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Completion Report

Project Number: 37220-023 Loan Number: 2499 September 2017

Pakistan: Sindh Cities Improvement Investment

Program - Tranche 1 This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – Pak Rupee (PRe/PRs)

At Appraisal At Project Completion 27 Oct 2008 30 June 2014

PRe1.00 = $0.01228 $ 0.01013 $1.00 = PRs81.3500 PRs98.73

ABBREVIATIONS

ADB – Asian Development Bank BOD – board of directors DNI – distribution network improvement EARF – environmental assessment and review framework EIRR – economic internal rate of return EMP – environmental monitoring plan FIRR – financial internal rate of return GIS – geographic information system GOS – government of Sindh ICB – international competitive bidding IPPMS – investment program performance monitoring system LAR – land acquisition and resettlement LARP – land acquisition and resettlement plan LGRD&HTPD – Local Government, Rural Development & Housing, Town

Planning Department NCB – national competitive bidding NRW – non-revenue water NSUSC – North Sindh Urban Services Corporation Limited OSF operational and transition support funding O&M – operation and maintenance P&DD – Planning and Development Department PSC – program steering committee PSU – program support unit SAMA – service and asset management agreement SCIIP – Sindh Cities Improvement Investment Program SLGO – Sindh Local Government Ordinance SWM – solid waste management TA – technical assistance TMA – taluka municipal administration USC – urban services company WACC – weighted average cost of capital WSS – water supply and sanitation WTP – water treatment plant WWM – wastewater management

NOTES

(i) The fiscal year (FY) of the government and its agencies ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2009 ends on 30 June 2009.

(ii) In this report, "$" refers to US dollars.

Vice-President W. Zhang, Operations 1 Director General O. Sullivan, Central and west Asia Department (CWRD) Director X. Yang, Country Director PRM, CWRD Team leader M. Shafi, Senior Project Officer, CWRD Team member M. Bukhari, Project Analyst, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 2 B. Project Outputs 4 C. Project Costs 6 D. Disbursements 7 E. Project Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 8 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10

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

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 14 C. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Update on Urban Development Actions 21 3. Project Cost at Completion 23 4. Contract Awards and Disbursement 29 5. Tranche 1 Implementation Schedule 32 6. Status of Compliance with Covenants 41 7. Update on Gender Action Plan 55 8. Consulting Services Packages, Terms of Reference, and Input Utilization 57 9. Project Impact on Health and Customers’ Satisfaction 63 10. Redundant Covenants 67 11. Time Bound Action Plan for Compliance of Covenants 69 SUPPLEMENTARY APPENDIXES (available on request) A. Service Delivery Performance B. Average Hours of Water Supply C. Collection Efficiency of North Sindh Urban Services Corporation

BASIC DATA

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

Pakistan 2499-PAK MFF: Sindh Cities Improvement Investment Program – Tranche 1 Islamic Republic of Pakistan North Sindh Urban Services Corporation SDR 25,538,000 (Equivalent of $38,000,000.0 1670

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

5 June 2008 28 July 2008 29 October 2008 30 October 2008 19 December 2008 6 February 2009 8 March 2009 6 March 2009 31 December 2012 31 March 2016a 2 1% per annum during the grace period and 1.5% per annum thereafter. 32 8 1% per annum during the grace period and 1.5% per annum thereafter. 32 8 Government of Sindh

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a The delay in PCR preparation is due to (i) delays in the refund of the unspent imprest advance, and the loan account closure; (ii) the late transfer (in 2017) of the full project record to the Pakistan Resident Mission; and (iii) Project Completion Review team members were unavailable because of other priority assignments.

9. Disbursements a. Dates Initial Disbursement

19 April 2010

Final Disbursement

09 December 2014

Time Interval

55 months

Effective Date 06 March 2009

Original Closing Date 31 March 2016

Time Interval 84 months

b. Amount ($ ‘000’)

Category or Subloan

Original

Allocation

Last Revised

Allocation

Amount

Canceled

Net Amount Available

Amount

Disbursed

Undis-bursed Balance

Civil Works 9,609.48 9,038.72 (570.76) 9,038.72 9,038.72 Materials and Equipment 3,670.77 3,587.49 (83.28) 3,587.49 3,587.49 Engineering Design & CSS 2,404.28 2,162.87 (241.41) 2,162.87 2,162.87 Consulting Services & PM 2,464.16 2,222.14 (242.02) 2,222.14 2,222.14 Recurrent Cost – OSF 6,654.61 6,587.57 (67.04) 6,587.57 6,587.57 Interest Charge 665.00 446.71 (218.29) 446.71 446.71 Unallocated 69.70 (69.70) Total 25,538.00 24,045.50 (1,492.50) 24,045.50 24,045.50

Equivalent of US$ 38,000.00 36,970.55 1,029.45 36,970.55 36,970.55 ( ) = negative, CSS = construction supervision services, OSF = operational support fund, PM = project management Source: Loan Financial Information System

10. Local Costs (Financed) Not applicable b

C. Project Data 1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign Exchange Cost Local Currency Cost Total 50.0 49.05

b Local and foreign currency cost breakdown does not apply to this loan.

Source: Asian Development Bank estimates

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Implementation Costs Borrower Financed 12.00 12.07 ADB Financed 37.01 36.29

Total 48.36

IDC Costs Borrower Financed ADB Financed 0.99 0.68

Total 50.00 49.05

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ADB = Asian Development Bank, IDC = interest during construction. Numbers may not add up due to rounding


3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Urban Planning, Institutional Development, and Program Implementation Support

6.60 8.74

B. Urban Water Supply and Wastewater Improvements 16.84 21.94 C. Solid Waste Management Improvements 6.09 3.76 D. Operational and Transition Support 8.00 13.92 Interest during implementation 0.99 0.69 Total Base Cost 38.52 49.05 Physical and Price Contingencies 11.48

Total project Cost 50.00 49.05


4. Project Schedule

Item Appraisal Estimate Actual

Date of Contract with Consultants

Firms:

Mapping, Planning and Feasibility Studies Q1 2009 Feb 2010 Program Management and Support to NSUSC Q1 2009 Feb 2010 Mapping, Planning and Feasibility Studies Q1 2009 Jul 2011 Review and Feasibility of Sukkur Intake Q1 2009 Jun 2011 Management Support to P&DD Q1 2009 May 2010 Urban Development Strategy for Sukkur Q4 2009 Sep 2013 Construction Supervision Sewerage Khairpur Q1 2009 Mar 2010 Independent Verifier Q2 2009 Feb 2010 Urban Development Strategy for Larkana Q4 2009 Sep 2013 Individual Consultants: Regional Specialist for PSU Q2 2009 Oct 2013 Municipal Services Specialist for PSU Q2 2009 Dec 2009 Urban Development Specialist for PSU Q2 2009 Jan 2010 Municipal Services Specialist (W&WW) for PSU Q2 2009 Jan 2010 Monitoring and Evaluation Specialist for PSU Q2 2009 Jan 2012 Public Finance Specialist for PSU Q2 2009 Feb 2012 Human Resource Specialist for PSU Q2 2009 Mar 2012 Procurement and Contract Specialist for PSU Q2 2009 Nov 2013 Resident Supervision Engineer Q2 2009 May 2014 Four Assistant Resident Supervision Engineers Q2 2009 May 2014 Four Site Inspectors May 2014 Completion of Engineering Designs Q2 2009 Q3 2010 Civil Works Contract Date of Award Q3–Q4 2009 Q1 2010–Q3 2013 Completion of Work Q1–Q2 2012 Q1 2011–Q2 2016 Equipment and Supplies Q1 2010 Q2 2010–Q1 2013 Dates First Procurement Q2 2009 Q3 2009 Last Procurement Q3 2009 Q3 2013 Completion of Equipment Installation Start of Operations Completion of Tests and Commissioning Q3 2012 Q2 2016 Beginning of Startup Q3 2012 Q2 2016

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NSUSC = North Sindh Urban Services Corporation, P&DD = planning and development department, PSU = project support unit, Q = quarter, W&WW = water and wastewater Sources: Borrower’s Completion Report

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives Implementation Progress

From 06 Mar 2009 to 31 Jul 2009 Satisfactory Highly Satisfactory From 01 Aug 2009 to 31 Dec 2010 Satisfactory Satisfactory Rating in eOperationsa

From 01 Jan 2011 to 30 Jun 2011 Potential Problem From 01 July 2011 to 30 Sep 2011 Actual Problem From 01 Oct 2011 to 31 Mar 2012 On Track From 01 Apr 2012 to 31 Mar 2013 Potential Problem From 01 Apr 2013 to 30 Jun 2014 On Track

a Effective 1 January 2011, the legacy Notes-based PPR system was replaced with the Oracle-based eOperations database, which captures a single rating for the overall project.

Source: Lotus Notes PPR database, and Project Validation Record in eOperations

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Appraisal 1 5–12 Jun 1998 5 40 a,b,c,d,e Appraisal 2 17–28 Jul 1988 5 60 a,b,c,d,e Fact-finding 22 Jan–7 Feb 2008 6 102 a,b,c,d,e,f Consultation 1 7–14 Feb 2009 1 8 a Consultation 2 23–25 May 2009 1 3 a Review 1 21–26 Aug 2009 2 12 a,d Inception 13–18 Dec 2009 6 36 a,d,g,h,i,j Review 2 24–25 Feb 2010 1 2 a Review 3 28–30 Oct 2010 1 3 a Review 4 15 Apr 2010 1 1 a Review 5 3–12 Nov 2010 6 60 a,d,h,j,l,m Review 6 2–4 Feb, 6–7 Mar 2011 7 35 a,l,m,n,o,p,q Consultation 3 29–30 May 2011 1 2 a Midterm 21–26 Sep 2011 9 52 a,h,i.l,n,o,r,s,t Review 7 18–26 Apr 2012 3 27 l,n,r Review 8 3–14 Aug 2012 2 8 a,n Review 9 28 Jan–13 Feb 2013 3 21 h,n,r Review 10 27 Jun–1 Jul 2013 2 8 h,r Review 11 9–13 Dec 2013 3 15 n,r,u Review 12 9–18 Feb 2014 4 36 d,h,n,r Project Completion a Not fielded

a = principal urban development specialist, b = senior water and sanitation specialist, c = water supply and sanitation specialist, d = urban development specialist, e = development communication specialist (consultant), f = social development specialist, g = head project administration unit, h = project analyst, i = senior control officer, j = procurement consultant, k = environment specialist, l = senior environment specialist m = principal water supply and sanitation specialist, n = senior project officer, o = resident mission advisor (consultant), p = procurement officer, q = safeguards consultant, r = principal economist, s = senior safeguards officer, t = gender specialist (consultant), u = associate project officer a No project completion review mission was fielded as the Government of Sindh did not clear the mission request,

citing the preoccupation of the government officials due to budget preparation. Another factor in declining the PCR mission request by the Government was the political unrest in Project towns due to closure of NSUSC on the orders of Supreme Court of Pakistan.

Source: Missions Back-to-Office Reports, and Project Records in eOperations.

I. PROJECT DESCRIPTION

1. Sindh is the second-most populous province in Pakistan. It is highly urbanized, and data collected during appraisal indicated nearly half the population lived in urban areas.1 Karachi and Hyderabad, the two largest cities in the province, accounted for about 70% of the urban population, and 20 secondary cities for the remaining 30%. Sindh’s second-tier cities are under increasing stress due to population growth and urban poverty. The provision of urban infrastructure and services has not kept pace with population growth. The small infrastructure investments that have been made are inadequately planned and poorly managed, resulting in less-than optimal use and unsustainable operations. Deteriorating urban services increase business costs, damage the urban environment, diminish the quality of life, and discourage potential investment. The impact of devolution reforms enacted since 2001 have been disappointing. While providing scope for more effective service provision, improvements are hindered by continuing overlap and fragmentation of responsibilities between taluka municipal administrations (TMAs) and provincial-level agencies.2 Alternative approaches to service provision, including infrastructure planning and construction, are needed to address the challenges facing Sindh’s second-tier cities. Service delivery needs to be separated from political interest and placed on a commercial and self-sustaining basis, leveraging private sector expertise by providing incentives. 2. Within this context, the Asian Development Bank (ADB) approved a 10-year, $300 million multitranche financing facility for the Sindh Cities Improvement Investment Program (SCIIP).3 The aim of the program was to enhance the urban environment, public health, and economic opportunities for an estimated 4 million urban residents living in participating secondary cities. This was to be achieved by improving the quality, coverage, and reliability of water supply, wastewater management (WWM), and solid waste management (SWM) services in these secondary cities. The investment program was to achieve this through a combination of institutional and sector reforms, capacity development, and priority infrastructure investments along with provision for outsourcing and public–private partnerships for effective service delivery. Tranche 1 of the program was approved for SDR25.0 million ($38.0 million equivalent) from the Asian Development Fund on 19 December 2008, with an original closing date of 31 December 2012.

3. Tranche 1 had four parts: (i) part A: urban planning, institutional development, and program implementation support for institutional reforms; (ii) part B: water supply and WWM improvements through civil works and equipment provision; (iii) part C: SWM through provision of civil works and equipment for the construction and operation of sanitary landfill facilities, solid waste collection equipment, and communal waste bins; and (iv) part D: operational and transition support funding (OSF) to cover cash shortfalls in the newly established urban services companies (USCs) in advance of planned tariff increases and greater cost recovery. 4. The Government of Sindh (GOS) Planning and Development Department (P&DD), through the program support unit (PSU) was the executing agency of the program. The PSU was to lead work on reforming city governance, rollout of the USC model to new town clusters, monitoring and evaluation, and safeguard compliance. The program established the North Sindh

1 ADB. 2004. Technical Assistance to the Islamic Republic of Pakistan for Preparing the Sindh Basic Urban Services

Project. Manila (TA 4534-PAK, approved on 23 December 2004, supported program preparation). 2 A taluka is a district subdivision. 3 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility and Technical Assistance Grant to the Islamic Republic of Pakistan for Sindh Cities Improvement Investment Program. Manila.

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Urban Services Corporation (NSUSC) as the main implementing agency responsible for planning, investment and operational components of the six participating towns of tranche 1.4 An urban policy and strategic planning unit (the urban unit), was established within P&DD as the implementing agency for providing strategic policy and planning guidance for province-wide reforms to support more effective urbanization.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

5. The objectives and intervention of tranche 1 were consistent with ADB’s strategy for the urban sector at appraisal and at completion.5 ADB’s country strategy and program at appraisal emphasized urban sector interventions focusing on institutional reform and investments to improve municipal service delivery. 6 ADB investment under the current country partnership strategy also highlights institutional, policy and regulatory reforms as core components of any infrastructure investment to ensure efficient water use and investment, and financially sustainable delivery of urban services.7 6. The tranche 1 of the program was also consistent with the country’s development objectives at appraisal and at completion. The medium-term development framework (2005–2010), Pakistan’s Vision 2030 and Framework for Economic Growth envisage livable cities as engines of national growth, and centers of economic activity, culture, and knowledge.8 When the program was conceived and appraised (2001–2009), the devolution of administration, finances and functions to elected local governments was a major policy objective of the government. Under the Sindh Local Government Ordinance (SLGO) 2001, TMAs were entrusted with the municipal functions; but related financing, skills, and accountability mechanisms were not developed or fully devolved.9 The program and it tranche 1 was aligned to address these gaps in devolved service delivery, and strengthen devolved municipal institutions in the process. 7. The core reform of tranche 1 was the delegation of municipal services to professional management under performance-based contracts. The transition remained smooth until 2010—NSUSC became operational, 2,800 staff transferred from TMAs to NSUSC, a new management and NSUSC board of directors (BOD) was hired, and priority investments were identified. 8. However, the tranche 1 design was less than relevant. The NSUSC was simultaneously entrusted with two roles—infrastructure development and service delivery—from the outset, which was beyond its capacity as a newly established entity. In trying to achieve economies of scale, tranche 1 was active in six cities, which overstretched NSUSC’s limited resources.10 The geographic scope included Larkana and Shikarpur, which unlike the other 4 cities, had no tariff base to allow service cost-recovery. Given its limited capacity, NSUSC‘s focus remained on capital works, with marginal effort given to streamlining operations and assets, which was one of its core functions. ADB and GOS initially agreed to address these gaps by restructuring NSUSC

4 NSUSC, Pakistan's first regional USC, was established under Section 42 of the Companies Ordinance 1984, 5 ADB. 1999. Urban Sector Strategy (December 1999). Manila. 6 ADB. 2005. Country Strategy and Program Update: Pakistan (2006–2008). Manila. 7 ADB. 2015. Country Partnership Strategy, Pakistan (2015–2019). Manila. 8 Government of Pakistan, Planning Commission. 2007. Vision 2030—Pakistan in the 21st Century. Islamabad;

Government of Pakistan, Planning Commission. 2011.The Framework for Economic Growth. Islamabad. 9 Government of Sindh 2001: Sindh Local Government Ordinance 2001. Karachi 10 These cities included, Sukkur, New Sukkur, Khairpur, Shikarpur, Larkana, and Rohri.

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and returning responsibility for SWM partly to the TMA. However, GOS indecisiveness curtailed the impact of these improvements. 9. The reforms and institutional model were not fully implemented for various reasons. Most importantly, the overall commitment of the GOS to devolved service delivery began to wane in the middle of tranche 1 implementation. Elected mayors were replaced by TMA administrators, who became NSUSC BOD members in December 2009, and remained in their positions for the remainder of tranche 1. The premise of professional USCs was to replace inefficient TMA administration; providing the TMAs with representation on the BOD put them in a position to directly influence the reforms that were undermining their role. In 2010 the GOS began progressively centralizing previously devolved local government functions (e.g., planning, building control, and SWM), by amending the SLGO, sending strong signals against the reforms started under the SCIIP, and undermining the role of the NSUSC. 10. The risks associated with choosing all six tranche 1 cities from North Sindh were not thoroughly analyzed at the design stage. Many politically influential Sindh residents live in these cities, and were opposed to the concept of USCs in Sindh—the political representatives of all cities except Sukkur were against the urban reforms and the new governance structure of USC. By the second year of program implementation, the NSUSC BOD had no political representation from North Sindh, because elected mayors were replaced with the administrators in participating towns (para. 9). Moreover, almost all nominated BOD members were from Karachi, with limited knowledge of and interest in North Sindh. BOD interference and micromanagement also served to limit the NSUSC’s autonomy and ability to develop as envisaged at appraisal. ADB sought to reduce the size of the BOD and improve its constitution, but this process was slow, influenced by the political elite of North Sindh; it was not completed prior to closure of tranche 1, and was ongoing during tranche 2 implementation. 11. Factors essential for establishing the foundation of the urban reform model were not fully in place during tranche 1 design, and were not followed up during its implementation. Generating baseline data and mapping existing systems was a priority activity to establish targets to evaluate NSUSC and TMA performance (footnote 3, para. 20). The performance targets and costs had to be linked to service agreements, service tariffs, and financing for operational shortfalls and monitoring. There was no concept of “value for money”, as the service and asset management agreements (SAMAs) lacked well-defined service standards and charges as envisaged at the design stage (footnote 3, para. 25). These gaps were not addressed during implementation, which made the relationship between the TMAs and NSUSC fragile and susceptible to interpretation. 12. The outcomes of investments in different types of infrastructure were interdependent, but sequencing and prioritizing of investments during design did not recognize this interdependence. The program included six distribution network improvement (DNI) packages, but provision of additional water needed to feed the DNIs was only partially included in the scope of tranche 1, with the remainder included in tranche 2. Similarly, the major increase in water quantity was included in the tranche 1 scope in four cities, while the drainage and sewerage facility to manage the additional water provided to these four cities was not included in the scope of tranche 1, and only partially included in tranche 2. As a result, service improvement targets under tranche 1 could not be fully achieved, even after making major priority subproject investments. 13. All Sindh TMAs fall under the Local Government, Rural Development & Housing, Town Planning Department (LGRD&HTPD), which is the custodian of the municipal sector in the province. The selection of the P&DD as the tranche 1 executing agency dissociated the tranche 1 from mainstream local government functionaries within the GOS, and created a lack of

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ownership of the investments within the participating TMAs. Coordination among the PSU, the urban unit and NSUSC with LGRD&HTPD was weak, because no tranche 1 component directly financed LGRD&HTPD or the TMAs. This arrangement was ineffective in helping TMAs participate effectively in the reforms and develop in their new role under tranche 1. 14. The tranche 1 proposal correctly identified many risks at the design stage (footnote 3, paras. 89–98), such as delayed tariff increases, changes in the SLGO, and vertical programs. However, the mitigation measures proposed in the design to mitigate these risks were inadequate, and no major changes were made during implementation to mitigate the risks. The design and monitoring framework generally captured the flow of results chain from outputs to impacts, but output indicators failed to capture the results well, as they were expressed as a percentage of the population or household, rather than as a quantitative measure of accomplishment (e.g., change in solid waste collection capacity, length of new pipes, or number of new households connected to water supply). The result was that monitoring and reporting of outputs was ambiguous. The design and monitoring framework targets were reduced due to an underestimation of civil works cost at appraisal, while landfill site development was completely taken out of the tranche 1 scope, and water supply service outputs were reduced. B. Project Outputs

15. Tranche 1 had four parts (para. 3). The output achievements were verified from secondary sources, because the NSUSC was disbanded and their offices closed in compliance with a ruling from the Supreme Court of Pakistan (para. 50). Part A: Improved Urban Service Management and Planning:

16. A.1: Creation of effective and sustainable urban services providers. This subcomponent included (i) technical, financial and organizational management; (ii) subproject identification and design; (iii) subproject procurement and implementation; (iv) enhanced private sector participation; (v) financial management systems; (vi) surveys, studies, training and orientation; and (vii) provision of computers and office furniture, equipment and vehicles. 17. NSUSC was incorporated as an autonomous nonprofit company in 2008, with the operations of the existing assets of the six participating towns transferred to NSUSC by the end of 2010. NSUSC offices were established and equipped. Requisite technical experts were hired but turnover was high due to a weak incentive structure. A financial management system was developed that captured financial flows for capital expenditures but was weak in capturing operational flows for performance management. A complaint system was developed and well managed. The focus of NSUSC remained on infrastructure development, while operations were generally weak. Subprojects were identified, designed and procured with delays due to poor consultant performance (para. 39) and weak NSUSC capacity (para. 8). No public–private partnership initiatives could be undertaken. The operational support was managed by multiple firms and NSUSC had limited capacity to absorb their inputs, resulting in many outputs either not being delivered by the firms, or not properly internalized in NSUSC operations. 18. A.2: Establishment of the urban policy and strategic planning unit. The urban unit was established in 2009, after a 1-year delay. A time-bound action plan for reforms to be supported by the urban unit was included in tranche 1 scope but many critical actions were either partly complied with or not complied with. The urban unit was to support the participating TMAs in monitoring USC performance and developing town planning capacity, but this target was not achieved. The urban unit undertook city development strategies for Sukkur and Larkana, but was

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unable to use mapping by NSUSC to develop infrastructure plans in other larger secondary towns. No work was done by the urban unit on urban policy and regional planning or on developing a municipal management informational system, as envisaged at design. The detailed status of urban reform actions is provided in Appendix 2. Part B: Water Supply and Wastewater Management Improvements

19. This component was to finance (i) physical investments in water supply system augmentation and rehabilitation (source development, treatment, storage, and transmission) in the TMAs of Khairpur, New Sukkur, Rohri, and Sukkur; (ii) pilot DNI schemes in specific urban council areas in Khairpur, New Sukkur, Rohri, and Sukkur; (iii) groundwater monitoring in Larkana and Shikarpur; (iv) urgent improvements to WWM systems in Khairpur and Rohri; and (v) small-scale investments in drainage and sewerage networks and associated facilities through an allocation of loan funds for wastewater improvement works in tranche 1 cluster towns, subject to selection criteria (footnote 3). 20. At appraisal, five water treatment plants (WTPs) were to be rehabilitated and made operational in Sukkur and Kharpur. Contracts were awarded for rehabilitation of four WTPs due to funding constraints, two each in Sukkur and Kharipur, with a cumulative treatment capacity of 14.5 million gallons per day. However, works on three WTPs were left incomplete by the closure of tranche 1 (para. 41). Delays—in procurement and contractor mobilization, and decision making by GOS; and resulting from interference by BOD in operational decisions—were major reasons for the incomplete works. At tranche closure, complete water supply treatment was being achieved only in Khairpur, where quality generally met national water quality standards. In Sukkur treatment was partial, and failed to meet national water quality standards, as the work on the two WTPs was incomplete However, the works were completed under tranche 2 in the last quarter of 2016, resulting in an increase of potable water supply to 3,411 households in four DNI zones. Reduction of non-revenue water (NRW) was targeted through six DNI contracts coupled with installation of bulk and individual meters for 18,000 customers; however, only 12,000 meters were supplied by the vendor, with 5,596 house connections made in DNI zones, and just 2,752 meters installed.11 The installation of water meters did not result in a reduction of NRW or an increase in tariff collection, because bulk meters were not installed, a volumetric tariff was not adopted, and a meter-reading regime was not put into place. 21. The water supply subcomponent was to increase revenues by updating consumer databases, increasing the consumer base, reducing illegal connections, reducing NRW, and developing a system for groundwater quality monitoring. The target was to reduce NRW from greater than 50% in the base year to 40%–50% at completion. The borrower reported achieving 45%–55% at the end of tranche 1, which could not be substantiated (para. 20). Another target was to enhance revenues by increasing the customer base and improving collection efficiency, so that tariff revenue could contribute up to 5% of operation and maintenance (O&M) costs. The performance reported against the target is a mere 4% O&M cost-recovery by fiscal year (FY) 2015. The customer base increased from 28,232 in 2010 to 36,553 in 2016, an increase of 30%, but totaling just 19% of households in the project area. Recovery averaged 42% of the amount billed; as a result, operations remain heavily subsidized and unsustainable.

11 Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi. Data could

not be verified because NSUSC offices closed in March 2017 by order of the Supreme Court of Pakistan. The remaining meters are in NSUSC stores as reported by the Borrower. With the closure of NSUSC, and in the absence of any consumption-based billing regime in the TMAs, it his highly unlikely that the remaining meters will be installed.

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22. Eight contracts were awarded to rehabilitate 13 disposal stations each in Larkana, Khairpur and Shikarpur, along with related sewerage and drainage networks. The scope of sanitation activities in Sukkur, New Sukkur and Rohri was limited because work financed by GOS was ongoing in these cities, that was handed over to NSUSC close to project completion. Part C: Investments in Solid Waste Management Improvements

23. The component included physical investments in (i) construction of four landfill facilities in Khairpur, Larkana, and Shikarpur, with a common facility in Rohri serving New Sukkur, Rohri, and Sukkur; (ii) procurement of specialized solid waste collection and disposal equipment; and (iii) provision of improved communal bins for waste storage. 24. Under this component, 300 ramps were constructed against a target of 520 ramps for solid waste collection through wheel barrows. These ramps became redundant as sweepers did not use them due to the steep grade. Studies for the four sanitary landfill sites were completed but the landfills could not be constructed because of land acquisition issues. This was subsequently excluded from the scope of tranche 1 because of funding constraints, and tranche 1 outputs were revised. Equipment for primary and secondary collection was procured and distributed to all six participating towns. The overall capacity of the equipment supplied is enough to transport more than 800 tons of waste daily (70% of household waste); however, in the absence of effective monitoring and control (weigh bridges), the actual waste collected cannot be verified. Part D: Operational and Transition Support Funding 25. Part D provided financing for operational support funding to bridge the operational cash shortfalls of the USCs with GOS grant funds. At completion, expenditures under operational support funding totaled $11.1 million, 39% above the appraisal estimate of $8.0 million. C. Project Costs

26. At appraisal, the tranche 1 cost was estimated at $50.0 million. ADB financing was equivalent to $38.0 million (76%), with the remaining $12.0 million (24%) to be contributed by the GOS. At completion, $49.1 million (98%) of tranche 1 funds were used. ADB financing at completion, was $37.0 million (75%) and the GOS share $12.1 million (25%) of tranche 1 expenditures (Appendix 3). 27. The tranche 1 scope and costs for the SWM subcomponent (para. 24) and civil works related to water and sanitation were underestimated at appraisal. Following completion of detailed design, the civil work cost estimates increased substantially compared to appraisal estimates, while the bids were generally higher than estimates due to the remote location of participating cities. A 2-year delay in implementation also resulted in cost increases. The tranche 1 scope and outputs were consequently reduced (para. 14) and contingencies reallocated. The full tranche 1 loan amount could not be used as some works could not be completed because of non-payment to contractors (involving two international and two national contracts) due to tax and site handover issues.12 At appraisal, civil work costs were estimated at $11.4 million, which increased to $19.2 million at closure, although the overall scope of activities under this component decreased. The consultancy cost increased by 18% to $6.8 million, compared to the appraisal estimate of $5.6 million. The operational support funding increased by 39% above the appraisal estimates (para. 25).

12 These include; (i) construction of 4 WTPs in Sukkur and Khairpur, and (ii) construction of 6 DNI zones in 4 cities.

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D. Disbursements

28. The disbursement procedures were less than efficient as replenishment of imprest accounts against operational support funds was slow and negatively impacted NSUSC operations. The original disbursement schedule was followed except in 2012, when actual disbursements were only $12.0 million, versus a projection of $21.9 million (Appendix 4). The slow disbursements resulted from delays in contracts awards (footnote 12), a lag in disbursing operational funds, and delays in implementation of ongoing contracts. Disbursements totaled $37.0 million at completion, or 97% of the approved loan amount. 29. The imprest account procedures were used for operational expenses and payments to contractors of less than $100,000. Direct payments procedures were followed to make payments to consultants, contractors, and suppliers for claims exceeding $100,000. The OSF that financed NSUSC’s operational shortfall was initially disbursed through an escrow account co-signed by the PSU, with payments verified by an independent auditor (independent verifier) before replenishment. This procedure created unnecessary delays in OSF payments, and was in violation of established government procedures; it was subsequently changed through a change in implementation arrangements, which marginally improved disbursements. However, delayed approval of annual operations plans resulted in continued delays in OSF disbursements. E. Project Schedule

30. The original and actual tranche 1 schedules are in Appendix 5. Tranche 1 scheduled from January 2009 to June 2012; was extended twice, initially to June 2013 and then to June 2014. The key reasons for the extensions are: (i) a delay in restructuring of NSUSC; (ii) delays in fully staffing the NSUSC and PSU; (iii) indecisiveness regarding issues with contractors and taxes; (iv) delayed land acquisition for subprojects; (v) delays in counterpart payment releases by the GOS; (vi) delays in procurement, execution of civil works, and handover of subproject sites; (vii) delays in recruitment and subsequent termination of design consultants due to poor performance; and (viii) interference and delayed decisions of the NSUSC BOD and GOS related to project implementation. A review of the procurement record also reveals delays in procurement actions and approval both by the NSUSC and ADB (para. 41). F. Implementation Arrangements

31. The institutional arrangement was less than effective. The arrangement was extensively detailed, in terms of the relationship between different entities, and was structurally and legally robust. The design envisaged establishing three sets of institutions under the tranche 1 investments: (i) a PSU (para. 4), (ii) the urban unit (para. 18), and (iii) the NSUSC (para. 17). A Program Steering Committee was also formed under the P&DD to provide policy directions and strategic oversight. The PSC met at least once per year and served as the focal point for interagency coordination on implementation-related matters. 32. All three institutions were established. However, the institutional arrangement had inherent weaknesses. The TMAs and LGRD&HTPD (para. 13) were not considered in the institutional arrangements, while the absence of well-defined performance benchmarks and service standards made the contractual arrangement between the TMAs and the NSUSC untenable (para. 11). The institutional arrangement also required complete transfer of both operational and capital investment planning and implementation responsibilities to NSUSC immediately after its

8

establishment, without allowing the new organization adequate time to growth before taking increased responsibility (para. 8). G. Conditions and Covenants

33. The loan covenants were partly complied with. Of the 70 covenants in the loan and the project agreement, 41 (59%) were complied with, 23 (33%) were partly complied with, 5 (7%) were not complied with, and 1 (1%) became not applicable as a result of an amendment to the project agreement approved on 8 May 2012 (Appendix 6, Schedule 4, Para 6 (a). Some critical covenants that remain relevant and were not or partially complied with are discussed in paras. 62 and 63, and Appendix 11. The “not complied with” covenants related to; (i) insurance of project facilities, (ii) putting in place an enforcement mechanism for NSUSC, (iii) monitoring project impacts on gender, (iv) disclosure of the procurement process on the website, and (v) establishment of the Investment Program Performance Monitoring System and collecting gender desegregated data. The key reasons for lack of compliance with the covenant related to policy actions and supporting studies was the reduced commitment of the GOS (para. 9), and lack of funding provided by the GOS for this purpose. The operational covenants and requirements related to performance benchmarking, metering of water supplies, tariff revisions, outsourcing of different functions and/or services, and effective public engagement were not complied with or met due to lack of capacity on the part of the NSUSC, weak performance of consultants, weak PMU oversight role, and interference of the NSUSC BOD. This failure in compliance resulted in: (i) absence of a corporate and performance-based culture in NSUSC, (ii) unsustainable operations, (iii) weak performance measurement and lack of incentives to improve services, (iv) inability to engage private sector potential to increase efficiency of operations, and (v) poor public and stakeholder perception about NSUSC performance due to ineffective communication and information dissemination. Similarly, the delay in providing counterpart funds resulted in reduction in the number of landfill sites included in the tranche 1 scope. H. Related Technical Assistance

34. The program was supported by technical assistance (TA)—Improving Efficiency and Accountability of NSUSC—for $2.5 million. The TA was implemented in two parts. Component A was to (i) assist with information gathering, (ii) implement operational improvement programs, (iii) improve outsourcing arrangements, and (iv) develop and implement public–private partnership transactions. Component B supported (i) customer awareness of reforms in water supply, wastewater, and SWM services; (ii) communications between service providers and customers; (iii) public monitoring of service delivery; (iv) accountability of service providers to the public; and (v) development of a customer care system. Component A comprised 42 person-months of international and 100 person-months of national consulting services, and component B 2 person-months of international and 20 person-months of national consulting services, 315 person-months of customer relations staff, and IT support. It was envisaged that the TA would be implemented over 48 months, from December 2008 to November 2012. In total 1,314 person-months contracts were awarded to international and national individuals, but only 831.53 person-months were used by tranche closing. The remaining person-months were terminated, mainly because of limited absorption capacity of NSUSC, or lack of capacity on the part of the consultants to deliver the required services.

35. The scope of the TA was relevant at appraisal and remained relevant throughout implementation. The systems developed under the TA were not implemented due to frequent turnover of NSUSC staff and its partner TMAs, which contributed to a loss of the institutional memory and internal capacity required to maintain the systems. Some aspects of the TA, such

9

as the operational improvements program, communication with customers, outsourcing arrangements and public–private partnership models were not well delivered due to weak capacity of consultants, which affected achievement of intended TA outputs. I. Consultant Recruitment and Procurement

36. Consultant recruitment and procurement were less than efficient. Consultants were recruited and goods and works were procured according to the provisions of the loan agreement and ADB guidelines.13 All goods and works were procured as designed at appraisal and according to the approved procurement plan, albeit with delays. A major reason for delays in procurement was that neither the implementing agencies nor the consultants were able to attract quality procurement staff throughout implementation. ADB provided continuous training and guidance to the PSU and NSUSC to offset lack of procurement capacity in these organizations. 37. The design and construction supervision consultants failed to perform satisfactorily, and had to be replaced, which delayed the overall hiring schedule for consultants and implementation. Four international consulting packages and three local service contacts were procured. On average, it took 513 days to hire the consulting firms, from publishing of an expression of interest to signing of the contract.14 The delay in hiring of consultants also contributed to a 2-year delay in tranche implementation.

38. NSUSC and PSU took 3–8 months to procure works and supply contracts, from publishing an invitation for bids to making the contract award. On average, (i) the NSUSC took 48 days (and a maximum of 162 days) to prepare bid evaluation reports; and (ii) ADB took 38 days (and a maximum of 121 days) to approve bidding documents, and 16 days (with a maximum of 71 days) to approve bid evaluation reports. J. Performance of Consultants, Contractors, and Suppliers

39. The performance of consultants and contractors was less than effective. A comparison of terms of reference of different consultancy packages awarded under tranche 1 showing overlap in services is in Appendix 8 (Table A8.2). The main challenge was the capacity of the NSUSC to absorb work performed by six international consulting firms (including two hired under the TA), and many smaller service contracts handling diverse themes, because of the lack of capacity and counterpart staff within NSUSC. The poor performance of the design and construction supervision consultants also delayed implementation (para. 37). 40. The main weakness was in operational consultancy support. Tariff structures could not be finalized, no services were outsourced, and performance-based systems were not developed to allow NSUSC to shift from input- to output-based budgets to support institutional and financial sustainability. The annual operational plans were not prepared on time and lacked clear performance and service benchmarks, delaying approval and release of annual operational budgets, which undermined NSUSC operational performance. The consultants performed no substantial work on project monitoring as a result no baseline was not established, drastically limiting subsequent performance monitoring options. 41. Of the 13 civil works and supply contracts, only 2 were completed within the original timeline, with the remainder delayed by 3–13 months. This in turn delayed achievement of tranche

13 ADB. 2015. Procurement Guidelines. Manila; and ADB 2016. Guidelines on the Use of Consultants. Manila. 14 The shortest period for hiring a consulting firm was 250 days, and the longest period was 931 days.

10

1 outputs. Two international competitive bidding (ICB) contracts for rehabilitation of three WTPs and for six DNI zones, and two national competitive bidding (NCB) contracts for rehabilitation of a rapid sand water filter and small capital works were delayed and remained incomplete even at closure, undermining outputs and impacts (para. 20). Inadequate design resulted in ICB contracts requiring contract variations. The contract variations were verified by an individual consultant and approved by ADB, but the NSUSC BOD took more than 8 months to approve the two variations. K. Performance of the Borrower and the Executing Agency

42. The performance of the borrower and the PSU was less than effective. The GOS was very prompt in establishing the PSU, urban unit, NSUSC and PSC to steer implementation, and was expeditious in approving the urban reforms roadmap. However, the commitment of the GOS to continue reforms after the first 2 years of implementation declined substantially (para 9). Parallel vertical programs for drainage and sewerage improvement were started by the GOS in two participating towns that were not in agreement with the approved plans for the towns developed under tranche 1. There were major delays in release of operational funds to NSUSC. The GOS could not appoint the heads of the urban unit and PSU through open competition. The GOS was unable to control delays and manage key appointments (in terms of ensuring their quality, and avoiding political interference). The top management of PSU and the urban unit changed more than four times during 2009–2014, and senior bureaucrats appointed by the GOS (which constituted a conflict of interest) headed both organizations for a significant period of time. These actions delayed implementation, affected the quality of operations, and tainted the reputation of NSUSC. 43. The PSU played a very active role in establishing NSUSC under the relevant regulations, facilitating the signing of SAMAs between NSUSC and the 6 participating TMAs, guiding the handing over of assets of TMAs to NSUSC, planning the investment subproject for the first six towns, and planning for the second tranche under the multitranche financing facility. However, the PSU failed to establish a working relationship with key stakeholders (e.g., the TMAs, NSUSC, Finance Department and LGRD&HTPD) during program implementation. The PSU’s key implementation role was to monitor and evaluate NSUSC performance and results, almost as a de facto regulator. The PSU was unable to perform this important role and all business and operational plans of NSUSC were approved without effective performance indicators, and service and cost standards. The independent verifier hired to verify NSUSC’s operational expenditures and performance was poorly managed by the PSU, with verification of expenditures invariably delayed, and performance monitoring not undertaken against the targets (however weak) provided in operational and business plans. Performance of the NSUSC (para. 17) and urban unit (para. 18) were also less than satisfactory. L. Performance of the Asian Development Bank

44. ADB’s overall performance was less than effective. ADB expedited implementation, facilitated and guided compliance with loan conditions and covenants, trained NSUSC and PSU staff in ADB disbursement and procurement guidelines, and resisted ad hoc parallel investments from the GOS. Resistance to expensive and unsuitable vertical government programs kept the NSUSC’s operational costs manageable. ADB provided support to speed the procurement process after observing a growing backlog and persistent lack of capacity within NSUSC and the consultants to manage the procurement process. ADB carried out 14 review missions during tranche 1 implementation. There were three changes in the ADB project officer during implementation (2009–2014). The design of tranche 1 was relatively complex and ADB largely micro-managed implementation for the initial 2 years; this kept tranche 1 on track, reduced

11

external interference, but also fostered dependency that slowed the growth and development of NSUSC. No changes were made in the tranche 1 design (except fund flow procedures) to address design gaps that hampered tranche 1 performance (paras. 8 to 14). ADB was unable to take meaningful steps to enforce loan covenants on critical issues such as competitive recruitment, transfer of funds to NSUSC for staff salaries and operations, and performance-based budgeting of NSUSC.

III. EVALUATION OF PERFORMANCE

A. Relevance

45. Overall, the tranche 1 design was less than relevant, although the outputs were relevant to the problems faced by the urban population of medium-sized towns of Sindh (paras. 1 to 2), and tranche 1 was relevant to the ADB country strategy, and Pakistan’s development objectives at appraisal and completion (paras 5–6). 46. Steps undertaken by the GOS during implementation reduced tranche 1 relevance (para 9). No major changes were made in the design to address shortfalls (paras. 9, 13, and 14) and improve relevance. At mid-term the outputs of tranche 1 were curtailed, as land could not be acquired for landfills and there were cost overruns in civil works (para. 27). This reduced tranche 1 relevance, as improvements in primary and secondary collection increased solid waste quantities, but with no final disposal option, environmental gains achieved in one part of the city were offset by negative impacts on the health of people elsewhere due to insanitary disposal. Similarly, changes were made in tranche 1 costs to meet shortfalls in the civil works component, construction supervision, and operational shortfalls, primarily through reallocation of contingencies. The reallocation improved relevance generally, but increased OSF reduced pressure on the NSUSC and GOS to improve cost recovery, performance, and operational efficiency. B. Effectiveness in Achieving Outcome

47. Tranche 1 of the program was less than effective in achieving its outcomes, as most outcomes were partially achieved. Tranche 1 was to increase quality, reliability, and coverage of water supply, wastewater, and solid waste management services in participating towns. According to the data reported by the Borrower (footnote 11), the population served by household water connections decreased on average from 37% in 2008 to around 30% in 2014, vs. a target of 52% envisaged at appraisal. This reduction in population coverage can be attributed to the massive urban migration following floods in 2010, particularly in Sukkur and adjacent areas, and the related increase in the absolute number of household to be served. The average hours per day of water supply were to be increased from 3 hours in 2008 to more than 6 hours by 2014. However, at completion in 2014, water supply averaged 2–4 hours per day (data are based on the average of the total volume supplied and average hours of pumping across all towns). The increase in supply could not be achieved, because three WTPs supplying water to the network were incomplete at tranche closure. Household connections increased from 28,232 in 2010 to 31,125 in 2014 in four towns supplied with water-supply networks. Similarly, only 5,596 households were connected to six DNI zones; of these, 3,411 households in four DNI zones had access to potable water for more than 10 hours per day, rather than 18,000 household with a supply of 20 hours per day in 6 DNI zones as envisaged at appraisal. Additional houses were not connected to the network due insufficient capacity to serve additional households, as three WTPs

12

remained incomplete. Drainage network benefits accrued to 88,745 household in 2014 compared to the appraisal estimate of 100,000 households (footnote 3). C. Efficiency in Achieving Outcome and Outputs

48. Tranche 1 of the program was less than efficient. The economic and financial analysis of project was not undertaken at completion because: (i) physical works were incomplete on the loan closing date (para. 41), (ii) the NSUSC was disbanded before project completion review, (iii) the ownership of all assets created by NSUSC were transferred back to the TMAs, (iv) no service tariffs increase was reported in any participating city, and (v) the volumetric tariff was not implemented. In addition as a result of political unrest in the project area due to premature closure of NSUSC and long delays in payment of salaries of staff that were transferred back to TMAs from NSUSC, the financial data of the TMAs to whom the assets were transferred also remained unavailable during project completion review. In the absence of financial and economic data it was not possible to undertake an economic and financial analysis of even the completed subprojects. 49. The less than efficient rating of tranche 1 is based on qualitative analysis. The outputs (paras. 15 to 25) and outcomes (para. 47) were partially achieved that too with delays. Tranche 1 was delayed by two years and out of the 13 civil works and supply contracts, 4 major water supply treatment and distribution contracts remained incomplete by loan closing (para 41). Out of the 4 incomplete contracts the 2 major international contracts for water treatment and distribution that remained incomplete were 90% complete at loan closure and were subsequently completed under tranche 2 of the program. People of the participating cities started benefitting from the project facilities incrementally as wastewater disposal system and coverage was improved, and coverage of solid waste collection was also expanded before loan closure. A WTP in Khairpur started providing treated water to half of the city at completion and two WTPs in Sukkur started providing treated water two years after tranche 1 completion. These outputs generally created a positive impact on the health of the people (para. 52). D. Preliminary Assessment of Sustainability

50. The program is less than likely sustainable. In March 2017, the Supreme Court of Pakistan, after hearing a constitutional petition about poor service delivery of urban services across Sindh, ordered the NSUSC disbanded, and municipal functions returned to the participating TMAs. The GOS issued an administrative order in April 2017 to comply with the court’s order. With extremely low tariffs and recovery (para. 48); inefficient operations that lack professionalism, with poor performance parameters and incentives (paras. 11 and 32); and the disbanding of NSUSC, it is unlikely that operation of the assets created in tranche 1 will be sustained. However, all the services that were partly improved through tranche 1 investments are essential basic services, and the operation of these services has historically been subsidized by town and GOS. The design of tranche 1 ensured that low operational costs of assets compared to similar assets created elsewhere in Sindh. It is expected that these assets will continue to operate, albeit sub-optimally, through subsidies provided by the GOS and TMAs. 51. The other positive political development to support the urban agenda in Sindh is that local body elections have taken place and city and town mayors are in place. If the elected local representatives can create momentum around provision of basic services that fall within their mandate, the devolved service provision may be again get strengthened.

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E. Impact

52. The overall impact of tranche 1 of the program is less than satisfactory. Tranche 1 was expected to increase the per capita monthly income in interior Sindh by 2018 from the baseline of PRs1,446 in 2008; according to secondary data, the average monthly per capita income had increased substantially, to PRs4,545 in 2016.15 However, no direct link to the substantial increase in monthly per capita income could be established with tranche 1 investments. The prevalence of diarrhea in children under 5 years of age was reduced from 19% in 2005 (footnote 3, Appendix 1) to 8.9% in 2016, which is below the target of 10% (Appendix 9). The cases of diarrhea in children under 5 years of age have declined from levels prevalent in 2012 in the towns where investments were made in water supply improvement (Table A9.2, Appendix 9). With the exception of New Sukkur (where the WTP was not completed), the reduction in diarrhea cases is directly proportional to the level of investment in water supply subprojects. Data also shows that in Shikarpur, where no water supply investment was made, cases of diarrhea increased from 55,607 in 2012 to 60,626 in 2015. Similarly, the prevalence of diarrhea per household in Shikarpur, where inhabitants use own-source water, is 10 times higher than in towns where the public water supply system was improved under tranche1. A customer report card survey conducted at completion was compared with a similar survey conducted at the start of tranche 1, and the results related to the level of tranche 1 investment in each sector and town. The data show a direct relationship between per household investment in water supply services and the number of customers dissatisfied with the water service (Table A9.2, Appendix 9)—the number of dissatisfied customers decreases as per household investment in water supply increases. Similar trends were observed in other services (Appendix 9). 53. Tranche 1 was classified as category B for involuntary resettlement and the environment, and category C for indigenous people. Land acquisition and resettlement plans (LARPs) were prepared and disclosed for three landfill sites, as all other investments were made on sites already in the possession of NSUSC. One landfill site was acquired in Khairpur that was not under any productive use and had no existing structures. The 109 affected people identified in the LARP were paid according to their entitlements, and no complaints were received. The land for the remaining two sites could not be acquired due to delayed release of funds by GOS to acquire the land. The initial environmental examination reports and environmental management plans (EMP) were prepared for all relevant subprojects. The implementation of the EMP was regularly monitored, reported and disclosed. The housekeeping measures (e.g., disposal of waste, including asbestos) were managed according to the EMPs. However the reports were not updated to capture changes in program scope, and the impact of increased water supplies on drainage and sewerage (paras. 12 and 14).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

54. Tranche 1 of the program was less than successful. The design and interventions were partly relevant (para 45). Tranche 1 was less than effective in achieving its intended outcomes and outputs (para 46). It was less than efficient in achieving its outputs and outcomes, due to delays, and lack of improvement in operational efficiency and tariff structures (para. 49). Policy and institutional reforms were introduced but not fully implemented as projected at appraisal

15 Pakistan Bureau of Statistics. Household Integrated Economic Survey (HIES) 2015-16.

http://www.pbs.gov.pk/content/household-integrated-economic-survey-hies-2015-16.

http://www.pbs.gov.pk/content/household-integrated-economic-survey-hies-2015-16

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(paras. 9 and 18). The NSUSC was disbanded and the current tariff regime makes provision of quality services less than likely sustainable (paras. 50 and 51) in the long term. B. Lessons

55. The tranche 1 design was ambitious and potentially transformational. However, the complexity of the political and social realities of North Sindh rendered it nearly impossible to implement. In addition, political will to adopt the model and reform the governance structure of urban services delivery was grossly overestimated at design. NSUSC, with limited capacity and lack of direction from GOS and BOD, struggled to simultaneously implement its capital investment and service delivery functions. An incremental, phased approach to transferring operations following successful implementation of capital investment functions would have benefitted from the increased recognition of NSUSC prior to transfer of operations. This would have enhanced sustainability, and reduced political resistance. 56. Analysis of tranche 1 at completion indicates a major issue in its design was its institutional anchorage (para. 13). As a municipal services improvement program it should have been anchored in LGRD&HTPD to enhance ownership and reduce internal resistance. Similarly, the PSU and urban unit had overlapping mandates such as planning and monitoring of urban services. It would have been prudent to establish only the urban unit to coordinate and plan this and all future urban development projects and investments in Sindh. This would have increased credibility and ownership of the urban unit in the provincial bureaucracy. 57. NSUSC also faced a large service area and expansion of operations in towns without a tariff structure, such as Larkana and Sikarpur (para. 8). Similarly, with limited resources, only priority investments were selected, which limited the impact of investments made because of interdependent outcomes and outputs (para. 12). Restricting the investments to a limited number of cities with more comprehensive, integrated sector packages could have yielded better results, and built a constituency for the new approach and institutional structure and related reforms supported by tranche 1 of the program. 58. The absence of baseline data, performance indicators, service standards and service standard costs made it very difficult to measure the performance of NSUSC. This made the contractual obligations between the participating TMAs and NSUSC very ambiguous and open to any interpretation (para 11). SAMAs should take the form of partnership agreements, in which each TMA and USC know what to expect, and how it will be measured and paid for; this was missing in the SAMA agreements signed between the TMAs and the NSUSC. 59. Private sector participation and outsourcing were included in tranche 1 but were not implemented; these were included without an adequate analysis of the legislative and institutional environment, and tranche 1 design lacked the needed supporting inputs to enable successful implementation of this activity. Before an activity is included in a program or project it should be thoroughly designed and inputs required for its implementation included in the project scope and cost. C. Recommendations

60. In Sindh Province the majority of the urban reforms initiated in 2001—and on which the program was based—have been undone, either by the GOS through changes in SLGO, or more recently through decisions of the Pakistan Supreme Court. The GOS currently has no clear urban policy direction or roadmap to manage and harness the urban growth potential of Sindh. There is

15

an urgent need to examine the Supreme Court decision and the GOS response. In the short to medium term, no new programs or investments are recommended in Sindh until there is greater clarity regarding an urban sector policy. In the short term there is a need to closely follow up and guide the transition of services back to the TMAs and other government departments. The following are key recommendations related to this transition. 61. Covenants. Many covenants related to NSUSC are redundant, as the NSUSC has been disbanded. These covenants are listed in Appendix 10. A time bound action plan for the partially or not complied with covenants that remain relevant and need to be followed is in Appendix 11. 62. Further actions and monitoring. To make the urban unit a more effective institution that can advance the urban policy agenda it is urgent that it be effectively staffed, including through competitive recruitment of a director. The urban unit needs to work with stakeholders to generate urban data and studies that can form the basis of stakeholder discussions on urban issues, assist in development of policy directions, and help to generate a roadmap to make cities more competitive, improve quality of life, and generate economic growth. A study on the regulatory framework for water and sanitation—which was not conducted under the program—should be initiated by the urban unit to recommend effective regulation of these services. 63. The assets created under tranche 1 were transferred to the respective TMAs. There is an urgent need to develop an asset inventory to document the transfer of assets and to establish a baseline for services. For effective water-supply operations, metering of source, bulk supplies, and commercial and household connections needs to be completed (which was not done under tranche 1). To sustain operations TMAs also need to increase tariffs based on the service improvements and standards already achieved in the participating cities. Similarly, the TMAs need to create capacity to handle the improved infrastructure, for which they need to update their staffing plans and fill vacant positions. To reduce operational overheads the participating TMAs should identify a list of key services that can be outsourced, the current cost of these services, and the related service standards. Based on this the TMAs should initiate a process of outsourcing to the private sector where capacity exists. A time bound plan for the above actions is in Appendix 11. These actions will be regularly followed during urban policy dialogue with GOS. 64. Another key recommendation for the projects involving land acquisition is that the land should be acquired before project approval only if the detailed design of the component is complete by that time, otherwise there will be a high risk of selecting unfeasible location and/or acquiring of inadequate piece of land that is not sufficient for operational requirements. 65. Timing of the program performance evaluation report. It is recommended the report be prepared in early 2018, after all tranche 1-financed assets have been handed over to the TMAs and an established inventory. This will allow the tranche 1 performance evaluation report to assess the operations delivered by the TMA using the assets created under tranche 1, and follow up on the key outstanding covenants and actions that are essential for effective and sustainable operations of these assets (Appendix 11).

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK Design Summary Performance Targets /

Indicators (As Appraised) Performance Targets / Indicators (Revised)

Achievements at Completion

Impact Improved health, quality of life in and economic competitiveness of participating towns

Increase in per capita monthly income by 2018 in interior Sindh

By 2018, increase in per capita monthly income from an estimated PRs1,446 in 2008.

Achieved. Average monthly per capita income in Sindh increased to PRs4,545 in FY2016.a However, the project was not able to demonstrate a direct correlation with this substantial rise in per capita income.

Percentage of children under 5 years old suffering from diarrhea in last 30 days reduced from 19% in urban areas of Sindh (excluding Karachi and Hyderabad) in FY2005 to <10% by 2018

Percentage of children under 5 years old suffering from diarrhea in last 30 days reduced from 19% in urban areas of Sindh (excluding Karachi and Hyderabad) in FY2005 to <10% by 2018

Achieved. The percentage of children under 5 years of age suffering from diarrhea decreased to 8.9% in urban Sindh (excluding Karachi and Hyderabad).b Although the decrease in diarrhea cases cannot be fully attributed to the project—potable water was provided to only 3,411 households, vs. a target of 18,000 households in the DNI zones—the program did contribute to improving the health of children under 5 years of age. Water was not fully treated to meet the WHO standards, but there was partial treatment of water supplied to the DNI zones.

Outcome Increased quality, reliability, and coverage of water supply, wastewater, and SWM services in participating towns.

Population of participating towns served by household water connections increased on average from approximately 37% in 2008 to 52% in 2013.

Population served by household water connections increased on average from 37% in 2008 to 52% by 2014

Not achieved. At tranche I closure, the population served by household water connections was around 30% (Details in Supplementary Appendix A). The low coverage rate may result in part from massive urbanization following the 2010 floods, particularly in Sukkur.

At completion, treated water was supplied only to Khairpur city—Sukkur and Rohri received partially treated water. Some parts of Sukkur received treated water following completion of remnant tranche 1 works in Q4 2016. At present, out of 5,596 households connected to six DNI zones, 3,411 households in four DNI zones are receiving potable water for 10–12 hours per day.

Appendix 1 17

Design Summary Performance Targets / Indicators (As Appraised)

Performance Targets / Indicators (Revised)


Average hours per day of water

supply increased from about 3 hours in 2008 to more than 6 hours in 2013, and over 20 hours for 18,000 households in DNI Zones

Average hours per day of water supply increased from 3 hours in 2008 to over 6 hours by 2014

Not achieved: Average hours per day of water supply is around 4 hours in Rohri, and 2.1 hours in Khairpur. The actual hours of supply range from 0.5 hours to 12 hours in different locations. Data for Sukkur are not available (Details in Supplementary Appendix B). In the 5,596 houses in the DNI zones, water supply is provided for more than 10 hours per day, with 3,411 receiving portable water.

Drainage and knock-on water

quality benefits for 100,000 households by 2013.

Drainage benefits for 100,000 households by 2014

Almost achieved: 88,745 households were connected to the sewerage network by 2014.c

Household access to solid waste management (SWM) services increased on average to 80% by 2013 in participating towns.

Household access to secondary solid waste management services increased on average from 37% in 2008 to 80% by 2014

Almost achieved: Borrower’s PCR reported increase in household access to secondary solid waste management services up to 72%. However, due to the failure to construct sanitary landfill sites, the solid waste was being dumped in the available open space, plots and private lands.

Output

Part A: Improved Urban Service Management and Planning A.1 Creation of effective and sustainable urban services providers

Establishment of sustainable North

Sindh Urban Services Corporation.

Performance-based contracts between NSUSC and private operators for SWM.

Performance-based contracts between NSUSC and private operators for solid waste collection by 2014

Achieved. NSUSC was established as an institution but continued to struggle to attain technical and financial sustainability. Not achieved. No activity was outsourced

Partial operation and maintenance cost recovery of water services through user charges, with household monthly water user charge set

Increase in recovery of operation and maintenance cost through user charges from 1% to at least 5% by 2014.

Not achieved. The overall recovery of operation and maintenance costs through user charges was 4% in FY 2015 for water supply (Details in Supplementary Appendix A).

18 Appendix 1




at relevant willingness-to-pay figure.

Average percentage of connected households paying water bill in participating towns increases from 39% in 2008 to 67% in 2013

Average percentage of connected households paying water bill in participating towns increases from 39% in 2008 to 67% in 2014

Not assessed. The percentage of households paying water bills is not available. However, collection efficiency of the billed amount for FY2016 was 36%. The overall collection efficiency for FY2011 to FY2015 was 41.9%. (details in Supplementary Appendix C)

A.2 Establishment of urban policy and strategic planning unit (urban unit)

More informed urban policies and planning

A.3 Effective support facility for Taluka Municipal Administration Planning

Timely and transparent operations support funding for NSUSC to cover eligible shortfall

Urban unit functioning,

operational, fully staffed, and sustainable in 2009

Adoption of strategic urban vision and planning processes for interior Sindh by 2011.

Accurate (digitized) maps for

each participating town in North Sindh publicly available and used by 2013.

Planning officials posted by 2010 and urban plans developed at town-level for Sukkur and Larkana by 2011

Adoption of strategic urban vision by 2012.

Planning processes for

interior Sindh by 2012 Digitized maps for 6 participating towns in North Sindh publicly available by 2014

Urban plans at town-

level for Sukkur and Larkana submitted to P&DD by 2014

NSUSC monthly staff

payroll met

NSUSC suppliers paid as agreed.

Achieved.

Achieved.

Achieved. Digitized maps are available: www.nsusc.org.pk/frmMIS.aspx?FTI= 28&PageTitle=GIS/MIS

Achieved.

Achieved.

Partly achieved. Some contractors and suppliers were not paid.

http://www.nsusc.org.pk/frmMIS.aspx?FTI

Appendix 1 19




Part B: Investments in Water Supply and Wastewater Management Improvements B.1 Rehabilitation and expansion of existing piped-water supply systems, water works, and treatment facilities in participating towns; groundwater quality monitoring system developed in Shikarpur and Larkana

Connected households increase on average from about 37% in 2008 to 52% by 2013 in participating Towns

Over 18,000 households with access to potable water available >20 hours day in 6 distribution network improvement (DNI) zones by 2013

Over 18,000 households with access to potable water available >20 hours day in 6 distribution network improvement zones by 2014

Not achieved. Of the 108,169 households in participating towns (Sukkur, Rohri, and Khairpur) 31,125 (around 30%) are connected. The reduction in coverage below the baseline may be due to massive urbanization following the 2010 floods, particularly in Sukkur.

Not achieved. Only 3,411 households (19% of the target) in four DNI zones had access to potable drinking water for more than 10 hours per day. Metering was installed for 2,752 household connections, but billing was not based on water consumption.

B.2 Rehabilitation and expansion of sewerage and drainage networks and wastewater treatment completed in participating towns; shifting sewage outflow in Rohri

Over 27,500 households in Khairpur with improved sewage flow and wastewater stabilization; 6,000 households in Rohri with improved water supply at intake.

Over 27,500 households in Khairpur with improved sewage flow and wastewater stabilization by 2014

6000 households in Rohri with improved water supply at intake by 2014

Not achieved. Over 20,000 households in Khairpur have improved sewerage flow, but wastewater stabilization is not complete. Not achieved. Works for treatment of wastewater being disposed of upstream of the Rohri intake, or shifting of wastewater disposal downstream of the Rohri intake, were not executed. As a result the target of providing improved water supply to 6,000 households from Rohri intake was not achieved.

Part C: Investments in Solid Waste Management

Sanitary landfills are operational, sustainable, and

Not achieved: The development of landfill sites was dropped following a change in scope at the midterm review.

20 Appendix 1




Improvements C.1 Development of sanitary landfills and provision of secondary collection (including equipment and services)

under private sector Arrangement

At least 80% of households with access to secondary collection of solid waste by 2013

Percentage of solid waste collected increases on average from 19% in 2008 to at least 80% by 2014.

Not achieved. Of the 1,094 million tons of solid waste generated in the participating towns, 600.4 million tons (54.9%) was collected in FY2015. The collection percentage varied from 45% to 90% in various towns (details in Supplementary Appendix A).

DHQ = district headquarter, DNI = distributed network improvement, FY = fiscal year, NSUSC = North Sind Urban Services Corporation, P&DD = Planning and Development Department, PCR = project completion report, PSU = project support unit, PSLM = Pakistan Social Living Measurement, SWM = solid waste management, WHO = World Health Organization a Pakistan Bureau of Statistics. 2016. Household Integrated Economic Survey (2015-16). http://www.pbs.gov.pk/sites/default/files//pslm/publications/hies15-

16/write%20up%2015-16-HIES-final_0.pdf. Table 25 reports average monthly household income in Sindh as PRs32,271. Using the average household size of Sindh as 7.1, the per capita income is calculated as 32,271/7.1 = PRs4,545.0.

b Government of Pakistan. Statistics Division, Pakistan Bureau of Statistics. 2016. Pakistan Social and Living Standards Measurement Survey 2014-15. Islamabad. c Government of Sindh. Planning Project Support Unit, Planning and Development Department. 2017. Completion Report of Sindh Cities Improvement Investment Program – Tranche 1. Karachi Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi; NSUSC Annual Operation Plan 2014-15; Government of Pakistan. Statistics Division, Pakistan Bureau of Statistics. 2016. Pakistan Social and Living Standards Measurement Survey 2014-15. Islamabad. http://www.pbs.gov.pk/sites/default/files//pslm/publications/PSLM_2014-15_National-Provincial-District_report.pdf

http://www.pbs.gov.pk/sites/default/files/pslm/publications/hies15-16/write%20up%2015-16-HIES-final_0.pdf

http://www.pbs.gov.pk/sites/default/files/pslm/publications/hies15-16/write%20up%2015-16-HIES-final_0.pdf

Appendix 2 21

UPDATE ON URBAN DEVELOPMENT ACTIONS

Issues Time

Frame Agency Actions Status Remark/Clarification

Strategy 1: Establish Institutional Focal Point at Provincial Level

Q2 (2009) P&DD Operationalize urban policy and strategic planning unit; recruit urban unit head

Partly complied with.

The Directorate was established with some delay but the head was not appointed from the open market as agreed.

Q2-Q3 (2009)

P&DD Recruit urban unit staff budgeted under SCIIP Complied with. The staff was financed by GOS.

Q2 (2009) P&DD Notify Government technical committee to review urban economic development and urban investments in Sindh.


The Coordination Committee was notified but never met.

Q2 (2009) P&DD Notify Sindh working group and advisory committee on urban planning and development to include government, private sector, research institutions, and civil society organizations

Complied with. Notified. Policy and Planning Board consists of representatives as notified in June 2012 but was generally ineffective.

Q2-Q3 (2009)

P&DD Prepare business plan for Urban Policy & Strategic Planning Unit, including public communication and information-sharing strategy


A detailed work / business plan was prepared and made part of the approved PC-II of the Directorate. There was no public communication and information sharing strategy

Q2 (2009) P&DD Establish working relationship with the National Planning Commission and the urban unit-Punjab.

Complied with. Working relationship established.

Strategy 2: Increase TMA Capacity for Urban Planning

Q3 (2009) P&DD, LGD

Taluka officers-Planning appointed in Sukkur and Larkana; develop prioritized schedule for posting additional staff to district headquarter towns with urban populations> 200,000


Staff appointed but with high turnover.

Q4 (2009) P&DD, LGD

Taluka officers-Planning appointed in participating district headquarter towns with urban populations >200,000 as per prioritized schedule


Staff appointed but with high turnover

Strategy 3: Develop and Implement Tools for Urban Policy Making and Strategic Planning

Q2 (2009)

P&DD

Establish urban unit website

Complied with.

Website established and regularly updated: www.urbandirectorate.GoS.pk

Q3 (2009) P&DD, LGD Provide Government comments on and revisions to urban sector assessment drafted under PPTA 4534; post to urban unit website

Not complied with.

http://www.urbandirectorate.gos.pk/

22 Appendix 2

Issues Time Frame

Agency Actions Status Remarks/Clarifications

Q4 (2009) P&DD Complete urban data and policy review to identify gaps and prepare work plan to fill gaps

Complied with Work Plan prepared. A number of assignments and studies were carried out as per the work plan

Q1 (2010) P&DD Initiate economic regeneration study to assess potential of and develop strategy for revitalizing secondary cities, including economic, resource, and strategic SWOT analyses of key urban clusters

Complied with. City Development Strategies including plans for economic regeneration, SWOT analysis, resource development, and investment plans developed for Larkana and Sukkur. Similar development plans for 19 district headquarter towns were also planned for preparation. Additionally, the Directorate worked on preparation of a province-wide investment management study.

Q3 (2009)–

Q2 (2011)

P&DD Develop integrated data and mapping system for policy setting, planning, and public information for urban sector in Sindh, drawing on existing government data and linking these management information and geographic information systems (MIS/GIS) to urban unit website


A draft MIS and GIS framework was prepared by consultants hired to plan the third tranche of the SCIIP. This was used as a template to compile databases for Sukkur and Larkana development strategies. The template was also intended to be used to prepare databases for preparation of urban development master plans for headquarter towns of Sindh.

Q4 (2009) P&DD, LGD Undertake strategic master plan preparation studies-commencing with Sukkur, then Larkana

Complied with. Urban Development Plan for Sukkur and Larkana. Similar development plans for 19 district headquarter towns of the province were in process..

Q1 (2010) P&DD. LGD Develop program for urban services infrastructure mapping in larger secondary towns, drawing on NSUSC mapping under SCIIP


The Municipal Infrastructure Assessment Study was planned to be carried out during FY 2015/16 (status unknown).

Q4 (2011)–

Q2 (2012)

P&DD, LGD Develop and implement simplified zoning system in pilot town

Not complied with.

Draft strategy for zoning plan was prepared, piloting was not accomplished.

GIS = geographical information system, GoS = Government of Sindh, FY = fiscal year, LGD = Local Government Department, MIS = management information system, P&DD = Planning and Development Department, Q = quarter, SCIIP = Sindh Cities Improvement Investment Program, SWOT = strength, weakness, opportunities, and threats Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi; Government of Pakistan. Statistics Division, Pakistan Bureau of Statistics. 2016. Pakistan Social and Living Standards Measurement Survey 2014-15. Islamabad. http://www.pbs.gov.pk/sites/default/files//pslm/publications/PSLM_2014-15_National-Provincial-District_report.pdf

Appendix 3 23

PROJECT COST AT COMPLETION

Table A3.1: Tranche 1 Cost by Financier ($ million)

Source As appraised As completed

Amount % Amount %

Asian Development Bank 38.00 76 36.97 75

Government 12.00 24 12.07 25

Total 50.00 100 49.05 100 Source: ADB Loan Financial Information System Data; Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

24 Appendix 3

Table A3.2: Project Component Cost by Financier

($ million)

Item

At Appraisal At Completion ADB Government ADB Government

Total Amount % Amount % Total Amount % Amount %

A. Base Cost 1.Land Acquisition 0.39 0.00 0 0.39 100 0.27 0.00 0 0.27 100

2.Civil Works 11.49 8.76 76 2.73 24 19.20 13.66 71 5.54 29 3.Mechanical. Equipment and Materials 5.92 5.92 100 5.60 5.56 99 0.04 1 4. Engineering Design. Mapping and Feasibility Studies 1.95 1.95 100 3.32 3.32 100 5.Consultancy – PM&CD 3.80 3.80 100 3.44 3.43 100 0.01 6.Incremental Administration 0.77 0.00 0 0.77 100 1.37 1.37 100 7.Recurrent-Operational Support Fund 8.00 8.00 100 11.14 10.31 93 0.83 7 Subtotal (A) 32.32 28.43 88 3.89 12 44.34 36.29 82 8.05 18

B. Taxes and Duties 6.10 0.00 6.10 100 4.02 4.02 100 C. Contingencies 10.59 8.58 81 2.01 19

D. Interest During implementation 0.99 0.99 100 0.68 0.68 100

Total 50.00 38.00 76 12.00 24 49.05 36.97 75 12.07 25 ADB = Asian Development Bank, PM&CD = program management and capacity development Sources: ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche Financing Facility and Technical Assistance Grant to the Islamic Republic of Pakistan for Sindh Cities Improvement Investment Program. Manila;,ADB Loan Financial Information System; and Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

‘

Appendix 3 25

Table A3.3: Detailed Project Cost at Appraisal ($ million)

Item Tranche

Total Sukur New

Sukkur Rohri Khairpur Shikarpur Larkana Corporate NSUSC Subtotal PSU

Urban Unit

P&DD Subtotal


1. Equipment and Vehicles

a. Computers and

office equipment 0.140

0.070 0.070 0.040 0.030 0.070

b. Office furniture and fixtures

0.190

0.110 0.110 0.050 0.030 0.080

c. Vehicles 0.261

0.181 0.181 0.060 0.020 0.080

2. Program management support

a. Program support

consultants (Firm/QCBS)

2.441

1.221 1.221 0.780 0.440 1.220

b. Program support

consultants (Individual/ICS)

1.130

0.730 0.400 1.130

c. Independent

verifier (Firm/QCBS)

0.210

0.210 0.210

d. Studies, trainings

and orientation 0.620

0.200 0.200 0.180 0.240 0.420

e. Consultant overheads

0.650

0.270 0.270 0.250 0.130 0.380

f. Incremental staff

and overhead 0.960

0.720 0.240 0.960

Subtotal (A) 6.602 2.052 2.052 3.020 1.530 4.550

B. Urban Water Supply and Wastewater Improvements

1. Water supply b 13.654 2.516 6.253 1.416 3.469

13.654

2. Groundwater quality testing

1.213 1.041

0.086 0.086

1.213

3. Wastewater management

0.451

0.451

0.451

4. Mapping,

measurement, studies and sanitation planning

1.032

1.032 1.032

26 Appendix 3

Item Tranche

Total Sukur New


Urban Unit

P&DD Subtotal

a. Water supply system mapping, studies and insertion meters

0.330 0.190 0.002 0.002

0.136 0.330

b. Wastewater

system mapping and strategic sanitation plans

0.160 0.040 0.040 0.040 0.040

0.160

Subtotal (B) 16.840 2.746 6.253 2.499 3.962 0.126 0.086 1.168 16.840

C.

Solid Waste Management Improvement

1. Landfill costs 3.242 0.823

0.826 0.755 0.838

3.242

2. Secondary collection

2.849 0.716 0.249 0.156 0.389 0.436 0.903

2.849

Subtotal (C) 6.091 1.539 0.249 0.156 1.215 1.191 1.741

6.091

D. Operational and Transition Support

8.000

8.000 8.000

Interest during

implementation 0.990

Total Project Base

Cost 38.523 4.285 6.502 2.655 5.177 1.317 1.827 11.220 32.983 3.020 1.530 4.550

Physical and Price Contingencies

11.480

Total Project Cost 50.003

ICS = individual consultant selection, NSUSC = North Sindh Urban Services Corporation, P&DD = planning and development department, PSU= , QCBS = quality and cost-based selection Source: Asian Development Bank Loan Financial Information System, and Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi .

Appendix 3 27

Table A3.4: Detailed Project Cost at Completion

($ million)

Item Tranche

Total Sukur New


Urban Unit

P&DD Subtotal


1. Equipment and Vehicles

a. Computers and office

equipment 0.202

0.091 0.091 0.071 0.040 0.111

b. Office furniture and fixtures 0.122

0.084 0.084

0.038 0.038

c. Vehicles 0.241

0.157 0.157 0.055 0.029 0.084 2. Program management support

a. Program support consultants (Firm/QCBS)

6.014 3.944 3.944 1.742 0.328 2.070

b. Program support consultants

(Individual/ICS) 0.328 0.030 0.030 0.298 0.298

c. Independent verifier

(Firm/QCBS) 0.194 0.194 0.194

d. Studies, trainings and

orientation 0.268 0.268 0.268

e. Consultant overheads 1.370 1.370 1.370 f. Incremental staff and

overhead -

Subtotal (A) 8.739 4.574 4.574 3.730 0.435 4.165

B. Urban Water Supply and Wastewater Improvements

1. Water supply b 16.267 2.996 7.450 1.687 4.134 16.267 2. Groundwater quality testing 0.223 0.189 0.017 0.017 0.223 3. Wastewater management 5.450 0.242 0.062 2.147 0.062 2.937 5.450 4. Mapping, measurement,

studies and sanitation planning

a. Water supply system

mapping, studies and insertion meters

b. Wastewater system

mapping and strategic sanitation plans

Subtotal (B) 21.940 3.238 7.450 1.938 6.281 0.079 2.954 21.940

28 Appendix 3

Item Tranche

Total Sukur New


Urban Unit

P&DD Subtotal

C.

Solid Waste Management Improvement

1. Landfill costs 0.267 0.145 0.059 0.063 0.267 2. Secondary collection 3.491 0.879 0.305 0.191 0.476 0.534 1.106 3.491

Subtotal (C) 3.758 0.879 0.305 0.191 0.621 0.593 1.169 3.758

D. Operational and Transition Support

13.923 13.923 13.923

Interest during implementation 0.685 0.685

Total Project Base Cost 49.045 4.117 7.755 2.129 6.902 0.672 4.123 18.497 44.880 3.730 0.435 4.165

Physical and Price Contingencies

Total Project Cost 49.045

ICS = individual consultant selection, NSUSC = North Sindh Urban Services Corporation, P&DD = planning and development department, PSU = , QCBS = quality and cost-based selection Source: Asian Development Bank Loan Financial Information System, and Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi .

Appendix 4 29

CONTRACT AWARDS AND DISBURSEMENT

Table A4.1: Projected and Actual Contract Awards and Disbursement ($ million)

Years/ Quarters

Contract Awards Disbursements Projected Actual % Projected Actual %

2010 Q1 Q2 Q3 Q4 10.470 8.091 77% 5.710 5.432 95%

2010 Total 10.470 8.091 77% 5.710 5.432 95% 2011

Q1 4.445 4.696 106% 0.178 0.178 100% Q2 1.43x8 1.453 101% 1.316 1.437 109% Q3 2.981 2.739 92% 2.597 2.703 104% Q4 6.329 6.556 104% 2.440 2.521 103%

2011 Total 15.193 15.444 102% 6.531 6.839 105% 2012

Q1 0.989 0.107 11% 5.099 3.170 62% Q2 7.314 4.968 68% 4.849 2.814 58% Q3 5.300 0% 6.725 1.767 26% Q4 0.121 4.367 3,609% 5.179 4.291 83%

2012 Total 13.724 9.442 69% 21.852 12.043 55% 2013

Q1 0.097 4.329 1.315 30% Q2 2.905 3.239 Q3 1.477 Q4 0.817

2013 Total 3.002 4.329 6.848 158% 2014

Q1 Q2 0.539 Q3 1.121 Q4 5.188

2014 Total 6.849 2015

Q1 Q2a (1.041) Q3 Q4

2015 Total (1.041) Tranche 1 Total 39.387 36.286 92% 38.422 36.971 96%

Q = quarter a Refund of unspent imprest advance Source: Project Record in the Asian Development Bank Oracle-based database (eOperations)

30 Appendix 4

Figure A4.1: Cumulative Projected and Actual Contract Awards ($ million)

Source: Project Record in the Asian Development Bank Oracle-based database (eOperations)

0

10.470

25.66

39.39 39.39

0

8.091

23.54

32.98 35.98 36.29

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016

$ m

illi

on

Projected Contract Awards Actual Contract Awards

Figure A4.2: Cumulative Projected and Actual Disbursements ($ million)


0

5.710

12.24

34.09

38.42 38.42

0

5.432

12.27

24.31

31.16

38.01 36.97 36.97

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016

$ m

illi

on

Projected Disbursement Actual Disbursement

Appendix 4 31

Table A4.2: Loan Disbursement, by Category and Year ($ million)

Category 2009 2010 2011 2012 2013 2014 Total %

Works 0.947 0.416 0.673 3.336 2.858 5.433 13.663 37.0 Equipment & Material 0.721 0.211 2.255 2.154 0.043 0.177 5.562 15.0 Design and Construction Supervision 0.035 0.614 0.874 0.598 0.717 0.481 3.320 9.0 Consulting Services 0.154 0.324 1.035 0.622 0.692 0.601 3.429 9.3 Operational Support Fund 1.424 0.550 1.930 5.174 1.234 10.311 27.9 Interest Charges 0.035 0.071 0.159 0.263 0.156 0.685 1.9 Total 3.282 2.151 6.839 12.043 5.807 6.849 36.971 100.0

Source: Asian Development Bank Loan Financial Information System

Figure A4.3: Loan Disbursement by Category ($)


Works, 13,663,252 (37%)

Equipment & Material, 5,561,814 (15%)Engg. Design and

Const. Supervision , 3,320,340 (9%)

Consulting Services, 3,429,150 (9%)

Operatioinal Support Fund, …

Interest Charges, 684,745 (2%)

32 Appendix 5

TRANCHE 1 IMPLEMENTATION SCHEDULE

Table A5.1 Tranche 1 Schedule As Appraised versus As Completed

Task 2008 2009 2010 2011 2012 2013 2014

O N D J F M A M J J A S O N D Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Institutional Set-up-first tranche

1) NSUSC Set-up

1.1 Incorporate NSUSC

1.2 Recruit the Managing Director

1.3 Recruit Management Team

1.4 Identity/Elect Independent Board Directors

1.5 NSUSC Business Plan

1.6 Recruit Technical Managers

1.7 Transfer Deputed Staff to NSUSC

1.8 Establish Capital Works & Safeguards Units

1.9 Negotiate & Sign SAMAs

2) Program Support

2.1 Staff the Program Support Unit

2.2 Establish & Operationalize Urban Unit

2.3 Notify the Program Steering Committee

2.4 Sign Loan and Project Agreement

2.5 Sign Tripartite Financing Agreement

2.6 Establish Operating Support Escrow Account

Appendix 5 33

Task 2008 2009 2010 2011 2012 2013 2014

O N D J F M A M J J A S O N D Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Engage Provincial Support Consultants

3) Engage Consulting Firm to Support PSU & UU

3.1 Prepare Request for Proposal

3.2 Advertise & Prepare Shortlist

3.3 Issue RFPs & Receive Proposals

3.4 Evaluation & Contract Award

3.5 Mobilization

4) Engage Individual Consultants to Support PSU

4.1 Prepare ToR & advertise

4.2 Evaluation & Contracting

4.3 Mobilization

5) Engage Individual Consultants to Support UU

5.1 Prepare the ToR & advertise

5.2 Evaluation & Contracting

5.3 Mobilization

6) Engage Independent Verifier (Consulting Firm)





34 Appendix 5

Task 2008 2009 2010 2011 2012 2013 2014

O N D J F M A M J J A S O N D Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 6.5 Mobilization

Engage Consultants for NSUSC

7) Engage Consulting Firm to Support NSUSC





7.5 Mobilization

Engage Design, CS & Feasibility Studies Consultant

Feasibility Studies Consultant

8) Engage Consultants





9) Water & Wastewater Design & Supervision

9.1 Prepare Detailed Designs

9.2 Prepare Bid Documents & Run Tender

9.3 Supervise the Construction

10) Master Plans & Feasibility Studies

10.1 Water Supply & Wastewater Mapping

10.2 Wastewater & Drainage Master plans

Appendix 5 35

Task 2008 2009 2010 2011 2012 2013 2014

O N D J F M A M J J A S O N D Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10.3 Sukkur Intake Feasibility Study

10.4 Feasibility Studies & Preliminary Design for Tranche 2

11) SWM Procurement

11.1 Prepare Design Build Tender Documents

11.2 Prepare Specifications for SWM Equipment

11.3 Run the Equipment & Landfill Tender Processes

11.4 Supervise Compliance with the Contracts

Water Supply & Wastewater Management

12) Tendering & Construction Main WSS Works

12.1 Advertise & Prepare Shortlist of Contractors

12.2 Issue Bidding Documents & Receive Bids

12.3 Evaluate, Award & Negotiate

12.4 Construction works implementation

13) Groundwater Monitoring Larkana & Shikarpur




13.4 Groundwater Monitoring

Solid Waste Management

14) Tendering & Construction of Landfills

14.1 Land Acquisition

36 Appendix 5

Task 2008 2009 2010 2011 2012 2013 2014

O N D J F M A M J J A S O N D Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 14.2 Advertise & Prepare Shortlist of Contractors



14.5 Construction works implementation

15) Procurement of SWM Equipment

15.1 Advertise & Prepare Shortlist of Equipment Suppliers



15.4 Equipment Delivery

CS = construction supervision, NSUSC = North Sindh Urban Services Corporation, PSU = Program Support Unit, Q = quarter, RFP = request for proposal, SWM = solid waste management, UU = urban unit Planned Actual Not undertaken Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi

Appendix 5 37

Table A5.2: Procurement Contracts under Tranche 1

Contract

Am

ou

nt

(PR

s M

illion

)

Milestone Dates

DB

D S

ub

mitte

d

AD

B A

pp

rov

al

Day

s b

y A

DB

IFB

iss

ue

d

Bid

s O

pe

nin

g

BE

R S

ub

mis

sio

n

EA

's tim

e fo

r BE

R

AD

B A

pp

rov

al

Day

s b

y A

DB

Co

ntra

ct A

wa

rd

Day

s fro

m IF

B to

Aw

ard

Orig

ina

l Co

mp

letio

n

Pla

nn

ed

co

ntra

ct d

ays

Rev

ise

d c

on

trac

t da

te

Actu

al c

om

ple

tion

da

ys

Dela

y (d

ay

s)

1) Improvement and rehabilitation of 13 sewerage disposal stations in Khairpur

192.1

6-Dec-09

4-Jan-10

10-Feb-10

37 15-Feb-10

5 4-Mar-10

88 4-Sep-10

184 31-Jul-11

514 330

2) Locating and setting out of 6 test well sites, mobilization of drilling rigs and equipment.

20.7

25-Jul-10

26-Aug-10

21-Sep-10

26 4-Oct-10

13 11-Nov-10

109 11-Jan-11

61 24-Jan-11

74 13

3) Improvement and rehabilitation of 13 sewerage disposal stations in Larkana

295.7 27-Aug-10

27-Sep-10

31 29-Oct-10

29-Nov-10

29-Dec-10

30 12-Jan-11

14 9-Mar-11

131 10-Jan-12

307 30-Jun-14

1209 902

4) Installation of 300 Skips platforms for solid waste collection/disposal.

38.1

10-Mar-11

29-Apr-11

8-Jul-11

70 2-Aug-11

25 28-Jun-11

110 19-Jul-11

21 14-Feb-12

231 210

5) Construction of brick lined channel at Jamali Goth, Khairpur.

4.9

8-Sep-11

13-Sep-11

8-Oct-11

25 10-Oct-11

2 30-Nov-11

83 26-Dec-11

26 9-Jan-12

40 14

38 Appendix 5

Contract

Am

ou

nt

(PR

s M

illion

)

Milestone Dates

DB

D S

ub

mitte

d

AD

B A

pp

rov

al

Day

s b

y A

DB

IFB

iss

ue

d

Bid

s O

pe

nin

g

BE

R S

ub

mis

sio

n

EA

's tim

e fo

r BE

R

AD

B A

pp

rov

al

Day

s b

y A

DB

Co

ntra

ct A

wa

rd

Day

s fro

m IF

B to

Aw

ard

Orig

ina

l Co

mp

letio

n

Pla

nn

ed

co

ntra

ct d

ays

Rev

ise

d c

on

trac

t da

te

Actu

al c

om

ple

tion

da

ys

Dela

y (d

ay

s)

6) Provision of 11 sets of diesel generators of Khairpur and Shikarpur.

23.9 13-May-10

13-May-

10

0 30-May-10

6-Jul-10

16-Aug-10

41 7-Sep-10

22 4-Oct-10

127 4-Dec-10

61 4-Jan-11

92 31

7) Solid Waste collection equipment. (Lot 1 SWCE-01)

194.2 9-Sep-10

15-Oct-10

36 18-Oct-10

2-Dec-10

30-Dec-10

28 18-Jan-11

19 21-Feb-11

126 22-Mar-11

29 22-Dec-11

304 275

7) Solid waste collection equipment ( Lot 2 – SWCE -02)

39.2 9-Sep-10

15-Oct-10

36 18-Oct-10

2-Dec-10

30-Dec-10

28 18-Jan-11

19 10-Mar-11

143 30-Mar-11

20 12-Dec-11

277 257

8) Provision of de-watering collection equipment.

6.2

22-Jan-11

7-Feb-11

21-Mar-11

42 23-Mar-11

2 11-Apr-11

79 29-Apr-11

18 14-Jul-11

94 76

9) Jetting machine and suction machine (ICB-02)

108.4 1-Dec-10

17-Jan-11

47 22-Jan-11

5-Mar-11

28-Apr-11

54 4-May-

11

6 6-Jun-11

135 31-Dec-11

208 19-Jan-12

227 19

10) ICB-03: a Rehabilitation of two 2.5 MGD, one 3 MGD and one 5 MGD WTP at Khaki Shah Khairpur & Sukkur.

1033.2 1-Dec-10

1-Apr-11

121 2-May-11

30-Jun-11

9-Dec-11

162 19-Dec-11

10 30-Dec-11

242 30-Dec-12

366 30-Jun-14

1644 1278

Appendix 5 39

Contract

Am

ou

nt

(PR

s M

illion

)

Milestone Dates

DB

D S

ub

mitte

d

AD

B A

pp

rov

al

Day

s b

y A

DB

IFB

iss

ue

d

Bid

s O

pe

nin

g

BE

R S

ub

mis

sio

n

EA

's tim

e fo

r BE

R

AD

B A

pp

rov

al

Day

s b

y A

DB

Co

ntra

ct A

wa

rd

Day

s fro

m IF

B to

Aw

ard

Orig

ina

l Co

mp

letio

n

Pla

nn

ed

co

ntra

ct d

ays

Rev

ise

d c

on

trac

t da

te

Actu

al c

om

ple

tion

da

ys

Dela

y (d

ay

s)

11) ICB-04: 24/7 a safe drinking water through DNI to approx. 35916 household.

716.521

1-Aug-12

1-Sep-12

31 7-Sep-12

31-Oct-12

19-Dec-12

49 21-Dec-12

2 26-Dec-12

110 31-Dec-13

370 30-Jun-14

1282

912

12) Khaki Shah aRSFP: rehabilitation of the 2.5 MGD plant at Khairpur.

12.484 1-Feb-13

1-Mar-13

28 4-Apr-13

2-May-13

2-May-13

0 12-Jul-13

71 29-Jul-13

116 14-Dec-13

138 30-Jun-14

1067

929

13) Small capital awork to uplift various disposal stations water works at Sukkur, Rohri and Khairpur.

16.193 29-Apr-13

8-May-13

9 16-May-13

18-Jun-13

10-Sep-13

84 27-Sep-13

17 21-Oct-13

158 31-Dec-13

71 30-Jun-14

983 912

ADB = Asian Development Bank, BER = bid evaluation report, DBD = draft bidding document, DNI = distributed network improvement, EA = executing agency, ICB = international competitive bidding, IFB = invitation for bids, MGD = million gallon per day, RSFP = rapid sand filter plant, WTP = water treatment plan a These contracts remained incomplete by close of Tranche 1 and were completed under Tranche 2 in quarter two of 2016. b The actual days Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi

40 Appendix 5

Table A5.3: Procurement Delays

Time Taken

BD approval by ADB

BER by EA

BER approval by ADB

IFB to Award

Original contract period

Actual Completion

time Delay in

Completion

Minimum Days 0 0 2 79 18 40 13

Maximum Days 121 162 71 242 370 1,644 1,278

Average Days 38 48 16 126 134 574 440 ADB = Asian Development Bank, BD = bidding document, BER = bid evaluation report, EA = executing agency, IFB = invitation for bids Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

Figure A5.1: Delays in Procurement and Implementation

Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

0 0 2

7918 40 13

121162

71

242

370

1644

1278

38 4816

126

134

574

440

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

1500

1600

1700

BD approvalby ADB

BER by EA BER approvalby ADB

IFB to Award Originalcontractperiod

ActualCompletion

time

Delay inCompletion

Nu

be

r o

f d

ays

Minimum Days Maximum Days

Appendix 6 41

STATUS OF COMPLIANCE WITH COVENANTS Covenant

Reference in Loan/Project Agreement

Status of Compliance

A. Loan Agreement

In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Schedule to the Project Agreement.

Section 4.01


The Borrower shall enable ADB’s representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan, all other plants, sites, properties and equipment of the Borrower, and any relevant records and documents.

Section 4.02. Complied with.

Notwithstanding any other provision of this Loan Agreement, no withdrawals shall be made from the Loan Account until: (a) the TMA in each of Sukkur, New Sukkur, Rohri,

Shikarpur, and Larkana shall have entered into a Service and Asset Management Agreement with NSUSC, in the form and substance acceptable to ADB

(b) Sindh, NSUSC and the TMA in each of Sukkur, New Sukkur, Rohri, Shikarpur, and Larkana shall have entered into a Tripartite Operational Support and Capital Investment Grant Agreement, in the form and substance acceptable to ADB;

(c) the independent directors of NSUSC shall have been appointed in accordance with the criteria specified in paragraph 12 of the Schedule to the Project Agreement; and

(d) the managing director of NSUSC shall have been appointed in accordance with the criteria and process specified in paragraph 11 of the Schedule to the Project Agreement.

Schedule 3: Para 8

Complied with.

The Borrower shall not award any Works contracts under the Loan in the amount of $1 million or above until: (i) the board of directors of NSUSC shall have approved the business plan of NSUSC; (ii) the independent verifier, which will assess NSUSC and TMA compliance with the Service and Asset Management Agreements, and the Tripartite Operational Support and Capital Investment Grant Agreement, shall have been recruited; and (iii) an escrow account shall have been established and funded.

Schedule 4: Para 6 (a)

Complied with. No escrow account was established as the disbursements arrangements were modified through an amendment to the Loan Agreement on 8 May 2012, whereby only two imprest accounts were required to be opened and operated; one for P&DD, and the other for NSUSC.

The Borrower shall not award any Works contracts in Khairpur until the TMA in Khairpur shall have become a shareholder in NSUSC.

Schedule 4: Para 6 (b)

Complied with.

The Borrower shall not award any Works contracts in Khairpur in the amount of one million dollars ($1,000,000)

Schedule 4: Para 6 (c)

Complied with.

42 Appendix 6

Covenant


Status of Compliance or above until the TMA in Khairpur shall have (i) entered into a Service and Asset Management Agreement with NSUSC, in the form and substance acceptable to ADB; and (ii) entered into the Tripartite Operational Support and Capital Investment Grant Agreement, in the form and substance acceptable to ADB. The Borrower shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party.

Schedule 4: Para 10 (a)

Partly complied with. Pirated copies of computer software were used in project offices, instead of using licensed copies.

The Borrower shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph.

Schedule 4: Para 10 (b)

Complied with.

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

Schedule 4: Para 11

Complied with.

The Borrower shall appoint the P&DD as the Project Executing Agency, which shall assume overall responsibility of the Project. The Borrower shall ensure that (a) P&DD shall be responsible for the implementation of Parts A (i) and D, and (b) NSUSC shall be responsible for the implementation of Parts A (ii), B, and C.

Schedule 5: Para 1

Complied with.

The Borrower shall, and shall cause Sindh to, ensure timely implementation of the agreed reforms set forth in the action plan for reform and investment, which is part of the urban sector roadmap;

Schedule 5: Para 2

Partly complied with. (details are in Appendix 2)

The Borrower shall, and shall cause Sindh to, ensure that ADB is kept informed on policies and programs related to municipal services in the Project area and other policies and programs that will materially affect the financial viability of the Project.

Schedule 5: Para 3

Complied with.

The Borrower shall, and shall cause Sindh to, ensure that (a) all land and rights-of-way required for any subproject under the Project are made available in a timely manner, including the requirement for allocation in the annual budget for the financing of land acquisition and related resettlement costs under the Project; (b) upon completion of the detailed design and detailed measurement survey, the resettlement plans under the Project will be prepared in full consultation with the affected people and in accordance with the Land Acquisition and Resettlement Framework (LARF) agreed upon between Sindh and ADB and will be promptly disclosed to the affected

Schedule 5: Para 4

Partly complied with. LARF and LARPs were disclosed. The LARP for Khairpur landfull site was fully implemented and land acquired. However, the required land for the remaining landfill sites could not be acquired due to non-availability of funds. The LARPs for those sites were thus not implemented.

Appendix 6 43

Covenant


Status of Compliance people; (c) reports on the implementation of the resettlement plan shall be submitted to ADB on a periodic basis; and (d) the entire involuntary resettlement activities under the Project shall be carried out in accordance with the LARF and resettlement plans agreed upon between Sindh and ADB, the relevant national and local policies on resettlement and rehabilitation, and ADB’s Involuntary Resettlement Policy (1995). The Borrower shall, and shall cause Sindh to, ensure that that the design, construction, operation, and implementation of all subproject facilities are carried out in accordance with ADB’s Environment Policy 2002), and the Borrower’s Environmental Protection Act, 1997. Any adverse environmental impacts arising from the construction, operation, and implementation of subproject facilities shall be minimized by implementing the environmental mitigation and management measures and other recommendations specified in the Environmental Assessment and Review Framework (EARF) and initial environmental examinations or environmental impact assessments, as applicable. The subproject assessment shall be conducted in accordance with the EARF, which has been prepared based on the Borrower’s environmental requirements and ADB's Environment Policy.

Schedule 5: Para 5

Complied with.

The Borrower shall, and shall cause Sindh to, implement the Gender Action Plan prepared under the Investment Program to encourage gender-balanced consultation and participation in the Project planning and implementation, including the representation of qualified women in the board of directors of NSUSC.

Schedule 5: Para 6

Partly complied with. Details on implementation of gender action plan are in provided in Appendix 7.

The Borrower shall, and shall cause Sindh to, comply with ADB’s Anticorruption Policy (1998, as amended to date). The Borrower shall, and shall cause Sindh to, agree (a) that relevant provisions of ADB’s Anticorruption Policy are included in all bidding documents for the Project; (b) that ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive or coercive practices relating to the Project; and (c) to cooperate fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. In particular, the Borrower shall, and shall cause Sindh to, (a) conduct periodic inspections on the contractors’ activities related to fund withdrawals and settlements; and (b) ensure that all contracts financed by ADB in connection with the Project include provisions specifying the right of ADB to audit and examine the records and accounts of Sindh, all contractors, suppliers, consultants and other service providers as they relate to the Project.

Schedule 5: Para 7

Complied with.

44 Appendix 6

Covenant



Project Agreement

Each of Sindh and NSUSC shall carry out the Project with due diligence and efficiency, and in conformity with sound administrative, financial, engineering, environmental, and project management practices.

Section 2.01 (a)

Partly complied with. NSUSC failed to operate in conformity with sound administrative, and financial practices.

In the carrying out of the Project and operation of the Project facilities, each of Sindh and NSUSC shall perform all obligations set forth in Schedule 5 to the Loan Agreement and the Schedule to the Project Agreement to the extent that they are applicable to each of them.

Section 2.01 (b)

Partly complied with. The Government of Sindh did not meet all of its obligations under the loan and project agreements (e.g. timely provision of funds, and land required for the project)..

Each of Sindh and NSUSC shall make available, promptly as needed, the funds, facilities, services, equipment, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Section 2.02 Partly complied with (see description under Section 2.01 (a) and (b) above)

In the carrying out of the Project, each of Sindh and NSUSC shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB.

Section 2.03 (a)

Complied with.

Except as ADB may otherwise agree, all Goods, Works, and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

Section 2.03 (b)

Complied with.

Each of Sindh and NSUSC shall carry out the Project in accordance with plans, design standards, specification, work schedules and construction methods acceptable to ADB. Each of Sindh and NSUSC shall furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

Section 2.04. Complied with.

Each of Sindh and NSUSC shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.

Section 2.05 (a)

Not complied with. The project facilities were not insured.

Without limiting the generality of the foregoing, each of Sindh and NSUSC undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for

Section 2.05 (b)

Complied with.

Appendix 6 45

Covenant


Status of Compliance such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods. Each of Sindh and NSUSC shall maintain, or cause to be maintained, records and accounts adequate to identify the Goods, Works, and consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

Section 2.06 Complied with.

ADB and each of Sindh and NSUSC shall cooperate fully to ensure that the purposes of the Loan will be accomplished.

Section 2.07 (a)

Partly complied with. The government of Sindh has not been very cooperative or supportive of the NSUSC.

Each of Sindh and NSUSC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, or the accomplishment of the purposes of the Loan.

Section 2.07 (b)

Complied with.

ADB and each of Sindh and NSUSC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, Sindh or NSUSC as applicable and the Loan.

Section 2.07 (c)

Complied with.

Sindh shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works, and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of Sindh and NSUSC; and (v) any other matters relating to the purposes of the Loan.

Section 2.08 (a)

Complied with.

(b) Without limiting the generality of the foregoing, Sindh shall furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter year under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following quarter.

Section 2.08 (b)

Complied with.

(c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, Sindh shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on

Section 2.08 (c)

Complied with, following delay of 2.5 years.

46 Appendix 6

Covenant


Status of Compliance the execution and initial operation of the Project, including its cost, the performance by Sindh and NSUSC of their respective obligations under this Project Agreement and the accomplishment of the purposes of the Loan. Each of Sindh and NSUSC shall (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the proceeds of the Loan and compliance with the financial covenants of the Loan Agreement as well as on the use of the procedures for the imprest account and statement of expenditures), all in the English language. Each of Sindh and NSUSC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

Section 2.09 (a)

Partly complied with. There was a delay of 2.5 years in complying with this covenant.

(b) Each of Sindh and NSUSC shall enable ADB, upon ADB's request, to discuss the financial statements and its financial affairs related to the Project, from time to time with the auditors, appointed by Sindh and NSUSC pursuant to Section 2.09(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of each of Sindh and NSUSC unless either Sindh or NSUSC shall otherwise agree.

Section 2.09 (b)

Partly complied with. APFS for FY 2010 – FY 2014 were received by ADB. However, the APFS for FY 2015 and 2016 were not received. Audit report for FY 2016 was not received primarily because there was no disbursement after 31 December 2014 although the loan account remained open until 31 March 2016 for refund of unspent imprest advance.

Each of Sindh and NSUSC shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan and any relevant records and documents.


Each of Sindh and NSUSC shall, promptly as required and to the extent such actions are within its control, take all action within its powers to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business. proceeds are used exclusively in the carrying out of the Project.

Section 2.11 (a)

Complied with.

Appendix 6 47

Covenant


Status of Compliance Each of Sindh and NSUSC shall at all times conduct its business in accordance with sound administrative, financial, environmental and urban development practices, and under the supervision of competent and experienced management and personnel.

Section 2.11 (b)

Partly complied with. NSUSC’s operation were not run fully in accordance with the sound administrative practices or in line with corporate good governance.

(c) Each of Sindh and NSUSC shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, environmental, urban development, and maintenance and operational practices.

Section 2.11 (c)

Complied with.

Except as ADB may otherwise agree, each of Sindh and NSUSC and its departments shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.


Except as ADB may otherwise agree, each of Sindh and NSUSC shall apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all Goods, Works, and consulting services financed out of such Section 2.11 (a)


Sindh shall establish a Program Steering Committee (PSC) to provide policy direction and strategic oversight and service as a focal point for inter-agency coordination. The PSC shall and be responsible to (a) advise on key sector reform milestones; (b) review annual and quarterly performance reports on reform and implementation progress of the Project and the Investment Program; and (c) advise on, or make policy-level decisions required to facilitate timely execution of, the Project and Investment Program.

Para 1, Schedule to Project Agreement (PA)

Complied with.

2. Sindh shall ensure that the PSC shall be chaired by the additional chief secretary, P&DD with the Program director being the member-secretary. The members of the PSC will comprise, among others, members consisting of: (a) secretary, Local Government Department; (b) additional chief secretary/secretary, Finance Department; (c) secretary, Public Health and Engineering Department; (d) district coordination officers whose coverage areas include the participating talukas; (f) one of the taluka nazims of the participating TMAs; (g) head of the urban unit; (h) Program director; (i) managing director, NSUSC; and (j) three () representatives from civil society, acceptable to ADB. The chair of the PSC

Para 2, Schedule to PA

Complied with.

48 Appendix 6

Covenant


Status of Compliance may invite other persons as necessary either to become a member of the PSC or to attend its meetings. The PSC shall meet at least on a quarterly basis. Program Support Unit 3. Sindh shall establish a Program Support Unit (PSU) to support the implementation of the Project, including to: (a) promote agreed urban and related sector reforms; (b) support roll-out of the USC model to new town clusters; (c) facilitate, through the Program Steering Committee, inter-departmental and provincial coordination; (d) carry out monitoring and evaluation of the Project through the Investment Program Performance Monitoring System (IPPMS); (e) prepare quarterly and annual performance reports on the progress of the Project implementation; (f) ensure quality of the social and environmental safeguards documentation prepared by NSUSC; and (g) engage an independent verifier, which shall be recruited from one of the accounting firms based on criteria acceptable to ADB, to assess NSUSC and the participating TMAs compliance with the Service and Asset Management Agreements, and the Tripartite Operational Support and Capital Investment Grant Agreements. The PSU shall establish regional office(s), as required.


Complied with.

4. Sindh shall ensure that the Program director, who shall head the PSU, shall be recruited by P&DD through competitive processes acceptable to ADB, and criteria mutually agreed between Sindh and ADB. The Program director shall be supported by competitively recruited professional and support staff, including specialists in municipal services engineering, municipal finance, program implementation, monitoring and evaluation, finance and accounting, urban development and information technology. The Program director shall be responsible to ensure that the Project implementation is consistent with its environmental and social safeguards frameworks.


Partly complied with. The program directors were not recruited through a competitive process.

Urban Unit 5. Sindh, through P&DD, shall establish an Urban Unit, within six (6) months of the Effective Date. The Urban Unit shall provide strategic urban planning and policy support for urban development in Sindh. Under the Project, the Urban Unit shall collaborate with the PSU as a “change manager,” supporting roll-out of the USC model to new town clusters. The head of the Urban Unit shall be recruited through competitive processes acceptable to ADB, open to government and market applicants, and against criteria mutually agreed between Sindh and ADB. The head of the Urban Unit shall be


Partially complied with. The urban unit was established late and the head was recruited through competitive process.

Appendix 6 49

Covenant


Status of Compliance supported by competitively recruited professional and support staff, including specialists in urban policy and economics, regional and urban planning, statistics and mapping, and information technology. NSUSC 6. Sindh shall allow NSUSC to operate as a limited liability company in accordance with (a) the prevailing laws and regulations of the Borrower, including the Companies Ordinance; and (b) its constitutional documents.


Complied with.

7. Sindh shall provide the necessary resources needed to ensure that (a) NSUSC shall be an effective and sustainable vehicle for the delivery of water supply, wastewater and solid waste management services; and (b) the Project facilities shall continue to be in good condition during and after the completion of the Project and the Investment Program.


Partly complied with. Sindh did not provide required resources in a timely manner, particularly for land acquisition.

8. Within six (6) months of the Effective Date, Sindh shall ensure that the participating TMAs shall have deputed their relevant staff members to NSUSC, in a manner acceptable to ADB.

Para82, Schedule to PA


9. Sindh shall provide NSUSC with timely assistance and support through the provision of capital investment and Operational Support Funding under the Tripartite Operational Support and Capital Investment Grant Agreements.


Complied with.

10. Within six (6) months of the Effective Date, Sindh shall ensure that NSUSC shall have adequate enforcement mechanism to effectively collect service fees and penalize defaulters in order to improve the collection efficiency, deter non-payment and ensure sustainability of USC operations.


Not complied with. NSUSC had no enforcement mechanism in place.

11. NSUSC shall ensure that its managing director of NSUSC shall (a) be recruited from the open market and on a competitive basis in a manner acceptable to ADB; and (b) have a minimum of ten (10) years of work experience in managing service delivery and other relevant qualifications to be agreed upon between ADB and Sindh.


Partly complied with. ADB was not part of the selection of the managing director.

12. NSUSC shall ensure that its board of directors shall have no more than seventeen (17) directors and that its composition shall include (a) the six (6) taluka nazims of


Complied with.

50 Appendix 6

Covenant


Status of Compliance the participating TMAs; (b) two (2) district coordination officers whose coverage areas include the participating talukas or other Sindh government officials; (c) the Program director, (d) a representative from the Finance Department; (e) the managing director of the NSUSC; and (f) at least six (6) independent directors, selected based upon skills-based criteria and in accordance with a process acceptable to ADB. NSUSC shall ensure that its independent directors shall be drawn from civil society, including representatives from the business community and that one-third of the independent directors shall be women. 13. NSUSC shall be responsible for (a) the procurement process, including the award and implementation of contracts related to subprojects under Parts B and C; (b) the preparation of annual plans and budgets for submission to its board; (c) the provision of immediate oversight for environmental and social safeguards related to subprojects under Parts B and C; and (d) the preparation of the periodic financing requests with respect to the subprojects under Parts B and C.


Complied with.

14. Within one (1) month of the Effective Date, NSUSC shall have appointed its director of finance and director of operation and services, in a manner acceptable to ADB. Within three (3) months of the Effective Date, NSUSC shall have established its safeguards and capital works units, to the satisfaction of ADB.


Partly complied with. The appointments were not made within the given timeframe.

15. Within three (3) month of the Effective Date, Sindh shall have appointed an escrow agent, acceptable to ADB, to manage the escrow account to be established at the National Bank of Pakistan, for the deposit and disbursement of the Operational Support


Not applicable. On 8 May 2012, the Project Agreement was amended to delete this provision.

Funding proceeds to NSUSC. 16. Within six (6) months of the Effective Date, NSUSC shall have appointed its technical managers and assistant managers for finance in accordance with the staffing requirement set out in the organogram in Appendix 7 of the RRP. Within twelve (12) months of the Effective Date, NSUSC shall ensure that it has been fully staffed in accordance with the staffing requirement set out in the organogram in Appendix 7 of the RRP.


Partly complied with. The appointments were not made within the given timeframe.

Taluka Municipal Administration 17. Sindh shall ensure that the participating TMAs shall be adequately staffed.



Appendix 6 51

Covenant


Status of Compliance TMAs remained understaffed. 18. Sindh shall ensure that (a) the necessary budgetary resources to fund the TMA staff deputed to NSUSC and other budgetary requirements pursuant to the Service and Asset Management Agreement shall be fulfilled; and (b) these funds shall be channeled into the escrow account referred to in paragraph 15 of this


Partly complied with. NSUSC encountered substantial delays in receiving the salary of TMA staff deputed to NSUSC. The escrow account requirement was abolished through an amendment in the project agreement on 8 May 2012.

Subproject Selection Process 19. Sindh and NSUSC shall ensure that all subprojects are selected in accordance with the agreed criteria set out in Schedule 4 to the FFA and other applicable requirements and guidelines for subproject implementation. Both Sindh and NSUSC shall monitor the implementation of subprojects until their completion.


Complied with.

Counterpart Funding 20. Sindh shall ensure the availability and timely release of counterpart funding for the timely implementation of the subprojects under the Project. The counterpart funds to be provided by Sindh shall include, but not be limited to, in-kind contributions of land, counterpart staff, office space, and vehicles.


Partly complied with. There were delays in receiving counterpart funds by NSUSC.

Environment 21. Sindh and NSUSC shall ensure that the environmental management and monitoring plan prepared under the Project shall be strictly implemented. Sindh, NSUSC and ADB shall review the progress in the implementation of the environmental management and monitoring plan covering the subprojects financed under the Loan prior to processing the follow-up loans under the Investment Program. Sindh and NSUSC shall submit to ADB annual monitoring reports on subprojects’ environmental performance in accordance with the EARF. Sindh and NSUSC shall also ensure that prior to the issuance of the bidding document, ADB shall have reviewed and cleared, as applicable, the initial environmental examinations or environmental impact assessments of the subproject including the environmental management plan or their revised versions, and receipt of the Borrower’s clearances, approvals or permits for such documents.


Complied with. NSUSC had a monitoring system in place for environmental monitoring of the EMPs and regularly submitted environmental monitoring reports to ADB; these reports were also disclosed on the ADB website.

Land Acquisition and Resettlement 22. Prior to issuance of notice for mobilization for civil works activities under a subproject, Sindh shall ensure


Complied with.

52 Appendix 6

Covenant


Status of Compliance that (a) the Land Acquisition and Resettlement Plan (LARP) has been disclosed to the affected people and submitted to ADB for review and approval; (b) the negotiations on the resettlement entitlements with the affected people have been completed; and (c) the affected people have been satisfactorily compensated for their loss through cash payment or land replacement or other forms of agreed entitlement. 23. In the event of any changes to the agreed LARP, including on the agreed compensation to the affected people, Sindh shall inform ADB and update the LARPs accordingly, and submit the updated resettlement plans to ADB for review and approval


Complied with.

Gender and Child Labor 24. Sindh and NSUSC shall monitor the impact of the subproject on women during implementation of each subproject, including where relevant, with gender disaggregated data collected pursuant to the monitoring and evaluation system referred to in the IPPMS and the Gender Action Plan.


Not complied with. The IPPMS was not developed. No monitoring was undertaken of the subproject impacts on women.

25. Sindh and NSUSC shall ensure that (a) there is no differential payment between men and women for work of equal value; and (b) civil works contractors do not employ child labor in the construction and maintenance activities in accordance with the relevant laws and regulations of the Borrower.


Complied with.

Governance 26. Sindh shall disclose basic information concerning activities and progress of the Project, as appropriate, including procurement-related information, financial statements, and physical progress and that the disclosure shall be done through websites and the bulletin boards at the offices of the participating TMAs, the regional office(s) of the PSU and NSUSC customer service units at town-level.


Partly complied with. The website contained no information about budgets, board minutes, progress reports and similar items.

27. Sindh shall ensure that the procurement-related information to be disclosed shall include the lists of participating bidders, names of winning bidders, basic details of the bidding procedures adopted, contract values, and lists of goods and services to be procured.


Not complied with. No such disclosures were made.

Project Review, Accounts and Audits 28. ADB, Sindh and NSUSC shall conduct a quarterly review of the implementation of the Project. The review shall discuss the progress of the Project and any changes



Appendix 6 53

Covenant


Status of Compliance to implementation arrangements or remedial measures required to be undertaken towards achieving the objectives of the Project. Within eighteen (18) months of the Effective Date, ADB, Sindh and NSUSC shall conduct mid-term review. The review shall examine the summary of contracts awards and disbursement, implementation progress including progress against service delivery performance, reform, institutional development and capacity building milestones. The mid-term review shall also identify problems or weaknesses in implementation arrangements, and agree on any changes needed.

Reviews were not done on quarterly basis. The MTR was conducted with a delay of 13 months.

29. Sindh shall submit a Project completion report to ADB within three (3) months of the completion of the Project. This report shall contain detailed evaluation of the Project covering the design, costs, contractors’ and consultants’ performance, social, environmental and economic impact, economic rate of return, and other details as may be requested by ADB.


Partly complied with. The PCR was submitted with a delay of 2.5 years.

30. Sindh shall ensure that the PSU (including its regional offices), Urban Unit, and NSUSC shall maintain separate records and accounts adequate to identify financing resources received and expenditures made under the Loan.


Complied with.

31. Without limiting the generality of Section 2.09 of this Project Agreement, NSUSC shall (a) maintain separate accounting records for each of the participating TMAs, and (b) provide ADB with its audited financial statements, within six (6) months after the end of its financial year, which shall be audited in accordance with sound auditing standards by an independent external auditor pursuant to the Companies Ordinance.


Complied with.

Program Performance Monitoring System 32. Sindh shall cause the PSU to establish, within three (3) months of the Effective Date, the IPPMS in form and substance acceptable to ADB. The IPPMS shall incorporate a set of performance monitoring indicators relating to outputs and outcomes, including service delivery performance, physical implementation, institutional reform and capacity-development milestones. The PSU shall establish baseline data for each of the selected indicators and conduct annual surveys with the assistance of consultants, and update ADB on the progress against each indicator.


Not complied with. No work was done for development of the IPPMS.

33. Sindh shall cause the PSU to prepare quarterly progress reports on the Program, including progress against reform and service delivery objectives, and implementation progress of the subprojects. The reports shall be prepared based on information provided by


Partly complied with. QPRs were provided to ADB, but not on a regular basis.

54 Appendix 6

Covenant


Status of Compliance NSUSC and submitted to ADB within thirty (30) days after the close of each quarter. The reports shall discuss progress made during the period of review, changes if any on implementation schedule, problems or difficulties encountered and remedial actions taken, and work to be undertaken in the coming quarter. NSUSC shall also be responsible for providing information as required to the independent verifier. ADB= Asian Development Bank, APFS = audited project financial statement, EARF = environmental assessment and resettlement framework, EMP = environmental management plan, FY = financial year, IPPMS = investment program performance management system, LARF = land acquisition and resettlement framework, LARP = land acquisition and resettlement plan, MTR = midterm review, NSUSC = North Sindh Urban Services Corporation, P&DD = Planning and Development Department, PA = project agreement, PSC = project steering committee, PSU = project support unit, TMA = tehsil municipal administration, USC = urban service company

Appendix 7 55

UPDATE ON GENDER ACTION PLAN

1. In generally tranche 1 had positive impacts on gender. The recruitment policy of North South Urban Services Corporation (NSUSC) was gender responsive, and the program was successful in encouraging women from conservative, remote areas to work in NSUSC and providing them with a decent working environment and economic benefits. More than 60% of the staff members working for the customer resolution unit (CRU) and 18% of sanitation workers were women. There was a significant increase in the salaries of sanitation staff (including women) after joining the program—contractual sanitation workers were paid PRs 2,700.0 (initially in 2010), which was increased to PRs 11,000.0 by 2014. Sanitation staff showed satisfaction regarding their timely and regular salary payments. 2. Through its capacity building and skill training programs the program enhanced the confidence and communication skills of female staff working for the CRU. Communication and publicity material were gender sensitive and promoted equal participation of both men and women. It was observed that having women staff front desks at CRU was effective when women consumers registered complaints, as they are more comfortable interacting with female customer care officers.

Table A5.2: Tranche 1 Gender Action Plan Progress Activity Task Indicator Progress Update

1. Incorporate gender perspective in capacity development and public awareness program

Incorporate gender perspective in training and capacity development activities

Training and public awareness programs: Contain a gender perspective

Are gender sensitive

Involve an increasing number of women

Training module developed for employees of the CCU included a gender perspective but did not incorporate separate sessions on gender sensitivity issues and concepts

More than 60% of the CRU staff were women, who were trained in complaint handing and communication skills

18% of the sanitation workers were women.

Salaries of sanitation workers (including women) working under contractual agreement increased by more than 300%.

2. Participation,

consultation, grievance resolution, activities takes into account gender issues

Ensure (i) increased participation of women in program-related consultations, gender-sensitive design of grievance procedures and (ii) specific all-women consultations

Participation and consultation raise awareness of gender issues and target women

Women participating in program design,

The program carried out many formal awareness-raising campaigns through advertising on cable TV, radio programs, and public consultations, including with women. The communication material developed was gender sensitive and promoted equal participation. The communication strategy of NSUSC was gender sensitive. For instance, cable TV tickers were run to create awareness and inform women at the household level about NSUSC services. Workshops on DNI zones were conducted to raise public awareness, particularly women’s

56 Appendix 7

Activity Task Indicator Progress Update implementation and monitoring

awareness in Sukkur, Rohri, and Khairpur.

There was minimal participation by women in program design, implementation and monitoring. However, the participation of women in the Citizen Report Card survey was ensured to assess their level of satisfaction with program services delivery.

3. Gender disaggregated data collected and used during Investment Program implementation and monitoring

Include and collect gender disaggregated data in baseline and in follow up and resettlement surveys. Build requirements into terms of reference for statisticians, surveyors, IT consultants and Urban Services Corporation staff.

Disaggregated data is collected for developing compensation packages

Land Acquisition and Resettlement Plans note, where relevant, compensations selected by women and addresses concerns of female-headed households, widows and elderly

Disaggregated data collected and analyzed for monitoring and evaluation and subsequent tranche design

No women were affected by program land acquisition (four sites were selected, two were government-owned, and the other two had no women with entitlements)

The MIS developed for registration of customer complaints was gender disaggregated. However, no information is available on data disaggregated by gender in the complaints system of NSUSC.

4. Gender disaggregated data collected and used for analysis of urban sector at province level

Include and collect gender disaggregated data in baseline, followup and other surveys conducted as part of developing management information system for Sindh urban sector

Disaggregated data collected and analyzed for urban sector analysis and planning

Not undertaken.

5. Gender Action Plan

Review impact of Gender Action Plan; adjust plan at each tranche consideration

Status reports prepared on Gender Action Plan

Strengthened capacity of agencies to promote gender equality

Status report on GAP was prepared and submitted to ADB. Capacity building in gender sensitivity was not carried out.

6. Urban Services Corporation governance

Encourage diversity and consideration of gender balance on Urban Services Corporations Boards of Directors

At least one-third of Independent Board Directors are qualified women

The proportion of women serving as members of the Board of Directors changed over the time, but was generally 5%–10% vs. a target of 33%.

ADB = Asian Development Bank , CCU = customers complaint unit, CRU = customer resolution units, DNI = distributed network improvement, GAP = gender action plan, MIS = management information system, NSUSC = north Sindh urban services corporation Source: Asian Development Bank estimates

Appendix 8 57

CONSULTING SERVICES PACKAGES, TERMS OF REFERENCE, AND INPUT UTILIZATION

Table A8.1: Consulting Services Contracts

Consulting Package Consulting Firm Cost at Completion

Contract Signing

SCIIP-04 CONSULTING SERVICES FOR MAPPING, PLANNING FEASIBILITY STUDIES, DETAILED DESIGN

Posch & Partner PRs40,901,174 24-Feb-10

$ 460,088

SCIIP-02: PROGRAM MNGMT AND IMPLEMENTATION SUPPORT FOR NSUSC

GHK Consultants $1,100,245 20-Feb-10

MAPPING, PLANNING, FEASIBILITY STUDIES, DETAILED DSGIN & CONSTRUCTION SUPERVISION (ORIGINAL POSCH&PARTNER TERMINATED)

MM Pakistan (Pvt.) Ltd. £361,201 22-Jul-11

PRs148,329,103

OPTIMAL APPROACHES, REVIEW AND FEASIBILITY STUDY ON WATER AVAILABILITY AT SUKKUR INTAKE

RCC Consultants $ 232,472 9-Jun-11

SCIIP-03: PROGRAM MANAGEMENT IMPLIMENTATION SUPPORT FOR PLANNING AND DEVELOPMENT DEPARTMENT

Brisbane City Enterprise Pty Limited

$ 875,135 26-May-10

PRs70,523,385

PREPARATION OF URBAN DEVELOPMENT STRATEGY FOR SUKKUR

M/S OSMANI & COMPANY PVT. LTD.

23-Sep-13

CONSTRUCTION SUPERVISION IMPROVEMENT OF SEWERAGE SYSTEM AT KHAIPUR (SINDH); contract variation

JERS ENGINEERING CONSULTANTS

PRs3,284,156 15-Mar-10

INDEPENDENT VERIFIER FOR PROGRAM SUPPORT UNIT UNDER PLANNING AND DEVELOPMENT DEPARTMENT

GRANT THORNTON CONSULTING PRIVATE LIMITED

PRs14,911,100 23-Feb-10

PREPARATION OF URBAN DEVELOPMENT STRATEGY FOR LARKANA

M/S ECG CONSULTING PVT. LTD.

$ 127,252 23-Sep-13

REGIONAL SPECIALIST FOR PROGRAM

SUPPORT UNIT

MR. MAQSOOD AHMED

BHATTI

PRs6,477,087 4-Oct-10

MUNICIPAL SERVICES SPECIALIST FOR

PROGRAM SUPPORT UNIT

MUHAMMAD KHALID PRs4,405,920 1-Dec-09

HUMAN RESOURCE SPECIALIST FOR THE


SHOAB ADIL MUGHAL PRs1,497,253 4-Oct-10

URBAN DEVELOPMENT SPECIALIST FOR

THE PROGRAM SUPPORT UNIT

MUMTAZ HALEPOTO PRs2,605,395 20-Jan-10

MUNICIPAL SERVICES SPECIALIST (WATER

& WASTEWATER) FOR THE PROGRAM

SUPPORT UNIT

NABESH AKHTAR

MEMON

PRs 608,007 26-Jan-10

MONITORING AND EVALUATION

SPECIALIST FOR THE PROGRAM SUPPORT

UNIT

JAMAL MUSTAFA

SHORO

PRs2,750,000 1-Feb-12

PUBLIC FINANCE SPECIALIST FOR


MUHAMMAD AMIR

ANSARI

PRs2,912,239 1-Feb-12

58 Appendix 8

Consulting Package Consulting Firm Cost at Completion

Contract Signing

HUMAN RESOURCE & COMMUNICATION

SPECIALIST

SUHAIB QURESHI PRs2,642,274 6-Mar-12

PROCUREMENT AND CONTRACTS

SPECIALIST TO SUPPORT PROGRAM

SUPPORT UNIT

NAZIR AHMED SHAIKH PRs1,121,813 22-Nov-13

RESIDENT SUPERVISION ENGINEER MUHAMMAD IDRIS

RAJPUT

PRs 526,500 23-May-14

ASSISTANT RESIDENT SUPERVISION

ENGINEER

SHAMSUDDIN QURESHI PRs 268,125 23-May-14


ENGINEER

ABDUL MAJEED SURHIO PRs 268,125 23-May-14


ENGINEER

INAYATULLAH BHUTTO PRs 268,125 23-May-14


ENGINEER

NOOR MUHAMMAD

UMRANI BALOCH

PRs 363,250 23-May-14

SITE INSPECTOR 1 MANZOOR ALI

MUGHERI

PRs 75,075 23-May-14

SITE INSPECTOR 2 AZAHARUDDIN BHUTTO PRs 75,075 23-May-14

SITE INSPECTOR 3 ALI NAWAZ UMRANI

BALOCH

PRs75,075 23-May-14

SITE INSPECTOR 4 NAVEED AHMED MANGI PRs75,075 23-May-14 SCIIP = Sindh Cities Improvement Investment Program, NSUSC = North Sindh Urban Services Corporation Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi

Appendix 8 59

Consulting Services Packages, Terms of Reference, and Utilization of Inputs Table A8.2: Terms of Reference of Consulting Services

SCIIP 1 SCIIP 2 SCIIP 3 SCIIP 4 SCIIP 5 SCIIP 6

Independent verifier

Support to NSUSC Support to PSU/GOS

Planning, Design and Supervision

Efficiency & accountability of NSUSC (ADB TA)

Customer Awareness (ADB TA)

Review business plans and approve annual funding requests

Verify monthly invoices

Verify performance targets and deviations from these targets

Shift from input to output based-funding mechanism

NSUSC operations and management systems and reform initiatives

Advise and review of tranche 1 and 2 subprojects

Advise and assist with ADB safeguards compliance

Institutionalize sustainable service provision for low-income consumers

Program monitoring and evaluation, and results measurement

PSU support and investment program monitoring and evaluation

Provide due diligence advice to assist PSU to identify town clusters and appraise investments for subsequent SCIIP tranches

Support the PSU to implement the SCIIP action plan for reform

Assist start-up and capacity development of the urban unit and implementation of urban planning initiatives and reforms

Urban planning initiatives and reforms

Water supply system mapping for Sukkur, New Sukkur, Khairpur, Rohri, and the selected Tranche 2 towns

Water supply master plans for the selected Tranche 2 towns

Wastewater management master plans for Sukkur, New Sukkur, Rohri, Shikarpur, and the selected Tranche 2 towns

SWM master plans for the selected Tranche 2 towns

Confirm project details and identify information gaps

Conduct required surveys and investigations

Complete any additional studies and surveys required to fill the gaps for the detailed design of the subprojects

Assist with information gathering

Benchmarking

Implementation of improvement programs

Develop and implement improved outsourcing

Build internal NSUSC expertise

Develop PSP option

Implement PSP transaction

Support to NSUSC staff and management

Develop and implement public awareness and communication strategy and plan

Computerized customer relation system

Pro-poor outreach complaints system

Develop and implement CRC system

ADB = Asian Development Bank , CRC = citizen report card, GOS = Government of Sindh, NSUSC = North Sindh Urban Services Corporation, PSP = private sector participation, PSU = Project Support Unit, SCIIP = Sindh Cities Improvement Investment Program, SWM = solid waste management, TA = technical assistance Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

60 Appendix 8

Table A8.3: Utilization of Consulting Services Input

Expertise Input (Person-months)

As contracted

As completed

A – INDIVIDUAL NATIONAL CONSULTANTS AND SPECIALISTS a. Shoeb Adil Mughal, Human Resource Specialist 15.00 15.00 b. Mumtaz Ali Helipto, Urban Development Specialist 24.00 24.00 c. Muhammad Khalid, Municipal Planning Specialist 36.00 36.00 d. Maqsood Ahmed Bhatti, Regional Specialist 54.00 54.00 e. Nabesh Akhter, Municipal Service Specialist (Water and Waste

Water) 6.00 6.00

f. Suhaib Qureshi, Human Resource & Communication Specialist 28.00 28.00 g. Jamal Mustafa Shoro, Monitoring & Evaluation Specialist 22.00 22.00 h. Muhammad Amir, Public Finance Specialist 24.00 24.00 i. Nazir Ahmed Shaikh, Procurement Specialist 7.00 7.00 j. Mansoor Ahmed, Municipal Service Specialist (Water and Waste

Water) 4.00 4.00

Subtotal A 220.00 220.00 B – INTERNATIONAL CONSULTANTS (FIRMS) 1. SMEC INTERNATIONAL PTY LTD

a. Peter Grifiths, Momir Vranes, Team Leader 15.06 15.06 b. George Malcolm, Requito, Development Advisor 7.30 7.03 c. Emmanuel S. Travino, Sean Williams, Virgilio, Municipal Finance,

Tariff & Regularity Advisor 6.25 5.20

d. Lyndsay Chapple, Advisor (SWM) 2.00 1.87 e. Mr. Nazim Uddin, Safeguard Advisor(Environment) 2.00 1.80 f. Manzur ul Haq, Safeguard Advisor(Land Acquisition, Resettlement) 2.00 1.50 g. Mod Makini, Water Supply Expert 4.30 4.30

2. Posch+Partners a. Michael Chapman, Team Leader 15.00 8.51 b. Juri Vonmetz, Assistant Team Leader 0.74 c. Heinz Becker, Wastewater Expert 10.00 1.37 d. Martin Steiner, SWM Expert 9.00 3.72 e. Erich Kaschka, Procurement Expert 2.00 2.17 f. Victor Gillespie, Environmental Expert 4.00 1.87

3. Mott MacDonald Limited a. Warwick G.A. Weeks, Water Supply Expert 14.75 11.43 b. Keith Hitchcook, Wastewater Expert 8.23 5.15 c. Lingwood, Dr. Peter, SWM Expert 6.23 5.47 d. Morris, Alastair, Procurement Specialist 1.00 0.45 e. Taylor, G Joh. Environment Expert 1.29 0.78

4. GHK Consultants a. Utility Management Advisor/Joint Team Leader 8.00 5.21 b. Tariif & Regularity Advisor 5.00 2.23 c. Municipal Service Delivery /Low Income Unit Advisor 5.00 0.25 d. WSS Engineering Advisor 5.00 4.51 e. Financial Systems, Procurement & Implementation Advisor 10.00 1.73 f. Environmental Safeguards Advisor 3.50 1.20 g. Land Acquisition & Resettlement Safeguards Advisor 3.00 1.17 h. Water Utility Expert 5.50 5.57 i. SWM Engineering Advisor 4.12 j. Municipal Finance, Tariff & Regularity Advisor 1.70 k. Solid waste Collection Fleet Management Advisor 0.96

Appendix 8 61


As contracted

As completed

5. RCC Consultants

a. Water Supply & Sanitation Expert/TL 4.00 3.47 b. Water Resource Expert 1.00 1.00 c. Other/River Modeling Expert 1.50 1.50

Subtotal B 161.91 113.04 C – NATIONAL CONSULTANTS (FIRMS) 1. Euroconsult Pakistan (Pvt.) Ltd.

a. Water Supply Engineer Expert 19.00 0.33 b. Waste Water Management Expert 11.00 0.67 c. Surveyor 20.00 1.37 d. Surveyor 20.00 0.30 e. Senior Design Engineer 12.00 1.80 f. Structural Engineer 4.00 1.50 g. Resettlement Specialist 9.00 0.50 h. Accounts Officer/Office Manager 29.00 2.87

2. MM Pakistan (Pvt.) Limited

a. Technical Specialist 4.00 4.00 b. Water Supply Specialist / Co Team Leader 24.87 24.18 c. Waste Water Management & Drainage Specialist 18.00 18.00 d. Senior Design Engineer / Hydraulic Modeler 8.83 8.83 e. Structural Engineer 11.53 11.53 f. Electro Mechanical Engineer 2.12 1.98 g. Junior Design Engineers 49.97 49.40 h. CAD Operators 38.96 38.89 i. Survey Engineer / Mapping Expert 8.00 7.77 j. Surveyors 55.03 55.03 k. Hydro – Geologist 3.00 3.00 l. Environmental Specialist 9.00 8.00 m. Community Outreach Specialist 14.19 14.19 n. Chief Supervision Engineer 14.65 14.65 o. Contract Engineer 12.00 12.00 p. Assistant Supervision Engineers 68.25 68.19 q. Inspectors 153.34 152.85 r. Accounts Officer / Office Manager 24.87 24.87

3. GHK Consultants

a. Municipal Service Delivery/ Low Income 1.31 0.23 b. Legal Council 3.50 1.13 c. HRM Specialist 5.00 3.89 d. Monitoring & Evaluation Specialist 5.00 1.56 e. Information Technology and Website Design & Management Specialist 7.00 3.07 f. Communication/Public Awareness Specialist 6.00 3.53 g. GIS, Mapping & CAD Specialist 11.00 6.43 h. WSS Operational Expert Low Income/Deputy Team Leader 10.00 8.20 i. Monitoring & Evaluation Specialist 28.04

4. RCC Consultants

a. Water Supply & Sanitation Expert/DTL 8.00 7.24 b. Hydrology Specialist 3.00 3.00 c. Hydrogeology Specialist 3.00 3.00 d. Civil /Cost Engineering 5.00 4.80 e. Finance/Economic Specialist 2.00 1.80 f. Water Supply & Sanitation Expert 1.00 1.00 a. Environmental Specialist 3.00 2.50

62 Appendix 8


As contracted

As completed

b. Junior Design Engineers 9.00 8.80 c. CAD Engineer 8.00 7.64 d. LAR Specialist 1.00 1.00 e. Solid waste Engineer 1.00 1.00

5. EGC Consultants Pvt Ltd a. Anwar Hussain, Amjad Habib, Municipal Service Engg (WSS) 13.20 13.20 b. Saeed-uz-Zafar, Municipal Service Delivery/Low Income Unit Advisor 3.00 0.42 c. Farhan Sami Khan, Monitoring & Evaluation Specialist 7.04 7.04 d. Saadat Ali, Municipal Service Engineering (SWM) 4.00 3.86 e. Chaudhary Wasiq Yar, Safeguard Advisor (Environment) 6.00 2.42 f. Zafar Ali, Acquisition & Resettlement Specialist 6.00 0.73 g. Balal A.Khawaja, Legal Advisor 4.00 2.30 h. Tasneem Bhatti, Tanveer Ishrat, Communications Specialist 6.00 5.10 i. Nasira Asghar, Evelyne Degryse, Urban Statistician 4.00 3.87 j. Mairaj uddin Siddiqui, MIS & Mapping Specialist 6.00 3.50 k. Yasir G, Water Supply Engineer 6.00 l. Mansoor Ahmed, Wastewater Engineer 6.00 m. Zafar Iqbal, Senior Surveyor 4.00 n. Asad Ghaffar Qureshi, Field Engineer 4.00 o. Structural Engineer 2.00 p. Ali Imam Qadri, Contract & Procurement Specialist 3.00 0.47 q. Aftab Alam Khan, Financial & Economic Analyst 3.00 2.41 r. Quantity Surveyor 4.00

s. M. Qamar uz Zaman, Hydro Geologist 3.53 3.53 t. M. Rashid, Electrical / Mechanical Engineer 2.00

u. Ambreen Bibi, Junior Engineer # 01 9.39 9.39 v. Arifa Ahmad, Junior Engineer # 02 8.00 0.84 w. Muhammad Sajid, CAD Operator / Draftsman 12.00 7.15

6. Anjum Aasim Shahid Rahman a. Water & Wastewater Utility Management Expert 0.53 0.53 b. Utility Finance & Accounting Expert 0.03 0.03 c. Accountancy Manager /TL 7.00 5.93 d. Legal Expert 0.03 0.03 e. Accounting Expert 1 14.66 14.66 f. Accounting Expert 2 8.50 7.35

Subtotal C 894.33 719.32 Total A+B+C 1,276.24 1,052.36

CAD = computer-aided design, GIS = geographic information system, HRM = human resource management, LAR = land acquisition and resettlement, SWM = solid waste management, TL = team leader, WSS = water supply and sanitation Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi

Appendix 9 63

PROJECT IMPACT ON HEALTH AND CUSTOMERS’ SATISFACTION 1. One of the performance indicators used to measure the program impact was a reduction to less than 10% in the incidence of diarrhea cases during the prior 30 days in children under 5 years of age. 1 The Pakistan Social and Living Standard Measurement Survey for 2014-15 indicates that the prevalence of diarrhea in children under 5 averages 8.9% in urban Sindh (excluding Karachi and Hyderabad), which is in line with what was envisaged during appraisal (Table A10.1).2

Table A9.1: Children under 5 suffering from Diarrhea in Past 30 days in FY2015

No. District % 1 Jaccobabad 4.0 2 Kashmore 3.0 3 Shikarpur 5.0 4 Larkana 9.0 5 Shahdatkot 7.0 6 Sukkur 6.0 7 Ghotki 11.0 8 Khairpur 4.0 9 Nowshero Feroze 24.0

10 Shaheed Benazirabad 6.0 11 Dadu 8.0 12 Jamshoro 12.0 13 Tando Allahy Yar 8.0 14 Tando Muhammad Khan 14.0 15 Matiari 10.0 16 Badin 6.0 17 Thatta 5.0 18 Sajawal 11.0 19 Sanghar 20.0 20 Mirpur Khas 3.0 21 Umer Kot 11.0 22 Tharparker 9.0

Average Urban Sindh (Less Karachi and Hyderabad) 8.9 Source: Government of Pakistan. Statistics Division, Pakistan Bureau of Statistics. 2016. Pakistan Social and Living Standards Measurement Survey 2014-15. Islamabad. http://www.pbs.gov.pk/sites/default/files//pslm/publications/PSLM_2014-15_National-Provincial-District_report.pdf

2. In general, there is a direct relationship between the level of investment in various services by the program and the improvement in the public’s health and satisfaction with services received. This is confirmed by district health information system (DHIS) data, and customer satisfaction surveys conducted by the Institute of Business Administration in 2012, and the project support unit in 2016. A. Water Supply 3. The incidence of diarrhea in children less than 5 years of age has declined from that in 2012 in the cities where substantial investments were made for water supply subprojects. With

1 Appendix 1 in ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed

Multitranche Financing Facility and Technical Assistance Grant to the Islamic Republic of Pakistan for Sindh Cities Improvement Investment Program. Manila.

2 Government of Pakistan. Statistics Division, Pakistan Bureau of Statistics. 2016. Pakistan Social and Living Standards Measurement Survey 2014-15. Islamabad. http://www.pbs.gov.pk/sites/default/files//pslm/publications/PSLM_2014-15_National-Provincial-District_report.pdf

64 Appendix 9

the exception of Khairpur and Larkana, the reduction in diarrhea cases is directly proportional to the level of investment on water supply subprojects. In Shikarpur—where no substantial investment was made on water supply—cases of diarrhea increased by 9.03%, from 55,607 in 2012 to 60,626 in 2015 (Table 9.2).

Table A9.2: Impact of Water Supply Subprojects on Diarrhea in Children Under 5

Name of City Households

(2016)

Water Supply

Expenses ($ million)

Investment per

household ($)

Diarrhea reported in children < 5 years of age No. of cases

2012 % of Pop. 2015 % of Pop. Change in

No. of cases

New Sukkur 7.450 Khairpur 20,961 4.134 197.227 4,360 3.42% 3,484 2.73% –20.09%

Sukkur City 68,841 2.996 43.521 1,249 0.30% 917 0.22% –26.58%

Rohri 42,466 1.876 44.176 4,044 1.57% 3,000 1.16% –25.82%

Shikarpur 22,200 0.017 0.766 55,607 35.78% 60,626 39.01% +9.03%

Larkana 55,442 0.017 0.307

Total 209,909 16.490 Pop. = population Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

4. There is a direct relationship between the level of investment per household (IPH) in water supply works and customers’ satisfaction with service levels (Table A9.3). With the exception of the Sukkur/New Sukkur, customer satisfaction increased as IPH in water supply subprojects increased. Khairpur had the highest IPH ($197.2/household) and the largest decrease in unsatisfied customers, from 27.4% in 2012 to 20% in 2016 (representing a 27% decrease in unsatisfied customers). Rohri’s IPH of $44.176 was the second-highest recorded, as was its decrease in unsatisfied customers (17%, from 51.5% in 2012 to 43% in 2016). The incidence of diarrhea in children under 5 years age as a percentage of the population is exceptionally high in Sikarpur, where people use own-source water (Table A9.2), as compared to other cities where public water sources are used. 5. There was a substantial increase in dissatisfied customers in Sukkur/New Sukkur, despite a high level of investment in these towns ($10.46 million), because the major water supply treatment plant works in Sukkur (international competitive bidding contracts 03 and 04) could not be completed prior to closure of tranche 1, thus the benefits of these investments were not apparent during 2016 (Table A9.3).

Table A9.3: Customer Satisfaction with the Water Supply Investment

City Households (No, 2016)

Water Supply Investment ($ million)

Investment per Household

($)

Customers Dissatisfied with WSS

Change in Dissatisfaction

2012 2016

Khairpur 20,961 4.134 197.227 27.40% 20.00% –27%

Rohri 42,466 1.876 44.176 51.50% 43.00% –17%

Sukkur City 68,841 2.996 43.521 14.70% 96.00% +553%

New Sukkur 7.450 51.60% 75.00% +45%

Shikarpur 22,200 0.017 0.766

Larkana 55,442 0.017 0.307

Total 209,909 16.490 WSS = water supply services Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

Appendix 9 65

B. Solid Waste Management 6. SWM services display the same trend: as IPH increases the percentage of unsatisfied customers declines. Interestingly, Sukkur and Rohri (adjacent to Sukkur) are exceptions. 7. The highest IPH in SWM ($29.627) took place in Khairpur, where unsatisfied customers declined by 83%, from 51.7% in 2012 to just 9% in 2016. Shikarpur had the second-highest IPH in SWM, and Larkana third-highest IPH; unsatisfied customers declined by 51% in Shikarpur, and by 35% in Larkana (Table A9.4).

Table A9.4: Customer Satisfaction and Investment in Solid Waste Management

City Households

(2016)

Investment in SWM

($ million) Investment per Household ($)

Customers Dissatisfied with SWM Services

2012 2016 Change in

Dissatisfaction

Khairpur 20,961 0.621 29.627 51.70% 9.00% –83%

Shikarpur 22,200 0.593 26.712 66.70% 33.00% –51%

Larkana 55,442 1.169 21.085 50.40% 33.00% –35%

Sukkur City 68,841 0.879 12.769 29.90% 35.00% +17%

Rohri 42,466 0.191 4.498 20.30% 36.00% +77%

New Sukkur 0.305 40.60% 59.00% +45%

Total 209,909 3.453 SWM = solid waste management Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

C. Waste Water Treatment 8. Customer dissatisfaction with wastewater treatment (WWT) services declined in cities where major investments to improve wastewater disposal capacity were made (i.e., Larkana, Khairpur and Shikarpur). Shikarpur had the second-highest IPH ($2.793) but the largest decline in unsatisfied customers (47%), with just 37% of customers unsatisfied 2016, compared to 70% in 2012. Khairpur had the highest IPH ($102.4) and a 39% reduction in unsatisfied customers, from 50.8% in 2012 to 31.0% in 2016. The number of dissatisfied customers increased in Sukkur (+325%), Rohri (+77%) and New Sukkur (+271%) primarily because almost no investment was made to improve wastewater disposal in these cities (Table A9.5). The exceptional increase in customers who are unsatisfied in Sukkur City may be because of the increase in the water supply, which was not accompanied by investment in disposal, possibly compounding wastewater disposal problems.

Table A9.5: Customer Satisfaction and Investment in Wastewater Treatment City Households

(2016) Investment

in WWT ($ million)

Investment per Household

($/HH)

Customers Dissatisfied with WWT

2012 2016 Change in Dissatisfaction

Khairpur 20,961 2.147 102.430 50.80% 31.00% –39%

Larkana 55,442 2.937 52.974 61.70% 41.00% –34%

Sukkur City 68,841 0.242 3.515 11.30% 48.00% +325%

Shikarpur 22,200 0.062 2.793 70.00% 37.00% –47%

Rohri 42,466 0.062 1.460 20.30% 36.00% +77%

New Sukkur 16.70% 62.00% +271%

Total 209,909 5.450 WWT = wastewater treatment Source: Government of Sindh, Planning and Development Department. 2016. Project Completion Report. Karachi.

66 Appendix 9

D. Conclusion 10. The project had a positive impact on the health of the beneficiaries. Data and analysis show that customer satisfaction was directly related to the level of investment, as satisfaction levels in 2016 increased compared to 2012 for all three services where investments were made and works related to the investments completed.

Appendix 10 67

REDUNDANT COVENANTS a

Covenant

Reference in Project Agreement

In the carrying out of the Project and operation of the Project facilities, each of Sindh and NSUSC shall perform all obligations set forth in Schedule 5 to the Loan Agreement and the Schedule to the Project Agreement to the extent that they are applicable to each of them.

Section 2.01 (b)


Section 2.05 (a)

Each of Sindh and NSUSC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement, or the accomplishment of the purposes of the Loan.

Section 2.07 (b)

ADB and each of Sindh and NSUSC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, Sindh or NSUSC as applicable and the Loan.

Section 2.07 (c)

Each of Sindh and NSUSC shall, promptly as required and to the extent such actions are within its control, take all action within its powers to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business. proceeds are used exclusively in the carrying out of the Project.

Section 2.11 (a)

Each of Sindh and NSUSC shall at all times conduct its business in accordance with sound administrative, financial, environmental and urban development practices, and under the supervision of competent and experienced management and personnel.

Section 2.11 (b)

(c) Each of Sindh and NSUSC shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, environmental, urban development, and maintenance and operational practices.

Section 2.11 (c)

Except as ADB may otherwise agree, each of Sindh and NSUSC and its departments shall not sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

Section 2.12

Sindh shall allow NSUSC to operate as a limited liability company in accordance with (a) the prevailing laws and regulations of the Borrower, including the Companies Ordinance; and (b) its constitutional documents.

Para 6, Schedule to Project Agreement (PA)

Sindh shall provide the necessary resources needed to ensure that (a) NSUSC shall be an effective and sustainable vehicle for the delivery of water supply, wastewater and solid waste management services; and (b) the Project facilities shall continue to be in good condition during and after the completion of the Project and the Investment Program.


NSUSC shall ensure that its board of directors shall have no more than seventeen (17) directors and that its composition shall include (a) the six (6) taluka nazims of the participating TMAs; (b) two (2) district coordination officers whose coverage areas include the participating talukas or other Sindh government officials; (c) the

Para 12,

68 Appendix 10

Covenant

Reference in Project Agreement

Program director, (d) a representative from the Finance Department; (e) the managing director of the NSUSC; and (f) at least six (6) independent directors, selected based upon skills-based criteria and in accordance with a process acceptable to ADB. NSUSC shall ensure that its independent directors shall be drawn from civil society, including representatives from the business community and that one-third of the independent directors shall be women. ADB = Asian Development Bank, GAP = gender action plan, NSUSC = North Sindh Urban Services Corporation, PA

= project agreement, TMA = tehsil municipal administration a The listed covenants became redundant as a result of closure of NSUSC’s operations following the decision by the

Supreme Court of Pakistan (in March 2017) to disband the NSUSC. Source: Asian Development Bank

Appendix 11 69

TIME BOUND ACTION PLAN FOR COMPLIANCE OF COVENANTS Covenant



Agreed Action and Responsible Entity

Deadline

A. Loan Agreement

The Borrower shall, and shall cause Sindh to, ensure timely implementation of the agreed reforms set forth in the action plan for reform and investment, which is part of the urban sector roadmap;

Schedule 5: Para 2

Partly complied with For details see Appendix 2

The borrower and the Sindh will take necessary steps to comply with all critical pending actions as indicated in Appendix 2

31 December 2017


Section 2.05 (a) Not complied with. No insurance of the project facilities were obtained.

The Government of Sindh shall make adequate arrangement for insurance of the project facilities.

31 December 2017.

Taluka Municipal Administration Sindh shall ensure that the participating TMAs shall be adequately staffed.

Para 17, Schedule to Project Agreement

Partly complied. TMAs remained understaffed.

The Government of Sindh shall ensure that the participating TMAs have appointed necessary staff to operate the newly constructed and/or rehabilitated project facilities.

31 December 2017

Sindh shall ensure that (a) the necessary budgetary resources to fund the TMA staff deputed to NSUSC and other budgetary requirements pursuant to the Service and Asset Management Agreement shall be fulfilled; and (b) these funds shall be channeled into the escrow account referred to in paragraph 15 of this

Para 2, Schedule to Project Agreement

Partly complied with. NSUSC encountered substantial delays in receiving salary of TMA deputed staff. The requirement of escrow account was abolished through an amendment in the project agreement on 8 May 2012.

The Government of Sindh shall provide adequate budgetary provisions to the participating TMAs to carry out operations of the project facilities.

31 December 2017

ADB = Asian Development Bank, GAP = gender action plan, NSUSC = North Sindh Urban Services Corporation, TMA = tehsil municipal administration Source: Asian Development Bank