international development assoiation public disclosure ...documents.worldbank.org/curated/en/... ·...

FOR OFFICIAL USE ONLY Report No: PAD2618

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 50.6 MILLION

US$70 MILLION EQUIVALENT

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

KHYBER PAKHTUNKHWA INTEGRATED TOURISM DEVELOPMENT PROJECT

June 6, 2019

Finance, Competitiveness and Innovation Global Practice Transport Global Practice Agriculture Global Practice South Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Exchange Rate Effective April 30, 2019

Currency Unit = Pakistani Rupee (PKR)

PKR141.65 = US$1

US$1 = SDR 0.72

FISCAL YEAR

July 1 – June 30

Regional Vice President: Hartwig Schafer

Country Director: Patchamuthu Illangovan

Senior Global Practice Director: Zoubida Kherous Allaoua, Guangzhe Chen, Juergen Voegele

Practice Manager: Nabila Assaf, Oliver Le Ber, Loraine Ronchi

Task Team Leader(s): Kiran Afzal, Mohammad Ajmal Askerzoy, Maha Ahmed

ABBREVIATIONS AND ACRONYMS

AF Additional Financing IFC International Finance Corporation

AGP Auditor General of Pakistan IMF International Monetary Fund

BDS Business Development Services IP Indigenous People

BoK Bank of Khyber IPPF Indigenous Peoples Planning Framework

BoQ Bill of Quantities ITZ(s) Integrated Tourism Zone(s)

C&W Communication and Works

Department M&E Monitoring and Evaluation

CERC Contingent Emergency Response

Component MDTF

Multi-Donor Trust Fund for Khyber

Pakhtunkhwa, FATA and Balochistan

CPS Country Partnership Strategy MFD Maximizing Finance for Development

CSO Civil Society Organization MSME(s) Micro, Small, and Medium Enterprise(s)

DA Designated Account MTR Midterm Review

DIMP(s) Destination Investment and

Management Plan(s) NPV Net Present Value

DMO Destination Management

Organization NTCB National Tourism Coordination Board

DoT Department of Culture, Sports,

Tourism and Youth Affairs P2P Peer-to-Peer

DT Digital Technology PAP(s) Project Affected Person(s)

DTS Department of Tourist Services PCR(s) Physical Cultural Resource(s)

EIRR Economic Internal Rate of Return PMU(s) Project Management Unit(s)

ERKF Economic Revitalization of Khyber

Pakhtunkhwa and FATA POM Project Operations Manual

ESMF Environmental and Social

Management Framework PPP(s) Public-Private Partnership(s)

ESMP Environmental and Social

Management Plan PSC Project Steering Committee

F&B Food and Beverage RAP Resettlement Action Plan

FATA Federally Administered Tribal

Areas RPF Resettlement Policy Framework

FLFP Female Labor Force Participation SME(s) Small and Medium Enterprise(s)

FM Financial Management SSU Shared Services Unit

FMIS Financial Management Information

System STEP

Systematic Tracking of Exchanges in

Procurement

GAAP Gender Analysis and Action Plan SWM Solid Waste Management

GBV Gender Based Violence T&T Travel and Tourism

GDA Galliyat Development Authority TIFC Tourist Information and Facilitation

Center

GDP Gross Domestic Product TMIS Tourism Management Information

System

GoKP Government of Khyber

Pakhtunkhwa ToR Terms of Reference

GRM Grievance Redress Mechanism TPMA Third Party Monitoring Agent

ICT Information and Communication

Technology UN United Nations

IDA International Development

Association UNESCO

United Nations Education Scientific and

Cultural Organization

IE Implementing Entity WTTC World Travel and Tourism Council

The World Bank Khyber Pakhtunkhwa Integrated Tourism Development Project (P163562)

TABLE OF CONTENTS

DATASHEET ................................................................................. .............................................2

I. STRATEGIC CONTEXT ...................................................................................................... 8

A. Country Context ............................................................................................................................ 8

B. Sectoral and Institutional Context ................................................................................................ 9

C. Relevance to Higher-Level Objectives ......................................................................................... 11

II. PROJECT DESCRIPTION .................................................................................................. 12

A. Project Development Objective .................................................................................................. 12

B. Project Components ................................................................................................................... 12

C. Project Beneficiaries ................................................................................................................... 14

D. Results Chain ............................................................................................................................... 14

E. Rationale for World Bank Involvement and Role of Partners ..................................................... 15

F. Lessons Learned and Reflected in the Project Design ................................................................ 16

III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 17

A. Institutional and Implementation Arrangements ....................................................................... 17

B. Results Monitoring and Evaluation Arrangements ..................................................................... 17

C. Sustainability ............................................................................................................................... 18

IV. PROJECT APPRAISAL SUMMARY ................................................................................... 19

A. Technical, Economic and Financial Analysis................................................................................ 19

B. Fiduciary ...................................................................................................................................... 20

C. Safeguards ................................................................................................................................... 21

D. Gender ........................................................................................................................................ 24

V. KEY RISKS ..................................................................................................................... 26

VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 27

ANNEX I: Implementation Arrangements and Support Plan ........................................... 38

ANNEX II. Project Components Description ................................................................... 39

ANNEX III. Economic Analysis ........................................................................................ 44

ANNEX IV. Financial Management and Procurement Arrangements .............................. 48

ANNEX V. Gender Analysis and Action Plan ................................................................... 53


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DATASHEET

BASIC INFORMATION BASIC_INFO_TABLE

Country(ies) Project Name

Pakistan Khyber Pakhtunkhwa Integrated Tourism Development Project

Project ID Financing Instrument Environmental Assessment Category

P163562 Investment Project Financing

B-Partial Assessment

Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC)

[ ] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date

27-Jun-2019 30-Jun-2025

Bank/IFC Collaboration

No

Proposed Development Objective(s)

The project development objective is to improve tourism-enabling infrastructure, enhance tourism assets, and strengthen destination management for sustainable tourism development in Khyber Pakhtunkhwa.

Components

Component Name Cost (US$, millions)


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Sector Enablement and Tourism Entrpreneurship 8.00

Infrastructure Planning and Development 55.00

Project Management and Capacity Building 7.00

Contingent Emergency Response Component 0.00

Organizations

Borrower: Economic Affairs Division

Implementing Agency: Communication and Works Department Department of Tourism, Culture, Sports, Archeology & Youth Affairs

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFin1

Total Project Cost 77.00

Total Financing 77.00

of which IBRD/IDA 70.00

Financing Gap 0.00

DETAILS-NewFinEnh1

World Bank Group Financing

International Development Association (IDA) 70.00

IDA Credit 70.00

Non-World Bank Group Financing

Counterpart Funding 7.00

Borrower/Recipient 7.00

IDA Resources (in US$, Millions)

Credit Amount Grant Amount Guarantee Amount Total Amount

National PBA 70.00 0.00 0.00 70.00


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Total 70.00 0.00 0.00 70.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025

Annual 0.00 2.77 4.84 7.99 13.27 19.49 21.64

Cumulative 0.00 2.77 7.61 15.59 28.86 48.36 70.00

INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas

Finance, Competitiveness and Innovation Agriculture, Transport

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks

Gender Tag

Does the project plan to undertake any of the following?

a. Analysis to identify Project-relevant gaps between males and females, especially in light of country gaps identified through SCD and CPF

Yes

b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or men's empowerment

Yes

c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance ⚫ Substantial

2. Macroeconomic ⚫ Substantial

3. Sector Strategies and Policies ⚫ Moderate

4. Technical Design of Project or Program ⚫ Moderate


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5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial

6. Fiduciary ⚫ Substantial

7. Environment and Social ⚫ Moderate

8. Stakeholders ⚫ Moderate

9. Other

10. Overall ⚫ Substantial

COMPLIANCE

Policy Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [✓] No

Does the project require any waivers of Bank policies?

[ ] Yes [✓] No

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 ✔

Performance Standards for Private Sector Activities OP/BP 4.03 ✔

Natural Habitats OP/BP 4.04 ✔

Forests OP/BP 4.36 ✔

Pest Management OP 4.09 ✔

Physical Cultural Resources OP/BP 4.11 ✔

Indigenous Peoples OP/BP 4.10 ✔

Involuntary Resettlement OP/BP 4.12 ✔

Safety of Dams OP/BP 4.37 ✔

Projects on International Waterways OP/BP 7.50 ✔

Projects in Disputed Areas OP/BP 7.60 ✔

Legal Covenants


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Sections and Description The Project Implementing Entity shall, no later than three months after the Effective Date, prepare and adopt a Project Operations Manual, in form and substance satisfactory to the Association and carry out the Project in accordance with the POM.

Sections and Description The Project Implementing Entity shall ensure that DoT and C&W will maintain their respective Project Management Units with composition and terms of reference satisfactory to the Association, to carry out the day-to-day implementation of the activities under their respective parts of the Project (including compliance with the Safeguards Instruments) throughout project implementation.

Sections and Description The Project Implementing Entity shall, no later than one month after the Effective Date, establish and thereafter maintain throughout the period of implementation of the Project, a Project Steering Committee, with composition and terms of reference satisfactory to the Association.

Sections and Description The Project Implementing Entity shall, no later than one month after the Effective Date, appoint and thereafter maintain through the period of implementation of the Project, (i) a full-time Project director with full administrative and financial powers, each for PMU-DoT and for PMU-C&W, for the sanctioning of expenditures and approval of payments, and (ii) a finance manager, each for PMU-DoT and for PMU-C&W, all with terms of reference satisfactory to the Association.

Sections and Description The Recipient shall ensure, and cause the Project Implementing Entity to ensure that the Project is carried out in accordance with the Safeguards Instruments (ESMF, Sub-project ESMP, Sub-project ESIA, IPPF, Sub-Project IPP, RPF, Sub-project RAP, Physical CulturalResource Management Framework, Physical Cultural Resource Management Plan).

Sections and Description The Recipient shall ensure, and cause the Project Implementing Entity to ensure, that all civil works under the Project include the obligation of contractors, subcontractors and supervising entities to comply with the relevant aspects of Safeguard Instruments.

Sections and Description The Project Implementing Entity shall maintain, throughout Project implementation, and publicize the availability of a grievance mechanism, in form and substance satisfactory to the Association.

Conditions

Type Description

Disbursement Disbursement under Component 4: The Recipient has determined that an Eligible

Crisis/Emergency has occurred and has requested assistance under the Contingent


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Emergency Response Component (CERC); the World Bank has accepted the request and

notified the Recipient. The Recipient's Coordinating Authority has adequate staff and

resources. The Recipient has adopted a Contingent Emergency Response Operations Manual

acceptable to the World Bank, and has prepared and disclosed all safeguards instruments.


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I. STRATEGIC CONTEXT

A. Country Context

1. Pakistan, the sixth most populous country in the world is at a crossroad. The economy accelerated with Gross Domestic Product (GDP) growth of 5.8 percent in FY18 and slowed down to 3.5 percent in FY19 as fiscal and external imbalances emerged1. Poverty declined from 64.3 percent in 2001 to 24.3 percent in 20152, but inequality persists. The country ranks low on the 2018 Human Capital Index, at 134 out of 157 countries. Gender disparities continue, and female labor force participation (FLFP) was only 20.1 percent in 20183. Natural disasters and unreliable water and power supply constrain progress. After the onset of another boom and bust cycle, a new International Monetary Fund (IMF) program was negotiated in May 2019. Growth will pick up as structural reforms take effect and macroeconomic imbalances are addressed. Over the medium to long term, Pakistan needs to invest more and better in human capital, raise more revenue, simplify ease of doing business, expand regional trade and exports, and manage its natural endowments sustainably, as articulated in Pakistan@100:Shaping the Future1.

2. Khyber Pakhtunkhwa – Pakistan’s third-largest province by population—has over the past eight years made progress in transitioning out of vulnerability and unrest. During this time, there has been substantial poverty reduction. However, parts of the province remain vulnerable to crises and human development outcomes remain low. The province accounts for an estimated 10.5 percent of the country’s GDP. Almost 85 percent of the province’s population lives in rural areas, where access to public services and income generation opportunities are lower than in cities. The vast youth bulge is an opportunity to turn into a demographic dividend for the province.

3. The former Federally Administered Tribal Areas (FATA) are now merged with the province following the constitutional amendment in 20184. Over the ten-year transition period when this happens, Khyber Pakhtunkhwa will continue to receive Federal Government support. At the same time, the province will need to strengthen its administrative machinery to deliver services to people in a larger area than it did previously. However, without external financing support, the country’s fiscal challenges are expected to constrain the pace of development spending in the province to fulfill the vision of the merger.

4. The World Bank has been engaging in Khyber Pakhtunkhwa and merged areas through a Multi-Donor Trust Fund (MDTF) since 2010. As noted in the Performance and Learning Review of the Pakistan Country Partnership Strategy (CPS) (2015-2020) 5, the World Bank is now scaling up interventions through International Development Association (IDA) to finance interventions at scale drawing on the lessons of the MDTF experiences. The planned IDA financed program focuses on revenue mobilization, water and

1 World Bank (2019). “Pakistan at 100: Shaping the Future”. World Bank. https://openknowledge.worldbank.org/handle/10986/31335” 2 Redaelli, S. (2018). “From Poverty to Equity – Pakistan at 100.” World Bank. 3 World Bank Gender Statistics 2017. 4 The seven agencies of FATA were merged with the Khyber Pakhtunkhwa province following the 31st amendment to the Constitution in May 2018. 5 Country Partnership Strategy, 2015-2020 (Report No. 84645-PK), discussed by the Executive Directors on May 1, 2014, and extended by the Performance and Learning Review (Report No. 113574) distributed to the Executive Directors on an absence-of-objection basis with a closing date of June 15, 2017.


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agriculture, hydropower, tourism, digital economy and urban management. Collectively, these would improve overall development outcomes in the province as it returns to normalcy.

5. Khyber Pakhtunkhwa has vast tourism potential that is largely untapped. It is well endowed with natural resources, shaped by the Hindukush and Himalayan mountains that offer stunning alpine landscapes, iconic wildlife, lush forests, and numerous glacial lakes. It boasts sites of global importance and historical and religious significance for Buddhists, Muslims and Christians. These sites cover 2,000 years of history—including 6,000 sites of Gandhara heritage, some of which have been excavated and restored by the Directorate of Archaeology and Museums, and are now accessible to visitors. In January 2019, Khyber Pakhtunkhwa gave the status of National Heritage to the ancient Hindu site Punj Tirath. Additionally, in November 2018, United Nations Education Scientific and Cultural Organization (UNESCO) listed the Kalash community’s meteorological and astronomical practice, Suri Jagek, as an Intangible Cultural Heritage. 6 These activities build on Khyber Pakhtunkhwa’s Tourism Policy (2015), Antiquities Act (2016), and Cultural Policy (2017).

6. The province used to welcome 50,000 international visitors annually until the onset of unrest. Since 2014, domestic tourists have flocked to the province following the emergence of peace and security. This has overwhelmed the limited infrastructure and accommodation facilities, while risking natural and cultural heritage assets. The scope for organized and sustainable tourism is huge and the Government has prioritized tourism as a key sector of the province’s growth strategy for the next decade. Increasingly, tourists are using digital platforms to explore and plan their visits.

B. Sectoral and Institutional Context 7. Pakistan has identified sustainable tourism as a key driver of economic growth and consistent with the Sustainable Development Goals. The domestic tourism has been growing across Pakistan since 2015, however the travel and tourism (T&T) sector itself is in its infancy. The direct contribution of T&T to Pakistan’s GDP was US$8.8 billion (2.9% of GDP) in 2017. During the same year, T&T supported nearly four million direct and indirect jobs—6.5 percent of the country’s total employment7. The country ranks 124th out of 136 economies on the 2017 competitiveness index of the World Travel and Tourism Council (WTTC). On this index, Pakistan trails behind Sri Lanka (ranked 64th) and Turkey (ranked 44th), which similarly offer a mixture of natural and cultural attractions and have rapidly growing and youthful populations. These two countries made their early gains through tourist-friendly policies, including an e-visa regime for nationals of several countries.8 During 2017, international tourist arrivals in Pakistan were less than a million when compared to Sri Lanka’s 1.8 million and Turkey’s 39 million. 8. It is estimated that the total number of domestic tourists in Pakistan during 2016 nearly doubled in seven years,9 up from 46.07 million in 2009. 10 While the exact number of annual visitors to Khyber

6 Panj Tirath means “five pools of water.” It is believed that Pandu, mythical king in Mahabharata, belonged to this area. Hindus used these pools for bathing during their religious month of Kartik. The Kalash reside in 15 villages in three valleys of Chitral. Suri Jagek (observing the sun) is a traditional meteorological/astronomical practice of Kalash based on the observation of the sun, moon, and stars. 7 WTTC (2018). “Travel and Tourism Economic Impact – 2018, Pakistan.” 8 UNWTO and WTTC (2018). “Travel & Tourism Competitiveness Index 2017 edition – Pakistan, Sri Lanka, Turkey.” 9 PTDC (2017). “80 million domestic tourists annually travel in Pakistan.” 10 PILDAT 2015 statistics.


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Pakhtunkhwa is not known, a 2018 survey shows that 4.45 million tourists visited the popular sites of Galliyat, Naran, Kalam, and Kumrat in 201811 alone. It was also reported that more than 2.5 million tourists (mostly domestic) visited these destinations during the four days of Eid-ul-Fitr in 2017, showing high level of seasonal variation. The survey also reported that the economic contribution exceeded half a billion dollars, created nearly 10,000 local jobs and a domestic tourist spent Pakistani Rupees (PKR) 10,000 daily.

9. The country is expected to see an expansion of domestic and international visitors in the coming years. However, strong growth in this sector demands effective management to ensure that the potential socioeconomic benefits are realized, and that the destinations are ready for visitors while accounting for the needs of all stakeholders. Without adequate safeguards and strategic management of the destinations, tourism could lead to environmental degradation, social disruption and damage to sites of cultural and historical significance. 10. To realize tourism’s potential in a sustainable manner while mitigating the risk of “over-tourism,” Pakistan needs to address following challenges to the competitiveness of T&T sector: (a) The coordination between the Federal and provincial governments needs strengthening to realize

the full potential of tourism in Pakistan. The Federal institutions own several tourism assets including accommodation facilities and heritage properties across the four provinces. This issue also impacts the licensing for enterprises such as travel and tour operators. In addition, obtaining a visa for Pakistan is a cumbersome process owing to onerous procedures.

(b) There are constraints to doing business. The T&T micro, small, and medium enterprises (MSMEs) have to interact with multiple agencies even at the provincial level for business registration, including the Department of Tourist Services (DTS), the Wildlife and Forest Department, and the Labor and Industries Department.

(c) The entrepreneurship system is under developed. There is a lack of business development services (BDS) providers for MSMEs, dearth of skilled workers and limited career path options in Pakistan’s T&T, and food and beverage (F&B) sectors. The hospitality sector trains employees—often at great expense due to lack of training facilities and because of high staff turnover.

(d) The road and air connectivity to tourist attractions in the north needs to be modernized for all-weather access. The air connections are infrequent and unreliable due to limited number of air carriers. The road travel to northern locations from Islamabad can take up to 18 hours. The local authorities have inadequate road maintenance equipment thus limiting the season for visitors and restricting private sector growth. There are a few roadside facilities such as hotels and restaurants, fueling stations, and rest areas, with no dedicated amenities for women or the disabled.

(e) Specific issues of relevance to Khyber Pakhtunkhwa’s T&T sector include: Road signage and sharing of information with tourists about weather and road conditions need to be improved. The enforcement of quality and hygiene standards in F&B outlets has to be ensured. Tourists require basic medical facilities at most remote destinations. The issues of pollution, and disruption for the local communities can be addressed through communications campaign on responsible tourism. The unregulated growth in the Peer to Peer (P2P) accommodation economy12 needs appropriate

11 The Tourism Sector Analysis (2018) covers four tourist destinations: Galliyat, Kalam, Kumrat, and Naran. The sample comprised 1,849 tourism MSMEs(hotels, restaurants, shops, and transporters) – 2,744 tourists, and 2,728 households in these four destinations. 12 People providing accommodation directly to consumers using digital platforms.


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management to address potential issues around destination capacity, reputation, quality and safety of the residents and visitors.

C. Relevance to Higher-Level Objectives

11. The proposed project is aligned with the World Bank Group’s Pakistan CPS for (2015-20)13 and the recent “Pakistan@100:Shaping the Future” report that highlights the underlying factors needed for Pakistan to become an upper-middle income country by 2047. The development objective and components of the Khyber Pakhtunkhwa Integrated Tourism Development (KITE) Project are aligned with the Results Areas 2 (Private Sector Development) and Outcome 2.1 (Improved Business Environment for the Private Sector).

12. KITE is aligned with the priorities of the Federal and provincial Governments as they see tourism among the new drivers of growth and job creation. Accordingly, the Government has set up the National Tourism Coordination Board (NTCB) headed by a Federal Minister, recently introduced a simplified visa regime and opened the Kartarpur Corridor for Sikh pilgrims to travel to Pakistan. The Khyber Pakhtunkhwa Sustainable Development Strategy (2019) provides a strategic direction to the development of province’s governance, social and economic sectors14. Tourism development is at the centerpiece of economic revitalization and job creation and articulated in the development roadmap. The province’s tourism sector is overseen by a Senior Minister who is advised by a body of T&T professionals drawn from public and private sectors. The focus of the Khyber Pakhtunkhwa Tourism Policy (2015) includes infrastructure development, quality assurance, institutional and regulatory reforms, image building, talent development and resource mobilization. A challenge fund for T&T start-up entrepreneurs has also been established by the Government of Khyber Pakhtunkhwa (GoKP). 13. The financing for KITE by the World Bank is expected to mobilize investments and technical assistance to support Khyber Pakhtunkhwa in realizing its vision of a progressive tourism sector. KITE will support the planning and implementation of select parts of T&T value chain (see Table 1 in Annex II) relevant to the province. Specifically, it will: (a) assist to overcome infrastructure bottlenecks at popular existing sites; (b) attract visitors by developing quality products and reducing overcrowding to encourage higher tourist per capita spending; (c) equip the authorities with the skills and tools for visitor management, heritage protection and environmental preservation through implementation of the destination investment and management plans (DIMPs)15; and (d) possibly support operationalization of Khyber Pakhtunkhwa Tourism Act 2019 which will provide a framework for the Integrated Tourism Zones

13 Country Partnership Strategy, 2015-2020 (Report No. 84645-PK), discussed by the Executive Directors on May 1, 2014, and extended by the Performance and Learning Review (Report No. 113574) distributed to the Executive Directors on an absence-of-objection basis with a closing date of June 15, 2017. 14 GoKP (2019). Sustainable Development Strategy, A Medium-Term Development Framework for Khyber Pakhtunkhwa 2019-2023. May 8, 2019. 15 DIMPs provide guidance for visitor planning and destination management activities and identify opportunities for public and private sector investments. They can especially help the authorities manage high-usage sites by suggesting mitigating measures to safeguard the attractions. DIMPs will be carried out by the DoT in agreement with the relevant government stakeholders.


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(ITZs) 16, Provincial Tourism Authority (PTA) 17, tourist police and private sector entities in the tourism and hospitality sectors of Khyber Pakhtunkhwa.

II. PROJECT DESCRIPTION

A. Project Development Objective

14. PDO Statement: The project development objective is to improve tourism-enabling infrastructure, enhance tourism assets, and strengthen destination management for sustainable tourism development in Khyber Pakhtunkhwa. 15. PDO-Level Indicators: The key results that will measure the achievement of the PDO are as follows:

(a) Improved planning and management of tourist destinations (numbers). (b) New private investments mobilized (measured in US$ and PKR).

(c) Individuals benefitting from improved infrastructure and training (numbers). (d) Increased tourist spending in Khyber Pakhtunkhwa (measured in US$ and PKR).

B. Project Components

16. KITE’s has four components supporting the relevant parts of the T&T value chain. The allocations to these components could change during implementation, depending upon performance, sector demand and market dynamics. The activities are planned to be implemented initially in four locations—potentially Naran, Chitral, Galliyat and Kalam. These destinations are both established and new, and at different stages of development. These were therefore selected to ensure a balanced approach towards site development. The four main criteria for destination selection are (a) tourism attributes (connectivity, seasonality, drawing power and facilities); (b) current visitation (number of tourists); (c) development potential and alignment with the objectives of KITE and the Khyber Pakhtunkhwa Tourism Policy; and (d) sustainability and replication value of the site development. Khyber Pakhtunkhwa also aims to designate eleven remote and unexplored sites as ITZs. The concept of the ITZs and their exact location will be decided during the implementation by supporting the feasibility study for at least two ITZs. 17. The following section presents the broader objectives that KITE will seek to achieve (see Figure 1 in Section D for a Results Chain). The Annex II present a detailed account of the activities that KITE will finance under each component. If viable additional investments are identified, additional financing may be considered subject to World Bank approval. 18. Component 1: Sector Enablement and Tourism Entrepreneurship (IDA:US$8 million): This component aims to strengthen and formalize Khyber Pakhtunkhwa’s T&T sector through the implementation of the following activities:

16 ITZ means a geographically delimited area consisting of tourism sites that are closely linked, e.g. by history, culture, nature or otherwise, with multiple private companies, a zone management system and its own governance mechanism. For example, Sentosa Island in Singapore and Nusa Dua in Republic of Indonesia. 17 The Bill for the Provincial Tourism Authority was approved in October 2018, and it is yet to be notified.


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(a) Strengthening the policy, institutional and regulatory environment for tourism through, inter alia, (i) conducting an analysis of the existing policy and regulatory framework in the travel and tourism sector and proposing necessary reforms; and (ii) providing advisory support to provincial authorities with a tourism development mandate, including providing advice on best practices regarding policy and regulations for the proposed introduction of ITZs, and other tourism-related institutions.

(b) Establishing automated data collection and monitoring mechanisms on tourism performance indicators.

(c) Supporting tourism entrepreneurship through, inter alia, (i) creating awareness among MSME and service providers in the travel and tourism sector about existing financing schemes and convene finance providers to improve MSMEs’ access to financing; (ii) providing BDS services to MSMEs; and (iii) providing vocational skills training mainly targeted towards women and youth.

(d) Transforming the visitor experience using digital technology (DT) and supporting creative business models in collaboration with the private sector.

19. Component 2: Infrastructure Planning and Development (IDA:US$55 million): Through this component, the project will support the provincial government with the planning and development of the public infrastructure, while identifying the opportunities for mobilizing private sector investments. These activities could aim at both established and emerging destinations, possibly Naran, Kalam, Galliyat and Chitral. The activities could include the following: (a) Providing destination development solutions through, inter alia, (i) developing DIMPs for tourist

destinations to be selected in accordance with the selection criteria and procedures set out in the Project Operations Manual (POM); and (ii) carrying out tourist destination development activities (including in ITZs) selected or to be selected in accordance with the selection principles and procedures set out in the POM.

(b) Preserving and managing heritage sites across Khyber Pakhtunkhwa to be selected in accordance with the selection criteria and procedures set out in the POM.

(c) Improving access by tourists and visitors to tourist destinations through, inter alia, (i) rehabilitating and upgrading secondary and/or tertiary roads to be selected in accordance with the selection criteria and procedures set out in the POM; (ii) supporting road maintenance and accessibility, including the provision of relevant equipment; and (iii) providing support to establish telephone/internet connectivity in tourist destinations.

(d) Undertaking feasibility studies for at least two (2) proposed ITZs.

20. Component 3: Project Management and Capacity Building (IDA:US$7 million): This component will support the following activities: (a) Supporting project management and capacity building through, inter alia, (i) providing technical

and operational assistance to project management unit (PMU) of Department of Culture, Sports, Tourism and Youth Affairs (DoT), called PMU-DoT, and PMU of Communication and Works (C&W), called PMU-C&W, to support project implementation, including procurement, financial management, environmental and social safeguards, monitoring and evaluation (M&E) of the project; and (ii) supporting the implementation of the Gender Analysis and Action Plan (GAAP) and the related communication strategy.


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(b) Implementing environmental preservation and waste management activities through, inter alia, (i) encouraging the reduction and recycling of waste through awareness campaigns for visitors; and (ii) procuring essential technology and equipment for sorting and using recycled plastics.

(c) Carrying out civil works for the appropriate functioning of PMU-DoT and PMU-C&W. 21. Component 4: Contingent Emergency Response Component (US$0). This component has been added to the project for providing immediate response to an Eligible Crisis or Emergency, as needed.

C. Project Beneficiaries 22. KITE will benefit public and private sector stakeholders and will support institutions on both the demand and the supply sides of the T&T industry. On the demand side, travelers and special segments such as women, youth, disabled, and the elderly will benefit from the tourism products, digital platforms, and modern facilities at tourist destinations. 23. The project will also implement activities to strengthen the capacity and governance of relevant public sector institutions, including (a) DoT and its allied functions, such as DTS and the Archaeology and Cultural departments; (b) Khyber Pakhtunkhwa’s C&W Department; and (c) the proposed PTA. KITE will also contribute towards heritage preservation through management, development and promotional activities focused on sites of historical and cultural significance.

24. KITE’s activities will create opportunities for local MSMEs. These include tourism operators, service providers, and digital platforms. It will benefit youth and women through training programs in the hospitality and F&B sectors. By launching activities such as plastics recycling and solid waste management (SWM) plans to address pollution in destinations over-crowded by tourists, the Project also aims to benefit local communities and environmental services.

25. The project has dedicated resources for communication and promotional activities that will use the DT to attract new segments of tourists, including more female travelers, once the desired facilities have been established in the project areas. The technology has particularly revolutionized the T&T industry by enhancing travelers’ experience and shaping the demand for new products and skills. KITE activities will be promoted through the Tourist Information and Facilitation Centers (TIFCs) and media broadcasts, to ensure strong community support and ownership. Media channels and DT tools, including virtual reality, will be used to enable virtual demonstrations of sites, create tourist awareness, and better manage such issues as traffic congestion and pollution caused by plastics, litter, and solid waste.

D. Results Chain

26. The relationship between sector challenges, KITE’s activities, outputs and outcomes, and the overall impact on the T&T sector is illustrated in Figure 1. The optimal achievement of KITE’s PDO requires the establishment of economic and spatial linkages at tourist destinations. The underutilized heritage and natural tourism assets need to be developed into attractive products that are managed effectively and, where possible, that generate revenue. KITE will use a destination planning and management approach involving skills enhancement, capacity building, and provision of high-quality tourism infrastructure to contribute to a rewarding experience for tourists, especially women and the disabled persons. This will


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ultimately lead to an enhanced revenue stream for the public and private sectors and realization of the Khyber Pakhtunkhwa Tourism Policy while attracting new private investments.

Figure 1. Results Chain

E. F. Rationale for World Bank Involvement and Role of Partners

27. The GoKP has been supported by the World Bank since 2010 in its economic revival. It has now requested the World Bank to provide global knowledge and investment financing to transform the tourism sector into an engine of job creation and revenue generation. The MDTF funded the AF of the Economic Revitalization of Khyber Pakhtunkhwa and FATA (ERKF) Project supported the analysis on the competitiveness of the tourism sector as a driver of economic growth for the province. This included support to DoT to upgrade TIFCs in Galliyat; procurement and installation of two automated traffic count systems in Galliyat; development of a Tourism Management Information System (TMIS) for DoT; and the purchase of two garbage compactors for the Galliyat Development Authority (GDA). The ERKF (AF) has been providing matching grants to SMEs across Khyber Pakhtunkhwa since March 2017, and it gives preference to applicants that are part of the T&T value chain. KITE builds on this initial engagement in the tourism sector and supports its mainstreaming in the economic growth strategy of the province. 28. The private sector is key to the success of KITE. While it is the Government that creates the enabling environment, KITE’s support to the private sector will create jobs and generate revenues through tourism product development. Specific activities include hospitality business, transport, F&B and other destination specific services. KITE would draw on the global expertise of the International Finance Corporation (IFC) in facilitating private sector investments using its Investment Generation Approach (IGA) for emerging tourism destinations18, consistent with the province’s strategy explained above. 29. KITE’s activities will be implemented in close partnership with the UNESCO, Aga Khan Foundation, academia, and registered civil society organizations (CSOs) that are active in project areas. It will also

18 IFC (2012). ‘Facilitating Tourism Investments in Maputo Elephant Resort – The Investment Generation Approach.’


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engage with the private sector for carrying out industry-specific activities, including ITZs, destination management and DT platforms.

F. Lessons Learned and Reflected in the Project Design

30. The World Bank has been engaged in the tourism sector in several countries and lessons relevant to Pakistan have been incorporated in project’s design. These include urban development, cultural heritage protection, hotel and resort development, connectivity infrastructure, and Public Private Partnerships (PPPs) in natural reserves, and are summarized below: a) Destination development should be strategic to integrate the essential elements of spatial planning,

demand analysis and public investment management. The identification and prioritization of sites and connectivity roads is important to ensure equitable allocation of resources across the country for tourism promotion. In addition, management of existing tourist destinations and growth of new sites should go hand in hand to ensure that the issues of over-tourism and environmental degradation are addressed, and new destinations are developed to create jobs for local communities and provide additional options to the visitors.

b) Collaboration between the country’s public and private sectors is critical to achieve sustainable growth in the tourism sector. Over the long term, tourism development requires collaboration across multiple sectors such as urban planning, transportation, skills, PPPs, and across diverse agencies at the local, state and national levels. The institutional arrangements of tourism sector projects should encourage and contribute towards collaboration among diverse public, private and civil society stakeholders. The projects should provide mechanisms for, and contribute towards trust-building between public and private sector stakeholders and involvement of communities through the local value chains.

c) The private sector and communities should be the key drivers of design and projects’ execution. A predictable regulatory environment will give impetus to a strong private sector led tourism industry as witnessed by many countries. The private sector brings innovation, knowledge, capital and technology at a faster pace than the public sector and sets the stage for a positive branding of a country’s tourism identity. The engagement of local communities is critical to the sustainability of investments in the tourism sector. Besides being the custodians of local resources and assets, they also gain economically by participating in tourism ventures.

d) Successful interventions in the tourism sector require support at the policy and institutional levels. This includes facilitating access (visa, road and air access), streamlined business registration procedures, access to finance and markets, accreditation framework for the hospitality sector, upgrading the quality of tourism training institutes and public private dialogue.

e) Effective project implementation requires strong provincial ownership. Experience from the World Bank’s portfolio in Pakistan including the Punjab Tourism for Economic Growth Project have informed the design of the project. These include continuous high-level client ownership, a project management and operating environment with clearly defined organizational responsibilities, dedicated project staff and a mechanism for timely decision making.


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III. IMPLEMENTATION ARRANGEMENTS

A. Institutional and Implementation Arrangements

31. The implementation of the project will be overseen by the Senior Minister for Tourism and supported by an overarching Project Steering Committee (PSC) and two Implementing Entities (IEs). The PSC will be chaired by the Additional Chief Secretary (ACS) of Khyber Pakhtunkhwa. It will include representatives from GoKP’s departments (Finance, C&W, DoT), the NTCB, Federal Planning Commission and private sector stakeholders, possibly including representation from the T&T industry, academia, Women Chambers of Commerce, Bank of Khyber (BoK), and the SME Development Authority. The PSC will provide guidance and facilitate coordination across different departments and local government(s). 32. Project IEs. The World Bank conducted the fiduciary and safeguards assessments of the IEs (DoT and C&W) to determine the implementation arrangements and the need for capacity interventions. For implementation, the two PMUs have been established in DoT and C&W and are functioning. PMUs are led by the project directors. The PMU-DoT is responsible for the completion of activities that fall under the mandate of the DoT: planning, marketing, heritage preservation, business registration and licensing, data collection, monitoring, and investor facilitation.

33. The PMU-C&W has been established at the head office of C&W in Peshawar. It will oversee the implementation of all engineering and infrastructure development activities identified under component 2—for instance, the rehabilitation/upgradation of roads, site development at tourist destinations, and construction of public facilities for tourists. The PMU-C&W will execute infrastructure-related activities (on behalf of and at the direction of the PMU-DoT) and will act as an implementation arm of the PMU-DoT in executing civil works. The PMUs will be strengthened through relevant staff whom the WB will train in relevant fields to ensure compliance with policies. The engineers will be employed on a regional basis to match the jurisdiction of associated works contracts at various project locations. A Liaison Officer has been hired by the PMU-DoT to ensure seamless coordination between the two PMUs. Both PMUs will follow conventional government channels between the departments to process official documents and will use mobile-based cross-platform messaging services to convey imperative messages. The structure of the PMUs is explained in Annex I. 34. KITE’s implementation will also benefit from the Shared Services Unit (SSU). The GoKP is establishing the SSU to provide cross-cutting implementation support to the World Bank financed projects. The SSU resources will be tapped to capacitate KITE’s PMUs with experts in procurement, financial management, M&E, gender, and environmental and social safeguards, when required.

B. Results Monitoring and Evaluation Arrangements

35. The M&E system will be based on the project’s results framework and monitoring arrangements described in Section VI. The PMUs will be responsible for collecting the necessary data from the field through implementation partners. The PMU-DoT will compile and aggregate the M&E data for KITE and, after validating the results achieved under each component, will periodically report KITE’s progress to the PSC. The TMIS will be used to monitor procurement milestones, project results, disbursements, and use of funds. The M&E expert of the SSU could provide overall support and guidance to the project teams and


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the IEs will hire a Third-Party Monitoring Agent (TPMA) for an independent monitoring of the project’s performance. The Component 1 also entails support for establishing a digital data collection and monitoring system to track the progress of T&T sector.

C. Sustainability

36. The impact of KITE is expected to continue well beyond its life. It has the right combination of destination planning and provision of infrastructure for access (last-mile roads), arrival (signage, parking area, rest areas) and visitor use (trails, TIFCs). The GoKP institutions supported through KITE will continue to operate even after the project has closed. The province’s political and economic leadership is committed and enjoys the support of the Federal Government’s National Tourism Task Force. The GoKP is already taking concrete measures to develop and promote the province’s tourism sector in close coordination with development partners, the private sector, and CSOs, while ensuring the protection of natural habitat and heritage sites. KITE will support these initiatives in addition to launching focused and demand-based interventions at the project sites. The engineering designs of the roads to be financed by the Project will include the measures for road safety and installation of cable box for ICT connectivity. The key factors for sustaining KITE’s benefits include: (a) a predictable regulatory regime that promotes the growth of a vibrant private sector: (b) a public sector that supports supply side interventions; (c) full implementation of DIMPs and their replication to other destinations; (d) ensuring the adequate participation of local communities including the skilling of their members to join the tourism workforce or become entrepreneurs; (e) making the hospitality sector safe for women as evidenced from other countries; and (f) the GoKP making available adequate budget in their annual development and recurrent plans.

(i) Climate Change

37. Climate change poses significant risks to Khyber Pakhtunkhwa, increasing the vulnerability of people, assets, and infrastructure to climate-induced disasters. Since 2010, extreme events such as cloudbursts over the catchment areas of the Indus and its tributaries in the mountainous north-west have frequently occurred during the annual monsoon season. The province is particularly vulnerable and faces an increased number of glacial lake outburst floods because of increased temperatures and intense precipitation. During the 2010 floods, its transport sector incurred losses of US$280 million, as 6,511 km of road infrastructure was damaged. KITE will increase the resilience of tourism assets. Therefore, the design and construction of the physical infrastructure, including roads, will include appropriate elements to mitigate the impacts of extreme hydro-meteorological and geophysical risks. Activities will be designed to sensitize the DoT, local authorities and C&W to the risks posed by climate change, through training and awareness activities. The project sites will be screened for climate risk, and risk mitigation measures will be included in the DIMPs and feasibility studies. Climate-smart solutions including for infrastructure development, road rehabilitation (road surface, subsurface, and side drainage) and energy efficiency measures (use of solar power and mini-hydro) will be included in the relevant project activities.


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IV. PROJECT APPRAISAL SUMMARY

A. Technical, Economic and Financial Analysis

(i) Technical Analysis

38. The technical design of the project has benefited from an extensive analysis of the tourism value chain in Pakistan. The project design also draws upon consultations with the GoKP teams, private sector and local communities in the potential project areas. The global experience of the World Bank and IFC in similar tourism interventions informs the activities of KITE. The technical discussions and analysis highlighted the need for improving the policy, institutional and regulatory environment for tourism, while significantly ramping up capability of the authorities to manage over-tourism in existing destinations. In addition, the project has considered the priorities of GoKP to match its vision for tourism sector development across the province including the ITZs and preservation of heritage sites. The project design incorporates these features and provides resources for enhancing entrepreneurial capacity of MSMEs and attracting private sector participation for job creation. The infrastructure development activities will be implemented with due consideration for climate smart engineering solutions. These will be complemented by the efforts to manage the social and environmental impacts of the activities on local communities and the sites. The technical capacity of the IEs will be enhanced using private sector solutions for engineering, transport and waste management.

(ii) Economic Analysis

39. KITE’s economic analysis focuses on the generation of benefits and costs over the life of the project and for a total period of 15 years. Data on four sites: Kumrat, Kalam, Galliyat, and Naran, collected through the 2018 Khyber Pakhtunkhwa Tourism Sectoral Analysis was used as a baseline for the economic analysis of this project. ‘With project’ and ‘without project’ scenarios were examined to assess the incremental benefits generated by KITE. A ‘without project’ growth rate in number of tourists to the four sites in the analysis is three percent per annum.19 In comparison, number of tourists visiting the sites increases by an additional 0.5 percentage points starting year three of the project, at 3.5 percent per annum for the ‘with project’ scenario. In addition, the average daily expenditure per tourist is assumed to be five percent higher for each project site in the ‘with project scenario’ compared to the ‘without-project scenario’. The rate of 10 percent is used to discount the cost and benefit streams generated by KITE. Since the project investment will offer returns over a long-term horizon, the Net Present Value (NPV) and Economic Internal Rate of Return (EIRR) are calculated over a period of 15 years. The benefits analyzed, as permitted by available data, include fiscal revenues to GoKP in the form of (i) sales tax on spending by tourists; and (ii) income earned through increase in number of jobs created. 40. The project NPV is equal to approximately US$40.8 million at a 10 percent discount rate and the EIRR is 27 percent. For sensitivity, the NPV was also calculated using discount rates of 8 and 12 percent. The NPV is US$54.7 million at an 8 percent discount rate and US$30.2 million at a 12 percent discount rate

19 A 3 percent ‘without project’ growth rate was assumed for growth in number of international tourists for the Punjab Tourism and Economic Growth Project based on historical trends. This number is used as a proxy for expected growth rate in number of tourists in targeted destinations.


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(see Table 1). Additional sensitivity analysis was done assuming different rates of spending increase in the “with project” scenarios. The NPV is positive in all cases examined. The details on the economic analysis including on the results of these additional sensitivity analysis are given in Annex III.

Table 1: Base Case Showing NPV of the project over 15 years assuming a five percent increase in tourist spending

Scenario Discount Rate

(%) NPV

(US$ million)

Low 12 30.2

Medium 10 40.8

High 8 54.7

EIRR 27%

41. KITE is a maximizing finance for development (MFD) enabling project. Khyber Pakhtunkhwa is developing its institutional framework for PPP projects and is also implementing the Swat Expressway using this modality. The PPPs provide an avenue for the MFD approach in the tourism sector. The GoKP wants to involve private sector financing and expertise in both the on-site infrastructure (commercial enterprises such as hotels, resorts, MICE (Meetings, Incentives, Conferences, and Exhibitions) facilities, cable car, chair lift, ski resorts) and off-site investments (DT platforms, etc.). Commercial financing is currently not cost-effective or viable in Khyber Pakhtunkhwa because of the perceived risks of market failures. To enable such financing to materialize, KITE will support addressing these market failures through upstream reforms to strengthen tourism sector policies, regulations, and institutions,20 while investing in complementary public infrastructure.

B. Fiduciary

(i) Financial Management 42. The Financial Management (FM) arrangements, as designed, provide reasonable assurance on the use of credit proceeds for intended purposes and consistent with relevant World Bank policies. To implement these arrangements at PMU-DoT and PMU-C&W, an experienced Finance Manager (for each PMU) will be hired in accordance with the terms of reference that are acceptable to the World Bank. The Government’s budgeting processes will apply, and KITE’s budget will be part of the Government’s annual budget. Both IEs will maintain separate books of accounts on the cash basis of accounting to record receipts and payments under each source of finance. The National Financial MIS (FMIS) will be used from project effectiveness for recording transactions. KITE’s transactions will be subject to compliance with GoKP’s internal control environment (General Financial Rules and the Accounting Policies and Procedures Manual) and its activities will be subject to periodic internal audit by GoKP’s Provincial Internal Audit Cell. KITE’s financial statements will be prepared in accordance with the Cash Basis IPSAS and audited by the Auditor General of Pakistan (AGP). The audited financial statements will be submitted to the World Bank within six months after the close of the financial year. Two segregated Designated Accounts (DAs) in US dollars (one each for C&W and DoT), will be established to receive funds from the World Bank. Disbursements will be report-based, and the World Bank will disburse funds as advance to the project DAs on the basis of six

20 WB (2018). “Tourism Theory of Change – Tourism for Development” (Knowledge Series).


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months’ cash forecast as reported in the biannual Interim Unaudited Financial Reports (IUFRs). The World Bank will also use the IUFRs to document expenditure against advances. Retroactive financing of up to the SDR equivalent of US$14 million is allowed on or after January 1, 2019 only if the items are procured in accordance with applicable World Bank Procurement Regulations.

(ii) Procurement

43. KITE’s procurement activities will follow the World Bank Procurement Regulations for Borrowers for Goods, Works, Non-Consulting Services and Consulting Services, dated August 2018, applicable to Investment Project Financing. KITE will also be subject to the World Bank’s latest Anticorruption Guidelines,

dated July 2016. The PMUs will use the World Bank’s on-line procurement management system, STEP21. The 18-month procurement plan (PP) is ready and once agreed with the Borrower, will be published on the World Bank website through STEP. The DoT lacks the experience of implementing activities in accordance with the World Bank’s Procurement Regulations and requires comprehensive training. The decision-making process of the PMU and the PSC will need to be well defined and notified to ensure that procurement decisions are taken efficiently. Initially the PMU-DoT will have support from resources under the ERKF (AF) project until recruitment of PMU-DoT staff is complete. This interim support has already facilitated the preparation/advertisement of procurement of early contracts relating to activities mentioned in the paragraph number 27. The C&W has considerable experience with civil works and associated design contracts and a sound understanding of the local construction sector, associated risks, and best practices. It has a suite of bidding documents, based on Pakistan Engineering Council documents, and consistent with Khyber Pakhtunkhwa Procurement Regulation Authority rules for national procurements. The PMU-C&W will initially have procurement systems and support from the parent department and its capacity will be enhanced through SSU’s experts to manage the increased workload of contracts during KITE’s implementation. The C&W will decide on the governance of its PMU by issuing the relevant notifications and seeking administrative approval, to ensure that there is no issue of jurisdiction when sites are in different districts of Khyber Pakhtunkhwa. The Annex IV outlines the detailed FM and procurement arrangements.

C. Safeguards

(i) Environmental Safeguards

44. KITE’s environmental and social safeguard category is assessed as B with a partial assessment. The subproject locations are surrounded by natural habitats and ecologically significant destinations with a lot of tourist attraction. Therefore, it is envisaged that the proposed physical activities will have potentially adverse impacts on the environment, natural habitats and associated biodiversity. These adverse impacts could be temporary, localized and reversible in nature—for example, air and noise, pollution, roadside tree cutting, labor camps, traffic congestion, improper construction material handling including waste disposal at the natural sites/water bodies, and disturbance for wildlife crossing corridors at construction sites. These impacts will be managed through the mitigation plans which will be developed prior to the civil works. Since the exact locations and types of subproject activities to be financed under the project are not known at the time of project approval, therefore, a framework approach has been adopted to develop the mitigation plan for the potential environmental and social impacts of project interventions. The implementation arrangements are

21 Systematic Tracking of Exchanges in Procurement


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identified in Section III. The environmental safeguard policies relevant to KITE are:

• Environmental Assessment (OP/BP 4.01) to ensure that any environmental impact associated with project activities are identified in time and mitigated according to the screening mechanism and identify the potential risks provided in the Environment and Social Management Framework (ESMF).

• Natural Habitats (OP/BP 4.04), as most of the infrastructure activities will be in areas surrounded by natural habitats. The screening mechanism described in the ESMF will identify the potential adverse impacts on natural habitats and designated protected areas prior to the civil works. In such conditions, the sub-project interventions will develop the habitat management plan with mitigation measures to prevent the degradation of such ecosystems during implementation.

• Forest (OP/BP 4.36), as most of the tourist sites are surrounded by natural forest at various altitudes. KITE will not support construction activities that cause extensive forest clearance, and to the extent possible, the tourist facilities will be developed without cutting trees. In case of any damages to the forest, the compensatory plantation will be undertaken as per provincial forest laws and regulations. The ESMF screening mechanism will identify the potential risks with mitigation measures to the forest habitats prior to the commencement of civil works, if any.

• Physical Cultural Resources (OP/BP 4.11), as KITE could implement activities at sites involving Physical Culture Resources (PCRs). Similarly, the construction activities and soil excavation during road rehabilitation could encounter PCRs, such as graveyards, mosques, cultural and heritage artifacts, and so on. A PCR Management Plan will be prepared before the commencement of construction and rehabilitation activities around the sites of cultural, archeological and historical significance.

(ii) Social Safeguards

45. KITE is assessed to have manageable impacts and mitigation measures have been incorporated in the project design. Specific impacts will be identified during the subproject screening process. Stakeholders’ major concerns related to the project, as noted in framework documents, include possibility of traffic congestion because of increased vehicular influx, inconvenience during construction, added burden on existing municipal services and natural resources, job opportunities and subcontracts not benefiting local people, an increase in disputes and harassment in public spaces, which can affect mobility and economic activity (especially of women) and possible negative cultural impacts from exposure to domestic and foreign tourists. To build on the positive and prevent negative impacts, the development and promotion of destinations will be done in consultation with relevant stakeholders. The social safeguard policies relevant to KITE are:

• Indigenous People (OP/BP 4.10), as KITE may implement activities in Chitral district where the indigenous people (IP) of Kalash live22. This policy requires GoKP to engage in a process of free, prior, and informed consultation to gain broad community support in case activities are undertaken impacting the Kalash people.

• Involuntary Resettlement (OP 4.12), as KITE will require land for the construction and rehabilitation of tourist infrastructure. Some project interventions may lead to resettlement, but with low

22 The Kalash reside in 15 villages in three valleys of the Ayun Union Council. Based on the last census (1998), the extrapolated population of Kalash people in 2015 was 3,628 (with 1,729 women), making them the smallest minority community in Pakistan (and among the smallest communities of indigenous people in the world).


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and localized impacts on livelihoods. Efforts will be made to use government‐owned land for project-related civil works and to minimize private land acquisition.

46. The GoKP has prepared and disclosed the following safeguard instruments to manage the impacts

of the project’s activities: a) An ESMF, which presents the potential adverse environmental impacts of the proposed civil works

activities and describes appropriate mitigation measures. In addition, it proposes a mechanism for the screening, management, supervision and monitoring of such activities and also for third-party validation. Site-specific Environmental and Social Management Plans (ESMPs) will be prepared for relevant sub-project activities, such as road rehabilitation and other civil works (including under DIMPs) once sites are identified. ESMPs will provide guidance for the protection of the natural habitats, forests biodiversity and wildlife crossing the roads.

b) A Resettlement Policy Framework (RPF) to identify and mitigate income losses and social impacts and risks from the land acquisition and associated assets for KITE’s activities whose exact scope and scale of impact is unknown at the time of project approval. A Resettlement Action Plan (RAP) or Abbreviated RAP will be prepared for activities that cause impacts related to land taking, such as resettlement or economic impacts.

c) An Indigenous Peoples Planning Framework (IPPF) to document the possible effects of project activities on the IP of Kalash and proposes mitigation measures. If the screening of an individual subproject financed under the project indicates that Kalash are present, in or have collective attachment to the area of a subproject, then the Recipient will prepare an Indigenous Peoples Plan prior to the start of activities.

d) PCR Management Framework to provide guidance for the protection of cultural and historical sites, together with the mitigation measures in case such sites are included in the activities.

(iii) Labor Influx 47. The rapid migration and settlement of workers and followers in the project area is called labor influx. It is anticipated that some skilled and unskilled labors will be hired through the lifetime of KITE, for construction activities under KITE’s component 2. The safeguard documents (ESMF and RPF) have identified possible risks arising from labor brought from other areas and have proposed mitigation measures in accordance with the World Bank’s Labor Influx Guidance Note.23 To minimize and mitigate possible negative impacts, subproject ESMPs will include a Labor Influx Management Plan and construction contracts will include relevant clauses whose implementation will be monitored by the PMU-C&W.

(iv) Citizens Engagement

48. For the project to be sustainable, local communities and main stakeholders should feel they have a stake in its success, leading to a spirit of co-operation. To the extent feasible, the citizens engagement (CE) mechanisms will build on and strengthen existing available engagement systems and processes already

23http://wbdocs.worldWorldBank.org/wbdocs/viewer/docViewer/indexEx.jsp?objectId=090224b084778e75&respositoryId= WBDocs&standalone=false

http://wbdocs.worldbank.org/wbdocs/viewer/docViewer/indexEx.jsp?objectId=090224b084778e75&respositoryId=%20WBDocs&standalone=false

http://wbdocs.worldbank.org/wbdocs/viewer/docViewer/indexEx.jsp?objectId=090224b084778e75&respositoryId=%20WBDocs&standalone=false


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functional in the province.24 To promote transparency and oversight of the sub-projects, their information will be disseminated in a timely manner, using methods that are accessible and understood by all stakeholders, especially the communities and tourists. A ‘resolved registered grievances’ indicator has been included in the project results framework to cover the CE.

(v) Grievance Redress Mechanism

49. A Grievance Redress Mechanism (GRM) accessible to project affected persons (PAPs) will be developed and housed each in the PMU-C&W and PMU-DoT, with user-friendly complaint submission options. It will outline clear roles, timelines, procedures and responsibilities. The GRM at the PMU-C&W will describe the options available to PAPs for on-site grievance redress during the land acquisition and resettlement process.25 The GRM at both PMUs will have an in-built monitoring mechanism to check on responsiveness to complaints or grievances lodged, including those related to the sub-projects requiring land acquisition. The TMIS digital data collection and monitoring system to be further developed under component 1 will also have a visitor’s feedback and complaints option. The TIFCs will also function as entry points for tourist-community feedback and resolution of complaints.26 In addition, the DoT maintains an active social media page which tourists are already using to lodge their feedback.

50. World Bank grievance redress mechanisms. Communities and individuals that believe that they are adversely affected by a WB-supported project may submit complaints to project-level GRM or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed and project-related concerns addressed. Project-affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of the WB’s noncompliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention and World Bank Management has been given an opportunity to respond. For information on how to submit complaints to the GRS, please visit http://www.WorldBank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org

D. Gender 51. Achieving high growth numbers for FLFP in Khyber Pakhtunkhwa remains a challenge. For instance, the ERKF (AF) project created 8,843 direct and indirect jobs between 2011 and 2017, of which only 126 jobs (1.4%) were for women in 32 beneficiary enterprises. This is despite the relaxed eligibility criteria for matching grants for women-owned SMEs. The Khyber Pakhtunkhwa Tourism Sector Analysis (2018) also identified low FLFP rates province’s T&T sector and lack of access to entrepreneurship opportunities. The jobs for women remain limited due to conservative social norms in the province that discourage women

24 For example, the Khyber Pakhtunkhwa’s Citizen’s Portal, which allows citizens to register their complaints about multiple sectors of service delivery, which are automatically forwarded to the concerned Deputy Commissioner for appropriate remedial actions. The application also enables the government to communicate directly with citizens to make routine and emergency announcements. See http://smart.pmru.gkp.pk/. 25 All subprojects requiring land acquisition or having livelihood impacts stemming from land taking will have site-specific GRMs in accordance with OP 4.12. 26 There are 6 existing TIFCs and additional TIFCs may be financed by the Project.

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/

http://smart.pmru.gkp.pk/


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from leaving their homes and place greater emphasis on childcare and household responsibilities. Further, significantly fewer women than men are able to establish and manage MSMEs, an issue that is exacerbated by the previous unrest in the region. These gender gaps will be addressed through KITE’s interventions in line with World Bank Gender Strategy, Pillar 2: removing constraints for more and better jobs. A supply and demand side constraint analysis/assessment for women workers, entrepreneurs and travelers in beneficiary districts will be carried out to determine the baseline for two indicators (jobs, BDS and training for women) and to identify facilities for women that are lagging behind in tourist destinations. 52. The KITE will facilitate better access to jobs for women and provide BDS and training support to different groups of women to address key gaps (access to finance, markets, capacity building) in women’s entrepreneurship and their employment options in the MSMEs. It will also encourage recruitment of at least 30 percent women staff in the PMUs. The PMUs will provide an inclusive and respectful work place, equipped with essential amenities, for the staff, especially women, while ensuring that the cultural norms are respected and reflected in the planning of the work space (for analysis and further details, please see GAAP (Annex V)). At present, popular tourist destinations are not equipped with adequate infrastructure to support basic amenities for women and persons with disabilities. KITE will provide women-friendly amenities such as toilets and nursing rooms at tourist sites. Relevant indicators have been added in the Results Framework (Section VI) and the results will be monitored frequently. 53. The risks for gender-based violence (GBV) related to KITE are Low, as confirmed by the GBV Risk Assessment Tool of the World Bank. The social norms around GBV risk consider the fact that survivors of violence and harassment are stigmatized, making it difficult for them to seek help. The IEs will be sensitized to the importance of addressing GBV risks and the relevant implementation mechanisms. KITE’s GRM in both PMUs will be gender-sensitive and will have a protocol for handling GBV complaints. All bid documents will clearly define the GBV requirements and expectations, and the contractor will develop a Code of Conduct, noting acceptable norms of behavior and sanctions for any GBV incidents. The Code of Conduct will be signed by employees working on the project sites. The DoT plans to mobilize tourist police in the popular tourist destinations to ensure enhanced security for locals and visitors and to manage traffic congestion during peak seasons. The training will be conducted for project workers, tourist police and local community. 54. The safeguards assessment of KITE notes that some project sites are rural or peri urban and because of their socially conservative norms, women are mostly confined to activities within the household related to family caregiving and doing chores such as fetching water, collecting firewood, washing clothes and grazing livestock. An influx of male construction workers and tourists could lead to adverse social impacts such as increased risk of illicit behavior, crime, and infringement of privacy, all of which could marginalize women and girls by confining them to private spaces. The risks of these occurrences and their mitigation has been captured in the safeguard documents and recommended actions will be incorporated into the contractor ESMP and other relevant documents.


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V. KEY RISKS

55. The overall risk rating for KITE is Substantial. This is driven by high political and governance risks, as well as an array of Substantial risks related to the macroeconomy, institutional capacity and fiduciary issues, described in detail below alongside proposed mitigation measures.

(a) Political and governance risks are Substantial. Khyber Pakhtunkhwa is going through transition through the merger with the former FATA. The re-elected Government is reform-oriented and has placed tourism as its priority and the country has begun simplifying the visa regime. The realization of this would largely depend on a continuing, stable political economy and security environment. A reversal of these could impede KITE’s implementation. To mitigate the risks, the KITE’s implementation will be overseen by the Senior Minister and supported by the PSC. The security situation has improved considerably across the country and within Khyber Pakhtunkhwa. Technical assistance will be provided through KITE to establish tourist police in the province.

(b) Macroeconomic risks are Substantial. These risks mostly stem from the recent deterioration in the macro-fiscal situation in Pakistan. The early effects are being felt through continued depreciation of the currency and hike in energy tariffs. This, in the medium term, will increase inflationary impacts and reduce spending power that can impact domestic tourism. This will be mitigated through the economic reform program recently negotiated with the IMF. The fiscal impact will lead to delayed release of capital and recurrent budgets for KITE’s implementation and this will be mitigated by ensuring that the province prioritizes project expenditures in its annual budget and development plans. The major infrastructure development activities will be implemented during the second half of the Project’s life.

(c) Implementation capacity and sustainability risks are Substantial. KITE is the World Bank’s first IDA

engagement for Khyber Pakhtunkhwa’s tourism sector development. The province’s economy has recovered from unrest and uncertainty, and the domestic tourism has a positive outlook due to restoration of peace. However, implementation challenges persist due to the gaps in departmental capacities. The ongoing ERKF (AF) project has successfully partnered with the DoT through advisory activities for provinces T&T sector. It has also contributed towards KITE’s implementation readiness. However, KITE will need to build the capacity of DoT and C&W and their systems. Meanwhile, the DoT teams are interacting with Punjab to learn from the successful Walled City Project in Lahore. Both DoT and C&W have already notified KITE’s PMUs and the Project Director for PMU-C&W.

(d) Fiduciary risks are Substantial. An assessment was carried out for the suitability of existing government systems and procedures. It examined the capacity of DoT and C&W to implement KITE. There are significant weaknesses in procurement and contract management that are due to insufficient capacity. DoT and C&W are implementing a World Bank-financed project for the first time. Both departments have constrained FM capacity and lack dedicated FM staff to manage development projects. Overall, the resources under component 3 will be directed toward strengthening the FM and procurement capacity in both PMUs through periodic training. Additional support will be provided through the SSU.

.


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VI. RESULTS FRAMEWORK AND MONITORING

Results Framework COUNTRY: Pakistan

Khyber Pakhtunkhwa Integrated Tourism Development Project

Project Development Objectives(s)

The project development objective is to improve tourism-enabling infrastructure, enhance tourism assets, and strengthen destination management for sustainable tourism development in Khyber Pakhtunkhwa.

Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline Intermediate Targets End Target

1 2

Strengthened Destination Management.

Improved Planning and Management of Tourist Destinations. (Number)

0.00 2.00 4.00 6.00

Improved Tourism-enabling Infrastructure.

New Private Investments Mobilised. (Amount(USD))

0.00 3,000,000.00 4,000,000.00 6,000,000.00

Improved Tourism-enabling Infrastructure.

Individuals benefiting from improved infrastructure and training. (Number)

0.00 5,000.00 20,000.00 30,000.00

Women benefiting from the improved infrastructure and training efforts. (Number)

0.00 1,000.00 2,500.00 6,000.00

Tourism Assets Enhanced and Destination Management Strengthened.

Increased Tourist Spending in Khyber 71.00 75.00 80.00 90.00


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RESULT_FRAME_T BL_ PD O


1 2

Pakhtunkhwa. (Amount(USD))

PDO Table SPACE

Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO


1 2

Sector Enablement and Tourism Entrepreneurship.

Reforms introduced to facilitate the market entry of T&T MSMEs (Number)

0.00 2.00 4.00

T&T MSMEs and workers receive BDS and training. (Number)

0.00 200.00 500.00 800.00

Women entrepreneurs and workers receive BDS and training on T&T sector. (Number)

0.00 150.00 350.00

Digital Data Collection and Monitoring System for T&T sector established. (Yes/No)

No Yes Yes

New direct and indirect jobs created (Number)

0.00 500.00 1,000.00 2,500.00

Jobs created for women. (Number) 0.00 150.00 250.00

Infrastructure Planning and Development.

Labor days generated through construction and works (Number) 0.00 15,000.00 50,000.00 100,000.00

Road Asset Management System established using the Geographic Information System. (Yes/No)

No Yes Yes

Public and private sector investments 0.00 4.00 9.00 12.00


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RESULT_FRAME_T BL_ IO


1 2

identified through DIMPs and ITZ feasibilities. (Number)

Tourist facilities and services provided in Project areas (Number)

6.00 10.00 15.00 20.00

Facilities and services for women and disabled travelers. (Number)

0.00 10.00 20.00

Project Management and Capacity Building

Public sector professionals receive training in Tourism and Project Management. (Number)

0.00 10.00 40.00 75.00

Female public sector professionals receive training in Tourism and Project Management. (Number)

0.00 8.00 15.00

Project responds to grievances in accordance with the stipulated service standards. (Percentage)

0.00 100.00 100.00 100.00

Technology acquired for plastics recycling at two Project sites. (Yes/No) No Yes Yes Yes

IO Table SPACE

UL Table SPACE

Monitoring & Evaluation Plan: PDO Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Improved Planning and Management of Tourist Destinations.

This will be considered achieved when the DIMPs and feasibilities for ITZs are

Alternate year

DoT

Monitoring reports

DoT


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completed in consultation with the public and private sector stakeholders and final reports are shared with PMU-DoT.

New Private Investments Mobilised.

The indicator will be considered achieved when the data has been verified through evidence (contracts with private sector). It measures the investments mobilized from the private sector, both domestic and international (in PKR and USD) .

Twice during Project implementation and at Project closing.

PUM-DoT, Khyber Pakhtunkhwa's Board of Investment (BoI)

Investments mean private sector funds invested in tourism infrastructure and value chains such as F&B. These could be PPPs as well. The review of contracts with investors will be done to verify the results.

PUM-DoT, TPMA

Individuals benefiting from improved infrastructure and training.

The achievements of this indicator will be measured through the training registration records and tourist surveys.This indicator captures the number of visitors that benefit directly from the investments in tourist infrastructure and also the beneficiaries of training programs supported by KITE.

Alternate year

Training registration data, TPMA reports.

TPMA survey.

PMUs (C&W and DoT) and TPMA

Women benefiting from the improved infrastructure and training efforts.

Gender dis-aggregated data for this indicator will be collected by the PMUs to

Annually

Beneficiary feedback and training

Surveys and review of training registration and completion data.

DoT


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measure the impact on women visitors and workers/entrepreneurs in the tourism sector. Of the 30,000 target, 20 percent is reserved for women.

data.

Increased Tourist Spending in Khyber Pakhtunkhwa.

This is considered achieved when the increased spending is reported to the PMUs after verification by the TPMA. The spending is on per day basis and will also be calculated in PKR. The average per day spending per tourist is PKR 10,000, which is the baseline and equal to US$71 (exchange rate of US$1=PKR141.65, as of April 30, 2019).

Twice during Project implementation and then at Project closing.

The Khyber Pakhtunkhwa Tourism Analysis (2018) will be updated in 2021 to measure the impact of project activities on tourist spending. TPMA reports will also review performance on this indicator.

Tourist spending covers all expenditures incurred at the touristic destination (accommodation, shopping, meals and user-fee on parks and other attractions). These will be measured through the tourist surveys. Survey, Focused Group Discussions, Data gathered by the PMU-DoT.

PMU-DoT and TPMA

ME PDO Table SPACE


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Monitoring & Evaluation Plan: Intermediate Results Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Reforms introduced to facilitate the market entry of T&T MSMEs

Whenever GoKP introduces and announces reforms to (for example) facilitate the registration and licensing procedures for T&T enterprises, as a result of KITE's support, these will be reported by the PMUs. The evidence of these reforms will be their notification by the relevant department.

MTR and Project closing.

Feedback from enterprises and reports generated by the DoT and BoI.

Survey and private sector consultations.

DoT

T&T MSMEs and workers receive BDS and training.

The data on beneficiary MSMEs and workers receiving BDS support and training through the Project will be gathered using the records of the service providers.

Alternate year

Survey of MSMEs, data gathered by the TPMA.

Surveys, focused group discussions.

PMU-DoT and TPMA

Women entrepreneurs and workers receive BDS and training on T&T sector.

This indicator will be considered achieved once the number of women beneficiaries who receive BDS and training in the areas of hospitality and other industry standards for travel and tourism sectors, is verified through training records.


Training and BDS registration data and TPMA reports.

Direct feedback from beneficiaries through survey.

DoT and TPMA


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Digital Data Collection and Monitoring System for T&T sector established.

The completion of this system will be verified by the PMU-DoT once it has been installed at the DoT and the staff has been trained to use it. This system will be developed and installed within DoT to capture and monitor the statistics on T&T sector's performance (number of visitors, traffic count, spending trends and length of tourist stay and so on). Present systems are manual and out dated, except for the online booking system of camping pods.


DoT

Online verification through MIS generated reports

DoT

New direct and indirect jobs created

Direct and indirect jobs created through the Project will be measured by the TPMA. 1. Direct jobs are defined when created directly as a result of project activities. For example; a restaurant is opened for business, the number of employment generated at restaurant are

Alternate year.

T&T sector MSMEs, TPMA reports.

Field Survey

DoT, TPMA


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direct created jobs. 2. Indirect jobs are defined when created indirectly as a result of direct jobs. For example; employment generated by food suppliers to the restaurant are counted as indirect jobs. 3. A full time job is defined as a working week equal to 40 hours. 4. A part time job will be counted as 0.5 time full time job. 5. A seasonal job will be counted as 0.25 time full time job.

Jobs created for women. Same as for the parent indicator


Independent survey

Survey and TPMA reports.

PMU-DoT and TPMA.

Labor days generated through construction and works

This will be considered achieved when the number of labor days have been reported to C&W Department by the contractors. The indicator measures the number of days of employment (as daily wage) as part of the construction process for roads and other

Alternate year.

PMU-C&W

BoQs and field surveys conducted by the PMU-C&W

PMU-C&W


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infrastructure.

Road Asset Management System established using the Geographic Information System.

The Project will finance the development and installation of this system for C&W Department. The completion of this indicator will be verified by the PMU-C&W once the installation is complete and the relevant staff has been trained.


PMU-C&W

Field visits

PMU-C&W

Public and private sector investments identified through DIMPs and ITZ feasibilities.

This indicator will stand achieved once the completed DIMPs and ITZ feasibilities identify specific investment opportunities for the public and private sector.

Alternate year

Findings of the DIMPs and Feasibilities.

Review of the DIMPs and feasibilities.

PMU-DoT

Tourist facilities and services provided in Project areas

This indicator will be achieved once the facilities are rehabilitated/constructed and that has been verified through field visits. Product development (tourist services e.g.) will also contribute towards the achievement of this target. The tourist facilities include the TIFCs (already 5 present at Islamabad, Peshawar, Abbottabad, Swat and

Alternate year.

PMU-DoT publications and social media updates.

Site visits.

PMU-DoT, TPMA


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Dunga Gali), rest areas with toilets, parking spaces, other facilities and so on.

Facilities and services for women and disabled travelers.

This will be considered achieved when the construction and maintenance of dedicated washrooms, access for the disabled and elderly, well-lit parking areas, etc. has been verified by the Project.


Local authorities and PMU-DoT

Tourist feedback, site visits

PMU-DoT, TPMA reports

Public sector professionals receive training in Tourism and Project Management.

This indicator will measure capacity building initiatives aimed at the representatives of the local authorities, DoT and C&W Department. The Project Management training will primarily focus on procurement and FM.

Alternate year.

Attendance sheets and training records.

Discussions with clients.

DoT and C&W Department.

Female public sector professionals receive training in Tourism and Project Management.

The performance on this indicator will be verified through the training records.

MTR and Project Closing.

Training records.

Back-to-Office reports of the trained officials.

PMUs

Project responds to grievances in accordance with the stipulated service standards.

The PMUs will report on this indicator and GRM's responsiveness will be verified by the TPMA.

Annually

Complaints ledger.

Review of the system generated reports from the complaints ledger.

PMUs (C&W and DoT) and SSU (once established).

Technology acquired for plastics recycling at two Project sites.

Once the equipment has been procured and installed at two Project sites, this

Alternate year.

PMUs (DoT and C&W)

Reports generated by PMUs

PMU-DoT


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indicator will be considered achieved. Plastics recycling technology includes machinery for plastics sorting, grading and re-purposing.

ME IO Table SPACE


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ANNEX I: Implementation Arrangements and Support Plan

COUNTRY: Pakistan Khyber Pakhtunkhwa Integrated Tourism Development Project

Department of Culture, Sports, Tourism and Youth

Affairs Components 1 and 2

PMU-DoT

1. Project Director 2. Heritage/ Eco Tourism Expert 3. Digital Marketing Expert 4. PPPs/ Legal Advisor 5. Financial Management Expert 6. Procurement Expert 7. Administration and Accounts Officer 8. Additional staff as and when desired

Communication and Works Department

Component 2

PMU-C&W

1. Project Director 2. Senior Infrastructure Engineer 3. Road Engineer 4. Senior Environmental Expert 5. Senior Social Safeguards Expert 6. Divisional Accounts Officer 7. Procurement Expert 8. Project Accounts Officer 9. Support staff (Drivers etc.)

*PSC to comprise ACS of Khyber Pakhtunkhwa (Chair), representatives of NTCB, Federal Planning Commission, Planning and Development Department (Khyber Pakhtunkhwa), GoKP departments (Finance, DoT, C&W), and private sector stakeholders, including representation from the T&T industry, academia, Women Chambers of

Commerce, BoK, and the SME Development Authority.

Component 3 will provide project management, establishment costs, and capacity-building support to PMUs.

Project Steering Committee (PSC)* Shared Services Unit


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ANNEX II. Project Components Description

1. KITE’ activities are required to provide improved accessibility to tourist sites and a better distribution of visitors across the province. Its interventions are also required for improved site management and visitor facilities; increased private sector involvement; and improved quality and innovation in an industry that is rooted in local value chains. As Table 1 shows, there are many direct and indirect entry points for strengthening the T&T value chain.

Table 1. Traditional Value Chain in the T&T Sector

2. The project’s interventions along the T&T supply chain have the following features:

• Technical support for creating conditions to support sustainable tourism investments by the private sector. The private sector needs the governments to provide conducive conditions to develop and operate tourism; conserve the environment and improve the livelihoods of local communities.

• T&T MSMEs development: helping to link firms with service providers to enhance their offerings.

• Market strengthening: bringing together tourism and F&B MSMEs for collective marketing efforts by also using the DT.

• Data collection: automated and reliable data collection and monitoring mechanisms for information on visitors and T&T industry performance.


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3. The detailed description of potential activities under the project components is as follows: 4. Component 1: Sector Enablement and Tourism Entrepreneurship (IDA: US$8 million): This component aims to strengthen, formalize, and improve province’s T&T sector. It envisages following activities: a) Strengthening the policy, institutional, and regulatory environment for tourism. The provincial regulatory

and policy framework for the T&T sector will be reviewed to identify and address gaps to ensure effective regulation. The PTA (once established) and local development authorities (including the Kaghan Development Authority and GDA) that have a mandate of tourism development will receive advisory support through this component for implementing the Khyber Pakhtunkhwa Tourism Policy. Similarly, the business registration and licensing procedures for T&T MSMEs will be analyzed and necessary reforms will be proposed to support easier market entry. This component will provide advice to the authorities on optimizing tourism assets with a focus on mobilizing revenue and enabling the role of the private sector through PPPs and P2P platforms. KITE will contribute towards improved tourism sector governance and competitiveness at the destination level by suggesting mechanisms such as the Destination Management Organizations (DMOs)27. This Component will also provide technical assistance on good practice policy and regulation for the ITZ concept to support decision making on the introduction of this concept in Khyber Pakhtunkhwa province.

b) Establishing data collection and monitoring mechanisms. Building on DoT’s recently developed TMIS, this

component will provide resources for an automated data collection and monitoring mechanism on tourism performance indicators (T&T enterprises registered, statistics on tourists’ duration of stay and spending, revenue collected, etc.).

c) Supporting tourism entrepreneurship. The project will create awareness among T&T MSMEs and service

providers about existing financing schemes28 and will convene finance providers to help MSMEs access finance. It will also help link the MSMEs with local partners in providing BDS services to improve their access to the tourism supply chain and markets, technology, infrastructure services, finance, and logistics. In addition, the BDS will support local MSMEs in product diversification and adoption of better marketing with a particular emphasis on branding and will mentor local entrepreneurs to improve their production techniques. The project will also support the provision of vocational skills training, targeted mainly towards women and youth, to stimulate employment. By doing so, the project will support handicrafts, the hospitality sector, tour operators, community tourism initiatives, and agribusiness.29

d) Transforming the visitor experience and tourism management through DT. The Project will support DT initiatives to transform visitors’ experience, promote KP’s tourism brand, support creative T&T business models, and facilitate the sustainable expansion of “sharing economy models.” The support entails training T&T enterprises in digital marketing systems and building the capacity of destination managers and hosts in the P2P accommodation sector to succeed through digital literacy, better management of visitor

27 DMOs are formal not-for-profit structures with their own constitution. They are made up of local tourism sector stakeholders, including land owners, academia, and public and private sector representatives, and their objective is to promote and facilitate the sustainable management and development of tourism assets. 28 BoK has recently announced US$40 million program to promote enterprise development through partners such as Karandaz and the Aga Khan Foundation to support rural enterprise development. In addition, the GoKP is implementing a digital entrepreneurship scheme and an SME matching grants programs through WB-funded projects. 29 Handicrafts value chains are prominent in Swat and Chitral, while agribusiness in Naran has a high potential.


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numbers, and improved marketing for driving higher revenues at the destination with underutilized assets. It also involves creating visitor management and information applications with special emphasis on women and disabled persons. KITE will thus partner with private sector technology incubators, universities, and DT platforms that focus on women’s participation. These activities will be executed through entrepreneurship ecosystem-building activities such as start-up competitions, hackathons, and mobile app development challenges. The MSMEs, including P2P accommodations that adhere to established and notified hospitality and F&B standards, will be allowed to display and associate themselves with the Khyber Pakhtunkhwa tourism brand.

5. Component 2: Infrastructure Planning and Development (IDA: US$55 million). This component will finance the procurement of services and goods to carry out diagnostics and to upgrade and develop tourism infrastructure at project locations including feasible ITZs, in accordance with the selection criteria and procedures outlined in the POM. Through this component, KITE will help the client plan and direct project investments in public infrastructure and identify opportunities for mobilizing private sector investments. The selection of activities and investments is expected to be a deliberative process on the basis of community needs, project feasibility studies, master plans (including DIMPs) and other policy considerations. The project activities could aim at both established and emerging destinations, possibly Naran, Kalam, Galliyat and Chitral, and could include the following:

a) Destination development and management. The component will support the formulation of at least six DIMPs for tourist destinations in agreement with the government stakeholders, using the destination selection criteria and procedures set out in the POM. The scope of the DIMPs will vary according to the need of a particular site/destination. For example, sites that are already established tourist destinations and are experiencing over-tourism will benefit from DIMPs that have a focus on visitor management plans. The less-known and new sites will require the DIMPs and feasibility studies to focus on the elements of both destination and investment planning, identifying investments including visitor facilities and site development activities, for implementation under KITE. Such facilities could include well-equipped TIFCs, rest areas, walking and hiking trails, signage (directional, management, and informative), parking areas, and dedicated convenience facilities for women, families and the disabled. It is important to note that not all the activities and investments identified through DIMPs and feasibility studies (that are formulated under KITE or otherwise) will be financed through this project. Similarly, the investments identified through GoKP own resources and private sector efforts could be financed by KITE in accordance with the principles and procedures defined in the POM. The project will encourage the provincial government to attract private sector investment to the tourism industry in accordance with the government regulations for PPPs.

b) Heritage preservation. This activity focuses on the preservation and management of heritage sites across

the province—including sites of religious significance for Buddhists and Sikhs—to be selected in accordance with the selection criteria and procedures set out in the POM. Private tour operators and travel agents will assist in developing these tourism sites to attract visitors from Asia Pacific. This will help reduce seasonality by increasing tourist spending and duration of stay in the destinations.

c) Accessibility and road connectivity. Additional infrastructure, including feasible secondary and/or tertiary

road(s) will be supported by KITE in accordance with the selection criteria/principles and procedures set out


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in the POM. The rehabilitation of roads will follow the framework approach for safeguards.30 The engineering design of roads will include considerations for road safety and the installation of a cable box for ICT

connectivity.31 KITE will support; (i) road maintenance and accessibility, including the provision of relevant equipment road clearing and maintenance; and (ii) establishment of telephone/internet connectivity in tourist destinations to enhance tourist safety. Mobile repeater stations and/or signal boosters could be installed at remote tourist sites such as camping pods32 using project resources.

d) The cost of the RAP for the infrastructure supported by the project would be financed by the GoKP’s own resources. An indicative amount of US$7 million (PKR equivalent 1,011 million33) is already added to the project’s PC1.

e) Feasibility studies for at least two ITZs will be financed.

6. Component 3: Project Management and Capacity Building (US$7 million). This component will finance technical assistance, equipment, and works for the project IEs and relevant implementation partners, such as the local development authorities in project sites. More specifically, it will support the following activities: a) Support for project implementation and training. This component will support the establishment, staffing, and

running costs of the IEs, implementation of the social and environmental safeguards plan, and project M&E. The project has two IEs and two project PMUs—one in the DoT and one in C&W.34 This activity also includes training public sector officials on hospitality standards, destination and environmental management, and procurement. KITE will sponsor the preparation of a PPP Toolkit for Tourism and the development of a GIS-based “road selection tool” and “asset management system” to help the province prioritize and allocate road investments and manage these assets. The resources for implementing KITE’s GAAP (Annex V) and communications strategy will also be mobilized through this component. In addition to DoT and C&W, the associated functions of DoT (DTS, archaeology, sports, youth affairs, and culture) will benefit from the activities of this project.

b) Environmental preservation. KITE emphasizes an “environmental value” approach introduced through DIMPs

and project safeguards documents. Globally, tourism is an innovator and initiator of environmental management systems that benefit the communities. KITE’s TA will contribute to an improved SWM planning system at the project locations. It will also launch efforts to reduce and recycle waste (especially glass and plastics) through planning and awareness campaigns for tourists and students. These activities will be complemented by the procurement of essential technology and equipment for sorting and using recycled plastics in the construction of walking trails and facilities such as signage, boardwalks, and shelters.

c) Carrying out civil works for the appropriate functioning of PMU-DoT and PMU-C&W.

30 When selecting the roads to be financed under KITE, the project could also consider such factors as; (a) road directly benefitting tourists and visitors, making travel more convenient; (b) expected traffic volume; (c) potential for tourist spots along the route if the road is long; and (d) number of social and economic centers likely to be connected through the road. 31 Adding the feature of fiber optic cable duct will save up to 80 percent of the cost of installing these cables after the completion of road(s) construction. GoKP could have contractual agreements with potential private ICT service providers who could pay a certain fee to install and maintain their respective cables in the duct. The revenues will contribute towards road maintenance. 32 Camping pods are functional at four locations across Khyber Pakhtunkhwa, including Thandiyani and Bashigram. 33 Currency exchange rate as of January 15, 2019: US$1 = PKR141.65 34 C&W is responsible for the construction and engineering of provincial roads and other infrastructure in KP province.


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7. Component 4: Contingent Emergency Response Component (US$0). This component will support preparedness for and rapid response to a natural disaster, emergency, or catastrophic event as needed. The provisional zero cost for this component will allow for rapid reallocation of credit proceeds from other components under streamlined procurement and disbursement procedures. Following an adverse natural event that causes a major disaster, the GoKP may request the Bank to reallocate project funds to this component from other project components to partially cover emergency response and recovery costs. This component could also be used to channel additional funds if they become available as a result of an emergency.


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ANNEX III. Economic Analysis


1. The T&T sector world over is a key driver of economic growth. Many countries have benefited from it while addressing associated risks. It creates new markets, boosts investments, drives infrastructure development, strengthens rural communities, bolsters artisans, and raises climate change awareness. A 2018 analysis of the global economic impact of T&T indicates that the sector accounts for 10.4 percent of global GDP and 313 million jobs (10 percent of total employment).35 According to a 2013 International Labour Organization analysis, women make up more than 60 percent of all workers in tourism.36 With the right regulatory conditions and government support, nearly 100 million new jobs—including for women—could be created globally in T&T over the next decade.37 2. KITE will provide the technical assistance and investment financing to GoKP for realizing the promise of tourism sector for province’s economy and its people. While the Annex II captures the details of project activities, the qualitative and quantitative benefits expected from KITE are detailed below:

a) Tourism benefits. The project aims to increase access to selected destinations from main hubs through improved visitor facilities and access infrastructure thereby increasing the number of tourist arrivals. It will also help manage existing tourism destinations by improving facilities such as visitor information centers, hiking trails, parking areas and so on. Better facilities and well-developed tourism products within a certain destination encourage increase in the length of stay and tourist spending. Increased tourist stay leads to job creation and enhanced tourist spending ensures greater revenues for the local communities, with an overall improved image of the destination. b) Environmental Service Delivery benefits. KITE will support destination management planning at selected sites, which will also suggest measures to reduce environmental damage to lakes, rivers, forest cover and alpine meadows. Improved waste collection, management and disposal – including recycling – will improve the quality of life of residents in the beneficiary areas. These benefits can be described qualitatively and serve as an added increment of benefits beyond what can be readily counted. c) Community benefits. KITE will support tourism value chain development, providing technical support and training to tourism MSME. The interventions including the rehabilitation and upgradation of roads, links to the value chains, job creation through training and BDS, and environmental preservation, have the potential of directly and indirectly benefitting at least 20-25 percent of 5.6 million people or 792,048 households38, residing in or around the project destinations. Additional benefits include increased availability of products and services (such as food supplies and mobile phone coverage) as the local markets and service providers adapt to increased visitor numbers.

3. KITE’s economic analysis focuses on the generation of benefits and costs over the life of the project and for a total period of 15 years. Using NPV analysis, the model compares the stream of benefits and costs under various scenarios. The rate of 10 percent is used to discount the cost and benefit streams generated by KITE. Since the project investment will offer returns over a long-term horizon, the NPV and EIRR are calculated over a period of 15 years. The benefits analyzed, as permitted by available data, include fiscal revenues to GoKP in the form of; (i) sales tax on spending by tourists; and (ii) income earned through increase in number of jobs created. The cost assumed for this analysis is US$70 million to be disbursed over the course of the project.


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35 WTTC Economic Impact 2018 36 Baum, Thomas. (2013). International perspectives on women & work in hotels, catering & tourism. Geneva, Switzerland: ILO 37 World Travel and Tourism Council (2018). “Travel and Tourism Economic Impact – 2018.” 38 Population and total number of households in districts with project sites (Galliyat, Naran, Kalam and Chitral). 2017 Data from the Pakistan Census. 39 As of April 30, 2019 40 A 3 percent without project growth rate was assumed for growth in number of international tourists for the Punjab Tourism and Economic Growth (PTEG) Project based on historical trends. This number is used as a proxy for expected growth rate in number of tourists in targeted destinations.

4. ‘With project’ and ‘without project’ scenarios were examined to assess the incremental benefits generated by the project. In the ‘with project’ scenario, the project is expected to increase the number of tourists visiting target areas at a rate higher than the ‘without project’ scenario. The spending per tourist is also expected to increase due to project interventions compared to the ‘without project’ scenario. Moreover, while the model does not account for this, it is possible that in the ‘without project’ scenario, the destination value in target areas declines due to poor visitor and destination management. This could eventually lead to a decrease in number of tourists visiting these sites and tourism sector revenues. 5. The data collected through the 2018 Khyber Pakhtunkhwa Tourism Sectoral Analysis was employed for the economic analysis of this project. This data covers four sites in Kumrat, Galyat, Kalaam, and Naran and contains data on total number of tourists visiting these sites annually and their daily expenditures and average time spent. This data is summarized below in the Table 3. While the survey captures daily expenditure per person, this analysis interprets it as expenditure per household (six individuals) to provide a conservative estimate. In addition, the data collected on daily expenditure per tourist was in PKR, so the exchange rate of PKR141.65 to 1US$39 was used.

Table 2: Data Collected Through the KP Tourism Sectoral Analysis

Kumrat Kalam Galliyat Naran

Annual tourist arrival 50,000 400,000 2,500,000 1,500,000

Daily expenditure in $ 55 83 85 87

Daily expenditure in $ by HH member 9 13 14 14

Average stay in Days 2 2 1 2

6. The following assumptions are used in the economic analysis.

• Activities under KITE will start attracting a greater number of tourists to select destinations compared to the counter factual starting year 3 under project implementation.

• A ‘without project’ growth rate in number of tourists to the four sites in the analysis is 3 percent per annum.40 In comparison, number of tourists visiting the sites increases by an additional 0.5 percentage points starting year 3 of the project, at 3.5 percent per annum for the ‘with project’ scenario.

• In addition, the average daily expenditure per tourist is assumed to be 5 percent higher for each project site in the ‘with project scenario’ compared to the ‘without-project scenario’.

• The sales tax on services in KP is 15 percent and has been used to calculate potential fiscal revenue for KP because of tourist activity. Additionally, average jobs per tourist is 0.04 and average tourism sector income is


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41 Numbers taken from the Impact Assessment Study and the Statuary Minimum Wage data for Pakistan, also used for the EA of PTEG.

US$158 per annum.41 The four sites Kumrat, Kalam, Galliyat, and Naran represent most sites which will be targeted through the project interventions, including Chitral. This assumption is considered reasonable as Kalam, Galliyat, and Naran are the potential sites for project interventions. The fourth potential site is Chitral which is in close proximity to Kalam.

7. Results: The NPV is equal to approximately US$40.8 million at a 10 percent discount rate, US$54.7 million at an 8 percent discount rate and US$30.2 million at a 12 percent discount rate. The EIRR for the project is 27 percent. (Table 3).

Table 3. Base Case Showing NPV of the project over 15 years assuming a 5% increase in tourist spending


(%) NPV

(US$ million)

Low 12 30.2

Medium 10 40.8

High 8 54.7

EIRR

27%

8. Sensitivity: The following sensitivity analysis were conducted: 9. Using the discount rates of 8 and 12 percent in calculating the NPV (Table 4). This is already reflected in the analysis above. An additional sensitivity analysis is conducted assuming that rate of spending by tourists in the ‘with project scenario’ increases by the following rates: 0 %, 2.5 %, and 10 %. In the case of 0 %, only the increase in number of tourists to target destinations is accounting for economic benefits in the NPV. In each of these scenarios, NPVs were calculated using discount rates of 8, 10 and 12 percent. (Tables 4, 5 and 6). The NPV is positive for all scenarios in this analysis with the highest EIRR at 29 percent and lowest at 25 percent

Table 4: Additional sensitivity analysis showing NPV over 15 Years, assuming a 10% increase in spending per tourist


(%) NPV

(US$ million)

Low 12 33.7

Medium 10 44.9

High 8 59.6

EIRR 29%


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Table 5: Additional sensitivity analysis showing NPV over 15 Years, assuming a 2.5% increase in spending per tourist


(%) NPV

(US$ million)

Low 12 28.5

Medium 10 38.8

High 8 52.3

EIRR 26%

Table 6: Additional sensitivity analysis showing NPV over 15 Years, assuming a 0% increase in spending per tourist


(%) NPV

(US$ million)

Low 12 26.8

Medium 10 36.7

High 8 49.8

EIRR 25%

10. Limitations of the NPV analysis. Determining the real revenue value of project sites as well as the community-based economic activities within and surrounding project areas is difficult. Hence this analysis is based on limited data availability and has therefore taken a conservative approach in formulating its assumptions. However, these data challenges will be addressed during the implementation stage to validate the NPV assumptions.


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ANNEX IV. Financial Management and Procurement Arrangements


A. Financial Management Arrangements

1. Implementing Entities. PMU-DoT and PMU-C&W will have the overall responsibility for maintaining appropriate FM systems for their respective project activities to be delineated in the Annual Work Plans of each PMU. DoT’s FM systems will be extended to PMU-DoT for the KITE’s FM arrangements for components 1, 2, and 3. For components 2 and 3, KITE funds will be managed using C&W Division’s FM systems.

2. FM staffing. For the project’s FM arrangements at both PMUs, Finance Managers—one for each PMU—will be engaged within one month of effectiveness in accordance with TORs that are acceptable to the Bank. They will each be supported by an Accounts Assistant, also hired in accordance with TORs that are acceptable to the Bank.

3. Budgeting and planning. Both Finance Managers will be responsible for the budgeting and planning of their respective project components, in close coordination with the operational/technical team. DoT will prepare the project’s PC-1 for Components 1, 2, and 3, and C&W will provide estimates for Components 2 and 3. Based on PC-1, the project’s budget will be reflected in the province’s Annual Development Program. Each year both PMU-DoT and PMU-C&W will prepare the budget for the project operations (for their respective components) in accordance with the budget rules and regulations of the GoKP and will submit it to the Planning and Development (P&D) Department for reflection in the Annual Development Program. A unique Cost Centre Number/DDO Code will be assigned by the Finance Department in the Budget Book for DoT and C&W to record expenditures against the allocation. Both PMU-DoT and PMU-C&W will prepare an annual work plan and a cash plan that will provide a quarterly breakdown of planned activities and associated costs. The operational/technical team will provide details of planned activities and their associated costs to the Finance Managers.

4. Funds flow arrangements. For disbursement purposes, two segregated Designated Accounts (DAs) in US dollars, one each for PMU-DoT and PMU-C&W, will be established at the National Bank of Pakistan for the receipt of funds from the Bank. The DAs will be opened and operated by PMU-DoT and PMU-C&W in accordance with the provisions of “Revised Accounting Procedure for Revolving Fund Account (Foreign Aid Assignment Account),” dated August 2, 2013, issued by the Finance Division. Disbursements will be report-based: an advance equivalent to six months’ forecast will be provided to the DAs, and subsequent bi-annual Interim Unaudited Financial Reports (IUFRs) will be the basis for documenting the expenditures. Subsequent IUFRs will also provide the forecast for the following six months, on the basis of which the amount of funds to be disbursed will be determined. Further details regarding disbursements will be provided in the Disbursement and Financial Information Letter (DFIL). Both implementing agencies will also have access to loan funds through Reimbursement (pre-financing by the government with its own funds, and the reimbursed by the Bank), Direct Payment, and Special Commitment methods of disbursement. 5. Retroactive financing of SDR equivalent to US$14 million will be available from January 1, 2019 until the date of signing of Financing Agreement. Retroactive financing is allowed for only those procurable items that are procured in accordance with applicable Bank’s Procurement Regulations.


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Table 7 – Disbursement Categories

Category Allocated Amount

(SDR million)

% of expenditures to be financed

(inclusive of taxes)

(1) Goods, works, non-consulting services, and consulting services for the project; incremental operating costs and training and workshop costs under Components 1, 2, and 3 of the project.

50.6 100%

(2) Emergency expenditures under Component 4 of the project. 0 100%

Total amount 50.6

6. Internal controls. A PEFA assessment conducted for KP in 2017 commends the robustness of the internal control environment, as GoKP is rated “A” on segregation of duties and compliance with internal controls. KP’s relevant internal controls are enshrined in the General Financial Rules and the Accounting Policies and Procedures Manual of the Government. They include budget checks; a well-defined and segregated scheme of assignments; a delegation of financial power rule that delineates the categories of officers and expenditure-sanctioning competencies; and custody of assets. KITE’s expenditure will be incurred by PMU-DoT and PMU-C&W in accordance with these internal controls. However, GoKP is rated “C” on commitment controls because of its non-comprehensive implementation of commitment accounting. KITE will strengthen commitment controls and accounting in the project by using commitment accounting in its separate books of accounts and by maintaining contract rosters and contract management sheets. To ensure segregation of duties, the preparation of books of accounts and financial reports will be the responsibility of the finance managers, and project directors will approve the financial reports for onward submission to the Bank.

7. Asset management. PMU-C&W will engage supervision consultants to validate the quantitative and qualitative aspects of the civil works executed by contractors before payments are processed. The Finance Managers will process the payments upon applying ex-ante controls (as defined in the General Financial Rules and the Accounting Policies and Procedures Manual): budget check, sanction of expenditure, technical sign-off, approval by Project Director, and recommendation by the supervision consultants (for civil works). For approval/sanction of expenditures, Project Directors will have full administrative and financial authority/powers, which will be delegated by respective Secretaries of DoT and C&W. For the assets created/procured under the project, the Project Directors will be responsible for their transfer to the concerned line department through appropriate handover procedures. The head of the beneficiary line department will be responsible for ensuring that such transferred assets are entered in the department’s asset register. For assets to be used by the project, Project Directors will be responsible for maintaining asset registers. 8. Internal audit. KP-PEFA 2017 indicates that the performance of the GoKP’s Provincial Internal Audit Cell (PIAC) (housed in the Finance Department) suffers from limited coverage and application of internal auditing standards; suboptimal implementation of internal audit programs because of limited staff ability; and weak management response to the internal audit function as a whole. For KITE, an internal audit function has been rolled out in the C&W department, but DoT has yet to be covered. For KITE, PIAC will conduct the internal audit of the project components to be implemented by DoT and C&W and will submit semester reports to PSC. The mechanism for the internal audit of KITE will be formulated and agreed with PIAC, to ensure that sufficient resources and qualified personnel are allocated


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to the project, and that the audit is timely, in accordance with the audit plan. To strengthen PIAC, the KP Governance and Policy Project (MDTF-funded project) could provide support to the Finance Department in capacitating PIAC through a capacity needs assessment and incremental resource requirements. 9. Accounting and reporting. Both Finance Managers will maintain separate books of accounts for their respective components under KITE. Payment vouchers will be prepared for each transaction, with each voucher showing the relevant accounting codes, disbursement category, and project component. The Finance Managers will work with the Accountant General KP to include the transactions of the project in the national FMIS from project effectiveness. The following manual registers (in Excel) will be maintained:

(a) Cash book (also in hard form, complying with government rules). (b) Assets register – will include details of assets procured from the loan, unique identification number,

location of the asset, and custodian of the asset. (c) Invoice register – will include date of invoice/bill receipt and date of payment to supplier/ contractor. This

will be used to monitor payment processing time.

10. Biannual and annual financial reports will be prepared as follows:

11. Biannual reports. The Finance Managers will prepare and furnish to the Bank within 45 days of the close of each calendar semester IUFRs that report receipts and payments during the semester according to project components, variance analysis against the planned targets, and reconciliation of the project’s accounting records with Client Connection. The format and content of the IUFRs will be shared with the PMU-DoT and PMU-C&W.

12. Annual report. The Finance Managers will consolidate the financial reports of PMU-DoT and PMU-C&W and will prepare project-level annual financial statements in accordance with the Cash Basis International IPSAS. The Finance Manager of PMU-C&W will share the financial reports with the Finance Manager (PMU-DoT) for consolidation purposes. The financial statements will cover a period of one financial year and will be submitted to the auditors within two months of the close of financial year. 13. Auditing. The Office of the AGP will conduct the annual audit of the project, which is acceptable to the Bank. The Directorate General Audit (KP), as representative of AGP, will carry out the audit of the project in accordance with the ToRs that have been agreed between the Bank and AGP. The audit will cover both IEs and will include physical verification of assets procured from the loan proceeds. For each financial year closing on June 30, acceptable audited financial statements for the overall project (combined) will be submitted to the Bank by December 31, that is, within six months after the close of the financial year. 14. There are no overdue audit reports and no overdue ineligible expenditures in respect of the DoT and C&W. It is recommended that PMU-DoT and PMU-C&W proceed to engage the Finance Managers in accordance with ToRs that are acceptable to the Bank.

15. Supervision plan. During the first six months of implementation, the project would need technical support in setting up the FM arrangements for both PMUs. Annually, two field supervision missions would be carried out to review the FM arrangements for the project.


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B. Procurement Arrangements

16. Procurement methods. All methods and approaches contained in the Procurement Regulations and as agreed in the PPs may be used under the project. The detailed TORs for DIMPs and feasibility studies of ITZs have been prepared by DoT, therefore the bidding documents for these will be complete before KITE is effective.

17. National Procurement Arrangements: In accordance with paragraph 5.3 of the Procurement Regulations, when approaching the national market (as specified in the PP tables in STEP), the country’s own procurement procedures may be used. When the Borrower uses its own national open competitive procurement arrangements as set forth in [insert appropriate references to the national procurement legislation], such arrangements shall be subject to paragraph 5.4 of the Procurement Regulations and the following conditions:

• The eligibility of bidders shall be as defined under Section III of the Procurement Regulations. Accordingly, no bidder or potential bidder shall be declared ineligible for contracts financed by the Bank for reasons other than those provided in Section III of the Procurement Regulations.

• For national open competitive procurement, only the model procurement documents acceptable to the World Bank, shall be used.

• The request for bids/request for proposals document shall require that Bidders/Proposers submitting Bids/Proposals present a signed acceptance (in the form attached) at the time of bidding, to be incorporated in any resulting contracts, confirming application of, and compliance with, the Bank’s Anti-Corruption Guidelines, including without limitation the Bank’s right to sanction and the Bank’s inspection and audit rights.

• Procurement Documents include provisions, as agreed with the Bank, intended to adequately mitigate against environmental, social (including sexual exploitation and abuse and GBV), health and safety (“ESHS”) risks and impacts

• Access to procurement opportunities shall not be restricted to firms that have pre-registered and/or paid a registration fee.

• No preference of any kind shall be given to national bidders in the bidding process.

• When other national procurement arrangements (other than national open competitive procurement) are applied by the Borrower, such arrangements shall be subject to paragraph 5.5 of the Procurement Regulations.

18. Complaint handling mechanism. To promote an open, fair, and transparent procurement process, the implementing agencies will administer a complaint handling system for the project. The composition of the complaint handling committee, the form of complaint register, response time, decision-making mechanism, and other features will be outlined in detail in the Operational Manuals and be subject to the WB’s review and clearance. 19. Procurement Planning and Strategy Document (PPSD). A PPSD has been prepared that looks at the procurement packages, their market risks and mitigations.

20. Procurement information and documentation. The following procurement information will be prepared and reported by the PMU: (a) complete procurement documentation for each contract, including bidding documents, advertisements, bids received, bid evaluations, letters of acceptance, contract agreements, securities, complaints (if any) and their resolution, and related correspondence will be maintained in order by the implementing agency, readily available for audit; (b) contract award information will be promptly recorded, and contract rosters as agreed will be maintained; (c) the PMU will submit semiannual reports with (i) revised cost estimates, where applicable, for each contract; (ii) status of ongoing procurements, including a comparison of originally planned and actual dates of the procurement actions, preparation of bidding documents, advertising, bidding, evaluation, contract award, and


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completion time for each contract; and (iii) updated PPs, including any revisions in dates or cost estimates, for procurement actions

21. Procurement Plan. The PMU offices will maintain and update PPs for their respective components in STEP. The PP will provide the basis for the procurement methods and prior-review requirements The PP will be updated in agreement with the World Bank before the implementation support mission or as required to reflect actual project needs and improvements in institutional capacity. The project will only finance those procurements that are included in the PP and agreed with the World Bank in a manner as stated in the applicable Procurement Regulations.

22. Procurement supervision. The World Bank will conduct semiannual implementation support missions to review the procurement performance of the project. The PMU will provide semiannual procurement progress reports to the World Bank that include, at the minimum, status updates of PP implementation, procurement monitoring reports, and analysis of procurement performance, including the status of procurement-related complaints.


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42 United Nations (UN) World Tourism Organization (2011). Global Report on Women in Tourism 2010. 43 Ferguson, L. (2011). Promoting gender equality and empowering women? Tourism and the third Millennium Development Goal. 44 UN World Tourism Organization (2011). Global Report on Women in Tourism 2010.

ANNEX V. Gender Analysis and Action Plan (GAAP)

COUNTRY: Pakistan

Khyber Pakhtunkhwa Integrated Tourism Development Project

1. In most regions of the world, women make up much of the tourism workforce, but they tend to be concentrated

in low-paid, low-status jobs,42 often in the informal sector. While there is evidence that their participation in these types of work may increase their involvement in household decision-making, it has not been found to increase their social and economic empowerment. Their engagement in this kind of work reinforces the gendered division of labor in the tourism sector (i.e., a clear segmentation into “men’s work” and “women’s work”) and relegates women to positions of subordination both at work and at home. There is also evidence that their involvement in such work increases their time poverty, as reproductive and care work continues to fall on their shoulders in the absence of formal

policies that help them address this burden.43 At the same time, women are twice as likely to be employers in the tourism industry than in other sectors. Further, women-owned businesses are often found to employ more women

than men.44 The women entrepreneurs also indicate lack of access to finance, markets and capacity building as key barriers to start or expand their businesses.

2. Although gender-disaggregated data on women’s entrepreneurship in Khyber Pakhtunkhwa are scarce, some evidence indicates that significantly fewer women than men own and manage MSMEs. According to the World Bank Enterprise Surveys 2013-15, of all the manufacturing firms surveyed in Khyber Pakhtunkhwa, only 4.9 percent had women in ownership, and none had a woman manager. In terms of FLFP, only 1.8 percent of the employees in the surveyed firms (operating in the manufacturing and services sectors) were female. Women entrepreneurs in Pakistan face numerous challenges to starting and operating their businesses, as was confirmed by the recent MDTF-funded ERKF (AF) project. It which awarded 36 (or 2.35 percent) of 1,526 project grants to women-owned SMEs in Khyber Pakhtunkhwa and the former FATA (now merged areas), identified numerous constraints that women encounter, including restricted mobility and social norms; weak application of property rights, which limits women’s ability to accumulate property that can be pledged as a collateral to access finance; and lack of literacy.

3. The World Bank’s qualitative research findings in Khyber Pakhtunkhwa regarding FLFP aspirations, experiences, and challenges highlight that despite a growing realization of the importance of women joining the workforce, to a large extent the decision is still dictated by families. Usually families prefer dedicated working spaces for women because of safety and harassment concerns. Marriage and child-bearing also take priority over pursuing careers, and women who work while raising families face a double burden of household duties and professional work. However, it was discovered that support from male household members contributes favorably to women’s participation in the labor force.

4. The following solutions to these issues will be implemented through KITE and measured through gender-disaggregated indicators:

(a) Providing gender-responsive amenities in all improved tourist sites. The project should ensure the

safety, security, and comfort of women personnel and women tourists in tourist spots through gender-


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45 Ibid.

responsive measures such as well-lit parking spaces and public transport stands, separate washrooms,

and nursing areas. Women’s hostels may also be established to provide, at subsidized rates, safe,

comfortable, and dignified room and boarding options for women tourists and workers. These measures

dovetail with the Khyber Pakhtunkhwa’s Tourism Policy pillar of allied infrastructure development for

tourism.

(b) Promoting investment in the tourism sector by women entrepreneurs. To further the Chitral Growth

Strategy’s goal of increasing the skilled labor force and driving FLFP,45 the project may build the capacity

of provincial and local tourism authorities to promote women-owned businesses in tourism. Home-

based stay and hospitality facilities for tourists could provide a viable avenue for greater inclusion of

women in household income-generation activities. These measures align with the Khyber Pakhtunkhwa

Tourism Policy’s pillars of creating an enabling business environment for investment and developing the

workforce.

(c) Encouraging tourism/hospitality companies to formulate codes of conduct for women staff and

provide gender-responsive amenities. Female staff may be encouraged to lodge complaints with existing

GRMs, including anti-harassment helplines and mobile apps in operation at the provincial level (see (f)

below for additional details).

(d) Gender mainstreaming within DoT and PMUs. KITE will encourage the relevant authorities and the

PMUs to establish quotas for engaging female staff.

(e) Awareness raising. Public information campaigns may be launched in intervention areas to discourage,

and raise awareness about the risks of, sexual harassment and abuse of women and children.

Information about redress mechanisms for those subjected to sexual harassment and abuse may also be

displayed in public. Local CSOs and voluntary organizations may also be engaged to conduct awareness-

raising sessions on sexual harassment and abuse with local law enforcement, the legal community, and

other relevant stakeholders.

(f) Anti-harassment helpline and referral. Existing complaints mechanisms set up in the province for women

to report incidents of sexual harassment and abuse (i.e. Khyber Pakhtunkhwa Assembly Zama Awaz

helpline, Social Welfare Department’s helpline (Bolo), reporting app of Khyber Pakhtunkhwa Commission

on the Status of Women) may be leveraged under the project. The helpline could provide services to

women providing and using the home-stay facility. To further decrease the risk of harassment and abuse

that these women may face, the project could also work with tourist police to develop a screening/identity

verification process for tourists using the home-stay facility. These measures dovetail with the Khyber

Pakhtunkhwa Tourism Policy’s pillar of ensuring the safety and security of visitors.