Document of The World Bank Report No: ICR00001663 ...documents.worldbank.org/curated/en/... · Report No: ICR00001663 IMPLEMENTATION COMPLETION AND RESULTS REPORT ... WAPDA Water

Document of The World Bank

Report No: ICR00001663

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-44370)

ON A

CREDIT

IN THE AMOUNT OF SDR23.4 MILLION (US$38 MILLION EQUIVALENT)

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR A

WATER SECTOR CAPACITY BUILDING AND ADVISORY SERVICES PROJECT (WCAP)

October 6, 2015

Water Global Practice Pakistan South Asia Region

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CURRENCY EQUIVALENTS

Exchange Rate Effective at Appraisal March 2008

Currency Unit = Pakistani Rupee (PRs.) PRs.60.0 = US$1

SDR1 = US$1.62976

Exchange Rate Effective at ICR August 2015 PRs.101.87 = US$1 SDR1 = US$1.406

FISCAL YEAR July 1 – June 30

ABBREVIATIONS AND ACRONYMS AF Additional Financing CMTL Central Material Testing Laboratory DHP-I Dasu Hydropower Stage I Project DSS Decision Support System ERR Economic Rate of Return FFC Federal Flood Commission FM Financial Management GDP Gross Domestic Product GIS/MIS Geographical Information System/Management Information System GoP Government of Pakistan HEP Hydroelectricity Project IA Implementing Agency IBIS Indus Basin Irrigation System IPDF Infrastructure Project Development Facility IBMR Indus Basin Model Revised IRSA Indus River System Authority MoWP Ministry of Water and Power NPV Net Present Value PAD Project Appraisal Document PC Planning Commission PC-II Planning Commission Proforma for TA Projects PDO Project Development Objectives PMPIU Project Management and Policy Implementation Unit PPIB Private Power Infrastructure Board PPP Public-Private Partnership PSC Project Steering Committee RCC Rock Compacted Concrete RF Results Framework SDC Seismic Data Center SSESA Strategic/Sectoral Environmental and Social Assessment of Indus Basin T4HP Tarbela Fourth Extension Hydropower Project TA Technical Assistance WAA-1991 Water Apportionment Accord 1991 WAPDA Water and Power Development Authority

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Vice President: Annette Dixon

Senior Director: Junaid Kamal Ahmad Country Director: Patchamuthu Illangovan Practice Manager: Parameswaran Iyer

Project Team Leader: Javaid Afzal ICR Team Leader: Christina Leb

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PAKISTAN Water Sector Capacity Building and Advisory Services Project (WCAP)

CONTENTS

A. Basic Information ....................................................................................................... vB. Key Dates ................................................................................................................... vC. Ratings Summary ....................................................................................................... vD. Sector and Theme Codes .......................................................................................... viE. Bank Staff .................................................................................................................. viF. Results Framework Analysis ..................................................................................... viG. Ratings of Project Performance in ISRs .................................................................... xH. Restructuring (if any) ................................................................................................. xI. Disbursement Profile ................................................................................................. xi1. Project Context, Development Objectives and Design ............................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 43. Assessment of Outcomes ............................................................................................ 84. Assessment of Risk to Development Outcome ......................................................... 115. Assessment of Bank and Borrower Performance ..................................................... 126. Lessons Learned ....................................................................................................... 147. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 15Annex 1. Project Costs and Financing .................................................................... ..... 16Annex 2. Outputs by Component ................................................................................. 17Annex 3. Economic and Financial Analysis ................................................................. 29Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 29Annex 5. Beneficiary Survey Results ........................................................................... 35Annex 6. Stakeholder Workshop Report and Results ................................................... 35Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 36Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...................... 41Annex 9. List of Supporting Documents ...................................................................... 42

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A. Basic Information

Country: Pakistan Project Name:

PK Water Sector Capacity Building & Advisory Services Project (WCAP)

Project ID: P110099 L/C/TF Number(s): IDA-44370 ICR Date: 06/29/2015 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF PAKISTAN

Original Total Commitment:

XDR 23.40M Disbursed Amount: XDR 22.56M

Revised Amount: XDR 23.40M Environmental Category: B Implementing Agencies: Ministry of Water and Power Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 03/13/2008 Effectiveness: 09/22/2008 09/22/2008 Appraisal: 05/02/2008 Restructuring(s): 03/15/2012 Approval: 06/26/2008 Mid-term Review: 12/22/2010 12/10/2010 Closing: 02/28/2014 10/30/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Moderate Bank Performance: Moderately Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing Agency/Agencies: Moderately Satisfactory

Overall Bank Performance: Moderately Satisfactory Overall Borrower

Performance: Moderately Satisfactory

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C.3 Quality at Entry and Implementation Performance IndicatorsImplementation

Performance Indicators QAG Assessments (if any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes

Original Actual Sector Code (as % of total Bank financing) Central government administration 33 22 General water, sanitation and flood protection sector 53 53 Renewable energy 14 25

Theme Code (as % of total Bank financing) Other public sector governance 33 22 Water resource management 67 78 E. Bank Staff

Positions At ICR At Approval Vice President: Annette Dixon Praful C. Patel Country Director: Rachid Benmessaoud Yusupha B. Crookes Practice Manager/Manager:

Parameswaran Iyer Karin Erika Kemper

Project Team Leader: Javaid Afzal Masood Ahmad ICR Team Leader: Christina Leb ICR Primary Author: Christina Leb F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project objective is to improve the management and investment planning of water resources in the Indus River Basin. Revised Project Development Objectives (as approved by original approving authority) NA

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(a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Enhanced capacity of institutions to manage water resources using modern tools, techniques and methodologies

Value quantitative or Qualitative)

As in 2008 70% improvement in the use of modern tools

Capacity needs assessed, recommendation ns approved, and implementation commenced

Capacity assessments carried out for MoWP and line agencies and implementation is underway.

Date achieved 07/15/2008 2/28/2014 11/29/2013 6/30/2015 Comments (incl. % achievement)

Target achieved; see Section 3.2 and Annex 2 for details.

Indicator 2 : Enhanced capability in planning and financing investments in water and hydropower sector

Value quantitative or Qualitative)

As in 2008

80% evidence of capability in planning and financing investment

Multi-purpose water reservoir cell established at Infrastructure Project Development Facility under Ministry of Finance.

Multi-purpose water reservoir cell established and later streamlined into IPDF structure.


Target achieved; see Section 3.2 and Annex 2 for details.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Strategic studies for improvement in water resources planning and management completed, recommendations thereof approved and their implementation commenced.

Value (quantitative or Qualitative)

N/A N/A

Recommendations of the strategic studies accepted by the Ministry of

Recommendations of strategic studies accepted by MoWP; one study

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Water & Power (National Flood Protection Plan –IV) still in progress.

Date achieved 16/26/2013 6/30/2015 Comments (incl. % achievement)

Target substantially achieved; see Section 3.2 and Annex 2 for details.

Indicator 2 : Number of staff identified and trained in various institutions to improve management and planning of the Indus River System


20 At least 70% [Indicator dropped at restructuring]

Forty staff of key water sector agencies trained


Indicator 3 : Telemetry stations upgraded and staff trained for continuous data collection and monitoring to perform flow measurements


80 +35 +23

Flow measurements and upgrades at 5 pilot sites and staff trained


Partially achieved.

Indicator 4 : Financial business model developed and approved by IPDF


None [Not defined in PAD]

Capacity of IPDF strengthened to develop financial business model

Capacity of IPDF strengthened in hydropower sector from none to current engagement in HEP financing with functioning business model.

Date achieved 7/15/2008 2/22/2012 11/4/2014

Comments (incl. % achievement)

Sub-component was dropped at 2012 Restructuring. Planned permanent Water Cell at IPDF was streamlined into IPDF structure which continues engagement in PPP financing in the hydropower sector.

Indicator 5 : Quality of data accessible to the public through an upgraded network system and transferred to an enhanced IRSA


0% At least 50% of quality data accessible to public

Quality of data accessible to the public through an upgraded network system and transferred

Handbook of Water Statistics publicly available. Transparency improvements of flow allocation and monitoring by

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to an enhanced IRSA.

IRSA is ongoing process.


Substantially achieved.

Indicator 6 : Sediment management studies and flushing tests for Tarbela Reservoir completed


0% of studies and flushing tests completed as against approved annual work plans

100%

Sediment management studies and flushing tests for Tarbela are completed

Studies completed.


Fully achieved.

Indicator 7 : Number hydropower sites identified by WAPDA and put forward for feasibility studies


As in 2008 At least 3

Two HEP designed and their procurement documentation prepared for investment.

Tarbela 4th Extention and Dasu HEPs under implementation with financing secured.


Revised target achieved.

Indicator 8 : Evidence of performing project management unit to be provided through timely fiduciary and monitoring reporting


0% 100% [Indicator dropped at restructuring]

Regular monthly reports provided by PMPIU and satisfactory fiduciary management.

Date achieved 7/15/2008 2/28/2014 6/30/2015 Comments (incl. % achievement)

Indicator 9 : Percentage of training programs effectively designed and satisfactorily carried out


0% 100% [Indicator dropped at restructuring] Forty staff trained.

Date achieved 7/15/2008 2/28/2014 6/30/2015

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Comments (incl. % achievement)

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP

Actual Disbursements (USD millions)

1 12/07/2008 Satisfactory Satisfactory 0.00 2 02/21/2009 Moderately Satisfactory Moderately Satisfactory 1.50 3 06/20/2009 Moderately Satisfactory Moderately Satisfactory 1.50

4 11/23/2009 Moderately Unsatisfactory

Moderately Unsatisfactory 1.62

5 05/11/2010 Moderately Unsatisfactory

Moderately Unsatisfactory 2.19

6 10/17/2010 Moderately Satisfactory Moderately Satisfactory 4.52 7 04/04/2011 Moderately Satisfactory Moderately Satisfactory 10.80

8 09/06/2011 Moderately Satisfactory Moderately Unsatisfactory 10.80

9 03/24/2012 Satisfactory Moderately Satisfactory 16.17 10 08/12/2012 Satisfactory Moderately Satisfactory 19.15 11 11/05/2012 Satisfactory Satisfactory 21.43 12 04/25/2013 Satisfactory Satisfactory 24.06 13 10/27/2013 Satisfactory Satisfactory 26.46 14 05/06/2014 Satisfactory Moderately Satisfactory 28.84 15 10/15/2014 Satisfactory Moderately Satisfactory 32.87 16 01/05/2015 Satisfactory Satisfactory 32.87 17 06/12/2015 Satisfactory Satisfactory 33.50

H. Restructuring (if any)

Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

03/15/2012 MS MU 16.17

The project was restructured on 15 March 2012 due to low disbursement ratio, duplication of some activities that are under implementation by other Government agencies, and emerging new priorities in the wake of the 2010 floods. The component structure remained

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Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made DO IP

the same, however some new activities were added and others were dropped.

I. Disbursement Profile

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This ICRR has been prepared as a process requirement to prepare Additional Financing (AF) for the project, which will put the project implementation period over 10 years. The project was approved on 26 June 2008. The proposed closing date for the AF is 30 June 2021. The total project implementation period would therefore be 13 years.

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal 1. Country and sector background. The key challenge for Pakistan was to sustain growth to generate significant poverty reduction. Pakistan’s economy is largely dependent on the management and development of the water resources of the Indus River Basin. In addition to conjunctive surface and groundwater management and water quality, the key water resources management challenges impacting economic development related to electricity production (hydropower) and agricultural water resources management, as well as institutional capacity to manage these sectors at the federal level. Pakistan has historically suffered from energy shortages. The lack of reliable electricity supply to industry has restrained economic growth. To respond to growing demand (increase of 7-8 percent per year) accelerated expansion in power generation systems was (and is) required. The country has developed only 15% of its estimated 40,000 MW of economically viable potential. The hydropower sector represents a viable option to meet future energy demand. However, significant investments are needed to support growth and service delivery goals in the sector. The investment climate and institutional capacity to raise financing and implement investments was low. 2. The country relies on the largest contiguous irrigation system in the world, the Indus Basin Irrigation System (IBIS), to provide basic food security (90% of food production and 25% of Gross Domestic Product GDP). Water availability in the IBIS is highly seasonal with 85% of annual river flows occurring during a 90 to 120 day period (June to September) making storage imperative. Storage capacity is gradually being lost (expected to decline by 57% by 2025) due to the large amounts of silt. The capacity of the Indus River System Authority (IRSA), which administers water allocation in the IBIS, needed to be enhanced to enable it to make measured decisions about water allocations based on the most modern tools, along with the ability to transparently assess water availability, distribution, and measurement throughout the system. This was deemed crucial for building trust among the main water users and stakeholders to ensure greater ownership and participation in future water sector investment programs. Despite large needs for investments in the sector to expand water supplies, improve water management and address energy shortages, the required investments were not forthcoming. The Government had only tapped public resources for investments in water and hydropower systems and currently owns major assets in these sectors. The extent of investments needed required expanding the range of financing options to include non-traditional methods, including involving the private sector. 3. Rationale for Bank Assistance. The Bank has a long history of partnership and collaboration with Pakistan; in particular in the water sector it is seen as the trusted partner. It has provided support to several major interventions in the development of IBIS, including to the 1960 Indus Water Treaty; the establishment of the Indus Basin Development Fund for the construction of replacement infrastructure (Mangla and Tarbela Dams, inter-river link canals and barrages); the Salinity Control and Reclamation Program; the Revised Action Plan for Irrigated Agriculture; and the Water Sector Investment Planning Study that led to the Inter Provincial Water Apportionment Accord of 1991 and the establishment of IRSA. 4. The project is fully aligned with the 2005 Pakistan Water Resources Assistance Strategy and with the objectives of the 2006 Country Assistance Strategy for Pakistan, including expansion in lending for infrastructure (primarily on energy and water). The project supported the envisaged Bank engagement in the water and irrigation sector through support to institutional reforms and investments throughout the system, including major investments in the rehabilitation of critical assets

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and reforms to improve the quality, efficiency, and accountability with which irrigation services are delivered. The project was not intended to address all shortcoming in the entire water sector – which would have been an unrealistic objective – but was to contribute to capacity enhancement on issues where the Bank had a strategic comparative advantage, such as in energy, agriculture, water allocation and investment planning.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved)

5. The PDO is to improve the Recipient’s management and investment planning of water resources in the Indus River system (according to the Financing Agreement). The PDO is worded slightly differently in the Project Appraisal Document (PAD) as: to improve the management and investment planning of water resources in the Indus River Basin. 6. Performance indicators selected to measure progress towards achieving the PDO were

Enhanced capacity of the relevant institutions to manage water resources using modern tools, techniques and methodologies; and

Enhanced capability in planning and financing investments in water and hydropower sectors.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

7. The PDO and results indicators were not revised. However, after restructuring, the key indicators were recorded as intermediate results indicators in the revised results framework.

1.4 Main Beneficiaries, 8. The main beneficiaries of the project were the implementing agencies (IAs) benefiting from capacity building and advisory services: the Ministry of Water and Power (MoWP) and its related authorities, IRSA and the Water and Power Development Authority (WAPDA), as well as the Water Section of the Planning Commission and the Infrastructure Project Development Facility (IPDF). The set of IAs comprised all key federal institutions mandated with the management and development of the Indus Basin water resources and related investment planning. Secondary beneficiaries are the people of Pakistan, who will benefit from the investments whose preparation was supported by the project, mainly in the hydropower and agriculture sector.

1.5 Original Components (as approved) 9. The project has three key components that are discussed below. More details are included in Annex 2. Component A: Capacity Building of and Support to Federal Institutions in Water Resources Planning and Management (USD 17 million) 10. This component aimed at reinforcing the mandates of the federal institutions and addressing the impediments to better performance and has the following sub-components: (1) Capacity building in regulation, policy and planning (Sub-component A1); (2) Capacity building in system planning, management and operation (Sub-component A2); (3) Capacity building in developing financing strategies for water and hydropower sector (Sub-component A3); and (4) Feasibility studies for small dams and water storage (Sub-component A4). Component B: Improvement in Water, Resources Management & Development (USD 17 million) 11. WAPDA’s mandate is to plan and coordinate large investments in water projects and expanding the electricity network across Pakistan. This component provided capacity strengthening and strategic support to WAPDA to enhance its mandated activities through enhancement of the

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tools used for Indus River system management, studies and assessments to improve hydropower development planning and project preparation. This component has four sub-components: (1) Upgrading of tools, water resources database, management system and models (Sub-component B1); (2) Sediment management studies (Sub-component B2); (3) Asset management plans, dam safety inspection and studies (Sub-component B3); and (4) Feasibility studies for run-of-the-river hydro projects (Sub-component B4). Component C: Project Management and Additional Studies (USD 4 million) 12. This component supported the Government (and in particular MoWP) with project management. The component had the following sub-components: (1) Project coordination, monitoring and evaluation (Sub-component C1); (2) Strategic studies approved by the Steering Committee during implementation (Sub-component C2); and (3) Technical Assistance and training (Sub-component C3).

1.6 Revised Components 13. The project was restructured on 15 March 2012 due to slow disbursements, duplication of some activities that were under implementation by other Government agencies, and emerging new priorities in the wake of the 2010 floods. The component structure remained the same, however some new activities were added and others were dropped. This is outlined in the next section.

1.7 Other significant changes 14. Time extensions. The WCAP became effective on 22 September 2008. In response to delayed implementation of some activities during the first three years, the project was restructured in March 2012. Since then implementation has accelerated and performance has improved. The Credit was extended twice and is currently under processing for a third extension until 31 January 2016:

8 January 2014: The Credit closing date was extended by 12 months to 28 February 2015 to complete on-going activities, including the National Flood Management Plan, and to allow the Government to prepare the request for additional financing (AF).

16 February 2015: The Credit closing date was extended by eight months to 30 October 2015 to allow time to process AF for the project (for which the request was received on 19 December 2014) and to allow time for (i) completion of the Improvement of Water Resources Management study (which required hydrologic measurements in one low-flow and one high-flow season), and (ii) finalization of the National Flood Management Plan.

15. Reallocation of credit and change in component activities. The component structure remained the same, however, the following activities were dropped and funds reallocated to existing and new activities (outlined below):

Strategy for Enhancing Productivity of Water Use and Irrigation Efficiency and Assessment of Beneficiary Participation (Sub-component A1) were dropped due to lack of progress and duplication with work under other projects.

Assessment of Development Plans (Federal), Ownership and Operation (Sub-component A1) was dropped due to lack of progress.

The following Sub-component A3) activities were dropped due to lack of progress in implementation by IPDF, risk of complaints on the procurement of consultancies, and duplication with activities undertaken by the Private Power Infrastructure Board (PPIB): Capacity Building and Development of Enabling Framework; Follow-up on Studies; Financial, Fiscal Analysis and Resources for Financing Public Private Partnerships (PPP) for Hydropower Projects; and Financial, Technical, and Transaction Advisory for Hydropower projects. Work with IPDF as IA was discontinued.

Assessment of Total Clean Development Mechanism (CDM) Opportunity in the Field of Renewable Energy with Special Focus on Hydropower (Sub-component C3).

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16. Activities which received additional financing:

Preparation and design studies for the Dasu Hydropower Project (Sub-component B4). Preparation of detailed engineering design, tender documents of Tarbela Fourth Extension

project (Sub-component B4).

17. New activity which received residual funds: Strengthening the capacity of the Federal Flood Commission (FFC) in developing and

implementing a comprehensive flood management plan (added to Component C2). Table 1: Reallocation of funds between components at restructuring1

Component Original

Amount (PAD) (USD million)

Reallocation at Restructuring (USD million)

Component A: Capacity Building of and support to Federal Institutions in Water Resources Planning and Management

17.00 9.65

Component B: Improved Water Resources Management and Development

17.00 20.93

Component C: Project Management, Coordination, Strategic Studies and Training

4.00 7.42

Total 38.00 38.00

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

2.1.1 Soundness of background analysis 18. The project was based on a sound analysis of the sector background and the lessons learned from the Bank’s multi-decade long engagement and experience in the water sector in Pakistan in general, and support to management of the IBIS, more particularly. Lessons adopted include:

Adoption of simple and streamlined procedures governing implementation, reflected in authorizing the Project Steering Committee (PSC) to approve any changes, additions and inclusion of studies/activities, as needs arise.

Technical assistance (TA) coordinated by a project director and designated project and policy implementation unit.

Avoiding excessive institutional complexity by limiting the TA to federal institutions mandated with water resources management. The mandates of the federal-level IAs engaged were all key to achieving the PDO.

Packaging of consultant contracts and technical assistance to avoid to the extent possible lengthy procedures and overhead in procurement and supervision of contracts.

19. The project was designed to complement other on-going water sector projects implemented in the provinces, e.g., Sindh Water Sector Improvement Project (P084302).

2.1.2 Assessment of project design 20. The waters of the Indus River system and the IBIS provide the backbone of the country’s economy and feed all provinces of the country. To achieve the PDO it was therefore central to engage and enhance the capacity of federal agencies that are tasked with management of the system across provinces. IRSA is responsible for the regulation and monitoring of the distribution of water resources of the Indus River amongst the provinces in accordance with the 1991 Water Accord.

1 Source: WCAP Progress Report No. 72 (February 2015). The precise dollar amount of each cancelled activity and each added activity was not detailed in the restructuring paper.

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IRSA is central to the management of water resources in the Indus Basin and for the country’s economy, given the importance of the irrigation and agriculture sector. WAPDA was created for the purpose of coordinating and giving a unified direction to the development of schemes in the water and hydropower sectors, which were previously being dealt with by the respective electricity and irrigation departments of the provinces. IRSA and WAPDA are the institutional backbone at the federal level for the management and development of the Indus River Basin. 21. Involvement of the IPDF, established under the Ministry of Finance in 2006 to promote PPPs in various sectors and to create an enabling legal framework for investments, and of the Planning Commission (PC), was to contribute to the achievement of the second part of the PDO on improving investment planning. While these two institutions contribute to the investment planning process in the Indus Basin, their roles are different from those of IRSA and WAPDA. The capacity for project implementation in both institutions was assessed to be low. IPDF was a very young institution and did not yet have a lot of experience in project implementation. The PC is not traditionally an IA. Hence, the planned sub-component activities for these two IAs were intentionally designed as moderate investments compared to the project activities of other IAs. The lessons of avoiding institutional complexity and ensure MoWP authority were taken into account to the extent possible. The IPDF and PC were included as IAs in response to strong client demand. 22. The PAD was somewhat ambiguous on the project’s institutional arrangements and does not adequately describe the role of the PC in project implementation. However, the Financing Agreements identify the PC as IA, and the PC is a permanent member of the PSC. Limitations in the implementation capacity of the PC ultimately led to non-implementation of capacity building activities at the PC and the transfer of implementation responsibility for feasibility studies for small dams (sub-component A4) to the PMPIU. The dropping of this relatively small activity did not have any significant impact towards achieving the PDO. 23. Lessons on the need for simple and flexible procedures to be able to adjust activities as per sector demand were well addressed. The PSC had the authority to approve changes and additions, rather than making this subject to renewed government approval. The long time taken to process the Planning Commission Proforma for TA Projects (PC-II) for the AF request (which required the Credit closing date to be extended twice) underscores the adequacy of this aspect of project design.

2.1.3 Adequacy of government’s commitment 24. Government commitment was and continues to be high, as evidenced by the current request for further additional financing to the project. The use of a Credit, rather than a grant, is evidence of the government’s commitment to invest in technical assistance and capacity building in water resources management and development at the federal level.

2.1.4 Risk Analysis and Mitigation 25. The overall risk rating at appraisal was “Moderate”, based on a thorough assessment of project risks, including: WAPDA may not agree to the progressive transfer of responsibilities to IRSA; potential lack of coordination among IAs; different levels of capacity at IAs; fiduciary compliance risks; and losing focus on strategically relevant issues that are of higher priority to GoP than the project’s capacity building and studies approach. 26. Mitigation measures were generally appropriate, including ensuring close coordination and collaboration between WAPDA and IRSA. Capacity building and targeted procurement training were built into project design. The risk of losing strategic focus was adequately mitigated by the flexibility of project design and decision making through PSC. This flexibility enabled the reallocation of funds to strategically important studies, including the development of the National Flood Management Plan and Dasu HEP preparation.

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2.2 Implementation 27. Project implementation was slow during the first three years as the main beneficiaries of the project financed capacity building and technical advisory services activities were also the agencies implementing these activities. Implementation progress was briefly downgraded from moderately satisfactory to moderately unsatisfactory in August 2011 due to slow disbursements and vacant financial management and procurement positions. It was upgraded to moderately satisfactory again in September 2011, after the government awarded key contracts leading to improvement in disbursement. At this time, the government also submitted a request for restructuring. 28. Factors in IA control

Delays in setting up of imprest accounts at the IAs affected the start of project implementation at WAPDA, IRSA and IPDF.

Initial inadequate capacity of, and staffing at, the Project Management and Policy Implementation Unit (PMPIU) to effectively coordinate across IAs hampered progress during the first 15 months of implementation. This was remedied by training and hiring a team leader in 2011.

Procurement for three activities implemented by IPDF at an estimated cost of about USD4 million was stalled due to complaints, and these activities were dropped at restructuring.

Due to low salary packages (based on the PC-II prepared in 2007/2008 rates) the project was neither able to retain staff nor fill vacant positions. Subsequently PMPIU established market based compensation rates for the staff funded by WCAP.

Over forty government officials have been trained in monitoring and evaluation techniques, dam safety, procurement, project management and investment planning. This contributed to the significant improvement in project implementation in the later years of the project.

29. Restructuring and project end date extensions. Project restructuring addressed issues relating to slow moving components. Activities implemented by IPDF which ran into procurement difficulties were dropped, as were studies to be implemented by PMPIU which were no longer considered as strategic and had not moved. Funds were reallocated to the preparation of a National Flood Management Plan (by FFC, which also hosts the PMPIU), and to the preparation of feasibility and design studies for HEPs, including for the design of Dasu HEP, (implemented by WAPDA) where funding was needed to progress on investment planning for the Indus River system. 30. Implementation of the IRSA led sub-component A2 was slow at first, but increased work and capacity building activities, as well as the two extensions to the Credit closing date, have allowed moderately satisfactory implementation of these activities. It is important to continue the IRSA led sub-components during the proposed AF.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 31. Design. The Results Framework (RF) in the PAD made an effort to address the difficult task of measuring the intermediate and long-term results of capacity building. This is by itself a difficult task under any capacity building project. The PDO indicators were designed to measure results towards achieving the two elements of the PDO, i.e., improvement in (a) management and (b) investment planning of water resources in the Indus River system. Intermediate results indicators defined in the PAD were to track outputs towards achieving intermediate results. However, the definition of quantitative targets and their baseline in the PAD RF lacked the necessary detail to facilitate tracking. Quantitative targets were revised at restructuring to qualitative tracking of results. 32. Implementation. Monitoring of these indicators was inadequate both on the Bank side and on the client side. Partly this is due to the lack of baseline and data definition for quantitative targets in the PAD. Due to the lack of proper definition of baseline and how indicators should be measured, data collection and monitoring of indicators was output rather than results based. On the other hand, inadequate monitoring is also due to a reversal in the monitoring of PDO vs intermediate results indicators and of results versus targets in the results frameworks used in the ISR and monthly

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progress reports of the project. In the ISRs, five of the eight intermediate results defined in the PAD RF were tracked as PDO Indicators and the two original PDO indicators from the PAD were tracked as intermediate results indicators. This new form of the RF was subsequently attached and adopted with the Restructuring Paper from 15 March 2012. 33. The first original PDO indicator “Enhanced capacity of relevant institutions to manage water resources using modern tools, techniques and methodologies” was linked to measuring capacity plans and training activities. The second original PDO indicator: “Enhanced capability in planning and financing investments in the water and hydropower sector” was linked to monitoring performance of IPDF led activities. Monitoring of the second original PDO indicator was dropped by the PMPIU after the remaining IPDF activities were dropped at restructuring, as this indicator had been re-defined and linked to the activities related to IPDF. From September 2011 to August 2012, the ISRs changed the indicator “Strategic staffing plan implemented”, initially designed to measure intermediate results on Component A, to a new PDO indicator: “Strategic studies for improvement in water resources planning and management completed, recommendations thereof approved and their implementation commenced”. This new indicator was integrated in the 2012 Restructuring RF. From April 2013 onwards, ISRs reverted to tracking “Strategic staffing plans implemented”. Intermediate results defined for and achieved under Component C were never monitored. 34. Utilization. The PMPIU provided monthly progress reports, which tracked achievement of indicators according to the RF that was later adopted as the RF at restructuring (i.e. with reversed indicators) in the Results Framework and Monitoring Annex. These comprehensive progress reports provide detailed status updates on progress towards outputs and disbursements. However with respect to the RF reported in the progress reports and the ISRs, the baseline and targets for the original PDO indicators were newly defined, likely due to the confusion that they were now measured as intermediate results indicators. 35. The monthly progress reports by PMPIU were used by the PSC to makes adjustments to planned studies during project implementation as per the project implementation arrangements outlined in the PAD; for example, the PSC decided to drop capacity building work to be implemented by the Planning Commission under Component A4, transferred the implementation responsibility to the feasibility studies of small dams to the PMPIU, and added the National Flood Protection Plan – IV as a new study. (See further Annex 2).

2.4 Safeguard and Fiduciary Compliance

36. Safeguards. The project was classified as environmental Category B and triggered OP/BP/GP 4.01 (Environmental Assessment) to ensure oversight of the preparation of specific environmental and social assessments carried out in the context of feasibility studies financed by the project. However, specific environmental and social assessments were not carried out for the project, either for the feasibility studies or for the construction and extension of PMPIU office in February 2011. Overall safeguards implementation and compliance was moderately satisfactory.

37. OP/BP/GP 7.50 (Projects on International Waterways) was triggered. The project did not foresee any physical works other than the installation of flow measuring stations and project preparation studies for hydroelectricity projects were to be only up to the feasibility level; hence the project was granted an exception under paragraph 7 (a) of OP/BP/GP 7.50. The restructured project partially financed detailed design for the Tarbela 4th Extension and the Dasu HEP, and included financing of river bed drilling for detailed design of Dasu. Exception under paragraph 7 (a) of OP7.50 applies to the Tarbela 4th Extension Project (P115893) and was approved on 23 November 2011. As required by OP7.50, riparian countries were notified on the Dasu HEP (P121507) by letter on 8 February 2014.

38. Procurement ratings remained ‘satisfactory’ throughout the project, barring a single downgrade. Procurement was mostly carried out in accordance with agreed procedures, though with

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significant delays, during the early years of implementation. Procurement complaints at IPDF were proactively addressed by the IA and the Bank.

39. A formal complaint handling process, which was required under the Financing Agreement, has not been developed. However, there are ad hoc processes in place for lodging, handling and responding to procurement complaints. Complaints and their status have, however, not been posted on the project website.

40. Financial Management (FM). The project has an adequate financial system which provides accurate and timely information, with reasonable assurance, that funds are being used for intended purposes. Financial statements are audited by the Supreme Audit Institution and acceptable audit reports are received in a timely manner. Factors that contributed to satisfactory FM during the later years of project implementation include the use of country systems, hiring and continuity of adequate FM staff, regular training and Bank supervision.

41. The project was at high risk of not fulfilling its financial commitments in the initial years because budget allocations had not been aligned with the procurement plan. Timely identification of the issue during Bank supervision resolved this issue. Annual budgets were subsequently prepared on the basis of planned activities identified in the procurement plan.

2.5 Post-completion Operation/Next Phase 42. Training of PMPIU, IRSA and WAPDA staff in project management, financial management, procurement capacity and dam safety will have a lasting impact on Indus River system management and investment planning. The proposed AF will contribute to ensuring that studies with policy focus, e.g., Best Practices in Resettlement Policy and the Strategic Sectoral Environmental and Social Assessment of the entire Indus Basin, will be further disseminated to inform future investment planning. Work on improving the transparency of measurement and allocation of IBIS flows will be continued under the AF that is currently being processed.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation Relevance of Objectives: High 43. The relevance of the project objective remains high. Pakistan is an agrarian economy that is heavily dependent on the waters of the Indus River system, mainly for agriculture and hydropower generation. The project is aligned with the World Bank’s twin goals of ending extreme poverty and promoting shared prosperity; the poorest are the most vulnerable to flood damage as they often live off the lands in the floodplains, whereas the bottom 40% will benefit from transparent water allocation and enhanced energy security through increased hydropower production. The project also remains relevant with respect to the current 2015-19 Country Partnership Strategy (CPS) for Pakistan. It supports Results Area 1; Energy of the CPS through support to preparatory work for the exploitation of the country’s hydropower potential. Increased investments in the hydropower sector are a priority under Results Area 1 of the CPS; hydropower development along the Indus River Cascade is the cornerstone of the WBG strategy for more and lower cost power generation in Pakistan. The project further supports the climate-change adaptation and mitigation cross-cutting area by focusing on investments and capacity building for energy, water and food security. Relevance of Design and Implementation: Substantial 44. Project design remains relevant both with respect to the two elements of the PDO, i.e., water management and investment planning in the Indus River system. The key federal level institutions mandated with management and planning of the Indus Basin Water Resources, in particular WAPDA and IRSA, were included as implementing agencies. The project design aims to strengthen the capacities of IRSA and WAPDA by the acquisition of state of the art tools and upgrading the decision support model, as well as by staff training and relevant studies, e.g., study on best practices

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on resettlement and on benefit sharing on hydropower projects, Strategic Sectoral Environmental and Social Assessment of the Indus Basin. Capacity improvements at IRSA and investments in the flow monitoring system were designed to enhance trust and confidence among stakeholders in the country’s water distribution system. The involvement of IPDF was designed to expand its capacity to access a wider array of financing sources. These activities, in addition to the preparation studies for HEPs, were designed to bring the client closer to realization of necessary investments in the water and energy sector. The reallocation of resources at restructuring realigned project funds according to client priorities by shifting significant resources to the planning and preparation of prioritized infrastructure investments. 45. Project design and implementation could have paid greater attention to the capacity differences between individual IAs. While the IPDF and PC sub-components were kept small, training did not prove sufficient during the early project implementation period and the project had to be restructured. However, given the relative importance of these IAs for the sector and the size of their project activities, achievement of the PDO was not significantly impacted. 46. The original Results Framework and the arrangements for implementation of the M&E were weak and required changes during the restructuring. While these changes are an improvement, the RF will need to be further strengthened under the proposed AF to reflect good practices in capacity building projects.

3.2 Achievement of Project Development Objectives

Improvement of water resources management in the Indus River System: Substantial 47. The project has contributed substantially to the improvement of water resources management in the Indus River System by equipping key federal water management institutions with modern state of the art tools, improving management skills of their staff and delivering studies to inform policy. The nation-wide study of groundwater availability and conjunctive management provides the sector with a plans for short-term (10 years), medium-term (15 years) and longer-term (25 years) plans for sustainable groundwater use. The establishment of a GIS/MIS Cell and Decision Support System (DSS) at IRSA improves the flow forecast and thus flow management capacity for IBIS significantly. The DSS also facilitates decision making by providing capacity to simulate various options of water availability. In additions, the Indus Basin Model Revised (IBMR) has been upgraded, including a more user friendly interface, which has expanded usage of the tool, including by the provincial irrigation departments. New modules on snow melt forecasting have further enhanced the reliability of forecasting capacity. Implementation of transparency enhancements of the IBIS flow measurement system, initiated under this project as an additional process to improve trust and confidence in the federal water management and allocation system, has now gathered momentum after a slow start. This is continue under the proposed AF. 48. The Handbook on Water Statistics provides entities tasked with water resources management with reliable data sets and has been made publicly available. The National Flood Protection Plan, which is currently being finalized by the Federal Flood Commission is expected to improve resilience and mitigate flood damage through improved country wide comprehensive flood management planning and implementation. The Draft River Act, restricting/prohibiting permanent settlements in high and medium flood risk areas, is being considered by federal and provincial stakeholders for follow-up action. 49. Other important project studies include the sediment management study of Tarbela Reservoir and the institutional capacity assessment of IRSA, which are both being implemented. A complete list of outputs, including a more detailed description of outcomes achieved, is provided in Annex 2. Improvement in Investment Planning: Substantial

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50. Improvement in investment planning was to be achieved through implementation of feasibility studies and investment planning studies to assist in identifying good investment options and investments in IPDF for developing PPP financing strategies for the hydropower sector. 51. Investment planning has been improved through studies which inform investments based on international standards, including the Strategic/Sectoral Environmental and Social Assessment of the Indus Basin and studies on Benefit Sharing and Resettlement. Both these studies have been applied to HEP investments to which this project contributed, and will inform future hydropower and large infrastructure investments in the Indus Basin (see Annex 2). Investment planning has been further improved through hands-on realization of investment planning studies, including completion of site identification and feasibility studies for two underground dams, as well as preparation of tender documents for eleven small dams. These studies provide federal and local level agencies with ready to implement investments. The high quality of planning for investments supported by the project also made the financing of two major HEP investments possible: the Tarbela 4th Extension (1410 MW) and the Dasu HEPs (4,320 MW). 52. Financing of the IPDF sub-component activities and of development of new financing business models, including PPP, was reduced after restructuring due to slow implementation and because it would have duplicated to some extent the work of WAPDA’s financing arm. Nevertheless, IPDF implemented activities have resulted in continued IPDF engagement for PPP financing for medium and small scale projects in the hydropower sector; this is a sector that IPDF had not been active in prior to WCAP. The newly established Water Resources Financing Cell has been streamlined into the overall IPDF structure after funding through WCAP was discontinued. The impact of dropping capacity building activities to be carried out by PC was limited, as the role of the PC in this process is relatively minor. The resources thus freed up were effectively utilized on increased hands-on investment planning and strengthening of WAPDA’s capacity for investment planning.

3.3 Efficiency

Rating: Substantial 53. The project financed technical assistance, capacity building, and preparation studies for infrastructure investment. Given the nature of the planned project activities, economic analysis in the PAD was qualitative and neither a net present value (NPV) nor an economic rate of return (ERR) was computed. The AF being processed presents an opportunity to explore the use of an improved methodology to measure project efficiency based on latest good practice. 54. The project’s relatively small investment in capacity building and technical assistance has made a significant contribution, in particular to improving investment planning to address the country’s power crisis. Funds were utilized efficiently, and where specific activities were either delayed or were not producing the desired results, funds were re-allocated to help finance more promising and better performing activities. The financing of the design, tender and other preparation documents of Stage I Dasu and Tarbela Fourth Extension projects through such a reallocation advanced the implementation of these investments and resulted in an avoided benefit loss of US$1195.2 Million (see Annex 3). 55. Project activities focused on value for money. Existing institutions and agencies were first strengthened instead of creating new ones, and the skills of existing staff were enhanced. Decision support tools already in use were first upgraded, and newer tools were developed only where it was felt that no comparable tools were already in place. Staff were trained on the new decision making tools. Terms of reference for studies were carefully reviewed to ensure that they were appropriate, required inputs from experts with appropriately defined skill levels, and costing was realistic. Adherence to these was carefully monitored during implementation, and contributed to efficient use of resources.

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56. The initial delays in the implementation of sub-components managed by WAPDA, IRSA and IPDF for the reasons discussed in Section 2, resulted in the project implementation period being extended by 18 months.

3.4 Justification of Overall Outcome Rating

Rating: Satisfactory 57. Project objectives continue to be highly relevant to GoP and the Bank and the relevance of design, despite some shortcomings in the results framework is rated substantial. Achievements of both elements of the PDO is rated substantial. The efficiency of the use of project resources, including the Credit, is rated substantial. Based on these assessments, overall project outcome is rated satisfactory. This corresponds to the satisfactory rating for the achievement of the PDO in the last ISR.

3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 58. The poverty and social development impact of this project is indirect. The technical assistance focused primarily on enhancing federal institutions mandated to manage the country’s water resources for public good. Feasibility and design studies for infrastructure investments financed by this project will have poverty and social development impacts once these projects are implemented. This project did not have a particular gender dimension. (b) Institutional Change/Strengthening 59. A large part of project activities focused on institutional strengthening and this is already assessed in other parts of the text. Continued investments in IRSA’s capacity have the potential to bring about revolutionary changes in Pakistan’s water allocation system and management of water resources across provinces. Improvement of transparency in the telemetry system and availability of real-time data at IRSA will improve trust in the institution and enhance allocation decisions. (c) Other Unintended Outcomes and Impacts (positive or negative) 60. None.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 61. Not applicable.

4. Assessment of Risk to Development Outcome Rating: Moderate 62. There are some risks to sustainability of the development outcomes:

Failure to continue to disseminate studies to make them policy relevant and continue to inform other planned investments when PMPIU, the “champion” who implemented the studies, disappears.

Non-implementation of feasibility studies due to lack of financing. 63. Institutional strengthening is a long term process. Given that an additional financing for this project is planned and important capacity building activities started under this project can be continued, the risk to the development outcome is rated moderate.

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5. Assessment of Bank and Borrower Performance

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 64. Strategic Relevance and Approach. The project was (at the time of appraisal) and continues to be strategically relevant for the water resources sector in Pakistan. The mainstay of Pakistan’s economy depends on the Indus River system’s water resources and the country continues to be affected by an energy crisis. The design approach to give priority to building government staff capacity over buying-in consultant services ensured capacity improvements, in particular in project management and also in investment planning. Project preparation was based on a sound assessment of sector issues and integration of lessons learned into the project design to be able to respond to GoP demand (see section 2.1.1). 65. Environmental, Fiduciary, Policy and Institutional Aspects. The project was appropriately placed in safeguards Category B with the aim to ensure good safeguards oversight in the preparation studies for investments that were to be financed by the project. Mitigation measures for fiduciary risks, including provisions for extensive staff training, were appropriately built into project design (see section 2.4). 66. Implementation Arrangements. Appropriate implementation flexibility was built into the project through an increased decision making mandate for the PSC. The project targeted the key federal water related institutions. The focus on federal institutions – versus also including provincial water management institutions - mitigated for the risk of excessive complexity, even if the arrangement of five IAs already seems complex. There remained however some ambiguity in description of the implementation arrangements in the PAD with respect to the role of the PC and the PC remained a stepchild of project implementation. However the low capacity of both IPDF and PC was correctly identified by the preparation team and the respective sub-component activity sizes were adjusted accordingly. Given the low implementation capacity of these IAs and also IRSA, the project design involving five IAs was ambitious, though necessary in order to work on bringing the key institutions up to if not same, then similar levels of institutional capacity. A levelling of institutional capacity among institutions in the water resources sector is crucial for sector performance. 67. Monitoring and Evaluation Arrangements and Risk Assessment. There were some challenges in the design of the RF and the monitoring arrangements given that M&E poses specific problems for capacity building projects (see section 2.3). Risk assessment and mitigation measures were generally appropriate (see section 2.1.4); however, the intensity of risk mitigation requirements to compensate for low implementing capacity of some IAs was underestimated in the initial period of project implementation. (b) Quality of Supervision Rating: Moderately Satisfactory 68. Focus on Development Impact. Bank supervision focused on the project’s development impact. Low performing IAs and slow moving activities, as well as activities already carried out by other agencies were identified early and the project was restructured by shifting resources to better performing IAs and to activities directly addressing the country’s energy shortage (see section 3.3). The restructuring was also used to revise the project’s results framework; however, more could have done in this regard. More efforts should have been made on dissemination of the studies for greater policy impact. These issues will be addressed during the processing of the current AF. 69. Supervision of Fiduciary and Safeguards Aspects. Procurement supervision was proactive to overcome the low capacity challenge at IAs. Financial management supervision was satisfactory.

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However, supervision of safeguards did not take into account the changes in activities that had safeguards implications (see section 2.4). 70. Adequacy of Supervision Inputs and Processes. The supervision team was appropriately staffed. Handover between TTLs (twice) was handled well to ensure continuity in client relationships and supervision. 71. Candor and Quality of Performance Reporting. ISR ratings and reporting were overall candid with some shortcomings. Risk assessments and mitigation measures, related, in particular, to the relatively small IPDF and PC implemented component activities, were not updated in project documentation at restructuring, despite clear performance issues. Monitoring of results and recording of IA involvement had some shortcomings, e.g., recording of work on sub-component A4 and recording of the discontinuation of work with IPDF. (c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory 72. With a Satisfactory rating for Quality at Entry and a Moderately Satisfactory rating for Quality of Supervision, overall Bank performance is rated as Moderately Satisfactory.

5.2 Borrower Performance

(a) Government Performance

Rating: Satisfactory 73. Government ownership and commitment to achieving development objectives. Government remained committed to the project throughout implementation. Its continued commitment to enhance impact in achieving the development objectives is evidenced by the request for AF. 74. Enabling environment. The Project Steering Committee convened on a regular basis. The location of the PMPIU (headed by the Chairman of Federal Flood Commission who is also the Federal Member of IRSA) gave it an adequately high profile to coordinate effectively across the IAs from MoWP. 75. Readiness for implementation, implementation arrangements and capacity, and appointment of key staff. Capacity to implement was improved over time. Given elaborate government procedures there were some delays in appointment of key staff. There were shortcomings in ensuring commitment from non-MoWP IAs. However, these IAs implemented relatively small parts of the project and their lack of capacity affected the project only marginally. (b) Implementing Agency or Agencies Performance

Overall Rating: Moderately Satisfactory 76. PMPIU - Rating: Satisfactory. PMPIU has been proactive in resolving problems and responding to Bank requirements in a timely and efficient manner after having acquired the experience of coordinating various IAs in the early stages of implementation. Staff training was used strategically to overcome shortcomings in the early phase of implementation. Monitoring of project results was effective and comprehensive status reports were furnished on a monthly basis. 77. IRSA - Rating: Moderately Satisfactory. Low capacity at IRSA led to delays in implementation. Implementation and supervision capacity remains low as IRSA did not take advantage of project management training opportunities financed under the project. This is an aspect that should be considered for the AF.

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78. IPDF - Rating: Moderately Unsatisfactory. IPDF performance faltered with respect to procurement processing. However, IPDF has since replaced the individuals concerned and activities with respect to PPP HEP financing have been streamlined within the institution’s structure. 79. Planning Commission - Rating: Unsatisfactory. The Planning Commission’s commitment to project implementation was low and its involvement in project activities was limited to the participation of one staff in training. 80. WAPDA - Rating: Satisfactory. WAPDA’s performance was satisfactory and efficient. Given its good performance, additional funds were allocated to the WAPDA managed component at restructuring.

81. The overall rating of Moderately Satisfactory is based on a weighting of the ratings of individual IAs taking into account their expected contribution to the overall project.

(c) Justification of Rating for Overall Borrower Performance

Rating: Moderately Satisfactory 82. Overall borrower performance is rated Moderately Satisfactory based on Satisfactory and Moderately Satisfactory performance of Government and the Implementing Agencies respectively.

6. Lessons Learned 83. Transparency and building trust in a water allocation system take time. Development of standardized and transparent flow measurement systems at key locations in the IBIS illustrated that building transparency in a water allocation system involving provinces in a federal system is subject to significant political pressures. The processes of building trust and confidence take time and long-term engagement through investment and facilitation needs to be ensured. Implementation of the AF will be critical to carry this process forward. 84. Linking institutional reform to tangible outputs. The project highlights the importance of linking institutional reform projects (such as WCAP) to the preparation of large investments in order to get government buy-in. Institutional reform processes usually take a long time to implement. If there are no tangible results along the way, such as new investments in HEP, irrigation or flow regulation, it is difficult to keep the client interested in institutional reform processes. 85. Staying the course on capacity strengthening. Shifting of resources at restructuring to well performing components (such as the one implemented by WAPDA for preparing HEP investments) can be important to maintain the client’s interest in an institutional reform agenda through ensuring tangible benefits. However, it is important to assess this move against continuing to be able to achieve the capacity building objectives of a project. Low performance is mostly linked to low capacity, which is the issue to be resolved by the project. Institutional development takes time and requires perseverance. The right balance has to be found between ensuring the achievement of capacity building objectives and project progress/disbursements. 86. Sustainability of implementation. Procurement specialists hired from the private sector to complement staff at PMPIU and IAs, including WAPDA, are difficult to retain at the comparatively low public sector salary scales. There are two options to address this issue: (1) the public sector (IAs, in particular WAPDA) to move to a more corporate approach, which would enable payment of market based salaries to sustain experts rather than rely on continued capacity building TA; or (2) invest in capacity building to create a dedicated cadre of procurement and contract management professionals in the public sector who can reliably fulfill these responsibilities for the government institutions. This ties in with the lesson that implementation arrangements should use existing Government systems (and staff) as far as possible to avoid creating parallel systems, which will not be sustainable after the project ends.

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87. Measuring results. Results monitoring and evaluation frameworks for capacity building projects are inherently difficult to develop. Special efforts should be made to use reflect good practice in the design of the RF and M&E arrangements for capacity building project (as is planned for the proposed AF).

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies 88. Comments were received by the PMPIU on 11 September 2015. In its comments the IA highlighted the major project achievements to be recognized; namely, i) enhanced capacity of the relevant federal water sector institutions to manage water resources using modem tools, techniques and methodologies; ii) enhanced capacity in planning and financing investments in water and hydropower sector; iii) improving management skills of their staff; iv) improvement in water resources planning and management through strategic studies; and v) improvement in investment planning in water sector through investment planning studies. 89. The PMPIU recognized that the Project passed though different stages of difficulties in the early phase of implementation. However, pointed out that overall the project performed well to achieve its Project Development Objectives (PDO) and continues to be committed to improve management and investment planning of water resources with important long term benefits for the sector and the country, therefore, given the critical nature of water and energy for the country’s economic development. 90. The PMPIU suggested text changes in the data sheet as well as in the main text (paragraph 16) and Annexes 2 and 7, which have been integrated as appropriate. (For details see Annex 7). 91. The PMPIU thanked the preparation and implementation teams from the Bank and recognized that the project contributed to a positive improvement in institutional capacity and expertise required to develop and manage Indus River System to meet the rising demand of water and power in sustainable manner for country’s economic growth. (b) Cofinanciers – Not applicable. (c) Other partners and stakeholders – Not applicable.

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Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Components

Appraisal Estimate

(USD millions)

Allocation at Restructurin

g (USD millions)2

Percentage of Appraisal

Actual Cost(Status

August 31, 2015) (USD

millions) Component A: Capacity building of and support to the federal institutions in water resources planning and management.

17.00 9.65 56.8 4.98

Component B: Improvement in water resources management and development

17.00 20.93 123.1 21.85

Component C: Project management and additional studies 4.00 7.42 185.5 5.8

Total Baseline Cost 38.00 32.63 Physical Contingencies Price Contingencies

Total Project Costs 38.00 38.00 Front-end fee PPF Front-end fee IBRD

Total Financing Required 38.00 38.00

Reallocation of funds between components and allocation of contingency occurred during project restructuring 15 March 2012. Due to variations in the exchange rate since appraisal between SDR vs USD and PKR vs USD the total loan amount available (status August 31, 2015) is at 35.46. Total expected loan requirements up to October 30, 2015 are at an amount of USD 34.96 million.

(b) Financing

Source of Funds Type of Cofinancing

Appraisal Estimate

(USD millions)

Actual/Latest Estimate

(USD millions)

Percentage of Appraisal

Borrower International Development Association (IDA) 38.00 38.00 100

2 The project is still under implementation. Final disbursement estimates have therefore not be made.

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Annex 2. Outputs by Component Component A: Capacity Building and Support to Federal Institutions in Water Resources Planning and Management 1. The key outputs of this component are:

Evaluation of Past and Present Resettlement Plans in Pakistan in the Context of International Best Practices Leading to Formulation of Improved Resettlement Plan

Strategic/Sectoral Environmental and Social Assessment (SSESA) of Indus Basin Nation-wide study of Groundwater Availability and Conjunctive Management Study on and Policies for Benefit Sharing on Hydropower projects among Stakeholders Development of GIS/MIS Centre and Decision Support System (DSS) to Enhance the Capacity Building of Indus River

System Authority (IRSA) Improvement of Water Resources Management of Indus Basin to Enhance the Capacity Building of IRSA Capacity building in developing financing strategies for water and hydropower sector

2. These activities strengthened the capacity of the Ministry of Water and Power for planning and implementation of hydro-power development, as well as for planning of sustainable use of the country’s groundwater resources. 3. IRSA’s capacity for flow forecasting and decision making for water allocation is strengthened through the investment in the GIS/MIS Center and DSS. The investments in transparent and standardize flow measurement systems aim at increasing trust in IBIS management and to reduce tension on water allocation between the provinces. This process is still ongoing and will continue with the AF. 4. Investments in IPDF, even though smaller than planned at appraisal, have resulted in continued IPDF engagement for PPP financing in the hydropower sector. 5. Investments in support of the Planning Commission for training were dropped by the PSC on 24 September 2013 due to lack of disbursement. The feasibility studies of small dams (listed in the PAD under Component A4) were implemented under component C2 and responsibility of implementation shifted to PMPIU.

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6. Utilization of funds and the impact of each individual activity are described in detail in the table below.

Component/ Agency Activity

Allocated Cost3 (USD million)

Incurred Cost 4 (USD million)

Outcomes/Outputs

A1 / PMPIU

Evaluation of Past and Present Resettlement Plans in Pakistan in the Context of International Best Practices Leading to Formulation of Improved Resettlement Plan

0.4 0.36

The study looked at improving resettlement planning capacity and the implementation processes for the construction of large water reservoirs and hydropower projects in the country. The benefits and outputs of this study include: - Recommendations that inform and assist in policy and strategy building, that improve the resettlement

planning. The study provides a guideline approach to implement resettlement plans and the necessary implementation arrangements and institutional setup needed.

- A framework for addressing issues of inadequate compensation and resettlement/ rehabilitation of the affected population within the context of Pakistan’s specific social circumstances, financial constraints, and legal infrastructure.

The Study’s finding/recommendations were considered as reference/guideline for social assessment and development of resettlement plan for Dasu Hydropower Project under WCAP.

3 Allocated cost at restructuring. Quoted activity costs per component do not include expenditure on equipment, individual consultants, O&M and miscellaneous expenditures (office administration etc.)

4 As reported in client progress report; for ongoing activities committed funds are quoted.

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A1 / PMPIU

Strategic/Sectoral Environmental and Social Assessment (SSESA) of Indus Basin

1.38 1.11

This activity has resulted in a study and the associated consultancy services. The study has undertaken a comprehensive assessment of storage and hydropower development investments/options in the entire Indus Basin. The study results provide clear direction for the future development of hydropower in the Indus Basin and provide potential investors and donors with confidence that strategic long range planning will be undertaken in a socially responsible and equitable manner. The consultancy services have examined the sectoral policies and institutional framework in the water sector, and also recommended the necessary institutions needed to support hydropower development while making environmental considerations and enhancing the institutional capacity to organize and manage water related environmental and social issues. The major output and benefit from the study include policy recommendations to enhance sustainable hydropower and a way forward to address the national needs of water and energy keeping in view the technical, financial, environmental and social considerations in a 20 year time span in five year investment periods.

A1 / PMPIU

Nation-wide study of Groundwater Availability and Conjunctive Management.

0.20 0.18

The study has looked into the nationwide availability of groundwater and provided a comprehensive set of recommendations for improvement in groundwater regulatory frameworks. The benefits and outcomes of the study include strategic conjunctive water management framework plans for short-term (10-year plan), medium-term (15-year plan) and long term (25 year plan). These plans will help in sustainable use of groundwater resource for the long term and bring practical benefits to water users. Additionally, these plans act as a guideline for full participation of all the stakeholders including concerned provincial departments for implementation of proposed framework for conjunctive management of surface and groundwater resources. The study findings and recommendations have been shared with various stakeholders for their consideration and implementation of suggested framework.

A1 / PMPIU

Study on and Policies for Benefit Sharing on Hydropower projects among Stakeholders

0.20 0.19

The study provides policy guidelines and mechanisms for benefit sharing on hydropower projects among stakeholders and thereby supports sustainable hydropower development in the country taking into account the broader range of benefits from multipurpose projects including irrigation, flood control, etc. The benefits of this study include policy recommendations/guideline for developing sound monetary and non-monetary benefit-sharing mechanisms, particularly within the context of existing policies (federal and provincial) and practices in Pakistan regarding hydropower (run-of-river as well as multipurpose) projects. The Study’s finding/recommendations were considered as reference/guideline for Dasu Hydropower Project under WCAP and provide guidance for future HEP and other major infrastructure investments.

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A1/PMPIU

Strategy for Enhancing Productivity of Water Use and Irrigation Efficiency and Assessment of Beneficiary Participation

0.19 N/A Dropped at restructuring due to lack of progress and duplication with work under other projects

A1/PMPIU

Assessment of Development Plans (Federal), Ownership and Operation

0.19 N/A Dropped at restructuring due to lack of progress.

A2 / IRSA

Development of GIS/MIS Centre and Decision Support System to Enhance the Capacity Building of Indus River System Authority (IRSA)

0.73 0.64

This activity built capacity of IRSA by developing a GIS/MIS Cell and Decision Support System (DSS) with tools, GIS databases and MIS with web based interfaces to access information from all stakeholders for season/10 daily planning of water distribution and operation of reservoirs. This data cell assists IRSA in efficient access, storage, process and retrieval of data, editing and updating the database and generating customized reports/information for various stakeholders through web. This DSS simulates existing procedures for IRSA’s operation in view of WAA-1991 including forecasting, rule curves and water accounting summary to increase operational efficiency. DSS also facilitates decision making by simulating various options of water availability at rim stations for efficient management of Indus Basin Irrigation System operation and to enhance trust and confidence amongst stakeholders in the water distribution system.

A2 / IRSA

Improvement of Water Resources Management of Indus Basin to Enhance the Capacity Building of IRSA

1.99 1.64

Under this activity, IRSA’s capacity was improved in the efficient use of water resources, thereby reducing growth in water demand and preventing conflicts over water resources especially during critical demand periods. This activity develops standardized and transparent flow measurement systems at key locations of the Indus Basin Irrigation System which will further enhance trust and confidence amongst stakeholders in the water distribution system.

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A3 / IPDF

Capacity building in developing financing strategies for water and hydropower sector

0.15 0.15

This component strengthened the capacity of IPDF to develop financing strategies for the water sector and hydropower infrastructure, and to provide advice to clients on financial, fiscal, legal and regulatory matters. The Multi-Purpose Water Reservoir Financing Cell which was initially established with financing from this project was streamlined into other departments of IPDF. IPDF continues to be active on small-to medium-size HEP project financing through PPP.

A3/IPDF

Financial and Fiscal Analysis and Resources for Financing Public Private Partnerships (PPP) Hydropower Projects

0.75 N/A Dropped at restructuring due to lack of progress in implementation.

A3/IPDF

Financial, Technical, and Transaction Advisory for HEP projects

1.5 N/A Dropped at restructuring due to lack of progress in implementation.

A4/PC

Training in International Law, International Liason, Civil Society and Technical Updates

3.00 N/A Dropped by the PSC on 24 September 2013 due to lack of progress in implementation.

A4/PC Feasibility of Small Dams (see C) (see C) Responsibility to implemented was shifter to PMPIU and studies were implemented under Component C. (See

description below.

Component B: Improvement in Water Resources Management and Development 6. The key outputs of this component are:

IBMR & Database and Strengthening of Flow Forecasting System

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Agro-Economic Farm Survey Sediment Management Study of Tarbela Reservoir Procurement of Antelope Software Upgrading of Antelope Software, Procurement of Security Surveillance, Fire Fighting and Security System Procurement of CMTL Equipment, Spares for Rock Mechanics Lab Procurement of Equipment, Establishment of Roller Compacted Concrete RCC Laboratory in CMTL and Training of CMTL

Personnel Dam Safety Training Detailed Engineering Design, Tender Documents and PC-I of Tarbela 4th Extension Hydropower Project Units 15 & 16 (960

MW) Consultancy Services for Detailed Engineering Design, Tender Documents and PC-I of Dasu Run-of-River Hydropower

Project (4,320 MW) 7. The IBMR was upgraded, including with inputs from the Agro-Economic Farm Survey, and ease of use enhanced through development of a simplified interface. WAPDA and IRSA capacity for flow forecasting has been significantly strengthened through the upgrading of IBMR. 8. Procurement, upgrading of and staff training on Antelope software eliminated time-lag in analysis of seismic data, which previously had to be sent to Switzerland for analysis. These investments present significant future cost savings in the analysis of seismic data (see Annex 3). Investments in CMTL equipment strengthened WAPDA’s capacity to construct large dams and hydrologic infrastructure. 9. The Sediment Management Study for Tarbela Reservoir and the studies implemented for preparation and detailed design of the Tarbela 4th Extension and Dasu HEP directly supported investments in large hydro-power projects (which are now under implementation) will alleviate the country’s energy crisis(see Annex 3). 10. Utilization of funds and the impact of each individual activity are described in detail in the table below. The impact of training activities carried out under all three components is described in a separate section at the end of this Annex.

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Allocated Cost5 (USD million)

Incurred Cost 6 (USD million)

Outcomes/Outputs

B1 / WAPDA

IBMR & Database and Strengthening of Flow Forecasting System

0.92 0.82

This aim of this activity was to improve flow forecasting capabilities leading to better water utilization. The study comprised two components, namely; a) IBMR, GIS and Database Integration, and b) Snow Melt Flow Forecasting of Upper Jhelum Catchment. Under this activity, the output is an integrated IBMR Model which comprises a database, web-GIS tools and user-friendly interface, which has expanded usage of the model to other water sector planning organizations including IRSA and Provincial Irrigation & Agriculture Departments for future water resources planning and water management in Indus Basin and also enhance the capacity of local professionals within WAPDA for future updating. Another output is the hydrological model, which shall forecast early Kharif snow melt flows and 10 daily flows for Jhelum River at Mangla and facilitate the decision-making regarding the water availability and distribution. The model is also a tool to assess climate change impacts on Jhelum River Inflows at Mangla.

B1 / WAPDA Agro-Economic Farm Survey 0.15 0.15

The activity included consultancy services for updating of agro-economic data and upgrading of existing IBMR from monthly mode to 10-daily basis for its application in studies relating to management and operation of Indus River System and evaluation of Agro-Economic benefits of future water sector projects.

B2 / WAPDA Sediment Management Study of Tarbela Reservoir

3.00 2.37

The study analyzed and evaluated the recommendations of Dr. Annandale in the 5TH periodic Inspection of Tarbela Dam and use them for Sediment Transport Models (1D, 2D & 3D) for Tarbela reservoir and downstream hydraulic structures and present sediment management options based on robust analysis for the Tarbela reservoir. The study findings and recommendations have been shared with various Federal and Provincial stakeholders for their consideration and implementations.

5 Allocated cost at restructuring. Quoted activity costs per component do not include expenditure on equipment, individual consultants, O&M and miscellaneous expenditures (office administration etc.)

6 As reported in client progress report; for ongoing activities committed funds are quoted.

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B3 / WAPDA

Procurement and upgrading of Antelope software. Procurement of Security Surveillance, Fire Fighting and Security System.

0.88 0.85

This activity established a state-of-the-art Antelope Software based at the central Seismic Data Centers (SDC) at Tarbela, Mangla and Lahore. This kind of seismic data is required for seismic hazard evaluations and re-evaluations of large hydraulic structures, dams, hydropower projects, etc. After this establishment of this software, real-time seismic data from 29 stations is processed, analyzed and cataloged at three central SDCs.

B3 / WAPDA

Procurement of CMTL Equipment, Spares for Rock Mechanics Lab. Procurement of Equipment, Establishment for Roller Compacted Concrete Laboratory in CMTL and Training of CMTL Personnel

1.92 1.31

This activity enhanced capacity in investigation works for large hydraulic structures / dams / hydropower projects, which were previously sent to other countries for testing, by procuring the necessary facilities (equipment/machinery) which are needed for investigation works for hydropower projects. Besides providing testing facility to local industry in the field of Rock Mechanics, cement & concrete and Roller Compacted Concrete (RCC), this activity supports large dams and hydropower projects.

B3 / WAPDA Dam Safety Training 0.3 0.28

This activity improved capacity in dam safety. WAPDA has sent its 12 engineers to USBR in the US for training its engineers on Dam Safety, which is a highly specialized subject and has provided WAPDA with this unique skill set.

B4 / WAPDA

Detailed Engineering Design, Tender Documents and PC-I of Tarbela 4th Extension Hydropower Project Units 15 & 16 (960 MW)

6.30 6.19

This activity has financed the detailed Engineering Design Tender Documents and PC-I of Tarbela 4TH Hydropower Project (1410 MW), which is an enormous effort to overcome acute power crisis in the country. Being renewable, cheap and clean energy project, these will not only help in overcoming power crisis but will also produce numerous economic benefits. Implementation of the project is now underway under a separate activity that is also supported by the Bank.

B4 / WAPDA

Consultancy Services for Detailed Engineering Design, Tender Documents and PC-I of Dasu Run-of-River Hydropower Project (4,320 MW)

7.70 7.48

This activity has financed the detailed Engineering Design Tender Documents and PC-I of Dasu Run-of-River Hydropower Project (4320 MW). Project is now under implementation under a separate activity that is also supported by the Bank.

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Component C: Project Management and Additional Studies 11. The objective of this component was to support the Government and the project IAs in project management and monitoring, as well as staff training. Additional studies that were initially planned to be carried out as part of sub-component A4 were reported and tracked by the PMPIU and the Bank under this component. 12. The key outputs of this component were:

Handbook on Water Statistics of Pakistan Feasibility Study of Underground Dams Feasibility Study of Small Dams and Water Storages Geotechnical investigation works and topographic survey Development of National Flood Protection Plan-IV (NFPP-IV) and Related Studies to Enhance Capacity Building of Federal

Flood Commission Institutional Assessment of IRSA Capacity Needs Assessment of MoWP and Line Agencies of WCAP Design and Construction of Office for PMPIU Design and Construction of Office for PMPIU

13. The Handbook of Water Statistics provides GoP an updated and reliable data set for strengthened water resources planning. The identification of sites, feasibility studies for underground dams and small dams, including tender documents for 11 small dams, have increased the readiness for investments of much needed small-scale regulation infrastructure and storage. Once implemented, these will enhance local water security. 14. Investment in NFPP-IV and additional studies for flood preparedness improved Government capacity to increase flood resilience and reduce future flood losses. 15. Capacity building measures and training carried out under this component have increased institutional capacity and the administrative efficiency for implementation of this project (see summary of Skill Development and Training Activities).

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16. Utilization of funds and the impact of each individual activity are described in detail in the table below.


Allocated Cost (USD million)

Incurred Cost (USD million)

Outcomes/Outputs

C / PMPIU Handbook on Water Statistics of Pakistan

0.075 0.075

The handbook is a comprehensive statistical databank that helps project planners, managers, researchers, universities and international donors’ to plan and manage future projects on technically sound basis. The handbook provides an updated reliable water-related database for Pakistan. It also facilitates online knowledge-exchange for all stakeholders involved in the water sector. The Handbook is publicly available and accessible to stakeholders beyond the federal level institutions benefiting directly from this project.

C / PMPIU Feasibility Study of Underground Dams

0.43 0.34

The study identifies potential sites for developing small underground storage dams that store flood water, and the study also prepares preparation studies for the construction of these selected underground dams. More specifically, this study included consultancy services for identifying potential sites in water scarce areas of Pakistan as feasible sites for underground storage and the preparation studies of two (2) underground dams.

C / PMPIU

Feasibility Study of Small Dams and Water Storages Geotechnical investigation works and topographic survey

2.27 2.12

The study and the associated consultancy services include identifying potential sites for small dams, in all the regions and the preparation of the associated preparation studies for selected dam/storage sites as recommended in consultation with the Client and Provincial Irrigation Departments and Small Dam Organizations.

C / PMPIU

Development of National Flood Protection Plan-IV (NFPP-IV) and Related Studies to Enhance Capacity Building of Federal Flood Commission

1.87 1.86

The activity’s benefits and output include (a) a National Flood Protection-IV (NFPP-IV) and umbrella PC-I for next 10 years based on integrated and innovative approaches and technical shortcomings and lessons learnt in the past major flood events; (b) a comprehensive inventory of the existing flood protection infrastructure of all regions of Pakistan (c) Floodplain Mapping & Zoning along all the Indus River and its major tributaries (Kabul, Swat, Jehlum, Chenab, Ravi & Sutlej) (d) reliable database Centre at FFC to store and retrieve required data and enhance data processing techniques for preparation and dissemination of Flood Reports, among all stakeholders at the Federal and Provincial levels, including public. The development of the National Flood Protection Plan-IV will benefit in improving country-wide comprehensive flood management planning, implementation and monitoring capacity and assist in achieving flood management objectives. The Draft River Act for restricting/prohibiting permanent settlements in high and medium flood risk areas has been shared with various Federal and Provincial stakeholders for their consideration.

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C/PMPIU

Assessment of Total Clean Development Mechanism (CDM) Opportunity in the Field of Renewable Energy with Special Focus on Hydropower

0.31 N/A Dropped at restructuring.

C / PMPIU Institutional Assessment of IRSA

0.23 0.23

This activity undertook an audit and strategic assessment of IRSA’s governance, and staffing and recommended how to improve performance and meet future challenges. The output includes an action plan for IRSA’s development, business plans for IRSA, based on best basin-management practices, and plans on how to adapt these best practices to the particular circumstances of IRSA.

C / PMPIU

Capacity Needs Assessment of MoWP and Line Agencies of WCAP

0.12 0.12

This activity financed training to build capacity within the Ministry of Water & Power, PMPIU, IRSA, WAPDA and Water Section of Planning Commission. As part of capacity building, foreign training imparted to 28 professionals from various water sector organizations under C component.

C / PMPIU Design and Construction of Office for PMPIU

0.52 0.42 Construction of office floor for PMPIU at the Federal Flood Commission office complex, Islamabad.

Summary of Skill Development and Training Activities 17. In the context of capacity building and skill improvement, US$ 643,514 was invested for training in the following areas:

Dam Safety and other dam related training, conferences and study tours (12 WAPDA staff; 6 staff from provincial irrigation departments; 1 Planning Commission staff)

Project Management, Monitoring and Evaluation (3 FFC staff; 2 MoWP staff) Procurement (8 WAPDA staff; 1 PMPIU staff) Financial Risk Management (3 WAPDA staff) Development of Public Private Partnerships (2 IRSA staff) Climate Change, Water and Environment (1 Pakistan Commission for Indus Water staff; 1 FFC staff)

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18. Training in project management, financial risk and procurement management enhanced project implementation progress and procurement processing in the IAs whose staff was trained. Dam safety training was provided to federal and financial agencies primarily responsible for dam structures and is expected to have a long term impact on enhanced design and system reliability.

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Annex 3. Economic and Financial Analysis Project Benefits as presented in PAD 1. The project planned for investments primarily in (a) technical assistance; (b) capacity building both through financing of upgrading of tools as well as training; and (c) preparation studies for infrastructure investment. The economic analysis in the PAD did therefore not calculate a net present value (NPV) or economic rate of return (ERR). The analysis in the PAD is purely qualitative with respect to expected project benefits of better water resources management and improved planning and development of water resources in the Indus Basin with better environmental and social consideration generating enormous benefits for the country overall. Assessment of Qualitative Benefits 2. Most of the intended benefits of the project, such as good planning and management in the long term, are not quantifiable. An assessment of qualitative benefits of the project is presented below. Improved water resources planning and management

The evaluation on past and present resettlement plans in the context of international best practice informed the design of DHP-I and is likely to inform future infrastructure project design.

The strategic sectoral environmental and social assessment of the Indus Basin has been used by IFC on private sector hydropower development projects.

The National Flood Protection Plan is expected to reduce flood damage losses in the future.

Additional feasibility studies for small and underground dams for implementation at the provincial level prepared the ground for enhanced water management capacity at provincial level.

The project achieved time-savings in assessing seismic risk at the reservoir level through investment in the purchasing of Antelope software at WAPDA. Previously raw data had to be sent for analysis to Switzerland which led to a significant time-lag in assessing risk; Antalope allows for real-time assessment of seismic data. The purchase of the software also allows for future cost-savings. The monthly fees for seismic data analysis were US$ 12,400 per station. In less than 3 years, the cost of purchasing Antelope software is paid off by offsetting the recurring fee payments that would have to be made otherwise.

Strengthened river basin organization and enhanced flow allocation 3. Capacity to improve flow allocation at IRSA was improved through investments in new and upgrading of existing tools.

The Indus Basin Model Revised (IBMR) date was brought updated on prize data with inputs from and agro-economic farm survey. The IBMR interface was simplified making the model more user friendly and open to wider use.

The GIS/MIS Center and Decision Support System allows IRSA to integrate satellite imagery in its decision support system. New modeling tools and the

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GIS/MIS team support IRSA members with improved data access and analysis for water allocation decisions.

The process of upgrading the telemetry system (currently 5 sites) and increasing its transparency increases trust in water allocation in the IBIS, which is IRSA’s core mandate.

Enhanced financing of HEP

Although the water resources financing cell, which was supported by the project, was disbanded after financing was stopped, the project initiated engagement of IPDF in the hydropower sector. IPDF continues to be engaged in PPP on medium and small scale projects. This is a sector that IPDF has not been active in before WCAP.

Approximated Net Present Value of Technical Assistance 4. As far as expected benefits from Component B related to materializing solutions for Pakistan’s water and power sector through preparation of implementable hydropower projects an approximate quantification of project benefits can be made. One of the key challenges in Pakistan’s hydropower sector are delays in investments due to challenges in the sourcing of financing for large hydropower investments. The project has leveraged an investment worth US$5,162 million (of which US$ 1,428.4 million IBRD and IDA) through supporting the preparation of the Tarbela Fourth Extension Hydropower Project (T4HP) and Dasu Hydropower Stage I Project (DHP-I). 5. The technical assistance activities have resulted in the identification of the best possible design of the DHP-I with least unit investment cost. The alternative chosen was technically and economically the most feasible with considerably lower social impacts (i.e., much smaller number of people to be relocated) and less land flooded (i.e., about 13% less), saving important physical and cultural resources of the area7. The final project design was arrived at after extensive consultations with the affected population, taking into consideration their social and environmental concerns. The technical assistance project also enabled the identification of the least cost alternative for the T4HP as well as the identification of optimal design for the selected alternative8. 6. One of the major contribution of the technical assistance project is avoidance of delays in the implementation of the two projects and therefore allows for time efficient realization of hydropower benefits. The assumption of the NPV analysis is that in the absence of the technical assistance project, the investments would still be implemented and the benefits will be realized but likely with significant delays. Methodology

7 See Dasu Stage I Project Appraisal Report, p.19 8 See Tarbela Fourth Extension Hydropower Project Appraisal Report, pp.13-14.

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7. In this analysis, the economic cash flows generated for the two projects were obtained from the respective PADs and combined without modification. The basic parameters such as discount rate, economic service life of hydropower plants and dams, etc., were maintained in the current analysis. The only modification is the time pattern of costs and benefits, which is expected to differ for with and without technical assistance scenarios.

8. The implementation-delay-avoidance benefits of the technical assistance project activities is undisputable. However, the specific number of years by which the technical assistance project accelerated the project implementation and realization of hydropower benefits is uncertain. Because of lack of definitive values regarding the number of years of delays avoided, four scenarios of the time patterns of the incidence of costs and benefits of the T4HP and DHP-I projects were formulated.

Scenario 1: Zero delay in the implementation (or With TA Scenario) Scenario 2: Five years delays in implementation (without TA Scenario) Scenario 3: Ten years delays in implementation (without TA Scenario) Scenario 4: Fifteen years delays in implementation (Without TA Scenario)

Economic Analysis Results: benefits of implementation delay avoidance 9. The results of the cost benefit re-analysis of the combined T4HP and DHP-I projects under different implementation delay Scenarios are summarized in Table 1. Under the optimal project implementation schedule (i.e., Zero delay due to technical assistance) the combined NPV of T4HP and DHP-I projects is estimated at US$2784.2 million. This value diminishes to only US$1589.1 million, if the project implementation is delayed by five years in the absence of TA support, which is equivalent to avoided benefit loss of US$1195.2 Million (or US$2784.2 million less US$1589.1 million). The results for the remaining scenarios can be interpreted similarly.

Table 3.1: Estimated benefits of implementation delay avoidance due to the TA project Delays in Year (Scenarios)

Estimated NPV(Million Us$) Under Different Delay Assumptions

NPV(Million US$) of Avoided Benefits loss due to TA Project

Zero (With TA Project) 2784.2 0 Five (Without TA Project) 1589.1 1195.1 Ten (Without TA Project) 901.7 1882.5 Fifteen (Without TA Project)

511.6 2272.6

10. The investment of US$17.86 million for the sediment management study of Tarbela reservoir, the detailed engineering design and tender documents for T4HP and the detailed design for DHP-I has potentially significant returns due to enhanced investment readiness of hydropower projects, reduced social and environmental costs,

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avoided delays in implementation, and improved overall cost economy of the investment operation (see PADs of respective projects).

Cost Efficiency and Administrative Efficiency 11. Project investments were cost-efficient, as interventions selected focused on avoiding redundancies. Thus, existing institutions and agencies with precedence were first strengthened instead of creating new ones. Instead of hiring consultants cost-efficient investments in the skill enhancement of existing staff were made. Also, decision support tools that had already been in use were first upgraded, and newer ones were only created where it was felt that there were no existing tools of the kind. Staff were trained on the new tools for decision making.

12. Administrative efficiency, after initial implementation delays, was greatly enhanced through IA staff training on project management, financial risk and procurement management (see Annex 2).

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Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/ Specialty

Supervision/ICR Javaid Afzal Sr Environmental Spec. GENDR TTL, Safeguards Masood Ahmad Lead Hydropower Specialist GEERD TTL Ousmane Dione Practice Manager GWADR TTL Ernesto Sanchez-Triana Lead Environment Specialist GENDR Safeguards Fouad Mohammad Khan Environment Specialist GENDR Safeguards Syed Sada Hussain Shah Naqvi Team Assistant SASDO

Rachel S. Palmer Program Assistant SASDO Mehvish Altaf Team Assistant SACPK Celita Janyna Rhor Senior Procurement Specialist SARPS Procurement Uzma Sadaf Senior Procurement Specialist SARPS Procurement Rehan Hyder Sr Procurement Specialist GGODR Procurement Judith K. Plummer Sr Financial Analyst SASDE FM Riaz Mahmood Financial Management Analyst SARFM FM

Furqan Ahmad Saleem Sr Financial Management Specialist AFTFM FM

Sabah Saeeda Rasheed Sr Financial Management Specialist GGODR FM

Syed Waseem Abbas Kazmi

Sr Financial Management Specialist GGODR FM

Qurat ul Ain Hadi Financial Management Specialist GGODR FM Tahira Syed Operations Officer SASDA Christina Leb Sr Water Resources Specialist GWADR ICR-TTL

(b) Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD (including travel and consultant costs)

Lending FY08 26.41 FY09 22.47 FY10 33.55 FY11 14.63 FY12 17.87

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FY13 14.83 FY14 20.23 FY15 19.92

Total: 169.91 830883.16

Supervision/ICR

Total: 0.00

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Annex 5. Beneficiary Survey Results (if any) – N/A

Annex 6. Stakeholder Workshop Report and Results (if any) – N/A

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Executive Summary of Borrower’s ICR Background 1. Water resources and hydropower development are vital to Pakistan’s economic health and their improved management is crucial for poverty reduction. Agriculture represents about 21% of Pakistan’s gross domestic product, employs over 45% of the rural labour force, and provides 60% of exports. The development and management of Pakistan’s water resources, in general, and of the Indus Basin, in particular, is a huge challenge, requiring very high levels of administrative, engineering and scientific capabilities. In last 67 years, Pakistan has added new dams, barrages, link and branch canals, and is modernizing and maintaining the world’s most complex and extensive irrigation system. The major issues being faced in the Indus Basin include increased water stress, water logging and salinity, environmental degradation of lower river reaches, vulnerability to drought and supply, inefficiency and low productivity. Prospects of climate change further complicate the management of these issues. Pakistan needs to, at least, double its storage capacity by 2025, in order to meet the projected domestic, industrial and irrigation/agriculture water requirements in the context of growth and urbanization. At present Pakistan is also suffering from acute energy shortages because of limited supplies and inadequate infrastructure development. Therefore, storage is also required to generate hydropower which is a key economic component of the country’s energy system and on which reliance is increased due to high fuel cost. Project Description 2. The GoP has received a credit of USD 38 Million (SDR 23.4 Million) from the World Bank towards funding Indus 21 Water Sector Capacity Building and Advisory Services Project (WCAP) which was approved by Executive Committee of the National Economic Council (ECNEC) on November 06, 2008. WCAP is of a highly technical nature project aiming to improve management and development of Indus River System to meet the rising demand of water and power for country’s economic growth and sustainability of Pakistan’s water sector. The current project is designed to help the GoP on institutional capacity building and technical issues necessary for the investment program as well as issues related to water resources management in the Indus River System, allowing a transparent way for water forecasting, availability, distribution and accounting thus building trust. Project Objectives 3. Indus River System development has enormous potential of investments in asset management and expansion including multi-purpose water and hydropower infrastructure projects. The main objective of the WCAP was to improve the management and investment planning of water resources in the Indus River Basin through support to capacity development, conducting strategic studies and explore/develop all financing strategies and options for water/hydropower development plans in Indus system besides conducting detailed bankable feasibility studies for hydropower projects and small dams/water storages in order to ensure effective management and development of the

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Indus River System in the context of significant economic, social and environmental change, and need for infrastructure. Project Scope 4. In order to achieve the above objectives, the project consists of the following components; A: Capacity Building of and Support to Federal Institutions in Water Resources Planning and Management. B: Improvement in Water Resources Management and Development in WAPDA, and C: Project Management, Coordination, Strategic Studies and Training. Project Achievements 5. The project outcomes contribute to the development and improvement of water management by preparing feasibility studies, preliminary designs, environmental and social impact assessment and documents contained doable recommendations for development/improvement of strategies/policies for land acquisition, resettlement plans, hydropower benefit sharing and environmental management to support financing and strengthening water resources and hydropower planning, development and management on sustainable basis. They also strengthened the capacity of the Water Sector Institutions through imparting training in planning, contract management, procurement, financial management and establishing/up-grading GIS, database Centre and material testing labs providing necessary modern equipment in water and hydropower sector. Physical Achievements 6. There were twenty two (22) studies/projects carried out under WCAP by various Implementation Agencies. The landmark achievements under WCAP are: Tarbela 4th Extension Hydropower Project (1410 MW); DASU Hydropower Project (4320 MW); Development of GIS/MIS Centre and Decision Support System to Enhance the Capacity Building of Indus River System Authority (IRSA); Improvement of Water Resources Management of Indus Basin to Enhance the Capacity Building of Indus River System Authority (IRSA); Evaluation of Past and Present Resettlement Plans in Pakistan in the Context of International Best Practices Leading to Formulation of Improved Resettlement Plan; Studies and Policies for Benefit Sharing on Hydropower projects among Stakeholders; Strategic/Sectoral Environmental and Social Assessment of the Indus Basin; preparation studies of eleven (11) small dams in all regions of Pakistan. Financial Results 7. The Project was approved at a cost of US $ 38.00 Million (SDR 23.4 million). As of August 31, 2015 on the basis of current exchange rate of SDR vs USD the current available Credit amount is USD 35.45 million and loan disbursed is USD 35.16 million whereas, USD 2.21 USD million is the parity loss (SDR vs USD). The Credit would be fully disbursed by the end of the closing of project i.e. October 30, 2015. The shortfall of USD 2.21 million would not affect activities under the project. Findings & Lessons

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8. In the early stages of implementation performance of all IAs was slow and delays occurred on the implementation of their respective components although, PMPIU provided adequate guidance. The major causes of delays were lack of capacity to deal with procurement of activities specifically in light of Banks’s guidelines, technical expertise and contract management professionals. Therefore, institutional capacity building is critical to create trained professional staff in the institutions for efficient implementation and to overcome with provision of necessary technical staffing under the project for sustainable management of the project. Comments of PMPIU on Draft ICR 9. Thank you for your e-mail dated August 18, 2015 forwarding therewith a copy of the draft of Implementation Completion & Results Report (ICR) for Water Sector Capacity Building and Advisory Services Project (WCAP) prepared by a team of the World Bank led by Christina Leb. 10. We are pleased to note that the World Bank has rated the overall performance of the Project as “Satisfactory”. The major project achievements include i) enhanced capacity of the relevant federal water sector institutions to manage water resources using modem tools, techniques and methodologies; ii) enhanced capacity in planning and financing investments in water and hydropower sector; iii) improving management skills of their staff; iv) Improvement in water resources planning and management through strategic studies; and v) Improvement in investment planning in water sector through investment planning studies. 11. The project is of a highly technical nature which aimed at improving management and development of Indus River System to meet the rising demand of water and power for country’s economic growth and sustainability of Pakistan’s water sector. The project is designed to help the Government of Pakistan on institutional capacity building and technical issues necessary for the investment program as well as issues related to water resources management in the Indus River System, allowing a transparent way for water forecasting, availability, distribution and accounting thus building trust among stakeholders’. 12. WCAP is performing well to achieve its Project Development Objectives (PDO) and is committed to improve management and investment planning of water resources with important long term benefits for the sector and the country, therefore, given the critical nature of water and energy for the country’s economic development, 13. The Project passed though different stages of difficulties in the early phase of implementation. However, overall the project performed well to achieve its Project Development Objectives (PDO) and is committed to improve management and investment planning of water resources with important long term benefits for the sector and the country, therefore, given the critical nature of water and energy for the country’s economic development.

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14. The following suggestions are given on draft ICR.

i At page viii, Indicator 1 column 4, title of the study “Flood Protection Planning” may be amended as “National Flood Protection Plan –IV”.

ii At page viii, Indicator 2, in comments, replace “Permanent Indus Commission”

with “Pakistan Commission for Indus Waters”. iii At page 14, para 74, the words “Director of the Federal Flood Commission” may

be replaced as “Chairman of Federal Flood Commission”.

iv At page 25, para 16, under activity “Handbook on Water Statistics of Pakistan” allocated cost and incurred cost may be amended as 0.075 million USD.

v At page 36 under “Financial Results” the text may be amended as proposed

hereinafter: 7. The Project was approved at a cost of US $ 38.00 Million (SDR 23.4 million). As of August 31, 2015 on the basis of current exchange rate of SDR vs USD the current available Credit amount is USD 35.45 million and loan disbursed is USD 35.16 million whereas, USD 2.21 USD million is the parity loss (SDR vs USD). The Credit would be fully disbursed by the end of the closing of project i.e. October 30, 2015. The shortfall of USD 2.21 million would not affect activities under the project.

vi In page 36 under “Findings and Lessons” following finding may also be added

9. In the early stages of implementation performance of all Implementing Agencies was slow and delays occurred on the implementation of their respective components although, PMPIU provided adequate guidance. The major causes of delays were lack of capacity to deal with procurement of activities specifically in light of Banks’s guidelines, technical expertise and contract management professionals. Therefore, institutional capacity building is critical to create trained professional staff in the institutions for efficient implementation and to overcome with provision of necessary technical staffing under the project for sustainable management of the project.

15. We acknowledge that there is a positive improvement in institutional capacity and expertise essentially required to develop and manage Indus River System to meet the rising demand of water and power in sustainable manner for country’s economic growth. 16. The project is also helpful to Government of Pakistan on institutional capacity building and technical issues necessary for preparing the investment program as well as issues related to water resources management in the Indus River System, allowing a transparent way for water forecasting, availability, distribution and accounting thus building trust among stakeholders’.

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17. We would like to thank the team who prepared the draft Implementation Completion Report for highlighting the achievements under the project and for their remarkable rating of the project. We also appreciate the complements given for the efforts made in the areas of Implementation, Procurement and Finance. In particular, the support and co-operation extended by Mr. Ousmane Dione and his colleagues in the initial stages of the Project and subsequently by Mr. Javaid Afzal and his team, is gratefully acknowledged.

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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

Not applicable.

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Annex 9. List of Supporting Documents

Project Appraisal Document, WCAP, Report No. 43784-PK – 27 May 2008 Restructuring Paper, Report No. 67677 – 15 March 2012 Restructuring Paper, Report No. RES11973, 8 January 2014 Financing Agreement, Credit Number 4473-PK, 14 July 2008 Amendment to Financing Agreement, 23 May 2012 Project Procurement Plans Monthly Progress Reports by the project Implementation Status Reports Mission Aide Memoirs Project Appraisal Document, T4HP, Report No. 60963-PK, 23 February 2012 Project Appraisal Document, DHP-I, Report No. 80488-PK, 14 May 2014 Client Completion Report, 14 July 2015

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