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Countries and Regions Country Assistance Plans Document
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Country Assistance Plans - Pakistan : II. Country Operational Strategy
C. Progress in Implementation of the COS41. Despite generic implementation problems (paras. 31-36), good progress has been made towards achieving the objectives of the COS. Under the strategy, the ADB's share of lending to HRD during the 1990s increased significantly compared to the previous two decades (from 9 percent of total lending during 1968-1979 to 28 percent in the period 1995-1997). Furthermore, the emphasis on policy and capacity building expanded considerably. A number of large loans to the social sectors were approved, including SAP I and SAP II, Technical Education Project (1995), Second Girls Primary School Project (1996), and Second Science Education Sector Project (1997). The development impact of the current program is difficult to assess because these loans have either recently been completed (SAP I) or are ongoing (SAP II) but they have made progress in addressing the problem of deterioration of delivery of social services. In recent years, however, the emphasis on HRD has been constrained due to a weak absorptive capacity despite increasing donor assistance, shortages of counterpart funds, and the deteriorating economic situation. Renewed emphasis on capacity building rather than civil works will assist in alleviating these problems. 42. The ADB's current strategy for Pakistan under the COF continues to support the HRD emphasis and social infrastructure requirements, as well as programs to respond to the policy environment, including increased priority for macroeconomic management and support for economic stabilization and restructuring. Initial support was for reforms and expansion of domestic capital markets and trade liberalization, export promotion, and private sector-led industrial growth in 1997, and trade and industry support under the TEPI Program loan in 1999. New strategic adjustments also entail an expansion of ADB support for governance, with an initial focus on strengthening the judicial and legal system, and public administration reform. Finally, the dramatic deterioration of the power sector's financial situation and its potentially damaging macroeconomic impact has prompted the Government to start a fundamental restructuring of the sector, with the support of the ADB and the World Bank. 43. The following are examples of strategic loans in the proposed program which will be the key operational instruments for continuing to implement the three main aims of the COF.
44. Of the proposed TAs in 2000 or during the program period, several have major significance due their scope, implications for policy development and possible future lending:
45. As noted in paras. 30-35, there is a need to significantly improve the performance of ADB's existing portfolio, including the need to assess borrower policies, institutions, and monitoring portfolio performance as a basis for effectively allocating future resources. While the performance criteria have yet to be finalized, they are expected to include four areas, including (i) economic growth and private sector development, (ii) poverty reduction with special attention on gender aspects, (iii) governance and public sector management, and (iv) protection of the environment. These key areas are essential to develop effective institutions to ensure sustained development impacts. The progress and achievement in these areas will guide the annual indicative planning figure (IPF). 45. The Government is of the view that it is pursuing a well-prioritized public expenditure policy to achieve their economic and social objectives. In pursuance of this policy, social sector expenditure as a proportion of total public expenditure (at constant FY1985 prices) increased from 20 percent in FY1991 to 25 percent in FY1999. Public expenditure on education and health has also increased significantly. Development outlay on education had increased nearly four folds over FY1991 - FY1999 along with substantial increase of ADP expenditure on health. The Government is giving particular attention to primary education and non-formal education and is allocating almost 50 percent of public expenditure on education to these activities. In tandem, Government is attempting to target public expenditure on health to the poor along with improved delivery service and making health care services more accessible, cost effective and sustainable. In addition to social infrastructure, the Government also recognizes the important role of physical infrastructure in poverty reduction, particularly in rural areas where the bulk of the poor live. For example, the Government has raised the share of rural roads in public transport sector expenditure from around 7 percent in the early 1990s to the current level of 23 percent. The share of rural electricity in the power sector's budget has also increased from 26 percent to 33 percent over the same period. The Government is also implementing several targeted programs such as Food for Works, Vulnerable Group Development, and Food for Education to address food insecurity problems of specific groups and simultaneously create employment opportunities. In addition, Bangladesh has also implemented several innovative and successful micro-credit programs. The NGOs continue to play an important role in supplementing Government's efforts in poverty reduction. 46. While the Government's efforts have yielded positive results in reducing both income and human poverty, ADB would like to stress that the pace of poverty reduction is slow and a more determined effort is required to meet the medium and long term targets of PAPR. The Government needs to further step up its investment in the social sectors, especially in primary education, health and nutrition, as these are crucial for reducing deprivation and improving the quality of human resources for sustaining long term growth. ADB has also emphasized to the Government that while the social sector expenditure (both revenue and development) as a proportion of total expenditure increased sharply during the period FY1991 to FY1995, the ratio has remained virtually constant since FY1996. The Government also needs to explicitly target the urban poor, especially those who reside in "squatter" settlements with limited access to safe drinking water and sanitation. Apart from providing them with the basic social infrastructure, the Government should also consider provision of security of tenure for slum dwellers and facilitate more self-help investment and employment opportunities. 47. ADB is of the view that mere increase in allocation of resources will not be sufficient to make a significant dent on poverty alleviation. It is equally important that the quality of service delivery is simultaneously improved. This will require development of decentralized and accountable local governments, greater private sector and community participation, and the creation of a conducive policy environment. Furthermore, ADB has stressed to the Government that an enlarged public expenditure program is sustainable only if it is accompanied by a greater tax effort. Given the current level of the fiscal deficit, any additional expenditure without a corresponding increase in revenue could lead to macroeconomic instability, which in turn will reduce the growth rate of the economy. It could also trigger unacceptably high level of inflation if the forthcoming harvests are below normal, which would hurt the poor in a disproportionate manner. ADB has also cautioned the Government against undertaking import-intensive projects, which are not aid financed, as they could further erode the already thin foreign exchange reserves. 48. In the current year, ADB will closely examine whether the Government's prospective plans for poverty alleviation are sufficient to meet the targets set in PAPR. Policy dialogue on key social sector issues and institutional constraints will be carried out to assist the Government meet the PAPR targets. 49. Regarding ADB's plan to implement its commitments under the PAPR, refer to section VII (ADB's Operational Program). The PAPR also indicates that good governance and reduction of corruption are essential for accelerated poverty reduction. Hence, ADB will provide assistance in this field, in particular, for policy and institutional reform in sectors where ADB is active. It will also help build capacity for improved local governments in both rural and urban areas to promote a more decentralized and participatory process of governance (refer to section III D for details on Governance related program). 3. Monitoring Implementation of the PAPR 50. Monitoring the accomplishment of PAPR targets is an important component of the Agreement. Accordingly, an advisory TA was included in the current year (2000) to help develop indicators for this purpose. The TA fact finding was completed in June 2000 and it has been agreed with the Government that the TA will assist in reviewing and improving the quality, methods used, timely production, and dissemination of key poverty measures and related socio-economic indicators. The TA will assist the Bangladesh Bureau of Statistics (BBS), in close collaboration with the Planning Commission, to produce and disseminate core human and income poverty estimates as well as related social indicators namely mortality rates, nutrition, access to reproducible health services, primary education enrollment and completion rates. This will be accomplished by (i) thorough study, documentation and critical evaluation of the methodologies and estimates, (ii) proposed improvement and building capacity to implement them, and (iii) field testing the proposed methodologies. The TA will also attempt to enhance the capacity of BBS to compile and disseminate these data on a regular basis. 51. Apart from monitoring the PAPR outcome targets, it is also important to monitor the implementation of various projects aimed at accomplishing these targets. The Government has been informed about ADB's internal project implementation monitoring system, and has been requested that this be used as a tool for improving project implementation on a continuing basis.
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