PROGRAM INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB2261

Operation Name / Punjab Large Cities DPL
Region / SOUTH ASIA
Sector / Housing construction (40%);General water, sanitation and flood protection sector (20%);Sub-national government administration (20%);General transportation sector (20%)
Project ID / P095983
Borrower(s) / GOVERNMENT OF PAKISTAN
Implementing Agency / Government of Punjab
Date PID Prepared / March 16, 2006
Estimated Date of Appraisal Authorization / November 13, 2006
Estimated Date of Board Approval / March 1, 2007
  1. Key development issues and rationale for Bank involvement

Punjab is Pakistan’s most urbanized province, with roughly 36% of its population living in urban areas. While its capital, Lahore, is home to about 7 million people, the Punjab also has four other cities with populations in excess of one million, namely Faisalabad, Rawalpindi, Multan and Gujranwala. Not surprisingly, the population density of the Punjab is more than 3½ times the rest of Pakistan. According to data from the Development Data Platform (a World Bank Database), Pakistan’s largely urban-based manufacturing and services sectors accounted for 77% of GDP in 2003, while contributing to over 90% of GDP growth between 1999-2003. Given its above average national urban structure and still rapidly urbanizing process, the Punjab is perhaps uniquely poised to place its cities at the center of its economic development and poverty alleviation strategies.

However, cities in the Punjab face many challenges, including a projected doubling of the population by 2021 if current growth rates hold. Cities have inadequate infrastructure to meet current needs, let alone an ability to respond to growing demand. In addition, cities are characterized by inefficient spatial structures (low density ribbon development), restrictive land use regulations, rent control, and limited supplies of land for commercial, industrial and residential development. Consequently, land is expensive relative to household and business incomes. Within the large cities of the Punjab (population exceeding one million) responsibilities for service delivery are fragmented, both spatially and institutionally, and fiscal capacity is limited.

The shortfalls in urban services are not merely an outcome of aggregate resource constraints. They are, more fundamentally, a function of the institutional, governance, and financial arrangements that have defined local service delivery and financing. The weaknesses in urban service delivery result from fragmented responsibilities among Local Government (LG) levels, weak accountability of public-sector institutions, and supply driven models for prioritizing, planning and financing of urban services. Historically, investments in urban services have been provided by public operators riddled with operational and cost inefficiencies, as well as weak incentives for ensuring the sustainability of investment. Uneconomic pricing and inefficient public service delivery mechanisms have limited the delivery of municipal services, and, indeed, most other local services, without providing benefits to the poor, most of whom are not served by existing systems. The decentralization program has brought some decision-making for service delivery closer to beneficiaries, but it has nonetheless failed to address a number of issues that affect the ability of LGs to deliver services in a sustainable manner.

Recognizing the major institutional, governance, and financial weaknesses that severely constrain urban service delivery, GoPunjab has stated that policy and institutional reforms are essential to improving service delivery in a sustainable manner. GoPunjab therefore requested that the Bank project support policy and institutional reforms within the Province and large cities through a programmatic DPL.

The proposed DPL’s objectives are consistent with the Draft CAS for FY’06-09, which notes that while the urban sector was an area of limited engagement during the previous CAS, devolution has created opportunities for deeper engagement and the Government of Pakistan has accorded greater priority to urban development with a particular focus on the “mega-cities” (CAS Section 85).

The Punjab Large Cities DPL has benefited from ongoing analytic work on local government issues in the Punjab, ranging from municipal finance to land and housing, as well as solid waste management and water supply. The DPL will also complement the Punjab Municipal Services Improvement Project (PMSIP), which deals with capacity building and the provision of services in the small municipalities of the Punjab. The DPL is also coordinating its activities and drawing on ongoing analytic work on Local Governance in both the Punjab and other Provinces.

  1. Proposed objective(s)

The development objective of the proposed project is to promote economic growth in the major cities of Punjab through metropolitan level strategic planning, integrated infrastructure investment programs, and efficient urban service delivery.

Specifically, the project will: (i) assist cities in developing strategic investment plans and improved service delivery in solid waste, and urban transport; and (ii) strengthen local finances that support infrastructure investment and sustainable service delivery. This objective will be met through the creation of three consecutive Development Policy Loan(DPL) reform reports, where each set of reforms build on the previous DPL

  1. Preliminary description

The DPL is expected to consist of a program of three consecutive single-tranche DPLs, about one year apart with an amount of US$ 100 million each. The DPL is part of a broader urban reform program with GoPunjab that seeks to implement a series of reforms over a number of years in the Province and its largest cities. Given the nature of issues faced by the Province and its large cities, the reforms will have to be sequenced as some reforms are prerequisites for others to succeed. Each set of reforms will build upon reforms implemented by the previous DPL.

The objective of the first DPL is to clearly define the roles and responsibilities of the Province and the CDGs. In order to create a solid foundation for the reform program, the first DPL will focus on improving the enabling environment for city-level development, which implies focusing primarily on the role of the Province. This will help to create an enabling environment where the Provincial Government creates a policy and institutional framework that stipulates clear lines of responsibilities between the province and tiers of local government.

The second and third DPLs will focus on implementing detailed reforms and strengthening the capacities within the five large cities. The success of GoPunjab’s devolution program depends largely on institutional reforms that strengthen city-level strategic planning, while also aligning expenditure and revenue assignments between the province and local governments (CDGs, TMAs, and UCs). This program will also seek to aligning responsibilities for city-level service delivery (and expenditure mandates) with revenue assignments within the Punjab’s five large cities that are governed by CDGs.

The three DPLs will implement policy reforms in two key areas: (i) improved urban service delivery; and (ii) strengthening of municipal finances. Within the area of improved service delivery, the program will focus on policies that strengthen urban planning and land management, creating adequate solid waste within cities, and improving urban transport. GoPunjab will also need to provide the fiscal space in order to enable local governments to enhance urban service delivery, accommodate urban population growth in large cities, and improve infrastructure service delivery for the poor.

  1. Environment Aspects

The DPL is focusing on improvements in urban management and service delivery that will bring overall improvements in urban environment, in terms of delivery of services, such as sanitation and waste management, reduction in local pollution of drains and open areas, better use of water resources (e.g. aquifers) and reduced impacts of solid and hazardous waste dumping. Urban environment issues relevant to the DPL are also being addressed by recent and planned analytic work on environmental management, urban air quality and waste management.

In terms of social aspects, there are currently large numbers of people engaged in provision of waste management and sanitation services, including a significant informal waste recycling sector. Proposed reforms aimed at improvements in efficiency should address specifically the implications for these workers under the reforms. This issue will be addressed under the proposed PSIA.

  1. Tentative financing

Source: / ($m.)
BORROWER / 0
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT / 100
Total / 100
  1. Contact point

Contact: Peter D. Ellis

Title: Economist

Tel: (202) 458-2814

Fax:

Email: