ii) A program loan for sub-program 1 of the PRMP ($ 200 million)
· JUSTIFICATION OF THE PROGRAM
· STRUCTURE AND SCOPE OF PROGRAM CLUSTER
· APPLICATION OF PROGRAM CLUSTER MODALITY IN PRMP
· TA LOAN ($4 MILLION)
· OBJECTIVES OF TA LOAN
· IMPLEMENTATION ARRANGEMENTS
· CONSULTANCY SERVICES
· SCOPE OF THE TA LOAN / CONTRACT PACKAGES
JUSTIFICATION OF THE PROGRAM
The overarching objective of the program is to assist the Punjab Government in reducing poverty through good governance including improved public sector resource management. It is common knowledge that despite many initiatives aimed at developing Pakistan’s economic and social sectors, the country’s level of development remains below its potential and social indicators are lagging. Incidence of poverty today is higher than a decade ago. Punjab mirrors these national trends and is further constrained by the fact that fiscal space available to the Government of the Punjab is limited. Furthermore, traditionally expenditures are allocated in a way that does not adequately reflect medium term policy priorities. Allocations are inadequate to cover the growing needs for operation and maintenance of public services. As a result, quality of public service is generally perceived to have deteriorated and unable to meet the needs of a growing population and increasing environmental pressures. Research has identified a crisis of governance as a central element in the sub-par service delivery and development spending at all levels. There is ample evidence that improvement in public sector governance and resource management yields considerable development gains.
Since 1999, the Government of Pakistan embarked on an ambitious program of restructuring and reforming government institutions at all levels, federal, provincial and local. The most obvious manifestation of this reform agenda was embodied in the Local Government Ordinance which was promulgated by all provinces in August 2001. This ordinance assigned responsibilities for the bulk of service delivery to local governments at district and tehsil levels and, by implication fundamentally changed the role, responsibilities and powers of provincial governments. The Punjab Government has achieved much in realigning and reorienting its administrative structures and processes in light of devolution plan. The investment through the PRMP will further strengthen the reform process and help in poverty reduction.
The program seeks to improve service delivery with particular emphasis on pro-poor sectors through structural reforms in systems and processes to manage public resources. Therefore, more than 80% of the loan proceeds will be utilized for restructuring of high cost debts and capitalization of provident funds. This spending is expected to gradually liquidate the accumulated structural rigidities in the provincial expenditures, creating sizeable fiscal space for enhanced spending on pro-poor activities and critical social sectors. The remaining loan proceeds will be utilized to strengthen institutional arrangements for maximization of outputs and utility of the resource (human, physical and intellectual) available to the province with an objective to reduce the severity and incidence of poverty. The exercise of reformation of the institutions and public sector entities will be undertaken with a view to improving upon the decision-making and implementation processes. Creation of enabling environment for private sector, minimizing public interventions in economic activities and generation of more economic activity also figure prominently in the list of results intended to be achieved.
Guiding design principles
Formulation and design of the Program is anchored in the following principles, taking account of past program experience in Pakistan and elsewhere:
(i) Strong leadership and participation. The program enjoys the full support at the political level, including the Chief Minister of Punjab. Program formulation was ‘home-grown’ with broad stakeholder participation, including from the private sector and non-government organizations (NGOs). The first Punjab Development Forum was held prior to program finalization to allow wide consultation on its content.
(ii) Output focused medium term approach with flexibility for adjustment of targets. The program takes a medium term view beyond the short-term horizon of traditional program loans, and by adopting the cluster modality allows for adjustment of design parameters based on actual progress and effectiveness.
(iii) Emphasis on strong implementation support and monitoring mechanism. A program monitoring unit (PMU) was established and staffed early during program formulation, and involved in the design of a comprehensive monitoring framework.
(iv) A holistic approach and coordination and complementarily with other governance activities anchored in the PRSP.
(v) ADB program financing allocated for financing of measures that create fiscal space within a defined medium-term budget framework rather than financing incremental sector spending that may not be sustainable.
STRUCTURE AND SCOPE OF PROGRAM CLUSTER
The structure of the program cluster and the key result areas in each component are as follows:
REFORMING PROVINCIAL FINANCING THROUGH FISCAL STRUCTURING AND FINANCIAL MANAGEMENT BY
A. Strengthening provincial revenues;
B. Rationalizing provincial expenditure;
C. Improving effectiveness, predictability and accountability in financial management.
REFORMING PROCESSES AND INSTITUTIONS FOR PRO-POOR SERVICE DELIVERY THROUGH
A. Improving strategic programming of investments for poverty reduction;
B. Restructuring and strengthening government, administration and human resource management.
CREATING OPPORTUNITIES FOR GROWTH AND INCOME GENERATION THROUGH PRIVATE SECTOR DEVELOPMENT BY
A. Undertaking regulatory reforms for private sector development and public-private partnership; Reducing direct public sector involvement in economic and/ or commercial operations.
APPLICATION OF PROGRAM CLUSTER MODALITY IN PRMP
The PRMP will be structured in sequential subprograms under the Program cluster modality. Under this modality, each subprogram will have a shorter time-horizon of about 1-2 years, and formulation and finalization of each subsequent subprogram will take place during the subprogram review (SPR) on an agreed schedule towards the later stages of implementation of the preceding subprogram. This will allow for flexibility in program based on progress made and changes in the external environment and build up momentum in the reform process as experience is gained through implementation. In addition, to supporting institutional development and implementation capacity for the reform program, the TA loan is also being provided for effective implementation of the PRMP and would be supplemented by a number of smaller TA grants over the Program cluster period.
TA LOAN ($4 MILLION)
The TA loan is meant to finance the costs of technical / consultancy services, capacity building and related inputs that are necessary for accomplishment of the actions as agreed in the signed Aide Memoir. Also the actions to be mutually agreed by the Government of the Punjab and the ADB during the course of the program are to be supported under the TA loan.
OBJECTIVES OF TA LOAN
The main objective of the TA loan is to provide technical support and augment the efforts of implementing agencies responsible to achieve agreed results/targets within stipulated period, under the three Components and corresponding policy outcomes as identified in the policy matrix. This will be done through consultancy services of the requisite quality to gain maximum benefits of the PRMP. The TA loan will assist in the achievement of the following objectives:
1. Strengthening of provincial revenues;
2. Rationalization of provincial expenditure;
3. Improvement of effectiveness, predictability and accountability in financial management;
4. Improvement in strategic programming of investments for poverty reduction;
5. Restructuring, and strengthening of government, administration and human resource management;
6. Undertaking regulatory reforms for private sector development and public-private partnership;
7. Reducing direct public sector involvement in economic and/ or commercial operations; and
8. Undertaking capacity enhancement of relevant government departments, district governments as well as public sector organizations.
Consultancies in these areas will be packaged as given in scope of the TA Loan. The overall result of the achievement of the above objectives will be the raising of living standards and reduction in the severity and incidence of poverty.
The executing agency (EA) for the scheme will be the Punjab Planning and Development Board (P&D). The implementing agencies (IAs), to be supported by the scheme, will include P&D, Finance Department, Excise & Taxation Department, Board of Revenue, Services and General Administration Department and the other departments of the Punjab Government as indicated in the policy matrix. As agreed in the MOU, the EA has established a Program Management Unit (PMU) prior to loan negotiations, funded by the Punjab Government. In addition to the PMU, each IA will set up a core team which will coordinate with the PMU in its mandated areas. The core team will be responsible for preparing progress reports as required, for their onward submission to the PMU. The core team notified by each department will also be responsible for preparing terms of reference. The core team would interact with the consultants hired by the PMU and would certify the progress of the consultants to the PMU for the purpose of contract payments. Consultants would be hired through the Consultant Selection Committee of the Government.
Separate teams of consultants as well as individual consultants will be appointed for each package of the TA loan or part thereof. TA Loan will rely primarily on domestic consultants and recourse to international consultants will be made only where equivalent skills are not available nationally. Similarly short term services of international resource persons will be utilized only where required for smooth implementation of the Program. The consulting firms, individual consultants or group of consultants having requisite experience will be hired by PMU in accordance with the ADB’s Guidelines on the Use of Consultants [including Quality and Cost Based System - QCBS] through the Consultant Selection Committee of the Government.
In consultant selection, preference will be given to those having adequate understanding as well as experience of working in the public sector. Similarly, capacity building to be supported under the TA loan will mainly focus on training and skill development services available within Pakistan with some suitable international exposure visits and trainings in areas where skills
and opportunities for capacity building are not available locally.
The studies and consultancies would be conducted in a participatory manner with full involvement of the relevant stakeholders. The consultants would interact with the civil society, major stakeholders through workshops, seminars, and informal consultations. This consultative process would refine the findings and final recommendations of the studies.
SCOPE OF THE TA LOAN / CONTRACT PACKAGES
The TA seeks to support assessments and analytical studies in key policy and reform areas addressed under the PRMP, develop strategies to improve fiscal sustainability and public service delivery; and build capacity to carry out institutional reforms in key public sector departments including P&D, FD, S&GAD, BOR, Excise and Taxation, Food, and Industries, Investment and Commerce Departments. The TA will comprise eight components/ contract packages, as follows:
1. Revenue and tax administration reform,
2. Public expenditure and financial management [including MTBF, intergovernmental financing,
procurement and financial management]
3. Liability management and pension reform
4. Strategic planning systems and change management
5. Human resource management
6. Land registration reform,
7. PSO reform [including preparation for privatization, liquidation and corporate restructuring]
Implementation support [including monitoring and evaluation].