10 to 15 per cent points increase in poverty. The federal government granted various relief measures to compensate the economic losses, including an additional one per cent of the net divisible pool under the 7th National Finance Commission award.

2.1.2 National Development/ Cooperation Policy and Strategy The province of Khyber Pakhtunkhwa has an extensive package of coherent development policy frameworks starting from the Comprehensive Development Strategy formulated in 2008. In August 2009 the Malakand Comprehensive Stabilisation and Socio-Economic Development Strategy was published by the provincial Government, shortly after the end of the military activity. Its aim was to coordinate relief and early recovery and to prepare the transition to a sustainable development. The Strategy foresees pursuance of community-driven participative development approaches as basis for “social regeneration” and to strengthen the resilience of local communities.

In October 2010 a more profoundly analysed and publically consulted peace-building strategy, the Post Crisis Needs Assessment for Khyber Pakhtunkhwa and FATA (PCNA), was developed with support of the federal government and international community including the EU. Recommendations relate to the need for the state to enact fundamental reforms that will 2 PSLM survey 2008, Pakistan Planning Commission 3 UNDP Human development report 2011: http://hdr.undp.org/en/reports/global/hdr2011/ 4 http://undp.org.pk/mdgs-in-pakistan.html

of 35

ensure basic rights, empower citizens and address key governance, security and development shortcomings and inequalities through an inclusive and participatory approach. Community driven activities are emphasized as key to achieving better service delivery and economic development, as well as re-engagement of citizens with the state. Implementation of the PCNA was costed at EUR 2.1 billion for four years, i.e. annually about the same magnitude as the combined development budget for Khyber Pakhtunkhwa and FATA.

2.2 Sector context: policies and challenges Community infrastructure and public services in large parts of rural Khyber Pakhtunkhwa are insufficient and often poorly functioning. Investments are mostly narrowly defined sector driven schemes and are decided with limited consultation of beneficiaries. Notwithstanding many problems to sustain funding, NGOs and associated community based organisations in Khyber Pakhtunkhwa have filled much of the growing vacuum in service delivery, which emerged from the losses and destruction caused by the recent natural and security calamities5 that have affected the province. There and across Pakistan an effective indigenous approach to social organisation has emerged. The three tier model addresses mobilisation at community level and as organisations mature, foresees federating these member based and often gender segregated organisations at village and union council level. For Khyber Pakhtunkhwa the current rate of penetration of this type of social mobilisation is 56 per cent of the union councils, albeit with a variation in levels of intensity and actual coverage. The PCNA, reinforced by the recent Economic Growth Strategy for Khyber Pakhtunkhwa, provides the principal components for a provincial rural development strategy. It acknowledges an increased role of civil society and the need for the government to re-orient and strengthen its collaboration at local level to improve service delivery. It links in detail the stimulation of employment and livelihood opportunities to the recovery of the agriculture and livestock sector as also the importance of skill development and off-farm employment in economic growth. It underlines the need for better living conditions and elaborates an integral approach for improvement of education, basic health care, water and sanitation, sustainable energy supply and social protection. The 7th National Finance Commission award in 2009 and the passage of the 18th Amendment to the Constitution in 2010 transferred substantial additional responsibilities and funds to the provinces. Legislation and administration of local government bodies from districts to municipalities and union councils have become exclusive provincial domain. A new provincial Local Governance Act was passed in May 2012, replacing the defunct federal Local Governance Ordinance of 2001. Local elections should be held before the next national elections due early 2013, but may be postponed until after. The government of Khyber-Pakhtunkhwa has been implementing a comprehensive provincial public finance management (PFM) reform since 2010. As a next step it wants to enable district governments to be more responsive to priority needs of rural communities by making available, in a transparent way, financial resources to support community action. A successful pilot initiative in two districts during the financial year 2011 – 12 has shown significant gains in efficiency and effectiveness of spending. The government is now looking to expand the roll-out to more districts to adapt the Medium-term Budget Framework and to introduce Output Based Budgeting while augmenting the budgetary space for discretionary spending on community driven initiatives.

5 Earthquake 2005, food market crisis 2008, Malakand insurgency 2007 – 2009, monsoon floods 2009

of 35

The current provincial annual budget is estimated EUR 2.33 billion and projected to increase to EUR 2.85 billion in 2015. The proportion of funds directly transferred to districts is to be increased from 29 per cent to 35 per cent. The budget for a typical rural district is EUR 15,000,000 – 25,000,000 of which 80 – 90 per cent covers salaries. The roll-out of the reforms is expected to augment the fiscal space for community driven development by EUR 2,000,000 – 3,000,000 per district (equivalent to an average of EUR 50.000 – 75.000 per union council) over a period of 5 years. In parallel and following the re-establishment of elected local government bodies, opportunities and scope for local revenue will be explored. The success of this is directly linked to the population recognising an improvement in living conditions as a result of an increase in investment resources made available by the local authorities.

2.3 Eligibility for budget support Building on the externally supported Fiduciary Risk Assessment based on the financial year 2009 – 10 and the provincial Public Expenditure and Financial Accountability (PEFA) assessment, the government of Khyber Pakhtunkhwa consolidated end of 2011 its PFM reform with the adoption of an Integrated Public Financial Management Reforms Strategy. The reforms strategy consolidates a number of reforms which were already under way with donor support – such as output budgeting and MTBF – and includes budget funding to implement and further extend initiatives, including internal audit and development of provincial business plans. The process is meanwhile making good progress as is evident from the quality in presentation of the provincial budget 2012 – 136. Medium Term Budgetary Framework and Output Based Budgeting have been introduced to all departments, as also measures for better reporting on budget execution, capacity building of staff and the establishment of the internal audit function. The initiative for expansion of PFM reforms into the districts is supported by an additional budgetary allocation of EUR 8,300,000. At the Federal Level, the PEFA update from the first half of 2012 confirms that there has been progress, even if it was slow. Pakistan has established elements of an effective PFM system which have the potential to place it on an improvement trajectory, even though the update also confirms the persistence of previously identified weaknesses. Notwithstanding this, there is an imperative for change and during the formulation mission for the new PFM support programme envisaged for AAP 2012, a broad range of key government and stakeholder representatives confirmed willingness and expressed enthusiasm and support for reform. The development of a comprehensive, integrated, over-arching and sequenced PFM reform strategy at the federal level will be supported by the EU under the above mentioned new programme.

The government of Khyber Pakhtunkhwa has taken a series of measures under the PFM reform programme to improve transparency and accountability on the utilisation of public resources. The full annual budget documentation as presented to the provincial assembly is made available on-line. The recently adopted Monitoring and Evaluation Framework structures the reporting on results based budgeting. The capacity for audit has been significantly increased and as the first province in Pakistan it succeeded in clearing its backlog of annual audit reports with the Public Accounts Committee.

The sector policy that is supported by this programme, to improve community infrastructure and basic service delivery in a context of strengthened and more effective local administration, is derived from the Malakand strategy, the PCNA and the PFM reform strategy. The principal policy documents described under section 2.1.2 and 2.2 set out objectives for inclusive economic development and governance reform in Khyber

6 http://www.financekpp.gov.pk/

of 35

Pakhtunkhwa. They take into account areas disproportionately affected by catastrophic floods and militancy, serve as a platform for dialogue and donor assistance and as a basis for planning resource allocation. The government introduced earlier this year its first Annual Strategy Review, to make sure that budget allocations are in line with development strategies. Detailed analysis of the last two Annual Development Plans against the Comprehensive Development Strategy demonstrated a compliance for the thirteen key sectors of more than 67 per cent. Similar work has also started for the implementation of the four strategic objectives of the PCNA. The PCNA recommends a high-risk, high-reward approach, involving citizens in funding allocations for development. More specifically, all PCNA efforts are based on an inclusive and participative identification of prioritised needs for investments at community and district level. This is what this Sector Reform Contract seeks to support.

Concerning macroeconomic policy, the situation remains fragile. The stand-by arrangement with the IMF helped the economy avoid a full-blown crisis in 2008 – 09, but it expired in 2011 without being fully implemented. According to the Pakistan Economic Survey 2011-2012, economic growth will be 3.7 % this year compared with 3 % last year. Workers´ remittances reached more than USD 1 billion monthly and inflation has been reduced to 10.8 % from 25 % last year. However, risks due to excessive Government borrowing remain a burden on inflation as well as to private sector credit. The federal budget deficit for FY 2012/2013 is of Rs 1.105 trillion, which is 4.7% of the GDP and out of Rs 2.960 trillion total expenditure, Rs 2.396 trillion is recurrent expenditure and Rs 564 billion development expenditure and net lending. Rs 925,775 million will be spend on interest payments, almost one third of the budget and defence is the second largest expenditure with Rs 545,386 million. These figures confirm the inflationary tendency of the budget.

The administration acknowledges the structural problems and is generally aware of the required solutions such as how to increase state revenues and tackle the problems related to high subsidies in the energy sector and subsidised state owned companies. Further measures to improve the fiscal situation were announced with the 2012 – 13 budget, however, the level of implementation is uncertain in the run-up to the elections early 2013. Possibilities for a new stand-by arrangement with the IMF are again being explored.

During a budget constrained period the proposed action will help to sustain adequate fiscal space for pro-poor community development which will be the basis for tranche releases. The budget reform process (MTBF and output based budgeting) is to ensure that this is dome in a way which can be sustained and guarantees efficiency. This underpins the importance of budget support as compared to other aid delivery modalities. The need to better manage budgetary deficits and improve the national tax base to control inflation is therefore of utmost importance and shall be addressed in the regular dialogue with both the provincial and federal governments.

In terms of the respect of fundamental values, the transition from military rule to democratic government in 2008, the liberty in press, the decentralisation process and the increasing control exercised by the national and provincial assemblies and the judiciary, confirm a clear progress in the democratic process. Following requests from the international community and the EU, Pakistan removed the majority of the reservations to international human rights instruments such as the International Covenant on Civil and Political Rights and the UN Convention against Torture, and the EU will be partnering Pakistan for effective implementation of these instruments. Reinforcement of the Ministry for Human Rights, the recent legislation improving human rights and in particular with regard to the protection of women, as well as the establishment of an the National Commission on the Status of Women and an independent Human Rights Commission, confirm a growing engagement in the area of human rights.

of 35

2.4 Lessons learnt The most important key lessons are summarized in the PCNA. These incorporate experiences over three decades from several national and donor funded programmes in rural development in Khyber Pakhtunkhwa and FATA, put in the wider peace-building and stabilisation context. A functional state – society relationship that is publically recognised and associated with the delivery of basic services, remains fundamental to peace and economic progress. Whereas greater involvement of civil society and promotion of participatory approaches are essential for efficient and effective implementation of relief and development, long-term impact and sustainability are more likely to be successful if such actions have a proper institutional anchoring. Mountainous areas in general, including large parts of Khyber Pakhtunkhwa, have limited economic and employment opportunities. The public dissatisfaction this deprivation is causing, not only in Pakistan but across the entire Hindu-Kush Himalayan region, has been identified as an important driver for conflict and insurgencies. Remittances from migrant workers represent an important potential source of private investment. This, however, is unlikely to be fully realised, if the quality in public infrastructure and services remains poor. A broader package of public investment in local development is essential not only to trigger private initiative, but also to generate employment opportunities and retain skilled labour to stimulate growth in services and trade.

2.5 Complementary actions The proposed action enhances ongoing activities under several EU funded programmes for Khyber Pakhtunkhwa. It complements the missing link to district administrative reforms in the Refugees Affected and Hosting Areas programme (RAHA) implemented by UNDP and the Programme for Economic Advancement and Community Enhancement (PEACE) implemented by the Sarhad Rural Support Programme. Both programmes are supported by the EU with each EUR 40,000,000 and work on community driven local development in 203 union councils of which 119 are in the Malakand division, thus covering 50 per cent of the area. The ongoing social mobilisation and infrastructure investments in these union councils and work of other donors will be taken into account when developing the programme for each of the target districts.

Financed from another project7 the EU will assist authorities in target districts as from October 2012, in training of district planning and output based budgeting and to establish and refine procedures for contracting, monitoring and supervision of community driven development interventions. Accordingly districts are expected to present a plan of investment as part of the annual government budget 2013 – 2014.

Design and preparation of the proposal have been closely coordinated with UK Department for International Development (DFID) and Germany. In addition to the EU funding, DFID under its new Sub-national Governance Programme is expected to support a similar output based budgeting reform programme into six more districts elsewhere in the province. Germany is supporting capacity building in public administration and revenue management at tehsil level in few districts of the Malakand division and may consider further investment in renewable energy and local infrastructure.

7 "Supporting rural development and natural resources management in NWFP and Balochistan through capacity building and promotion of sector-wide approaches", DCI-ASIE/2008/020-199

of 35

2.6 Donor coordination There has been a strong joint international engagement in support of post-crisis interventions in the western border regions of Pakistan, including Khyber Pakhtunkhwa, initiated through the Friends of Democratic Pakistan process and continued in various bilateral and multi-lateral declarations, including the recent EU – Pakistan 5-years Engagement Plan. Sector coordination in rural development in Khyber-Pakhtunkhwa is evolving around the US$ 140,000,000 Multi Donor Trust Fund (MDTF) administered by the World Bank that was set up in 2010. It implements a range of projects across Khyber Pakhtunkhwa, FATA and Baluchistan. The newly developed MDTF 5-year engagement strategy of October 2011 defines an active involvement of the MDTF secretariat with the respective provincial governments and the FATA secretariat. The government of Khyber Pakhtunkhwa wants to re-establish a bi-monthly donor coordination forum to allow coordination of activities of all major donors in the region and across sectors, including bilateral interventions. The main EU contributors in Khyber Pakhtunkhwa (UK, Germany and the EU) are collectively engaged with the MDTF secretariat in order to coordinate activities of their on-going programmes related to PFM, sub-national governance and administrative reforms, as well as community development.

3. Description

3.1 Objectives The programme contributes to an effective development and peace building strategy for the government of Pakistan that supports transformation of the functioning of the State in Khyber Pakhtunkhwa and FATA, improving democracy and rule of law, making it more accountable and providing equitable opportunities for better health, education and employment. The programme addresses three of the four strategic objectives of the PCNA:

• Build responsiveness and effectiveness of the State to restore citizen trust • Stimulate employment and livelihood opportunities • Ensure the delivery of basic services

The purpose is to support the government of Khyber Pakhtunkhwa in reforming public administration at district level to improve service delivery, economic growth and local governance through promotion of community driven development in the crisis affected Malakand Division.

3.2 Expected results and main activities

i. Increased investment in community development in six district budgets of the Malakand Division responding to specific local demands for public investment in service delivery and community infrastructure (rehabilitation, expansion and maintenance of intra- and intercommunity social and productive assets and infrastructure - education, health, water and sanitation, access, disaster risk reduction, irrigation, renewable energy, agriculture and livestock and natural resource management). Main activities (GoKP and service contract: funding and technical support (service contract) for the design and implementation of community demands and initiatives as identified and presented by the joint community based organisations of individual or

of 35

several union councils and in accordance with the strategic district development plan; training and coaching of government staff in support of the roll-out of Output Based Budgeting and other relevant aspects of the provincial PFM reform at district and tehsil level (service contract); establishment of a functional and participative system of strategic district development planning and monitoring (GoKP and service contract); increase of district budgets to be gradually phased out and substituted by the dividend from a more efficient and effective resource utilisation (GoKP).

ii. An inclusive, representative system of community mobilisation that federates villages exists in all union councils of the Malakand division. Main activities (grant component): support civil society organisations in the promotion and expansion of the three tier membership based model of community mobilisation; stimulate dialogue between community based organisations and local authorities on issues of increase and quality of delivery of public services; train and coach community based organisations in planning, implementation and monitoring of development investments; facilitate integration of the community based organisations with the local governance structures that are planned to be reorganised with the coming local elections.

iii. Enhanced human, technical and organisational capacities of district and tehsil government agencies to support community driven development and be more service and outcome oriented. Main activities (service contract): training and coaching of government staff from line departments to re-orient their technical concepts and methods of working that can support and oversee better community led planning and implementation of development investments; third party verification of all development investments that are funded from the district budgets; assist government institutions at provincial and district level to monitor and evaluate the progress achieved by the programme in the wider context of the ongoing reform process, including to establish performance and monitoring frameworks.

3.3 Risk and assumptions Five risk categories have been assessed: political (covering universal values, fundamental rights, conflict and security), developmental (credibility and pertinence of provincial government policies), macroeconomic (the extent to which the policies are stability-oriented), public financial management (regulatory framework, financial compliance and control systems, budget comprehensiveness, controls in revenue collection/budget execution, procurement and external audit), and corruption and fraud. Concerning the risk management framework, mitigating measures include the following:

i. Political: Continued dialogue at political level. Use of the regular contacts between the Delegation and the Government as well as high level meetings (strategic dialogue, joint commission, visits from Commissioners and MEPs).

ii. Developmental: Capacity building for authorities and communities in order to ensure their buy-in, continued political engagement.

of 35

iii. Macroeconomic: Suspension of tranche releases, inclusion of a specific obligation to pass on funds from the federal to the provincial Government will be included in the Financing Agreement.

iv. Public financial management: Suspension of tranche releases, support to ongoing PFM

reforms under this programme, in a separate project under AAP 2012 and by a member state (UK).

v. Corruption and fraud: Building of the technical and managerial capacities of the

frontline managers and the communities for increased public finance management efficiency and effectiveness and contribution to an enhanced public oversight of the budgetary discharge. Third part audits and validations are supported under the programme.

The analysis of the risks and benefits will be updated at annual review (early warning system) to facilitate risk management and identify possible risk increases e.g. in macroeconomic policy, economic governance (public procurement, corruption) or PFM (delays in reform, etc.).

3.4 Stakeholders The main stakeholders of this programme will be involved communities themselves, the Finance and Planning & Development Departments of Government of Khyber Pakhtunkhwa and the Ministry of Finance and the Planning Commission at federal level. Further roll-out of the output-based budgeting model will directly or indirectly have a positive effect on all line departments and other government institutions. Non-state actors and civil society will be involved in capacity building, programme reviews and awareness raising. 3.5 Crosscutting issues The capacity building of local communities will allow the programme to foster links with local government structures that lead to more transparency, reduced corruption, improved human rights. The mobilisation and strengthening of local organisations will foster cohesion and stabilisation, thereby reinforcing reconciliation and sustenance of peace. The gender dimension will be specifically targeted through awareness-raising by providing information on women’s basic human rights, providing training to female staff of the government and local institutions, creating employment opportunities for women, facilitating and promoting the social and economic advancement of women, and delivering priority social services and community infrastructure identified by women’s groups. As the programme supports integrated rural development, environmental sustainability, control of resource degradation and disaster risk reduction, mitigation and management will be included in all development interventions.

4. Implementation issues

4.1 Method of implementation The programme will be implemented under Direct centralised management through the signature of a Financing Agreement with the Government of Pakistan, represented by the Economic Affairs Division (EAD). In order to support the Government of Khyber Pakhtunkhwa's budget reform process using the Sector Policy Support Programme modality, the EU programme will partner the Government of Khyber Pakhtunkhwa. The untargeted EU budget support (EUR 64,000,000) will be used during four budget years to support the provincial government to sustain

of 35

adequate fiscal space in the district budget for community-driven rural development. It will be complemented by: i) EUR 7,500,000 support to involve civil society organisations to facilitate mobilisation of rural communities including preparation of quality proposals for possible district government financing, as well as remain engaged in the follow-up and decision-making processes i.e. in the demand side of governance; and ii) EUR 7,500,000 of technical cooperation aimed at supporting capacity development of the administration and reinforcement of government audit control.

The social mobilisation component will be implemented through approx. 2 to 4 grant contracts following a call for proposals and the technical cooperation component will be implemented through approx. 6 service contracts following calls for tender.

The programme will be implemented by the European Union, through its Delegation in Pakistan. The implementing agency of the programme will be the Department of Finance of the Government of Khyber Pakhtunkhwa. The Department already created a special unit in its PFM reform cell, to plan and coordinate the roll out of output based budgeting to the districts as proposed to support by the EU and DFID. 4.2 Procurement and grants award procedures

4.2.1 Contracts All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by Regulation No 1905/2006 of the European Parliament and of the Council of 13 December 2006 establishing financing instrument for development cooperation. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in articles 31(7) and (8) of DCI Regulation.

4.2.2 Specific rules for grants The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. They are established in accordance with the principles set out in Title VI 'Grants' of the Financial Regulation applicable to the General Budget. When derogations to these principles are applied, they shall be justified, in particular in the following cases: • Financing in full (derogation to the principle of co-financing): the maximum possible rate

of co-financing for grants is 100% of the total accepted costs, however a co-financing from grant beneficiaries will be encouraged during community mobilisation. Full financing may only be applied in the cases provided for in Article 253 1(b) of the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation applicable to the General Budget.

• Derogation to the principle of non-retroactivity: a grant may be awarded for an action which has already begun only if the applicant can demonstrate the need to start the action before the grant is awarded, in accordance with Article 112 of the Financial Regulation applicable to the General Budget.

of 35

4.3 Budget and calendar The total project budget is estimated at EUR 80,000,000 of which EUR 80,000,000 shall be financed from the general budget of the European Union. The indicative breakdown of overall amount by specific programme components is as follows:

Programme Components EU

contribution (EUR)

Total (EUR)

Contracting/ Paying

Authority 1. Sector Budget Support 64 000 000 64 000 000

2. Grants 7 500 000 7 500 000

2.1 Social mobilisation 7 500 000

3. Services 8 500 000 8 500 000

3.1 Training and coaching of government agencies 7 300 000

3.2 Monitoring 500 000 3.3 Evaluation 250 000 3.4 Audit 200 000 3.5 Visibility 250 000 Total 80 000 000 80 000 000

European

Commission

The operational duration of the programme is 84 months from the signature of the Financing Agreement, of which the operational phase will be 60 months and the closure phase 24 months. Indicative calendar:

Dec 2012 Financing Decision

1st semester 2013 Finalization of the Policy Matrix with Government of KP, including Appendix 1 to the Technical and Administrative Provisions – Fixed and Variable Tranche Release Matrix.

1st semester 2013 Signing of Financing Agreement with Government of Pakistan

1st semester 2013 Launch tenders for "training and coaching" and "monitoring " technical cooperation components

1st semester 2013 Launch call for proposals for "social mobilisation" and "impact study" components

Aug 2013 Signing of service contracts “training and coaching” and monitoring and grant contracts “social mobilisation” and “impact study”.

Oct 2013 Request for fixed tranche 1 release Nov 2013 First periodic external monitoring Feb 2014 Fixed Tranche 1 release (based on the four eligibility criteria)

Mar 2014 Start of budget release by the GoKP to support OBB based rural community driven development projects

May 2014 Second periodic external monitoring

Sep 2014 Request release of tranches II and formal progress review on fixed and variable tranche I (fiscal year 2013-2014)

Nov 2014 Third periodic external monitoring

Sep 2015 Request release of tranches III and formal progress review on fixed and variable tranche II (fiscal year 2014-2015)

Sep 2016 Request release of tranches IV and formal progress review on fixed and variable tranche III (fiscal year 2015-2016)

of 35

Variable tranches will be introduced representing 58 per cent of the budget support tranches. Indicators will be identified to provide initial leverage for the reforms necessary for successful implementation of the Sector Budget Support. Indicators for a variable tranche will serve to focus the dialogue on key points relating to the reform objectives supported by the programme, including public-financial management reform. Indicative budget support tranche releases (million EUR):

Year n+1

(FY2013/14) n+2

(FY2014/15) n+3

(FY2015/16) n+4

(FY2016/17) Amount Fixed Tranches 9 6 6 6 Amount variable tranches 0 12 13 12 Total Amount 9 18 19 18

4.4 Performance monitoring and criteria for disbursement Progress and performance will be assessed during annual joint reviews with the Government of Khyber Pakhtunkhwa, based on agreed policy implementation milestones and process indicators, using the policy matrix and results framework developed for the programme. In addition, there will be two joint reviews annually to discuss on-going implementation issues. The release of tranches of the Sector Budget Support will be conditional on satisfactory completion of the following general and specific conditions. 4.4.1 General conditions for the disbursement of all tranches; eligibility criteria for

(sector) budget support:

i. Satisfactory progress in the implementation of the sector policy and strategy.

Indicative sources of verification: Progress reports by government of Khyber Pakhtunkhwa on implementation of the budget reform agenda, implementation of the Monitoring and Evaluation Strategic Framework, procurement reforms, conditional grants, creation of additional fiscal space for community-driven development approaches, etc.

ii. Satisfactory progress in the maintenance of a stability-oriented macroeconomic policy.

Indicative sources of verification: Information provided by government of Khyber Pakhtunkhwa, economic reports by Government of Pakistan and State Bank of Pakistan as well as other international financing institutions like World Bank, Asian Development Bank and IMF (including IMF programmes in the country and Article IV Consultations).

iii. Satisfactory progress in the implementation of its programme to improve PFM.

Indicative sources of verification: Information and reports provided by the government of Khyber Pakhtunkhwa and other public institutions (Parliament, Auditor General of Pakistan, Controller General of Accounts, provincial institutions). Reports published by other donors and international or national organisations on PFM, including assessments like PEFA and Organisation for economic co-operation and development (OECD) – Development Assistance Committee (DAC) procurement assessments.

iv. Transparency and Oversight of the Budget.

Indicative sources of verification: Publication of the budget

of 35

4.4.2 Specific conditions for disbursement of individual tranches: Indicators, expected performance levels, time table, base and target values per year, and indication of disbursement triggers will be finalized (including Appendix 1 to the Technical and Administrative Provisions (TAPs) – Variable Tranche Matrix) before signature of the Financing Agreement. The specific conditions for disbursement of individual tranches will be defined in line with the draft policy matrix and are planned to cover the following areas:

1. More efficient use of provincial government budget

2. Increased community development, social mobilisation and capacity building

3. Improved front line public service delivery

4. Improved community infrastructure 4.5 Evaluation and audit External evaluations and audits of the service contracts and the grant contracts will be carried out by independent consultants recruited directly by the Commission in accordance with EU rules and procedures based on specifically established terms of reference. Joint evaluations with other donors and third party validations of various programme sub-components are foreseen. 4.6 Communication and visibility The EU will ensure visibility through: i) engagement with government, donors, media and other partners in the context of policy dialogue and aid effectiveness, as well as ii) other means such as the Delegation’s website. The Communication and Visibility Manual for EU External Actions will be applied by the programme beneficiary. The Government of Khyber Pakhtunkhwa will launch a specific website to disseminate the information about the programme and the engagement of partner organizations. Public relations/awareness campaigns will be undertaken regularly to make the EU’s contribution visible.

14

ANNEX 2

1. IDENTIFICATION

Title/Number "Public Financial Management Support Programme for Pakistan, PFM-SPP"

DCI-ASIE/2012/023-505

Pakistan

Total cost EUR 15,000,000

EU contribution: EUR 15,000,000

Aid method / Method of implementation

Project approach – direct centralized management

DAC-code 15111 Sector Public finance management

2. RATIONALE

2.1. Sector context

The public financial management (PFM) sector in Pakistan is characterised by an uneven development. Whereas some critical elements are equivalent or approaching international better practice, such as the computerised public finance information system and chart of accounts, other elements continue to display significant deficits. These latter include the lack of an overall PFM reform strategy, practically non-existent internal audit and control, poor revenue mobilization mechanisms, continuing drains on the national budget associated with loss making public sector organizations, an inadequate macroeconomic framework for budget and strategic planning, lack of effective enforcement of procurement regulations, and ineffective public debt management.

The EU mission carried out in support of the Action Fiche in February-March 2012 confirms earlier findings of the Public Expenditure and Financial Accountability appraisal (PEFA) that, while Pakistan has established some elements of an effective PFM system which have the potential to place it on an improvement trajectory, recent progress has been slow. The latest PEFA update conducted in the first half of 2012 has confirmed the persistence of previously identified weaknesses. Notwithstanding this, there is an imperative for change. The mission confirmed willingness and expressed enthusiasm and support for reform and change from a broad range of key government and stakeholder representatives consulted.

The poor macro-economic performance and faltering economic governance are severely constraining the economic and social development process in Pakistan. Successive attempts to reform the economic management of the country have rarely been accomplished because of a highly complex political economy. Repeated changes in leadership between democratically elected and military governments have resulted in a continuously weakening of public administration. Development policies

15

have been overly biased towards public sector projects and arbitrary incentives impeding competiveness and sustainable economic growth.

The current Government, in its 5th and final year mandate, has been fully cognisant of the root causes of the aforementioned problems. It has introduced a series of measures of which the most far-reaching were the 7th National Finance Commission award and the adoption of the 18th Amendment to the Constitution by the Parliament. As from the financial year 2011–12, eighteen ministries have been devolved to the provinces and the provincial share of the federal budget has grown to 57.5 % as against 47.5 % in 2009–10. Provincial taxation has been enhanced and provinces have the authority to raise domestic and foreign loans albeit with federal consent. The wider implications and success of this unparalleled devolution of federal power are yet to be seen as the provinces continue to build up their administrative capacity and understanding of the opportunities for more direct political oversight of the budgetary process through the provincial assemblies.

The devolution process re-emphasizes the need for a full modernisation of fiscal and budgetary management to the provinces. Khyber Pakhtunkhwa and Punjab provinces have both made substantial progress in adopting comprehensive approaches to strategic development planning and public finance management reforms8. In contrast, and apart from a few isolated sector-related initiatives, public finance management practices in Sindh and Balochistan remain weak. Neither of these provinces has elaborated overarching development strategies, and planning and budgeting is in practice input driven. Sindh has initiated, with limited donor support and using its own resources a Medium Term Budgetary Framework (MTBF) approach from 2010 in five pilot ministries (Irrigation, Power, Education & Literacy, Livestock & Fisheries and Agriculture). However, the initiative has achieved limited progress due to a combination of lack of technical skills, and capacity and resources to consolidate and expand the MTBF and demonstrate its benefits to decision makers.

The proposed programme will assist the Government of Sindh to introduce a full-fledged public finance management reform. It foresees a long-term approach and is expected to cover all sectors with a possible expansion into selected districts. Assistance will also be extended in consolidating the ongoing budgetary reform process at federal level, with the aim to devise a comprehensive and overarching reform strategy in coordination with the provinces. This should provide for a growing capacity to sustain and expand the reform process into other parts of the country, such as Balochistan or those areas that may transit into separate devolved provinces in the near future. The programme proposes cooperation at two levels of governance (Government of Sindh and Federal Government) as PFM systems in Pakistan are clearly interlinked and there is no separation between Federal and Provincial systems. The Constitution defines the basic PFM principles which apply to Federal and Provincial Governments alike. In spite of having separate parliaments and executives, core PFM functions like accounting and auditing remain under the domain of federal institutions. The existence of a fixed formula for the distribution of resources between the Federal Government and the Provinces approved every five years does not undermine the fact that provinces remain highly dependent on the centre for financial transfers (80-90%). The new powers devolved to the provinces in 2010 have been accompanied by

8 Khyber Pakhtunkhwa Integrated Public Financial Management Strategy; KP Comprehensive Development

Strategy; Strategy for Accelerating Economic Growth and Improving Service Delivery

16

the strengthening of the Council of Common Interests and other provincial inter-coordination bodies on which the Federal Government and institutions play a leading role. The programme will work on the same areas of reform at both levels, thus providing an inclusive perspective and facilitating coordination between the federal and provincial level.

In response to the new paradigm set out in the Framework for Economic Growth (May 2011), which includes a major focus on improving the efficiency of public sector management, the programme will support the federal government to improve macroeconomic forecasting and modelling to better understand potential impacts for macroeconomic and fiscal policy formulation - including enhanced capacity and flexibility to respond to changing economic circumstances and shocks – for a more informed political decision making process.

The programme will support the Government in improving its public finance management systems, improve service delivery and tackle poverty reduction.

2.2. Lessons learnt

The experience from a wide range of past interventions in support of economic reforms and better management of public finances in Pakistan has demonstrated the need for:

• Long-term engagement. The new programme, therefore, needs to be process oriented and sufficiently flexible and robust. The long implementation period will allow any necessary adjustment in case problems arise during the execution of the programme.

• Ownership and commitment. Throughout the EU and donor literature and in discussions with beneficiaries and stakeholders, a consistent message is that without real beneficiary commitment and support – particularly in the Pakistan context – interventions are at significant risk. The proposed programme is therefore formulated pursuant to extensive discussions to ensure local input into the design of the programme, and to ensure it supports interventions articulated and strongly supported by beneficiaries and stakeholders. The proposed interventions have been extensively discussed with relevant officials of the Federal Government and the Government of Sindh. A debriefing session was held in the Economic Affairs Division of the Federal Government and in the Finance Department of the Government of Sindh to receive official support to the programme.

• Technical feasibility and sustainability. The proposed programme takes account of the status of technical progress and capacity. Reforms cannot take place without the appropriate technical infrastructure. At the federal level, this is assessed through the confluence of the Project to Improve Financial Reporting and Auditing implemented public sector information system and building on the emerging MTBF and macroeconomic frameworks. In Sindh, the emphasis will be on consolidating and expanding the existing MTBF pilot and developing a reform strategy with the Sindh authorities that will mesh with their reform objectives and technical capacities to improve their PFM system.

• A clear strategic framework. Drawing on PEFA reports and emphasised in extensive discussions with beneficiaries and stakeholders, there is a critical need to develop a comprehensive, integrated, over-arching and sequenced PFM reform

17

strategy at the federal level and provinces, which establishes, inter alia, base-line status of PFM elements, reform objectives, priorities, strategy for achievement, coordination of donor participation, and essential institutional and capacity building. Without such a plan that is owned and led by the authorities and is shared with donors and stakeholders, there is a significant risk of duplication and dissipation of donor efforts and resources.

2.3. Complementary actions

The programme is in accordance with a shift in EU-Pakistan cooperation in response to the growing need to give more importance to support for improved governance. A trend that has also been confirmed globally in the 2011 EU’s ‘Agenda for Change’.

In its commitment to greater aid effectiveness the EU has been pursuing to increase direct support to the Government of Pakistan. A second phase of the education sector reform programme for Sindh was signed early 2012, while the same follow-up is expected to be initiated shortly for Khyber Pakhtunkhwa. Furthermore, the EU is preparing as part of the Annual Action Plan 2012, a ‘District Governance and Community Development Programme’ for Khyber Pakhtunkhwa. This programme builds on, and complements, the successful DFID funded public finance management reforms in the province and foresees a scaling up of the roll-out of output based budgeting at district level.

The focus on accountability and transparency envisaged under the proposed PFM programme links directly to a newly launched EU funded support programme to strengthen the functioning of support services for Standing Committees of the National Assembly and Senate, as well as the proposed expansion of this programme to all provincial assemblies.

The focus on PFM reform in Sindh addresses a gap in donor assistance to the Province, which has generally been overlooked by donors in favour of other Provinces, particularly Khyber Pakhtunkhwa and Punjab. There is no current donor providing or planning to provide assistance for PFM (other than discrete assistance to the Public Procurement Regulatory Authority by USAID and Asian Development Bank), notwithstanding that Sindh represents some 30% of the population, and there is strong engagement and support and recognition at senior official level that the Sindh province needs a functioning MTBF and other key PFM reforms.

The proposed programme for Sindh could provide a good potential for further-reaching sector support to improve frontline service delivery in the extremely deprived disaster prone rural areas of this province. This would follow up from the large scale civil society implemented humanitarian and early recovery assistance that started after the 2010 and 2011 monsoon floods.

Several other donors have been active in support of public finance management reforms, notably the World Bank, DFID, Asian Development Bank, USAID and Germany. The proposed action has been designed in full complementarity, identifying areas not covered so far (Sindh) or consolidation (federal MTBF).

The World Bank has provided assistance through the Project for Improving Financial Reporting and Auditing (PIFRA) in three phases from 1997 to 2013 (US$ 154.7 million) and the Tax Administration Reform Project from 2005 to 2011 (US$ 76.0 million). PIFRA introduced reform in the accounting and auditing, including the roll

18

out to all levels of Government of a full IT system. A new support for tax reform is currently under design. In addition, the World Bank has been a long-standing partner in the education sector in Sindh through the Sindh Education Sector Project 2009-2012 loan of US$ 300 million. This project has a technical assistance component which has been providing support on PFM to the Education Department of the Government of Sindh.

DFID has supported the federal government through the Medium Term Budgetary Framework project from 2002 to 2012 (UK£ 8.2 million) and the project Strengthening National Statistics in Pakistan 2006-2013 (UK£ 2.6 million). Following a slow start, the federal MTBF project gained momentum from 2009 when the MTBF model was rolled out to all government divisions including both current and development budget, and the MTBF documents were sent to the National Assembly for the first time in 2010. Both the Finance Department and DFID consider need to further consolidate the gains made, however, given DFID’s shift in priorities to direct its assistance to provinces, it has been requested to the EU to take over a final support of the federal MTBF. As per precepts of Division of Labour, and given the relevance in the wider context of support to the aforementioned National and provincial assemblies, this shift is considered pertinent and justified.

Asian Development Bank has been supporting the Government of Sindh through the project loan Sindh Public Resource Management Program II 2009-2013. This project loan focussing on infrastructure and agriculture included several conditions covering budgeting, procurement and audit. It is currently suspended due to the interruption of the IMF programme.

GIZ has recently engaged in a new long-term programme "Support for good governance in Pakistan" (€ 14 M) which includes tax reform as one of its main components, having the Federal Board of Revenue as main counterpart. It also assists the Pakistan Statistic Bureau.

2.4. Donor coordination

In June 2010 donors active or with a strong interest in public financial management established a joint working group, which has been meeting bi-monthly. A procurement reform working group was also created, though it has been meeting on an ad-hoc basis. There is as yet no concerted coordination led by the government, though this would have to be pursued by this programme, especially also at provincial level through donor coordination groups.

3. DESCRIPTION

3.1. Objectives

The overall objective is to contribute to the improvement of public financial administration to enhance the effectiveness and efficiency in the utilization of government budget resources in order to deliver better public services and to reduce the impact of poverty and social inequality.

The specific objectives are:

19

To support a comprehensive public finance management reform process in Sindh province including support for a Medium Term Budgetary Framework.

To support public finance management reform process at the federal level through the design of an overarching and comprehensive PFM reform strategy; and consolidation of the Medium Term Budgetary Framework process.

3.2. Expected results and main activities

Result 1: A PFM reform strategy is developed, a PFM action plan is implemented and a medium term budgetary framework is effectively established in the province of Sindh

Main activities:

1.1 To develop over-arching and sequenced PFM reform strategy and action plan. The diagnostic exercise will be followed by the implementation of selected interventions by the Government of Sindh. For this reason, an implementation period of 60 months has been given for this component due to the complex and long-term nature of PFM reform.

1.2 To support the adoption and roll-out of a medium term budgetary framework to key government departments, including strengthening macro-economic and fiscal forecasting and definition of policy objectives, outputs, outcome and results.

Result 2: A PFM reform strategy is developed; the Medium Term Budgetary Framework is consolidated and macro-economic and fiscal modelling and forecast is strengthened at federal level

Main activities:

2.1 Support for the development of a comprehensive, over-arching and sequenced PFM reform strategy and action plan by the federal government in consultation with all relevant institutions and in coordination with the provinces.

2.2 The ongoing Medium Term Budgetary Framework reform project of Finance Division will be strengthened and consolidated.

2.3 Assistance to upgrade the capacity of the Ministry of Finance and the Planning Commission in the application of macro-economic and fiscal modelling and forecasting.

3.3. Risks and assumptions

A PFM project in Pakistan is a high risk endeavour. The political, security and macro-economic situation in the country is likely to continue to be volatile and uncertain. At the same time, the risk of non-intervention needs to be considered. The EU has committed itself in working directly with the Government and provide, where possible, support through the budget at provincial level. Functioning and reliable PFM systems are a necessary prerequisite.

20

The proposed programme is a coherent selection from a wide range of demands and opportunities. It is robust and strategic in view of the EU’s growing profile as a donor in Pakistan and the expectations this has created with regard to share its experiences on PFM reform. In order to mitigate in handling the complexities of the start-up and initial years of implementation, the programme foresees engagement of a long-term expert for monitoring and coordination.

At a political level the risks relates to commitment and ownership and is associated with the level of involvement of political representatives in the implementation of the programme. It pertains to the often frequent and unpredictable changes of senior bureaucrats for political reasons, changes in the political leadership of key ministries or replacement of the entire Government. These risks are beyond the control of the programme, though changes in administrative and political leadership is to be fully anticipated and requires a continuously pro-active attitude to clearly communicate the purpose and achievements of the programme to all parties concerned.

Another category of risks relate to possible resistance to change from within the bureaucracy. The programme must ensure a direct and continuous dialogue to facilitate understanding and implementation of activities. The risk of frequent transfers and turn-over affects all levels of the civil service. This risk is mitigated by designing capacity building processes focused on institutionalized and sustainable capacity building rather than sporadic capacity building focused on individuals who might leave the institutions or being transferred. Finally, the skills of civil servants are a serious concern, which has an impact on the implementation of PFM reforms. The programme must ensure that the majority of civil servants benefit the most from the implementation of the programme through direct dialogue with concerned groups. Civil servants themselves can indentify necessary administrative and legal civil service reforms and propose them to the Government. The programme works under the assumption that civil servants need to be closely involved in the reform process and will play a key role in the programme.

3.4. Cross-cutting Issues

A PFM reform programme is by nature cross-cutting and expected to contribute to an overall improvement of governance, greater transparency in public expenditure and enabling democratic oversight to reduce corruption. Special emphasis is to be given when preparing the formulation of interventions, to ensure gender balanced approaches related to MTBF.

3.5. Stakeholders

The main stakeholders of this programme will be the Finance and Planning & Development Departments of Government of Sindh, the Ministry of Finance and Planning Commission at federal level. Some of the areas proposed in this programme like PFM reform strategy, budgeting, and macro-economic forecast and modelling will directly or indirectly affect all line departments and other specific institutions (Auditor General of Pakistan, Controller General of Account, Federal Board of Revenue and State Bank of Pakistan).

Most of the activities are aimed at strengthening the abilities of staffs in selected departments through training and coaching. The indirect beneficiaries are the depending technical departments and other entities responsible for the delivery of

21

public services. A more efficient and effective utilisation of the public resources is expected to benefit the general public by better services and greater value for their taxes.

4. IMPLEMENTATION ISSUES

4.1. Method of implementation A Financing Agreement will be signed between the European Commission and the Government of Pakistan, represented by the Economic Affairs Division (EAD).

The method of implementation will be direct centralised management. One service contract is foreseen for all activities under results 1 and 2 (c.f. activities 1.1, 1.2, 2.1, 2.2 and 2.3 above) following international restricted tender procedure. This will be a combination of a limited number of permanent long-term experts (approximately six), complemented with a larger contingent of short-term experts (approximately seventeen) drawn in according to the specific expertise required. Separate service contracts will be concluded for monitoring and coordination (c.f. section 4.4 below), and visibility (c.f. section 4.6 below).

One steering committee shall be set up to oversee and validate the implementation of the project with representation from the Federal Government, the Government of Sindh and the EU Delegation. The project steering committee shall meet, at least, once a year or when necessary to discuss progress of the programme. The steering committee may invite civil servants, technical assistance staff, donors and other stakeholders to discuss issues relevant to the implementation of the project.

4.2. Procurement and grant award procedures

1) Contracts

All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question.

Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by Regulation (EC) No 1905/2006 of the European Parliament and of the Council of 18 December 2006 establishing a financing instrument for development cooperation. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in articles 31(7) and (8) DCI.

2) Specific rules for grants

The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. They are established in accordance with the principles set out in Title VI 'Grants' of the Financial Regulation applicable to the General Budget. When derogations to these principles are applied, they shall be justified, in particular in the following cases:

– Financing in full (derogation to the principle of co-financing): the maximum possible rate of co-financing for grants is 80% of the total accepted costs. Full

22

financing may only be applied in the cases provided for in Article 253 of the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation applicable to the General Budget.

– Derogation to the principle of non-retroactivity: a grant may be awarded for an action which has already begun only if the applicant can demonstrate the need to start the action before the grant is awarded, in accordance with Article 112 of the Financial Regulation applicable to the General Budget.

4.3. Budget and calendar

The total project budget is estimated at EUR 15,000,000 of which EUR 15,000,000 shall be financed from the general budget of the European Union.

The indicative breakdown of overall amount by specific programme objectives will be as follows:

Category EU Contribution Type of procurement

Total

1. PFM REFORM in SINDH 9,350,000 9,350,000

1.1 Sindh PRM reform strategy 7,000,000 7,000,000

1.2 Sindh MTBF 2,350,000 2,350,000

2. PFM REFORM at FEDERAL LEVEL

4,000,000 4,000,000

2.1 Federal PFM reform strategy 1,000,000 1,000,000

2.2 Federal MTBF 2,000,000 2,000,000

2.3 Macro-economic forecast/modelling 1,000,000

One service contract

1,000,000

TOTAL 1 + 2 13,350,000 13,350,000

Monitoring and coordination 600,000 Services 600,000

Audit 100,000 Services 100,000

Evaluation 250,000 Services 250,000

Visibility 400,000 Services 400,000

Contingency 300,000 300,000

Total 15,000,000 15,000,000

23

The total operational implementation period of the programme is 72 months from the date of signature of the Financing Agreement and the main milestones are laid out below.

Estimated timeframe: Activity PFM reform in Sindh PFM reform at Federal level

Signature of Financing Agreement with Government of Pakistan (T09) T0

Tendering/contracting of service contract and negotiations Tendering: T0+ 2 month, contracting: T0+ 10 months

Implementation T12 + 60 months T12 + 36 months

Mid-term evaluation T12 + 36 months

Completion of service contract T12 + 60 months T12 + 36 months

Audit T12+18months, T12+42months, T12+60months

Ex-post evaluation T12 + 60 months

4.4. Performance monitoring

The programme will be subject to direct monitoring by the EU Delegation and possibly through the external monitoring system, ROM. The programme indicators are set out in the attached logical framework.

4.5. Evaluation and audit

External mid-term and ex-post evaluations and audits will be carried out by external consultants recruited directly by the EU Delegation to Pakistan in accordance with EU rules and procedures.

4.6. Communication and visibility

Specific funds are earmarked in the budget for communication and visibility purposes. These will be used to undertake appropriate promotional and visibility actions during the course of the programme, based on an overall and annual communication plan. The aim will be to raise awareness of the programme by key stakeholders including civil society organizations and professional associations as well as other beneficiaries of the programme.

Activities will include, but are not limited to, launch events, a web site, press releases, brochures, newsletters and other promotional materials with a view to enhancing effectiveness and visibility. All activities will follow the communication and visibility manual for EU external action.

9 The signature of Financing Agreement with the Government of Pakistan is used as basis for the presented

timetable, "T0" being the date of signature of the Financing Agreement by the Government of Pakistan.

24

ANNEX 3

1. IDENTIFICATION

Title/Number Support to democratic institutions and promotion of human rights DCI/ASIE/2012/023-516

The Islamic Republic of Pakistan

Total cost EUR 13,000,000

Aid method / Method of implementation

Project approach

Direct centralised management and joint management (UNICEF and UN WOMEN)

DAC-code 1) 15152

2) 15160 3) 15170

Sector 1) Legislatures and political parties

2) Human rights 3) Women’s equality organisations and institutions

2. RATIONALE

2.1. Sector context Pakistan is in the middle of a fragile transition from authoritarian rule to a fully fledged democratic system. Underpinned by a changing political environment, including a free press that stimulates greater use of parliamentary mechanisms, the transition from a military regime to an elected civilian government, starting in 2008, triggered an important and still on-going evolution in the role and functioning of democratic institutions and the promotion of human rights in Pakistan. The country is a case in point of the synergies between democratic institutions and respect for human rights. A number of laws implementing major commitments undertaken by Pakistan in the area of human rights, including rights of women and rights of the child, have been adopted by the national parliament since 2008. However, many of these laws have yet to be implemented at a provincial level.

This programme will seek to combine the role of democratic institutions both at federal and provincial level and the promotion of human rights across Pakistan two areas of major importance for EU-Pakistan relations as highlighted in the bilateral EU-Pakistan Cooperation Agreement, the Summit in 2009 and 2010 and the recently agreed 5-year Engagement Plan. The entering into force of the 18th Amendment to Pakistan's Constitution on 1st July 2011, introduced fundamental changes in the political, fiscal and administrative balance between the federal and provincial governments, involving a far-reaching devolution and correcting anomalies of centralisation and lack of democratic control.

The 18th Amendment also has financial and budgetary implications. Provincial taxation has thus been enhanced. And the 7th National Finance Commission award end of 2009 increased the provincial share of the divisible pool from the federal budget from 47.5% in 2009-10 to 57.5 % from 2012 onwards. Provinces are entitled to full proceeds of excise duty on natural resources and the authority to raise domestic and foreign loans albeit with federal consent. This not only entails a much larger role for provincial governments and provincial assemblies, but also is expected to enable a closer scrutiny of the political decision-making process by the media and public.

25

The four major provinces Baluchistan, Khyber Pakhtunkhwa, Punjab and Sindh all have provincial assemblies. In addition and because of their special (extra-) constitutional status Azad Jammu and Kashmir and Gilgit Baltistan have legislative assemblies. The track record on legislation, oversight and representation varies among the provincial and legislative assemblies but it is low. The standing committees are often not fully functional and secretariat resources limited.

Pakistan has undertaken steps to strengthen the electoral legal framework in line with the international standards, including ratification of the International Covenant on Civil and Political Rights, and as also reflected in the recommendations offered by the EU Election Observation Mission 2008. The electoral reforms introduced through the 18th and 20th Amendments to the Constitution have strengthened the mandate, authority and autonomy of the Election Commission of Pakistan, increased the transparency in the process, established new rules for appointing a care-taker administration to hold general elections and reduced the role of the President in the election process. While it is too early to assess the effect of these changes in Pakistan's Constitution, they clearly represent major steps towards a fully fledged democracy in Pakistan which has been plagued by short-lived civil governments being overthrown by military coups.

A Federal Ministry of Human Rights was established in 2008 and has been gradually defining its space and complementarities with other government institutions at federal and provincial level responsible for rule of law and involving respects for human rights such as the Ministry of Law and Justice, the Ministry of Interior and the Ministry for Foreign Affairs. The Human Rights Ministry is currently drafting a national Human Rights Policy. On this basis it will define its human resource strategy. The Ministry is in the lead for the preparation of the national report for the Universal Periodic Review to be presented and discussed at the United Nations Human Rights Council in Geneva in October/November 2012.

The Government of Pakistan will furthermore extend its authority through existing and several important new institutions, providing oversight and improved mechanisms to address human rights concerns. The National Commission on the Status of Women was recently given permanent status and greater autonomy; a bill setting-up a National Human Rights Commission is currently being discussed in the parliament and a bill for the establishment of a National Child Rights Commission is under preparation. These are very positive developments, demonstrating the link between vibrant democratic institutions facilitating the establishment of new mechanisms to ensure the respect and implementation of international human rights commitments.

Meanwhile, the provinces are developing their own structures, since following the 18th Amendment to the Constitution many issues previously under federal responsibility -for instance health, education, social welfare, and women development- have been transferred to the provincial level. As a result, the effective implementation of human rights commitments is since 1st July 2011 primarily a provincial task. While this devolution poses additional challenges to the provincial and local government in Pakistan, the federal government remains responsible to fulfil its obligations to all human rights international treaties it is a party to. Future EU programmes, such as this one, in the area of democratic institutions and the promotion of human rights need to take account of these major changes in the legal and political landscape of Pakistan. Moreover, the proposed programme is in line with the EU "Agenda for change" and in particular its recommendation on the need for EU to "seek to focus its offer to partner countries where it can have the greatest impact and […] concentrate its development

26

cooperation in support of human rights, democracy and other key elements of good governance and inclusive and sustainable growth for human development10".

2.2. Lessons learned The preparation of the proposed programme was done in parallel with the start up of the EU funded support to the National Assembly and Senate in Pakistan. Both programmes derive lessons learned from the experiences of EU assistance to parliaments world-wide, interventions of other major donors in Pakistan11 and EU support to electoral reforms in the country. It also draws important lessons learned from the recently undertaken evaluation of the European Instrument for Democracy and Human Rights (EIDHR) portfolio in Pakistan.

Key lessons learned include:

• Complement political dialogue with cooperation assistance to achieve synergy and consistency and ensure maximum effective use of resources;

• Coordinate with other organisations active in the sector (harmonisation); • Adopt an approach aiming at strengthening the targeted groups capacity as ‘duty-bearers’

(democratic representation / human rights obligations); • Assure coherence and complementarities between interventions; • Adopt long-term institutional development approach instead of emphasis on short-term

technical inputs to achieve sustainable results; • Include strategic interventions in critical areas that have the potential for an institutional

development impact; • Assist partners for the preparation/renewal and adoption of internal strategic documents

and frameworks to maximise the level of ownership over the process and its outcome; • Identify “agents of change” in the institutions, i,e. dynamic and reform-minded actors, and

solicit their support for the programme; • Reduce over time the dependence of actors on external support; • Maintain regular contacts and consultation with different stakeholders (inclusive

partnerships to guarantee ownership and local commitment); • Adopt a flexible approach to be able to respond to rapidly changing situations and needs; • Emphasize the processes as well as the outcomes; • Strengthen the transparency and accountability of all actors.

2.3. Complementary actions The envisaged support for provincial assemblies builds on the newly launched EU funded federal parliamentary support programme: "Improving parliamentary performance". It adopts a similar approach of support through long-term capacity building with the respective provincial assembly secretariats and standing committees. Where feasible the programme will work through the recently established Pakistan Institute for Parliamentary Services (PIPS), which is mandated to provide services to both federal and provincial legislatures. In addition, reputed institutes and learning centres in Pakistan and the transfer of relevant European and international Westminster model practices, as appropriate, would be of importance for both programmes.

10 COM(2011) 637 final: Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Increasing the impact of EU development policy: an Agenda for Change. 11 Reference is made in particular to the Pakistan Legislative Strengthening Project 2005-2010 (USD 16.7 million) of the United States Agency for International Development (USAID).

27

Complementarities with other EU programmes in the current pipeline e.g. in the area of supporting public finance management, support to electoral reforms and educational reforms, will be addressed through working with selected standing committees in the national and provincial assemblies. It should be underlined that there is no other similar major externally funded project in support of the provincial assemblies in Pakistan. However, a number of other donors are currently working through national civil society organisations such as Free and Fair Elections Network (FAFEN) or the Pakistan Institute of Legislative Democracy and Transparency (PILDAT) as well as through PIPS on a more limited scale and primarily in order to strengthen the electoral system rather than the democratic institutions.

The planned interventions in support of the Ministry of Human Rights, the different human rights Commissions and provincial structures directly complement EIDHR and similar activities supported through NGOs cooperation funds from Denmark, Finland, The Netherlands and the United Kingdom. While these interventions have so far mainly focused on the strengthening of rights holders, this proposal for a new and all-encompassing EU good governance programme emphasizes reinforcing the Pakistani institutional structures and capacities in the area of democracy and human rights to empower them to be able to deliver on Pakistan's obligations to International Human Rights Law, in particular to protect, promote and fulfil human rights with a special focus on the rights of women, children and religious minorities.

2.4. Donor coordination Technical coordination for support to the parliamentary institutions will be done through the respective assemblies at federal and provincial level. The new EU programme with the National Assembly and Senate seeks to enhance coordination between the different institutions, the Pakistan Institute for Parliamentary Support and donors, which should also encompass the proposed support for provincial assemblies.

Various donors in their political capacity are also directly involved with cross-party interest groups of elected members of the different institutions. Although these groups, such as the EU-Pakistan Parliamentary Friendship group, are political in nature, they can be expected to play a role in the orientation and coordination of interventions in support of parliamentary activities and promotion of democratisation and human rights.

In the area of electoral assistance, there is a well established coordination between donors and the civil society. And given its additional powers under the 18th and 20th Amendment the Election Commission of Pakistan is encouraged to take a stronger lead e.g. by calling for regular meetings with the international community supporting the upcoming elections.

The EU Human Rights Working Group meets monthly to monitor and exchange views on the evolution of the human rights situation in Pakistan. It has developed a joint strategy setting out common priorities, coordinates possible demarches and other interventions in support of political dialogue and cooperation in the field of human rights. This EU exclusive group is complemented by regular informal meetings with like-minded donors organised on ad-hoc basis to discuss human rights developments in the general political context.

A further local dialogue on democracy and human rights is expected to be established as a result of the commitments assumed under the EU-Pakistan 5-year engagement plan, in particular on enhanced parliamentary exchanges, support for capacity building of national and provincial institutions and dialogue on human rights, and on the ratification and effective implementation of international treaties. An additional benefit of this programme may be that it could provide important input to the human rights dialogue between the EU and Pakistan.

28

3. DESCRIPTION

3.1. Objectives The overall objective of the programme is to support the democratic process and the promotion of human rights in Pakistan. The programme envisages two specific objectives targeting respectively the parliamentary institution and the national human rights system:

• To advance the functioning of Pakistan parliamentary institution, in particular Pakistan provincial assemblies, through effective legislation, strengthened policy and budget oversight and enhanced representation.

• To strengthen the federal and provincial capacity to promote and protect human rights, especially of women, children and religious minorities in accordance with international human rights standards.

3.2. Expected results and main activities

The expected results for advancing the functioning of the parliamentary institution are:

• Strengthened institutional development process and frameworks of assemblies and better equipped elected representatives, select committees and other parliamentary bodies at provincial level;

• Strengthened assemblies' secretariats at provincial level;

• Improved transparency and accessibility of provincial assemblies.

These results will be achieved through long-term interventions in critical areas that have institutional development potential on the basis of thorough political analysis and include technical assistance for: (i) provincial assemblies' strategic planning, strengthened functioning of committees including through work on Rules of Procedure and capacity building for performance of the legislative, oversight and representative functions of parliamentarians; (ii) strengthened assemblies' secretariats through enhanced human resource policy and management, building professional parliamentary cadre as well as capacity building of secretariat key units; (iii) increased public awareness about provincial assemblies' work and accessibility to general public, media and external expertise.

Areas of specific support would include human rights, election standards, gender equality, budget and fiscal oversight, assembly proceedings and effective use of parliamentary oversight tools, including awareness of government rules of business, legislative and research support. Particular attention to women parliamentarians will be ensured through support for development of their legislative agendas and participation from the floor of the house and in committees and other parliamentary bodies such as women caucuses. Cross assembly approach in a systematic way involving provincial as well as federal assemblies to foster linkages and encourage experience sharing amongst parliamentarians and secretariats will be sought, including through involvement of PIPS.

The expected results for strengthening the institutional capacity to promote and protect human rights include:

• Improved capacity of the Ministry of Human Rights to fulfil its mandate as the main Pakistan institution in the field of human rights;

• Established and functional national human rights institutions, compliant with the Paris Principles;

29

• Assisted provincial institutions for the development of strategies and plans and their implementation to protect and promote women’s and child's rights;

• A White Paper on the existing human rights condition of religious minorities in Pakistan drafted and Plan of Action developed and followed-up.

Results will be achieved through technical assistance for: the preparation of treaty bodies' reports and action plans for implementation of follow-up on concluding observations; the revision of legislation and policies (particularly affecting women, children and religious minorities) and the drafting of new legislation or proposals for amendments in line with international human rights standards; the implementation of human rights commitments; the establishment and proper functioning of the National Human Rights Commission, National Commission on the Status of Women and National Child Rights Commission and their provincial chapters and the coordination of their activities to guarantee a strong national human rights system in the country; and for the development and implementation of a Plan of Action for religious minorities' rights in line with the charter of demands of religious minorities of Pakistan.

3.3. Risks and assumptions The main assumptions are:

• Political instability or violence does not hamper the implementation of the programme.

• The different stakeholders involved are interested and support the actions proposed to consolidate democracy and promote human rights and fundamental freedoms.

• Complementarities with other government's and donors' interventions are possible and sought by all involved.

Potential risks and corresponding mitigation measures are presented in the table below: Risk Likelihood Mitigating Measures Assumption

1. Reversal of democratic process

Low Follow up of political situation/ reassessment of EU support.

Functional parliamentary institution and, in particular, provincial assemblies.

2. Deterioration of security situation

Medium Limit the geographical scope of the programme

Conducive political and security situation

3. Lack of political will to develop/ empower the target programme institutions

Medium 1. Permanent contacts with the Speakers/ secretaries of the assemblies, relevant government departments and members of Commissions. 2. Raising awareness of benefits of institutional development and empowerment.

Leadership, parliamentarians and secretariat staff interested in developing and empowering the institution.

4. Concerned institutions do not collaborate closely in the programme

Low 1. To be addressed as part of EU overall political dialogue with the Government of Pakistan and in the context of the 5-year Engagement Plan. 2. Underline that the intervention builds on indigenous proposals/ requests and plans of regional assemblies, Ministry of Human Rights and provincial institutions.

There is a keen interest in this intervention by all concerned in the national and regional assemblies as well as in the human rights institutions.

30

5. Divergence between the Government and the EU in view on the level of priority to be given to specific human rights issues

Medium EU to address this as part of its dialogue with the Government of Pakistan: The "Human rights clause" in EU-Pakistan Cooperation Agreement is an important reference as is the 5-year Engagement Plan and the prospect of Pakistan applying for GSP+ trading status.

Even if it not always seen as a priority, human rights remain important for the government, which has transposed a series of international human rights laws into domestic laws in recent times.

6. Concerned institutions lack capacities to plan/ implement proposed activities

Medium Specific capacity building measures/ technical assistance to be provided.

Sufficient capacity to assess internal institutional needs/ interest in strengthening the relevant institution role.

3.4. Cross-cutting Issues The programme is relevant for several cross-cutting issues identified in the European Consensus on Development: democracy, good governance, human rights, gender equality and the rights of the child. Democracy and human rights are at the core of this intervention. The enumerated expected results would also have impact in terms of gender equality, human rights and good governance: drafting of gender-sensitive legislation; introducing reforms to discriminatory legislation; gender-sensitive approach followed in the work of the provincial assemblies and the human rights institutions; adoption of the principles of duty to respect, duty to protect and duty to promote or fulfil all human rights during periods of peace and conflict; compliance of legislation with international human rights instruments ratified by Pakistan as well as their implementation; specific support to legislative/oversight work of parliamentarians related to gender equality or specific support to women parliamentarian caucuses. Additionally, the rights of the child would be specifically targeted.

3.5. Stakeholders

Federal Level The lower and upper houses of the Federal Parliament, that is both the National Assembly and the Senate are primary beneficiaries of the EU programme “Improving parliamentary performance”. Despite the constraints in the functioning of the federal assemblies, their experience in a number of areas, including on oversight of public expenditures, is to be shared with provincial assemblies. Fostering inter-assembly relations is welcomed by the provinces. In addition, the current work in the Senate on revised Rules of Procedure and a draft bill on the Senate parliamentary cadre can set an example for other assemblies.

The Federal Ministry of Human Rights and the parliamentary committees on human rights of the National assembly and the Senate will also be part of the institutions targeted by this programme

The National Commission on Human Rights, which will be established soon -the bill is currently in the Senate-, the National Commission on the Status of Women recently strengthened and given more autonomy and the National Child Rights Commission which set-up a bill is under preparation, will work closely with the democratic institutions of the country as parliaments have significant responsibility for promoting, protecting and realising human rights through their functions of law-making, oversight and representation.

Pakistan Institute for Parliamentary Services has as mandate to support the national parliament and the four provincial assemblies and to build capacity of parliamentarians and

31

secretariats through trainings, seminars and workshops in various legislative businesses of each assembly.

Provincial Level

The respective secretariats and parliamentarians of the provincial assemblies have expressed a keen interest for an EU parliamentary assistance programme. While varying in their understanding of parliamentary institutional development, most of the secretariats are concerned with the proper preparation of the next parliamentary legislature and request immediate assistance. The relations between provincial parliamentarians and constituents appear to be predominantly geared towards facilitating social delivery services. This situation is exacerbated by the absence of a functioning local government system. Increased responsibilities and capacity constraints are recognised by parliamentarians and secretariats as a major challenge. Current provincial legislatures have adopted strategic plans for their institutional development. While the assemblies demonstrate a level of ownership of these plans, their implementation is lagging behind. Current levels of provincial assemblies' budgets entail dependence on external assistance. Establishment of realistic budgets however is within the assembly remit and is a precondition for ensuring their long-term institutional development.

As a result of the 18th Constitutional amendment, the provincial governments are beginning to assert themselves, in particular in social affairs and human rights. Two provinces, Sindh and Baluchistan, have established an independent Women’s Development Department (WDD) with a separate Minister. Punjab has recently made its WDD independent and is expected to appoint a separate Minister soon. Punjab and Khyber Pakhtunkhwa are anxious to take their women’s rights programs to the district level. Khyber Pakhtunkhwa is the first one to set up a provincial commission on women, others are expected to follow. Two provinces, Khyber Pakhtunkhwa and Punjab, have a separate legislation and institutional bodies for child’s rights.

For the time being, none of the provincial governments have a sound mechanism for minority rights. An issue that should be given priority in the proposed programme. Baluchistan has a Minorities Minister with no department under him. Punjab has a Minority Rights Department and a Minority Development Fund. Khyber Pakhtunkhwa has a focal point and a section for Minority Rights as does Sindh. The activities undertaken by these bodies relate almost exclusively to maintenance and repair of infrastructure (churches, schools, etc.).

Civil society at large

In the parliamentary support arena, FAFEN and PILDAT have gained experience in assessing and formulating recommendations and/or assisting Pakistan assemblies. FAFEN Parliament Watch Project is based on direct observation of parliamentary proceedings. The scope of observation includes the Senate and four provincial assemblies. PILDAT prepares performance “score cards” of the National assembly, Senate and Punjab provincial assembly (2008 - 2011). PILDAT is also active in the area of drafting policy papers, organising subject specific workshops mainly for the Punjab provincial assembly, organising study tours and supporting the Pakistan young parliamentarians. While these interventions have an added value, they appear limited in terms of sustainability and effect for the long-term institutional development of the assemblies.

Among the civil society organizations working on human rights, the NGO Human Rights Commission of Pakistan is known for its credibility and the sound data it provides, particularly in their annual report on the status of human rights in Pakistan. The Child Rights Movement provides a joint forum to tackle the widespread violence, abuse, neglect and exploitation of children. Other organisations, like Aurat Foundation or Shirkat Gah, also provide sound information on women’s rights while the following two networks Elimination

32

of violence against women (EVAW) and Alliance against sexual harassment (AASHA), advocate for the protection of women against different forms of violence. The National Commission for Justice and Peace and the Minority Rights Commission focus their work on the situation of religious minorities.

4. IMPLEMENTATION ISSUES

4.1. Method of implementation A Financing Agreement will be signed between the European Commission and the Government of Pakistan, represented by the Economic Affairs Division (EAD).

• Specific objective 1 (Parliamentary institution) will be implemented through direct centralised management (service contract for technical assistance to be awarded through an international restricted call for tender).

• Specific objective 2 (National human rights system) will be implemented through joint management on the basis of signature of agreements with two agencies of the UN family and the European Commission: UNICEF and UN WOMEN in accordance with Article 53d of the Financial regulation. Both agencies have specific mandates to work with two of the priority groups under this intervention: women and children; UN WOMEN also foresees special attention to members of minorities. Both agencies have long-term relations with the Government of Pakistan and well-established networks and presence in the provinces. UNICEF has been working with the Government of Pakistan for decades. In March 2012 it signed a federal multi-year work plan for child's rights protection very much in line with the activities proposed under this intervention. UN WOMEN has been working with the Ministry of Human Rights for the last years continuing the support provided to the Ministry for Women Development (absorbed by Ministry of Human Rights in 2010); and it has recently signed a specific Memorandum of Understanding (with attached work plan) with the Ministry "to promote the goals of gender equality, women's human rights and women's empowerment". Both UNICEF and UN WOMEN are covered by the Financial and Administrative Framework Agreement (FAFA) signed in 1994 between the European Commission and the UN. Standard Contribution Agreements will be used including for provision of technical assistance.

• Communication and visibility activities, described in Section 4.6, will be undertaken through a service contract.

• Monitoring, external evaluation and audit will be undertaken through activities described in Section 4.5.

The change of management mode constitutes a substantial change except where the Commission "re-centralises" or reduces the level of tasks previously delegated to the beneficiary country, international organisation or delegated body under, respectively, decentralised, joint or indirect centralised management.

33

4.2. Procurement and grant award procedures

1) Contracts All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question.

Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by Regulation (EC) No 1905/2006 of the European parliament and of the Council of 18 December 2006 establishing financing instrument for development cooperation as amended by Regulation (EU) No 1341/2011 of the European parliament and of the Council of 13 December 2011 and Regulation (EU) No 1339/2011 of the European parliament and of the Council of 13 December 2011 (hereafter 'DCI Regulation'). Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for articles 31 (7) and (8) of the DCI Decision.

2) Specific rules for grants The essential selection and award criteria for the award of grants are laid down in the Practical Guide to contract procedures for EU external actions. They are established in accordance with the principles set out in Title VI 'Grants' of the Financial Regulation applicable to the General Budget. When derogations to these principles are applied, they shall be justified, in particular in the following cases:

– Financing in full (derogation to the principle of co-financing): the maximum possible rate of co-financing for grants is 80% Full financing may only be applied in the cases provided for in Article 253 of the Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of the Financial Regulation applicable to the General Budget.

– Derogation to the principle of non-retroactivity: a grant may be awarded for an action which has already begun only if the applicant can demonstrate the need to start the action before the grant is awarded, in accordance with Article 112 of the Financial Regulation applicable to the General Budget.

3) All contracts implementing the action through Agreements with the International Organisations mentioned in Section 4.1. are awarded and implemented in accordance with the procedures and standard documents laid down and published by the relevant International Organisation.

34

4.3. Budget and calendar The total project cost is estimated at EUR 13 million. EU contribution is EUR 13 million and it shall be financed from the general budget of the European Union. The indicative breakdown of overall amount by specific programme objectives is as follows:

Category EU Contribution (in €) Contracting Authority/Paying Authority

Technical assistance (Specific objective1: Parliamentary institutions)

8,950,000

European Commission

Contribution agreements (Specific objective 2: National human rights system)

3,260,000

European Commission

External evaluation 180,000 European Commission

Audit 70,000 European Commission

Visibility 290,000 European Commission

Contingency 250,000 European Commission

Total 13,000,000 European Commission

The operational implementation phase of the programme is 72 months from the date of signature of the Financing Agreement and the main milestones are laid out below. Due to the political context and the foreseen national elections in the first semester of 2013, the timeframe of the two specific objectives of the programme may differ.

Estimated timeframe:

Activity Specific objective 1: Parliamentary institutions

Specific objective 2: National human rights system

Signature of Financing Agreement with Government of Pakistan (T012) T0

Tendering/contracting of service contract and negotiations for contribution agreements (UN WOMEN/UNICEF)

Tendering: T0+ 1 month, contracting: T0+ 8

months T0 + 3 months

Inception phase T0 + 12 months T0 + 5 months

Implementation T0 + 72 months T0 + 48 months

Mid-term evaluation T0 + 47 months NA

Completion of service contract and contribution agreements T0 + 72 months T0 + 48 months

Audit T0 + 96 months T0 + 72 months

Post completion evaluation T0 + 96 months T0 + 72 months

12 The signature of Financing Agreement with the Government of Pakistan is used as basis for the presented

timetable, "T0" being the date of signature of the Financing Agreement by the Government of Pakistan.

35

4.4. Performance monitoring The programme will be subject to direct monitoring by the EU Delegation and possibly through the external monitoring system, ROM. The programme indicators are set out in the attached logical framework. The logical framework will be updated during the inception phase.

4.5. Evaluation and audit External mid-term and ex-post evaluations and audits will be carried out by external consultants recruited directly by the EU Delegation to Pakistan in accordance with EU rules and procedures.

4.6. Communication and visibility Specific funds are earmarked in the budget for communication and visibility purposes. These will be used to undertake appropriate promotional and visibility actions during the course of the programme, based on an overall and annual communication plan. The aim will be to raise awareness of the programme of key stakeholders, and direct and indirect beneficiaries.

Activities will include, but are not limited to, launch events, press releases, brochures, newsletters and other promotional materials with a view to enhancing effectiveness and visibility. All activities will follow the communication and visibility manual for EU external action.

programme supporting community governance and · pdf fileinitially contained to the federal...

Documents