1

CHAPTER 1

INTRODUCTION
1.1 BACKGROUND OF THE STUDY The primary function of banks is to deal with money, one cannot speak about give priority to those banking without referring to money. Hence, it seems a must to understand money first. Otherwise many misinterpretations may arise as the result. Interest and profit, although being clear concepts, have been subjected to many misunderstandings. To be sure, let me make them clear at the outset. Interest and profit are rewards to money and capital investment respectively. In other words capital investment produces profits and money produces interest. Furthermore it has constantly and mistakenly written and quoted by some writers that the price of money is 1 (unity). One is the exchange rate of money with itself but the price of money is interest (rate). Asian Development Bank (ADB) is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. It was established in 1966. 63 member countries own ADB. Its members are 64, 46 from Asia and the Pacific and 18 from other parts of the globe. The overarching goal of ADB is to reduce poverty. To achieve this, ADB supports activities in its developing member countries to promote pro-poor economic growth, inclusive social development, and good governance. Asian Development Bank headquarter is in Manila. It has 26 other offices around the world. ADB takes into account in its activities three crosscutting themes: private sector development, regional cooperation, and environmental sustainability. ADB's principal tools are loans, guarantees, and technical assistance, which it mainly provides to governments for specific projects and programs. For most of the 1990s, Pakistans economy has been in difficulty mainly due to political instability, sectarian violence, weak governance, deep-rooted

structural problems, and inappropriate policy responses. These have resulted in unsustainable fiscal and current account deficits, a significant slowing down of economic growth to two-thirds of its historical levels, double digit inflation, stagnating industrial production and exports, and depletion of foreign exchange reserves. After taking office in February 1997, the new Government moved quickly to reverse the trend and initiate a program of economic reforms to address both immediate macroeconomic stabilization requirements and longer term structural adjustments, and free the economy from the low investment, low savings, and low growth path of the nineties. This program paved the way for the introduction of a comprehensive IMF Policy Framework Paper (PFP) and Enhanced Structural Adjustment Facility (ESAF)/Extended Fund Facility (EFF) in October 1997. The PFP encompasses critical reforms of the tax and fiscal system, state-owned enterprises, financial markets, trade regime, and the foreign exchange market. Concurrent with the structural policies of most immediate macroeconomic impact, the PFP also includes reforms directed at developing Pakistans human capital, raising productivity in key sectors, protecting the environment, and promoting good governance. ESAF is receiving substantial complementary support from other development partners, particularly the Bank and the World Bank. The first review of the program was successfully completed in March 1998. However, after Pakistans nuclear testing in May 1998, the IMF program was held in abeyance and is being renegotiated. Macroeconomic performance during the first year of the ESAF/EFF program (October 1997-June 1998) was generally encouraging. Partly as a result of economic revival measures implemented by the Government and because of strong agricultural growth due to favorable weather conditions, Pakistans economy showed some signs of recovery during FY1997/98. Real GDP growth during the fiscal year is projected at around 5.4 percent, a significant improvement over the previous years 1.3 percent. Sustained growth is, however, still severely constrained by a number of impediments rooted in both demand and supply sides, and including weak investment, slow export growth, and low productivity. Tight monetary and fiscal policies have led to a

substantial reduction in inflation, to eight percent by the end of the 1997/98 fiscal year, a single digit growth for the first time since 1989/90. Progress in reducing Pakistans budget deficit, the top priority for macroeconomic stabilization, has been mixed. The FY 1997/98 budget aimed to reduce the consolidated fiscal deficit to 5 percent of GDP through a combination of large expenditure containment and modest revenue growth. Revenue collection was however disappointing, with tax collection by the Central Board of Revenue (CBR) during the first half of the fiscal year falling short of target by about $250 million. Slower than expected economic growth, a sharp fall in imports, reduction in tax/tariff rates (as an economic revival measure), and poor tax administration are the main causes of the shortfall. The worsening financial position of Pakistans public sector corporations, particularly the power utility companies WAPDA and KESC, is also severely affecting fiscal operations and threatening macroeconomic stability. Despite a weak revenue performance, the Government estimates that the FY1997/98 fiscal deficit will reduce to 5.4 percent of GDP. ADB came with strong development approaches which will be later on discussed in the project and these implementations really boosted Pakistan economy. This research analyzes the functioning of ADB and its role in the economic development especially in Third World Countries. This research will be helpful to policy maters, researchers and students in this field. 1.2 1. PUROPOSE OF THE STUDY To gather relevant information to interpret and analyze it in a useful manner to understand the proposed topic. 2. To analyze the role and contribution of ADB in the Economic Development of third world countries. 3. To provide conclusion and suggestions based on analysis.

1.3

METHODOLOGY OF THE RESEARCH This would be basically a basic research i.e. to enhance knowledge

about Role of ADB in Development of Pakistan; the data would be mainly secondary in nature and will be collected through journals, books, and internet and from other already published materials 1.4 SCOPE OF THE STUDY The core of this work is centered on how ADB can play its vital role in the assistance of developmental projects in Pakistan. The global view of the ADB and its development attempting some definitions of its assistance used in its classification. There after, we examine the different programs run under ADB, their budgeted and actual costs incurred and finally make our conclusion and suggestions. It can also provide assistance to students seeking information regarding role of central banks in Islamic finance 1.5 SCHEME OF THE REPORT This project is organized into 6 chapters. Chapter 1 is about introduction. Chapter 2 explains the various view of different views people is know as the literature review. Chapter 3 gives Purpose and Functions of ADB. Chapter 4 is about the analysis of ADB. Chapter 5 is the findings. Chapter 6 is about the conclusion and suggestions.

CHAPTER 2

LITERATURE REVIEW
Over the years, Asian Development Bank have played a significant role in economic and social transformation in Asia and the Pacific- boosting economic growth, fostering social development, and helping improve the quality of life for millions of people. Asian development bank provide loans, Technical Assistance, and Grants to its member countries. ADB approved 11 loans totaling US$709.2 million for seven projects to Pakistan. ADB has also approved twenty-three technical assistance grants totaling US$28.9 million. Cumulative ADB lending to Pakistan as of 31 December 2004 was US$14.3 billion. Recently ADB has approved $ 1 billion for the reconstruction and rehabilitation of the earthquake affected people. Accounting period of ADB ends on 31 December. So the data in reports are as of December 2004. A large part of the Asian Development Bank's data is available at its web site and Depository libraries. 2.1 ADB Loans for Projects in Pakistan: ADB approved 11 loans totaling US$709.2 million for seven projects in the following sectors. 1. 2. 3. 4. 5. 6. 7. Assistance for sustainable livelihood improvement in Punjab; Multisector rehabilitation in AJK; Public resource management in Balochistan; Technical education and vocational training in Balochistan; Technical education and vocational training in NWFP; Devolved social services in Punjab; and Road development and sub regional connectivity in NWFP. The details of the above Project along with their respective loan amount are given in table 2.1

2.2

TECHNICAL ASSISTANCE (TA) ADB has three types of TA activity:

1.

Project preparatory technical assistance (PPTA) to prepare a project loan, a program loan, or a sector loan for financing by the ADD and other external sources;

2.

Advisory technical assistance (ADTA) to finance, for example, institution building or sector-, policy-, and issues-oriented studies; and

3.

Regional technical assistance (RETA) for any of the activities covered in (i) and (ii) involving more than one member country. ADB deems any technical assistance projected funded for under $150,000 a small-scale technical assistance (SSTA). ADB's public communications policy calls for TA reports to be made

publicly available no later than upon approval. Table 2.1:

(SMillion)

Details of the Projects Along with their respective amounts ADF OCR Total 41.0 11.0 75.0 133.0 150.0 11.0 16.0 296.2 301.2 57.0 481.2 709.2

Project Name

1. Sustainable livelihood in Barani Area 41.0 Project(Punjab)

2.

Balochistan Resource Management Program

23.0 75.0

3. Decentralized Social Service (Punjab)

4. Restructuring of Technical Education and 11.0 Vocational System NWFP 5. Restructuring of Technical Education and 16.0 Vocational Balochistan 6. NWFP Road Development Sector and 5.0 Regional Connectivity 7. Multisector Rehabilitation Project in AJK Total Technical Assistance Reports 57.0 228.0

A technical assistance (TA) report is a recommendation to the Board or President depending on the amount of assistance) to finance a technical assistance project.

2.2.1 Technical Assistance to Pakistan ADB has approved twenty-three technical assistance grants totaling US$28.9 million to Pakistan. These are listed in table 2.2. Table 2.2: ADB's Technical Assistance to Pakistan

S. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Project Name
Balochistan Rural Drought Mitigation Sindh Costal and Development Project Development inland

Division
and SAAE

TA Type
Projects Projects ID PP ID ID ID ID AO ID ID

Amount
600.0 650.0 300.0 550.0 400.0 250.0 450.0 450.0 150.0 950.0 400.0

Community SAAE SAAE SAEN

Water Sector Irrigation Development Renewable Energy Development

Supporting Public Resource Management SAGF Reforms in Balochistan Punjab Resource Management Reforms SAGF (Subprogram 2) Strengthening Coordination and Alignment PRM of Government Operations to Devaluation Strengthening Procedures to Reduce Delays PRM in Startup of Development Capacity Building of Alternative Energy SAEN Development Boar Implementation of Police Reforms in Punjab PRM National Primary Education Functional SAAE Literacy for Rural Women in Selected Barani Areas of Punjab Sindh Basic Urban Services Balochistan Devolved Social Services Capacity Building Management in Sindh for SASS SASS

Projects Projects Projects

795.0 400.0 400.0

Environment SASS

Coordination of Devolved Social services SASS Programs Mobilization of Grassroots Stakeholders for PRM Pro-Poor Social service Delivery Determents and Drivers of Poverty PRM Reduction and ADB's Contribution in Rural Pakistan Transport Sector Support SATC

ID ID ID

150.0 400.0 400.0

ID ID

290.0 130.0

Coordination of Devolved Social services SASS Program (Supplementary)

20 21 22
Total

Punjab Devolved Social services Program

SASS

ID Projects AND

20000.0 150.0 240.0

SSTA for Facility PPP Initiative in National SATC Highway Department Improving Governance in the Non-Profit PRM Sector of Pakistan

28605.0

Table 2.3:

Breakdown of Cumulative ADB lending to Pakistan, as of 31 December 2004

Loan (number) 46 49 25 19 22 1 39 12 12 8 7 239 Loan Amount (US$ million) 3,062.0 2,977.1 1,878.0 1,604.9 1,344.5 1 1,290.4 987.0 501.1 384.5 229.4 14,258.9 % 21.5 20.9 13.2 11.3 9.4 9.0 6.9 3.5 2.7 1.6 100.0

Sector Energy Agriculture and Natural Resources Finance Transport and Communications Multisector Industry and Trade Law, Economic Management, and Public Policy Education Water Supply, Sanitation, and Waste Management Health, Nutrition, and Social Protection TOTAL

2.3

OVERVIEW OF ADB ASSISTANCE As of 31 December 2004, ADB's total loan commitment to the Pakistan

since commencement of its operations in 1968, comprised 239 public sector loans amounting to $14.3 billion, out of which $7.4 billion (51.7 percent) is from the Ordinary Capital Resources (OCR) and $6.9 billion (48.3 percent) is from the Asian Development Fund (ADF). Out of 239 loans, 61 loans covering 51 projects with net loan amount totaling $4.9 billion are ongoing. Of the total loan amount of $4.9 billion, 42 percent is from ADF. As of 31 December 2004, the sectoral composition of ADB's assistance to Pakistan was 21.5 percent for energy sector, 20.9 percent for the agriculture

& natural resources, 13.2 percent for finance sector, 11.3 percent for transport and communications, 9.4 percent for multisector, 9.0 percent for industry and trade, 6.9 percent for Law, Economic Management, and Public Policy, 3.5 percent for education, 2.7 percent for water supply, sanitation, and waste management, and 1.6 percent for Health, Nutrition, and social protection(Figure 1). A cumulative of 293 technical assistance (TA) projects has been approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. 2.3.1 Social Sectors ADB has provided assistance for the Social Action Program for a total of $300 million. In addition, ADB has financed primary education projects with special emphasis on education for girls, improving the service delivery by providing assistance for teacher training projects and contributed to skills development by financing technical and vocational education projects. 2.3.2 Energy Sector ADB has provided 46 loans totaling $3062.0 million for Energy Sector Development. It is 21.5% of the total loans. Its assistance has been for improving the technical efficiency of the energy sector as well as for financing critical investments in both the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (WAPDA). As shown in pie chart ADB has provided the most amounts for Energy Sector. 2.3.3 Agriculture Sector ADB has provided program and project assistance with the objectives of reforming the policy framework, ensuring greater role for the private sector and increasing agricultural productivity. ADB has provided 49 loans totaling $2977.1 million for Agriculture Sector.

10

2.3.4 Irrigation Sector Irrigation plays an important role in agriculture sector. Realizing the fact, ADB has provided assistance for such major irrigation initiatives as Chasma Right Bank Irrigation Project in North West Frontier Province (NWFP) and Punjab [Stage III, approved in 1991], Pat Feeder Canal Project in Balochistan [approved in 1985], and the construction of the Pehur High-Level Canal in NWFP [approved in 1993]. ADB has also provided assistance for onfarm water management projects, forestry sector projects, and for the National Drainage Program. 2.3.5 Transport Sector Transport is the backbone of economy. Roads network is essential for boosting the economy. ADB has provided assistance for the development of farm to market roads m all the four provinces of Pakistan, as well as for rehabilitation of the provincial road network. ADB has provided 19 loans totaling $1604.9 million for the development of transport and communication sector development. It has also announced $ 1 billion assistance for the earthquake effected areas. The Government of Pakistan will determine how much to allocate for the transport and communication sector. Support has also been provided for strengthening the road sector institutions, such as the communication and works departments and for developing an appropriate regulatory mechanism. 2.3.6 Finance and Industry Sectors ADB has provided lines of foreign exchange credit for the private sector industrial development, and of late for the reform of the trade regime under the ongoing Trade, Export Promotion, and Industry Program Loan. To facilitate private sector access to foreign exchange for exports, the ADB has recently approved the Small and Medium Enterprises Trade Enhancement Facility. ADB has provided 25 loans totaling $ 1878.0 million for the development of finance sector.

11

Under its recently completed Capital Market Development Program Loan, ADB assistance facilitated the reforms of the capital market and strengthening of the regulatory environment. 2.3.7 Education Sector ADB has completed several major projects in education sector. While other are in progress. It has provided 12 loans totaling $501.1 million. It is 3.5% of total loan. 2.3.8 Technical Assistance The grant technical assistance provided by ADB has mainly been for capacity building and institutional development. In addition, it has also supported various in-country and foreign training programs for public and private sector institutions. 2.3.9 Decentralized Service Delivery Study Submissions are invited from individuals working with federal, provincial or district governments in Pakistan, NGOs, academic institutions and donor agencies to contribute to a series of short, published "Issues and Options Notes" that look at emerging concerns and difficulties posed by devolution, with an emphasis on pragmatic, immediate steps that could be taken to promote better service delivery by districts and tehsils. 2.4 ADB'S MAJOR PROJECTS IN PAKISTAN Asian Development Bank has provided assistance for several major projects. Some of these Projects are discussed in detail in the preceding chapters. Here these Projects are listed according to their sectorial composition. 2.4.1 Agricultural Research Projects 1. 2. 3. 4. 5. Agribusiness Development Project Decentralization Support Program Infrastructure Development Agriculture Sector Program II Forestry Sector Project

12

2.4.2 Social Sector Projects 1. 2. 3. 4. 5. 6. 7. 8. Capital Market Development Program Punjab Devolved Social Services Program North-West Frontier Province Barani Area Development Project, Phase Balochistan Devolved Social Services Program Earthquake Emergency Assistance Project National Drainage Sector Project Social Action Program (Sector) Project II Sustainable Livelihoods in Barani Areas Project Sindh Rural Development Project

2.4.3 Educational Sector Projects 1. 2. 3. 4. 5. 6. 7. 8. 9. Balochistan Devolved Social Services Program Restructuring of the Technical Education and Vocational Training System Project (Balochistan Province) Restructuring of the Technical Education and Vocational Training System Project (North-West Frontier Province) Decentralized Elementary Education Project Science Education Sector Project, Second Girls Primary School Sector Project, Second Technical Education Project Restructuring of the Technical Education and Vocational Training System Project (Balochistan Province) Restructuring of the Technical Education and Vocational Training System Project (North-West Frontier Province)

2.4.4 Energy Sector Development Projects 1. 2. 3. 4. Energy Sector Restructuring Program Ghazi Barotha Hydropower Project Proposed Loan to Laraib Energy Limited for the New Bong Escape Hydropower Project in the Islamic Republic of Pakistan Infrastructure Development

2.4.5 Finance and Industry Sectors Projects 1. 2. 3. Punjab Resource Management Program Financial (Non bank) Markets and Governance Program Financial Sector Intermediation Loan

13

4. 5. 6. 7. 8. 9.

Strengthening Regulation, Enforcement and Governance of Financial Markets Small and Medium Enterprise Trade Enhancement Finance Trade, Export Promotion, and Industry Program Micro finance Sector Development Balochistan Resource Management Program Rural Finance Sector Development Program

2.4.6 Governance 1. 2. 3. Earthquake Emergency Assistance Project Balochistan Devolved Social Services Program Strengthening Regulation, Enforcement and Governance of Financial Markets

2.4.7 Health, Nutrition, and Population Sector Projects 1. 2. 3. 4. 5. Balochistan Devolved Social Services Program Reproductive Health Project Women's Health Project Punjab Devolved Social Services Program Sindh Devolved Social Services Program

2.4.8 Irrigation and Drainage 1. 2. 3. 4. 5. 6. Punjab Farmer-Managed Irrigation Project Malakand Rural Development Project Flood Protection Sector Project, Second Dera Ghazi Khan Rural Development Project Bahawalpur Rural Development Project National Drainage Sector Project

2.4.9 Multisector Projects 1. 2.

3.

Earthquake Emergency Assistance Project Multisector Rehabilitation and Improvement Project for Azad Jammu and Kashmir
Private Sector Development and Finance

4.

Infrastructure Development

14

2.4.10 Rehabilitation Multisector Rehabilitation and Improvement Project for Azad Jammu and Kashmir 2.4.11 Roads (Operation and Maintenance) Earthquake Project 2.4.12 Roads, Railways and Highways 1. 2. 3. 4. 5. 5.
1.

Emergency

Assistance

Project

North-West

Frontier

Province Road Development Sector and Subregional Connectivity

Infrastructure Development Balochistan Road Development Sector Project Punjab Road Development Sector Project Rural Access Roads Project Transport and Communications Infrastructure Development Railways' Infrastructure Development
Micro finance Sector Development

2.4.13 Sectors / Sectoral Development 2.4.14 URBAN DEVELOPMENT AND HOUSING PROJECTS 1. 2.
1.

Southern Punjab Basic Urban Services Project North-West Frontier Province Urban Development Sector Project
Infrastructure Development

2.4.15 Water Resource Management Projects \ 2.4.16 Water Supply Projects 1. Punjab Community Water Supply & Sanitation Sector Project 2. Balochistan Devolved Social Services Program 3. Korangi Wastewater Management Project 2.4.17 Technical Assistance 1. Punjab Resource Management Program (Subprogram 2)

2.4.18 Others 1. 2. 1. 2. Punjab Resource Management Program (Subprogram 2) Sustainable Livelihoods in Barani Areas Project Access to Justice System Program Ports, Waterways, & Shipping Infrastructure Development Project

15

CHAPTER 3 3.1.1 Purpose and Functions The purpose of the Bank is to foster economic growth and co-operation in the region of Asia and Far East (hereinafter referred to as the "region") and to contribute to the acceleration of the process of economic development of the developing member countries in the region, collectively and individually. To fulfill its purpose, the Bank shall have the following functions: i. To promote investment in the region of public and private capital for development purposes; ii. To utilize the resources at its disposal for financing development of the developing member countries in the region, giving priority to those regional, sub-regional projects and programmes which will contribute most effectively to the harmonious economic growth of the region as a whole, and having special regard to the needs of the smaller or less developed member countries in the region; iii. To meet requests from members in the region to assist them in the coordination of their development policies and plans with a view to achieving better utilization of their resources, making their economies more complementary, and promoting the orderly expansion of their foreign trade, in particular, intra-regional trade; iv. To provide technical assistance for the preparation, financing and execution of development projects and programmes, including the formulation of specific project proposals; v. To co-operate, in such manner as the Bank may deem appropriate with the United Nations, its organs and subsidiary bodies and with public international organizations and other international institutions, as well as national entities whether public or private, which are concerned with the investment of development funds in the region, and to interest such institutions and entities in new opportunities for investment and assistance; and

16

vi.

To undertake such other activities and provide such other services as may advance its purpose.

3.1.2 Considerations for Project Lending ADB provides project-lending assistance based upon the following considerations Economic viability, technical feasibility, and financial soundness Effect on development activity in the country concerned Contribution to the removal of economic bottlenecks Capacity of the borrowing country to service additional external debt Introduction of new technologies to raise productivity Expansion of job opportunities Strengthening of institutions according to criteria of good governance Integration of environmental and social considerations into ADB projects

3.1.3 Membership 1. i. Membership in the Bank shall be open to: Members and associate members of the United Nations Economic Commission for Asia and the Far East; and ii. Other regional countries and non-regional developed countries, which are members of the United Nations or of any of its specialized agencies. 2. Countries eligible for membership under paragraph 1 of this Article which do not become members in accordance with Article 64 of this Agreement may be admitted, under such terms and conditions as the Bank may determine, to membership in the Bank upon the affirmative vote of two-thirds of the total number of Governors, representing not less than three-fourths of the total voting power of the members. 3. In the case of associate members of the United Nations Economic Commission for Asia and the Far East which are not responsible for the

17

conduct of their international relations, application for membership in the Bank shall be presented by the member of the Bank responsible for the international relations of the applicant and accompanied by an undertaking by such member that, until the applicant itself assumes such responsibility, the member shall be responsible for all obligations that may be incurred by the applicant by reason of admission to membership in the Bank and enjoyment of the benefits of such membership. Member Countries of Asian Development Bank In 1966, when Asian Development Bank was established, it had 31 members. Over the years its membership has grown to 64, listed in table 1.1, both within and outside the Asian and Pacific region. 3.2 CAPITAL STRUCTURE OF ADB

3.2.1 Authorized Capital According to the Article of ADB The authorized capital stock of the Bank shall be one billion dollars ($1,000,000,000) in terms of United States dollars of the weight and fineness in effect on 31 January 1966. The authorized capital stock shall be divided into one hundred thousand (100,000) shares having a par value of ten thousand dollars ($10,000) each, which shall be available for subscription only by members in accordance with the provisions of Charter of ADB. The original authorized capital stock shall be divided into paid-in shares and callable shares. Shares having an aggregate par value of five hundred million dollars ($500,000,000) shall be paid-in shares, and shares having an aggregate par value of five hundred million dollars ($500,000,000) shall be callable shares. The authorized capital stock of the Bank may be increased by the Board of Governors, at such time and under such terms and conditions as it may deem advisable, by a vote of two-thirds of the total number of Governors, representing not less than three-fourths of the total voting power of the members. 3.2.2 Subscription of Shares

18

Each member shall subscribe to shares of the capital stock of the Bank. Each subscription to the original authorized capital stock shall be for paid-in shares and callable shares in equal parts. The initial number of shares to be subscribed by countries which become members in accordance with Article 64 of this Agreement shall be that set forth in Annex A hereof. The initial number of shares to be subscribed by countries that are admitted to membership in accordance with paragraph 2 of Article 3 of this Agreement shall be determined by the Board of Governors; provided, however, that no such subscription shall be authorized which would have the effect of reducing the percentage of capital Table 3.1: Member Countries of Asian Development Bank
Subscribed Capital Members Year Joined Voting Power of Percent of Total

Number of Percent of Number of Percent Shares Total Votes Regional

Regional Members Afghanistan Armenia I Australia Azerbaijan

Bangladesh

1966 2005 1966 1999 1973 1982 1966 1986 1976 1970 1966 1966 1966 1994 1974 1994 1966 1966 1978 1990

1,195 10,557 204,740 15,736 36,128 220 1,750 228,000 94 2,406 19,270 224,010 192,700 552,210 28,536 142 178,246 10,582 492 96,350 142 94 142

0.034 0.301 5.834 0.448 1.029 0.006 0.050 6.496 0.003 0.069 0.549 6.383 5.490 15.734 0.813 0.004 5.079 0.302 0.014 2.745 0.004 0.003 0.004

14,904 24,266 218,449 29,445 49,837 13,929 15,459 241,709 13,803 16,115 32,979 237,719 206,409 565,91 42,245 13,851 191,955 24,291 14,201 110,059 13,851 13,803 13,851

0.522 0.850 7.654 1.032 1.746 0.488 0.542 8.469 0.484 0.565 1.156 8.329 7.232 11.8.829 1.480 0.485 6.726 0.851 0.498 3.856 0.485 0.484 0.485

0.340 0.553 4.979 0.671 1.136 0.317 0.352 5.510 0.315 0.367 0.752 5.419 4.705 12.900 0.963 0.316 4.375 0.554 0.324 2.509 0.316 0.315 0.316

Bhutan Cambodia
China

Cook Islands Fiji Islands India Indonesia Japan Kazakhstan Kiribati Kyrgyz Republic Lao PDR Malaysia Maldives Marshall Islands

Hong Kong, China 1969

Korea, Republic of 1966

Micronesia, 1990 Federated States of

19

Mongolia

1991

532

0.015

14,241

0.499

0.325

Subscribed Capital Members

Voting Power of Percent of Percent of Regional Total 1.156 0.485 0.663 2.384 3.181 0.484 0.597 3.434 0.484 0.902 0.489 1.199 1.831 0.835 2.168 0.493 0.485 0.794 0.482 1.315 0.489 0.903 100.000 0.752 0.316 0.431 1.551 2.069 0.315 0.388 2.234 0.315 0.587 0.318 0.780 1.191 0.543 1.411 0.320 0.316 0.517 0.314 0.856 0.318 0.588 65.056

Year Joined Number of Percent Number Shares of Total Votes 1973 1991 1966 1966 2003 New 1971 1966 1966 1966 1973 1966 1998 1966 2002 1972 1993 1995 1981 1966 19,270 142 5,202 54,340 77,080 114 3,320 84,304 116 12,040 236 20,520 38,540 10,134 48,174 350 142 8,958 50 23,834 236 12,076 2,223,452 0.549 0.004 0.148 1.548 2.196 0.003 0.095 2.402 0.003 0.343 0.007 0.585 1.098 0.289 1.373 0.010 0.004 0.255 0.001 0.679 0.007 0.344 63.351 32,979 13,851 18,911 68,049 90,789 13,823 17,029 98,013 13,825 25,749 13,945 34,229 52,249 23,843 61,883 14,059 13,851 22,667 13,759 37,543 13,945 25,785 2,854,066

Regional Members Myanmar Nauru Nepal Pakistan Palau Papua Guinea Samoa Singapore Solomon slands Sri Lanka Tajikistan Thailand Timor-Lestc Tonga Tuvalu Jzbekistan Vanuatu Viet Nam Total Regional

New Zealand 1966

Philippines

Taipei, China 1966

Turkmenistan 2000

20

Non Regional Member Countries

Subscribed Capital Members Year Joined Number Shares of Percent Total Voting Power of Number Votes of Percent of Percent Regional of Total

Non-regional Members | Austria | Belgium Canada Denmark Finland France Germany Italy Luxembourg 1966 1966 1966 1966 1966 1970 1966 1966 2003 12,040 12,040 185,086 12,040 12,040 82,356 153,068 63,950 12,040 36,294 12,040 12,040 12,040 12,040 20,650 12,040 72,262 552,210 1,286,276 3,509,728 0.343 0.343 5.274 0.343 0.343 2.347 4.361 1.822 0.343 1.034 0.343 0.343 0.343 0.343 0.588 0.343 2.059 15.734 36.649 100.000 25,749 25,749 198,795 25,749 25,749 96,065 166,777 77,659 25,749 50,003 25,749 25,749 25,749 25,749 34,359 25,749 85,971 565,919 1,533,038 4,387,104 1.680 1.680 12.967 1.680 1.680 6.266 10.879 5.066 1.680 3.262 1.680 1.680 1.680 1.680 2.241 1.680 5.608 36.915 100.000 0.587 0.587 4.531 0.587 0.587 2.190 3.802 1.770 0.587 1.140 0.587 0.587 0.587 0.587 0.783 0.587 1.960 12.900 34.944 100.000

The Netherlands 1966 Norway Portugal Spain Sweden Switzerland Turkey 1966 2002 1986 1966 1967 1991

United Kingdom 1966 United States Total Regional Grand Total Non1966

Stock held by regional members below sixty (60) per cent of the total subscribed capital stock.

1.

The Board of Governors shall at intervals of not less than five (5) years review the capital stock of the Bank. In case of an increase in the authorized capital stock, each member shall have a reasonable opportunity to subscribe, under such terms and conditions as the Board of Governors shall determine, to a proportion of the increase of stock equivalent to the proportion which its stock theretofore subscribed bears to the total subscribed capital stock immediately prior to such increase; provided, however, that the foregoing provision shall not apply in respect of any increase or portion of an increase in the authorized capital stock intended solely to give effect to determinations of the Board of

21

Governors under paragraphs 1 and 3 of this Article. No member shall be obligated to subscribe to any part of an increase of capital slock. 2. The Board of Governors may, at the request of a member, increase the subscription of such member on such terms and conditions as the Board may determine; provided, however, that no such increase in the subscription of any member shall be authorized which would have the effect of reducing the percentage of capital stock held by regional members below sixty (60) per cent of the total subscribed capital stock. The Board of Governors shall pay special regard to the request of any regional member having less than six (6) per cent of the subscribed capital stock to increase its proportionate share thereof. 3. Shares of stock initially subscribed by members shall be issued at par. Other shares shall be issued at par unless the Board of Governors by a vote of a majority of the total number of Governors, representing a majority of the total voting power of the members, decides in special circumstances to issue them on other terms. 4. Shares of stock shall not be pledged or encumbered in any manner whatsoever, and they shall not be transferable except to the Bank in accordance with Chapter VII of this Agreement. 5. The liability of the members on shares shall be limited to the unpaid portion of their issue price. 6. No member shall be liable, by reason of its membership, for obligations of the Bank. 3.2.3 Payment of Subscriptions Payment of the amount initially subscribed by each Signatory to this Agreement (Agreement refers to" Agreement Establishing the Asian Development Bank) which becomes a member in accordance with Article 64 to the paid-in capital stock of the Bank shall be made in five (5) installments, of twenty (20) per cent each of such amount.

22

i.

Each member shall pay the first installment within thirty (30) days after entry into force of this Agreement, or on or before the date of deposit on its behalf of its instrument of ratification or acceptance in accordance with paragraph 1 of Article 64.

ii.

The second installment shall become due one (1) year from the entry into force of this Agreement.

iii.

The remaining three (3) installments shall each become due successively one (1) year from the date on which the preceding installment becomes due.

1.

Of each installment for the payment of initial subscriptions to the

original paid-in capital stock: a. b. 2. Fifty (50) per cent shall be paid in gold or convertible currency; and Fifty (50) per cent in the currency of the member. The Bank shall accept from any member promissory notes or other obligations issued by the Government of the member, or by the depository designated by such member, in lieu of the amount to be paid in the currency of the member pursuant to paragraph 2 (b) of this Article, provided such is not required by the Bank for the conduct of its operations. Such notes or obligations shall be non-negotiable, noninterest-bearing, and payable to the Bank at par value upon demand. Subject to the provisions of paragraph 2(ii) of Article 24, demands upon such notes or obligations payable in convertible currencies shall, over reasonable periods of time, be uniform in percentage on all such notes or obligations. 3. Each payment of a member in its own currency under paragraph 2(b) of this Article shall be in such amount as the Bank, after such consultation with the International Monetary Fund as the Bank may consider necessary and utilizing the par value established with the International Monetary Fund, if any, determines to be equivalent to the full value in terms of dollars of the portion of the subscription being paid. The initial

23

payment shall be in such amount as the member considers appropriate hereunder but shall be subject to such adjustment, to be effected within ninety (90) days of the date on which such payment was due, as the Bank shall determine to be necessary to constitute the full dollar equivalent of such payment. 4. Payment of the amount subscribed to the callable capital stock of the Bank shall be subject to call only as and when required by the Bank to meet its obligations incurred under sub-paragraphs (ii) and (iv) of Article 11 on borrowings of funds for inclusion in its ordinary capital resources or on guarantees chargeable to such resources. 5. In the event of the call referred to in paragraph 5 of this Article, payment may be made at the option of the member in gold, convertible currency or in the currency required to discharge the obligations of the Bank for the purpose of which the call is made. Calls on unpaid subscriptions shall be uniform in percentage on all callable shares. 6. The Bank shall determine the place for any payment under this Article, provided that, until the inaugural meeting of its Board of Governors, the payment of the first installment referred to in paragraph 1 of this Article shall be made to the Secretary-General of the United Nations, as Trustee for the Bank. 3. 3 ORDINARY CAPITAL RESOURCES As used in this Agreement, the term "ordinary capital resources" of the Bank shall include the following: 1. Authorized capital stock of the Bank, including both paid-in and callable shares, subscribed pursuant to Article 5 of this Agreement, except such part thereof as may be set aside into one or more Special Funds in accordance with paragraph 1 (i) of Article 19 of this Agreement; 2. Funds raised by borrowings of the Bank by virtue of powers conferred by sub-paragraph (i) of Article 21 of this Agreement, to which the

24

commitment to calls provided for in paragraph 5 of Article 6 of this Agreement is applicable; 3. Funds received in repayment of loans or guarantees made with the resources indicated in (i) and (iii) of this Article; 4. Income derived from loans made from the aforementioned funds or from guarantees to which the commitment to calls set forth in paragraph 5 of Article 6 of this Agreement is applicable; and 5. Any other funds or income received by the Bank which do not form part of its Special Funds resources referred to in Article 20 of this Agreement. 3.4 FINANCIAL MANAGEMENT ADB provides different forms of assistance to governments and private enterprises in its developing member countries based on a member's priorities. The main instruments are: 1. 2. 3. 4. 5. Loans Technical assistance Grants Guarantees Equity investments Issuing bonds, recycling repayments, and receiving contributions from members, finance ADBs operations. About 70% of the bank's cumulative lending comes from its ordinary capital resources. ADB also provides loans from its Special Funds resources. Among them is the Asian Development Fund, which provides concessional loans to ADB's least developed member countries. ADB also manages several trust funds and channel financing of grants provided by bilateral donors. 3.4.2 Co-financing For every dollar lent by ADB in 2004, an additional 46 cents was mobilized from other official sources and commercial institutions.

Instruments

3.4.1 Loan and Grant Resources

25

3.4.3 Technical Assistance Technical assistance activities-funded through grants, loans, or bothhelp maximize development impact. In 2004, a total of 323 technical assistance activities, amounting to US$197 million, were approved for 1. 2. Preparing and executing projects and programs Supporting advisory and operational activities in areas such as law, economic management, public policy, agriculture and natural resources, energy, finance, education, etc 3. Regional activities 1.5 Organizational Structure and Management of Asian development Bank The Bank have a Board of Governors, a Board of Directors, a President, five Vice-Presidents (i.e. (i) Vice-president of Knowledge Management and Sustainable Development, (ii) Vice-president of Operation 1, (iii) (iv) Vicepresident of Operation 2, (v) Vice-president of Finance and Administration) and such other officers and staff. 3.5 Board of Governors The Board of Governors is ADB's highest policy-making body and all the powers of the Bank are vested in the Board of Governors. It is composed of one representative from each member. Each member appoints one Governor and one alternate and he or she serve at the pleasure of the appointing member. The Board of Governors meets annually. At its annual meeting, the Board appoints one of the Governors as Chairman who holds office until the election of the next Chairman and the next annual meeting of the Board. The Board of Governors elects the president of the Bank for a term of (5) five years. According to the Charter of the Bank, all the power of institution are vested in ABD's Board of Governors, which in turn delegate these power to the Board of Directors except for those power reserved for the board of government in the Charter.

26

3.5.1 Voting Power of Members The total voting power of each member consists of the sum of its basic votes and proportional votes. i. The basic votes of each member consists of such number of votes as results from the equal distribution among all the members of twenty (20) per cent of the aggregate sum of the basic votes and proportional votes of all the members. ii. The number of the proportional votes of each member shall be equal to the number of shares of the capital stock of the Bank held by that member. The basic votes allotted to each member are 13701. Pakistan has 77080 shares of the capital stock of the bank. Thus Pakistan has 90789 votes (total Pakistan voting power is 90789 votes= 77080 shares of capital stock + 13709 basic votes) Japan and USA have the highest number of votes (i.e. 12.900 % of total) each and Tuvalu has the lowest number of votes (0.314% of total votes). 3.5.2 Meetings of Board of Governors 1. The Board meets annually at such date and place as the Board may determine. However, the Board of Directors may change the date and place of the meeting when special circumstances or reasons arise to justify such action. 2. The Board also holds special meetings when it so decides or when called by the Board of Directors. 3. The President shall notify all members, by the most rapid possible means, of the date and place of each meeting of the Board. Such notifications must be dispatched at least sixty (60) days prior to the date of an annual meeting and thirty (30) days prior to the date of a special meeting

27

4.

A majority of the Governors shall constitute a quorum for any meeting of the Board, provided such majority represents not less than two-thirds of the total voting power of the members.

5.

The Board may order the temporary adjournment of any meeting end its resumption at a later date.

6.

The President, Directors and their Alternates may attend any meeting of the Board and participate therein. However, Directors and their Alternates shall not be entitled to vote unless they are entitled to vote as a Governor.

3.6

Board of Directors The Board of Directors is composed of 12 Directors (each with an

Alternate), Governors of regional-members elect eight of those 12 directors and the remaining four are elected by non-regional members. A director shall not be a member of the Board of Governors. The Board of Governors elects the Board of Directors every two years. Each director appoints one alternate who has full powers to act for him when he is not present. Directors and alternates shall be nationals of member countries. No two or more Directors may be of the same nationality nor may any two or more alternates be of the same nationality. The Board of Directors performs its duties full-time at the ADB headquarters and holds formal and executive sessions regularly. The Directors supervise ADB's financial statements, approve its administrative budget, and review and approve all policy documents and all loan, equity, and technical assistance operations.
The President chairs the Board of Directors and, under its guidance, conducts the business of ADB.

3.6.1 Powers of Board of Directors The Board of Directors is responsible for the direction of the general operations of the Bank and, shall, in addition to the powers assigned to it expressly by article, exercise all the powers delegated to it by the Board of Governors.

28

3.6.2 Election of Directors As mention earlier, there are two types of directors I) Those representing regional members; and ii) Those representing non-regional members 3.6.3 Election of Directors by Governors representing regional members: 1. Each Governor representing a regional member shall cast all votes of the member he represents for a single person. 2. The seven (7) persons receiving the highest number of votes shall be Directors, provided that he received ten percent of the total voting power of regional members. If seven (7) persons are not elected at the first ballot, a second ballot shall be held in which the person who received the lowest number of votes in the preceding ballot shall be ineligible and in which votes shall be cast only by: a. Governors who voted in the preceding ballot for a person who is not elected; and b. Governors whose votes for a person who is elected are deemed to have raised the votes cast for that person above eleven (11) per cent of the total voting power of regional members. 3. If, after the second ballot, seven (7) persons are not elected, further

ballots shall be held in conformity with the principles and procedures laid down in this Section, except that after six (6) persons are elected, the seventh may be elected notwithstanding the provisions of paragraph (2) of this Section - by a simple majority of the remaining votes of regional members. All such remaining votes shall be deemed to have counted towards the election of the seventh Director. 3.6.4 Election of Directors by Governors representing non-regional members 1. Each Governor representing a non-regional member shall cast all votes of the member he represents for a single person. 2. The three (3) persons receiving the highest number of votes shall be Directors, except that no person who receives less than twenty-five (25)

29

per cent of the total voting power of non-regional members shall be considered as elected. 3. If three (3) persons are not elected at the first ballot, a second ballot shall be held in which the person who received the lowest number of votes in the preceding ballot shall be ineligible and in which votes shall be cast only by: i. Governors who voted in the preceding ballot for a person who is not elected; and ii. Governors whose votes for a person, who is elected are deemed to have raised the votes cast for that person above twenty-six (26) per cent of the total voting power of non-regional members. 4. In determining whether the votes cast by a Governor shall be deemed to have raised the total number of votes for any person above twenty-six (26) per cent, the said twenty-six (26) per cent shall be deemed to include, first, the votes of the Governor casting the highest number of votes for that person, and then, in diminishing order, the votes of each Governor casting the next highest number until twenty-six (26) per cent is attained. 5. Any Governor, part of whose votes must be counted in order to raise the votes cast for any person above twenty-five (25) per cent, shall be considered as casting all his votes for that person even if the total number of votes cast for that person thereby exceeds twenty-six (26) per cent. If, after the second ballot, three (3) persons are not elected, further ballots shall be held in conformity with the principles and procedures laid down in this Section, except that after two (2) persons are elected, a third may be elected - provided that subscriptions from non-regional members shall have reached a minimum total of three hundred forty-five million dollars ($345,000,000) and notwithstanding the provisions of paragraph (2) of this Section - by a simple majority of the remaining votes.

30

3.7

DEPARTMENTS, OFFICES, AND MISSIONS OF ASIAN DEVELOPMENT BANK ADB's field offices include resident and regional missions, a country

office, a liaison office, and representative offices. Each support ADB's objective of reducing poverty by strengthening representation in its regional and non-regional members, and by providing broader and more direct access to its constituencies. 3.7.1 Resident Missions The resident missions provide the primary operational interface between ADB and the host DMC. The missions help implement ADB's goal of reducing poverty and related strategic objectives in the DMCs and enhance policy dialogue with the DMCs. They are the recognized intellectual resource and knowledge base on development issues in the DMCs. The resident missions also 1. 2. 3. 4. Create strong partnerships with DMC development stakeholders, including governments, the private sector, and civil society Enhance ADB's responsiveness to local needs and issues Take the lead in aid coordination where possible Promote Sub-regional Corporation.

Work of Resident Mission The work of the resident missions is grouped into two broad categories: standard and Specific functions Standard functions: Standard functions are those that the resident missions perform as ADB's principal representatives in the field: 1. 2. 3. 4. 5. Promoting relationships with government, civil society, and the private sector Engaging in policy dialogue and support Reporting on country activities Coordinating aid Assisting in external relations and information dissemination.

31

Specific functions The specific functions carried out by the missions relate to delivering and implementing ADD projects. More complex and resource intensive, these functions include 1. 2. 3. 4. Country programming Project and technical assistance processing Portfolio management and project administration Economic and sector work and analyses

3.7.2 Important Departments and Offices Budget, Personnel and Management Systems Department The Budget, Personnel and Management Systems Department (BPMSD) determines, allocates, manages, and administers the Bank's budgetary provisions for financial and human resources. The department also designs and assesses the organization and systems within which these resources are brought together to carry out the broad range of Bank activities. It develops and operates personnel programs. Central Operations Services Office The Central Operations Services Office (COSO) is responsible for central planning, monitoring, and coordinating project processing and administration work programs, and for identifying and resolving procedural and institutional problems being experienced with the Bank's projects. It provides advisory services on procurement of goods and services and use of consultants, it also prepares guidelines, loan administration manuals, project administration instructions, and other operational documents Economics and Research Department ERD delivers four basic products: ideas, instruments, instructions, and informal connections. Ideas: Knowledge Generation and Dissemination Its immersion in countries in the Asian and Pacific region makes ADB a key knowledge bank for the developing countries in the region. ERD publishes the results of empirical research carried out within the Department and other

32

departments in ADB. ERD distributes its publications to over 1,000 libraries and institutions worldwide. ERD also conducts seminars, workshops, and conferences meant to share country experiences, state-of-the-art knowledge, and progress on ongoing projects. Office of the Auditor General The Office of the Auditor General (OAG) consists of a Financial, Administrative and Information Systems Division (OAGF) and an Integrity Division (OAGI) reporting to the Auditor General. The Auditor General reports directly to the President. The Audit Committee of the Board of Directors reviews OAG's activities. Office of the General Counsel The Office of the General Counsel (OGC) provides advice and assistance to the President, the Board of Governors, the Board of Directors, and various departments and offices of the Bank on legal matters relating to the organization, administration, finance, policies, and operations of the Bank. 3.8 PAKISTAN AND ASIAN DEVELOPMENT BANK The Pakistan Resident Mission (PRM) located in Islamabad, Pakistan, started its operation in 1989. PRM's primary role is to: 1. Initiate and maintain policy dialogue with the Government of Pakistan on issues relevant to ADB's operations in Pakistan 2. Prepare the Country Strategy and Program (CSP) for Pakistan and its annual updates, and initiate and monitor the progress of the Poverty Reduction Partnership Agreement with the Government 3. Plan and prepare ADB's economic and sector work for Pakistan including Country Economic Review (2001), Pakistan Economic Update, Poverty Assessment 4. Maintain and strengthen working relations with the Government, civil society, private sector and development partners 5. Strengthen project processing and portfolio management

3.8.1 Pakistan Resident Mission

33

6. 7.

Process and implement a selected number of technical assistance Assist the executing agencies in complying with ADB procedures on procurement and disbursement

8.

Promote external relations and disseminate information about ADB and its operations, including publication of regular PRM Newsletter

9.

Undertake other activities from participating in HQ project processing missions to provide back-up operational support, donor coordination, and sub regional cooperation. The Pakistan Resident Mission (PRM) is organized into three operational units;

1. 2. 3.

Country Policy Operations (CPO) Unit, The Results Management & Development Effectiveness Unit And Two supporting operations units-Disbursement Unit and Finance Policy Operations Unit is responsible for; and

Administration Unit. Country Policy Operations Unit: The Country

4.

Preparing Country Strategy and Program (CSP) and its annual updates (CSPUs);

5. 6.

Carrying out programming tasks and conducting country programming Taking the lead role in economic and sector work relating to Pakistan including input in the processing and implementation of policy-based operations.

7.

Providing assistance in the processing of country assistance including loans and Tas.

8. 9.

Supporting work and initiatives on sub-regional cooperation. Supporting donors coordination.

Results Management & Development Effectiveness Unit The Results Management & Development Effectiveness Unit is responsible for;

34

1.

Assessing the performances of portfolio of ADB-financed projects in Pakistan.

2.

Identifying country-specific and sector-specific portfolio and project performance issues and analyzing underlying reasons.

3.

Formulating measures to improve portfolio and project performances with emphasis on increased development effectiveness.

4.

Building result-based management capacity for project implementation in the government and

5.

Carrying-out administration of delegated projects and assisting Headquarters in administering non-delegated projects.

Governance Unit The Governance Unit is responsible for: 1. Preparing and overseeing ADB's support to Pakistan's governance reforms, including devolution, gender and social development, access to justice, and civil society - state relations. 2. Assisting preparation of technical assistance and loan projects to ensure consistency with ADB policy commitments on governance, civil society participation, gender and social development. 3. Effectively administering and implementing delegated loan and technical assistance projects. 4. Networking with partners in civil society, research and policy institutions and government to support improved quality and relevance of ADB's operations to poverty reduction in Pakistan. Supporting Unit There are two supporting operations units; 3. 4. Disbursement Unit and Finance and Administration Unit.

35

Disbursement Unit The Disbursement Unit is responsible for: 1. Processing disbursement claims for all Pakistan Loans in accordance with ADB guidelines and local regulations 2. Monitoring Contract Awards and Disbursement achievements and communicating with Project staff, HQ and Federal and Provincial Governments. 3. Training Implementing Agencies' staff on Disbursement Guidelines of ADB for smooth disbursement of funds. 4. Coordinating its activities with Federal and Provincial Ministries of Finance, Implementing Agencies, ADB Controller's office and Result Management and Development Effectives Unit. 5. Fielding Review Missions to monitor and improve compliance of Disbursement Guidelines of ADB, and take remedial action. 6. Handling all internal/ external queries pertaining to disbursement or lending and borrowing issues. Finance and Admin Unit The Finance and Admin Unit is responsible for: 1. Providing support to the office operations in the fields of financial accounting and management, personnel functions and administration, including security. 2. Handling financial functions of PRM operations, including financial transactions of administrative expenses, business travel, training, capital expenditure, and TA-related expenses. 3. Preparing the annual, midyear and revised budgets and allocations, monitoring and controlling the expenditures and ensuring cost effectiveness and adherence to laid down policies and procedures 4. Advising the Country Director on personnel functions, covering recruitment of staff and various staff actions

36

5.

Monitoring and evaluating overall security situation in country, participating in security meetings at the UN, and based on that plus own assessments, issues

6.

Overseeing necessary work involved in physical expansion of PRM Office

7.

Providing support to AFRM in a number of areas, including transport, procurement of equipment and supplies. A cumulative of 293 technical assistance (TA) projects has been

approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. 3.8.2 Voting power of Pakistan Pakistan is the ninth largest shareholder in ADB among its regional members. Overall, Pakistan is the 13th largest shareholder. Table 3.2 Pakistan's Number of Share and voting power Number of shares held: 77,080 (2.203% of total shares) (2.08% of total membership,

Votes: 3.21% of total regional 90,965 membership) Overall capital subscription: Paid-in capital subscription:

US$1. 19 billion US$83. 55 million

3.8.3 Contributions to Special Funds Resources Pakistan has contributed to the Technical Assistance Special Fund (TASF), which provides grants to borrowing members to help prepare projects and undertake technical or policy studies. Contributions to the TASF (committed): | US$1.60 million

37

CHAPTER 4

ANALYSIS OF ASIAN DEVELOPMENT BANK ASSISTANCE

The aim of this study is to analyze The role of ADB in Pakistan Development. In order to analyze the required topic of the study, the improvement in quality of life is the criteria. Although, several other factors also contributed in improving the quality of life. But those factors cannot be isolated. For analytical study following projects were selected from allover Pakistan to give a comprehensive view of the ADB role. 4.1 ANALYSIS OF ADB ASSISTANCE FOR IMPROVING BASIC EDUCATION ADB's main human development objective is to reduce poverty by improving the health, living standards, and livelihood of people in its DMCs. Strengthening institutions; building capacity; reforming policy; and providing loans and technical assistance in education, health and nutrition, water supply and sanitation, and urban sectors. No country or region has done well in reducing poverty without first providing widespread basic education and health services. Education helps to empower the poor, to enhance their income-earning potential, and to improve the quality of their lives. Without basic education-without basic skills and knowledge-the poor lack the tools essential for breaking the poverty cycle. People with basic education are more productive and more likely to earn higher incomes. Where attention has been paid to educating women, multiple benefits have been obtained: educated women have lower fertility rates, produce less children and their children have lower infant mortality rates; and educated mothers are more likely to use health services and to send their children to school. Children from poor families are less likely to attend or to complete school and, as adults, these children will be less likely to improve their quality of life or that of their own children. The poor child-who was malnourished as

38

an infant-may have diminished learning ability, may suffer from chronic disease, and therefore may be unable to benefit fully from schooling. A child from a poor family is less likely to receive appropriate stimulation and encouragement at home and may find the transition from home to school more difficult. Early childhood development programs ensure adequate nutrition and health care, help compensate for disadvantaged home environments, and lay the foundation for better performance at school. ADB and education: Work continued in 1999 on preparing an updated education sector policy paper to assess ADB's evolving role in education, with particular attention to education's role in reducing poverty. Of all types of education, primary education is clearly the most important for poverty reduction. But even when this is available and successfully completed by the poor, their transition to higher education and training is limited. Strategies for education and poverty reduction must identify ways to ensure equity of access to education beyond the basic levels. As poor adults are likely to have had no access to education in their childhood or to have dropped out of school early, investing in adult and community education programs (designed to teach basic literacy, transfer essential knowledge in health and nutrition, and provide entrepreneurial and income-enhancement skills) is warranted. Enrollment of the poor in both higher education and skills development programs must be encouraged. However, entry qualifications often require completion of lower levels of education that are often not completed by the poor. Because books and supplies are expensive, the cost of such programs is usually beyond the means of the poor, even when tuition is provided free. The opportunity cost of attending post-basic education training in terms of income foregone is higher for the poor, whose immediate income is needed by the family. ADB-assisted programs in higher education and skills development support programs to enhance equity of access to higher levels of education and training for the poor through the provision of vouchers and scholarships, and develop alternative means of delivering and assessing skills training and higher education. Policy dialogue with governments and capacity building are needed to put in place

39

pro-poor policies and pro-poor resource allocation mechanisms. ADB's Projects for Improving the Education in Pakistan Asian development Bank has provided loans and grants for several projects to Pakistan for the improvement of educational sector, increasing the literacy rate in Pakistan. 4.1.1 Analysis of Teacher Training Project Basic Data about the project 1. 2. 3. Loan Number: Project Title: Executing Agency: i. ii. Federal Ministry of Education (MOE); and Provincial education departments (PEDs) of Balochistan, North-West Frontier, Punjab, and Sindh.
4. Amount of Loan: $52.1 million source: (Pakistan economic update, ADB website and Ministry of finance website)

1210-PAK (SF) Teacher Training

Project Description In spite of impressive economic growth in the previous two decades, Pakistan in the early 1990s had some of the world's lowest social indicators. Out of 160 developing countries, Pakistan ranked 120th and suffered from widespread poverty and low quality of life. Annual population growth rate was 3.1%; infant mortality rate, 107 per 1,000 live births; life expectancy, 55 years; overall illiteracy rate, 69% (85% for women); and primary-school enrolment was very low (less than 50%), particularly for females. In 1992, the Government of Pakistan launched the Social Action Program (1992-1995) to emphasize human resource development, which is essential to promote economic development, reduce poverty, and improve social well-being. The program allocates resources for universal primary education to increase the literacy rate to about 80% by the end of the decade. Government of Pakistan also adopted the National Education Policy in the 1990s. This policy reflected issues identified in the 1988 studies that strengthened the rationale for the Teacher Training Project (TTP). In 1990, ADB provided project preparatory technical assistance (TA) to prepare a detailed proposal for

40

the

TTP.

Principal

stakeholders,

policymakers,

administrators,

and

beneficiaries at a national conference in Islamabad reviewed the TA findings in 1992, and recommendations incorporated to improve the project design. Objectives of Teacher Training Program The objectives of TTP included the following: 1. An expanded teacher training system to solve the teacher shortage, which at appraisal was estimated to reach 525,800 by 2000 (234,600 for primary schools; 96,100 for middle schools; and 195,100 for secondary schools); 2. Improved quality of teacher training programs, which at appraisal were dominated by the 9-month primary teacher training certificate (PTC) training course and the 12- month certificate of teaching (CT) course, and which, after over 25 years, had become obsolete; and 3. Improve planning, management, and efficiency of teacher training institution (TTIs), which were under multiple chains of command and responsibilities at the federal and provincial levels. Anticipated Benefits Anticipated benefits upon project completion included the following: i. Training for over 160,000 teachers, of whom at least 60% would be women; staff development through overseas fellowship and in-country training for about 5,000 Ministry of Education (MOE) and provincial education department (FED) senior staff and officials involved in teacher training; ii. iii. Improvement of 59 TTIs; and Establishment of six new TTIs to a. b. Increase training capacity, quality, and research; Increase access to teacher training in disadvantaged rural areas, especially for women;

41

c.

Improve the quality of methodologies and teaching environment in TTIs;

d.

Strengthen planning and management.

Project Cost and Financing The total project cost at appraisal was estimated at $71.3 million. Table 4.1: Project Cost
($ Million) Cost Foreign Exchange cost Local Currency Cost Total Appraisal Estimate 13.5 57.8 71.3 Actual 7.3 19.4 26.7

Source: (Pakistan economic update, ADB website and Ministry of finance website) ADB provided a loan of$52.1 million and Government of Pakistan committed $19.2 million for local currency costs. The loan approved on 15 December 1992 and declared effective on 14 October 1993, was to cover the entire foreign exchange costs of $13.5 million, and part ($38.6 million equivalent) of the total local currency costs. The actual project cost was $26.7 million, including $21.4 million financed by an ADB loan and $5.3 million by Government of Pakistan. After five loan cancellations amounting to $29.7 million, the loan account was finally closed on 18 July 2002. No major changes were made to the project scope during implementation, including the midterm review, although changes to the project schedule were required due to long delays. Table 4.2 Financing plan of the Projects
Cost Implementation Costs ADB-Financed Borrower-Financed Sub total IDC Cost Appraisal Estimate Foreign Local Total 11.9 0.0 11.9 38.6 19.2 57.8 50.5 19.2 69.7 Actual Local 14.1 5.3 19.4

Foreign 6.3 0.0 6.3

Total 20.4 5.3 25.7

42

ADB-Financed Borrower-Financed Total

1.6 0.0 1.6

0.0 0.0 0.0

1.6 0.0 1.6

1.0 0.0 1.0

0.0 0.0 0.0

1.0 0.0 1.0

Source: (Pakistan economic update, ADB website and ministry of finance website) Performance of the Asian Development Bank ADB generally handled approval, disbursement, and related project procedures efficiently and on time. Fourteen review missions were conducted from 1995 to 2001. Although adequate staff time was provided for review missions, field supervision of project activities to help FCU and PIUs solve their problems, given the complexity of the umbrella-type design of the project, could have been more effective. During project implementation, the review missions could also have recommended further training of FCU and PIU staff in ADB's procurement and disbursement procedures to expedite completion of project components, and advised EAs to have funds reimbursed under advance action and retroactive financing. ADB's performance was considered partly satisfactory. Efficacy in Achievement of Purpose In general, TTP accomplished its overall objectives of capacity expansion and increased access to training, as well as intermediate and longterm goals of pre-service quality through the Dipl. Ed. course. Consistent with the targets, the physical infrastructure was practically all completed and more classrooms were constructed than planned. However, specific objectives such as the provision and installation of electronic media equipment and laboratory equipment, vehicles, furniture, curriculum and instructional material development, in-service training, and TEMIS and BME were partly accomplished. In other words, TTP is assessed as partly efficacious. 4.1.2 Analysis of Second Girls Primary School Project Basic Data about project 1. Project Number: 27180 2. Loan Number: 1454(SF) 3. Country: Pakistan

43

4. 5. 6.

Loan Number: 1454-PAK(SF) Project Title: Second Girls Primary School Sector Project Executing Agency: i. Ministry of Education (federal) ii. Department of Education (Balochistan) iii. Department of Education (NWFP) iv. Department of Education (Punjab) v. Department of Education (Sindh) SDR31, 178,000

7. Amount of Loan: Project Description

Pakistan has one of the highest rates of illiteracy in the region because of limited access to education and lack of basic education facilities. Females, especially in rural areas, are particularly disadvantaged, as the adult literacy rate is considerably lower in rural areas than in urban areas, and illiteracy is significantly higher among females than among males. The Asian Development Bank (ADD), through the Primary Education (Girls) Sector Project 1, supported the Government of Pakistan's (the Government's) long-term plan to increase girls' participation in primary education by setting up community model schools (CMSs) for girls in union councils. In the final phases of that project, ADB responded to the Government's request for further assistance by approving a project preparatory technical assistance (PPTA) to build on experience and achievement under the earlier project, and prepare a detailed proposal for the Second Girls Primary School Sector Project (the Project) in close consultation and coordination with the Government, other aid agencies, and expected beneficiaries. Purpose of the Project The Project was aimed at providing accessible and good-quality primary education to increase the participation and retention rates of girls in rural areas. The Project supported the government's long-term plan to expand primary education for girls by establishing CMSs where they could receive goodquality instruction and master the basic literacy skills needed for further education and productive life. Project Cost

44

The total cost of the Project at appraisal was estimated at $ 78.8 million equivalent comprising $ 10.1 million in foreign exchange cost of $ 68.7 million equivalent in local currency cost. ADB approved a loan of $45.0 million from its Special Fund to finance $7.6 million (76%) of the foreign exchange cost and $37.3 million (54%) in local currency cost. The ADB loan represented 57 % of the total project cost. The Organization of Petroleum Exporting Countries Fund for International Development (OPEC Fund) was to finance $16.0 million ($1.7 million of the foreign exchange cost and $14.4 million of the local currency cost). The remaining $17.8 million, comprising $0.8 million in foreign exchange cost and $17.0 million in local currency cost, was to be shouldered by the Government through budgetary allocations. The actual project cost was $60.6 million $41.6 million in foreign exchange cost 15 and $19.0 million equivalent in local currency cost. ADB financed $37.1 million, OPEC Fund $11.3 million, and the Government $12.2 million equivalent. Local currency costs financed by ADB included primarily civil works, furniture, IM, and staff development activities. The actual costs as shown in the following Table 4.3 were lower than the appraisal estimate. Here we do not discuss its reasons. Table 4.3: Project Appraisal Estimate and Actual Cost ($ million)
Cost Foreign Exchange cost Local Currency Cost Total Appraisal Estimate 10.1 68.7 78.8 Actual 41.6 19.0 60.6

Source: ( Pakistan economic update, ADB website and Ministry of finance website)

Breakdown by Project components The amounts allocated to each component of the Project are shown in the table below.

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Table 4.4: Breakdown by Project component

Component Base Cost Civil Work Furniture, Equipment, Vehicles, and Materials Staff Development Consulting Services Community Participation CMS staff Salaries Salaries, Incentives, and O&B Total Base Cost Taxes and Duties Service Charges Imprest Account Total Appraisal Estimate Actual

39.3 13.8 2.9 2.2 2.2 16.5 1.9 77.2 0.0 1.6 0.0 78.8

36.4 4.1 0.8 2.8 0.0 9.7 1.5 55.3 0. 0.8 4.5 60.6

Source: ( Pakistan economic update, ADB website and ministry of finance website)

Performance of the Asian Development Bank ADB closely supervised and monitored the Project, and guided the EAs in procurement. ADB approved contract awards on time and clarified implementation issues raised by the EAs. In addition to regular review missions, regular follow-up meetings were held with the project directors. As required, joint review meetings with the project directors were also held to discuss and resolve common implementation issues. The project directors keenly appreciated this initiative taken by ADB. The Government appreciated as well ADB's approval of a loan extension of 2 years and 10 months, to allow for the implementation delays and the need to complete the large number of civil works contracts. Throughout the implementation period, ADB maintained a cordial relationship with the EAs, and its review missions supported the quick resolution of outstanding constraints on project implementation. Efficiency in Achievement of Purpose In general, the Project accomplished its overall objectives of increased access and enhanced institutional capacity. Consistent with the targets, the physical infrastructure was practically completed and functioning with students and staff, classrooms and TRRs were being used, and most of the SMCs were in place, although not all were equally active. The PCR mission visited over 100 schools; nearly all were functioning, with average student enrollment near designed capacity. The Project made improvements in the collection and

46

analysis of data on student enrollment, dropout, and repetition rates; however, this initiative could not be completed because the consulting firm did not field the required consultants. The following key appraisal targets were met: 1. 75 new schools were built and 979 existing schools were upgraded. Nearly all these school projects were completed and are functioning. 2. Furniture was procured for all 1,054 CMSs. Most of the furnishings are in place and are being used. 3. Equipment and library books were procured, and IM were developed under the Project. 4. Management and planning capacity at the central level and in the provinces was strengthened. At the school level, SMCs were established. 4.1.3 Analysis of Middle School Project Basic Data
1. 2. Loan Number: Project Title: 1278-PAK (SF) Middle School Project

3.

Executing Agencies: i. ii. iii. iv. Ministry of Education, Federal Department of Education, Balochistan Department of Education, North-West Frontier Province (NWFP) Department of Education, Sindh $78 million estimated

4.

Amount of Loan:

Project Description In 1992 the Government of Pakistan requested Asian Development Bank (ADB) assistance to analyze issues, strategies, and options relating to expanding and improving middle-school education, and to prepare a project proposal to address issues identified. The Government confirmed its priority for the project to the 1993 Country Programming Mission and requested that ADB assistance be limited to the provinces of Balochistan, North-West

47

Frontier Province (NWFP), and Sindh. The Punjab was excluded because the World Bank was undertaking a similar project in Punjab. Objectives of the Project The rationale for the proposed intervention was that the Government was improving access, quality, and supervision in primary schools with external assistance, including from ADB. The Middle School Project took note of two realities: the need to create additional seats for the increased number of students projected to complete primary school; and the importance of elementary education with a special focus on girls' education. The Project thus aimed to: i. Improve access to and participation in middle schooling in rural and urban slum areas, especially for girls; ii. Improve the quality of education, and increase student learning and achievement; iii. Strengthen the capacity to plan, implement, and maintain the school system. To achieve these objectives the Project was to: i. ii. Increase the supply of middle-school places, especially for rural girls; Encourage demand from rural girls by offering stipends to attend grades 6-8, and assist rural female matriculates to qualify as middle-school teachers; Support the private sector's entry into the middle- school market; Reform the middle school curriculum and textbooks, and then retrain teachers and head teachers; v. vi. Produce pilot achievement tests in core subjects; Carry out studies on the provincial management of school systems so as to introduce efficiency gains; vii. viii. Improve the capacity to plan, monitor, and evaluate the school system. Establish systems for maintenance of school plant.

iii. iv.

48

Project Costs The total project cost at appraisal was estimated at $100.5 million equivalent comprising $ 38.5 million in foreign exchange cost and $ 62 million equivalent in local currency cost. ADBs loan of $78 million contributed 78% of the total project cost, covering 100% of the foreign exchange cost and 64% or $ 39.5 million of the local currency cost. The governments share was $22.5 million equivalent all in local currency. The total actual project cost was $40.7 million, comprising $ 14.7 million in foreign exchange cost and $26 million equivalent in local currency cost. The following Table 4.6 shows actual project costs. Table 4.6: Project Costs of MSP ($'000)
Item Foreign Exchange A. Implementation Cost 1. Civil Works 9,456.0 2. Furniture, Equipment and Vehicles 308.0 3. Instructional Material 5.0 4. Staff Development 908.0 5. Consulting services 1,571.0 6. Rural Girls Stipend Program 94.0 7. Incremental Recurrent Costs 0.0 8. Taxes and Duties 0.0 Sub-total (A) 12,742.0 B. Imprest Advances and Service Charges 1. Imprest Advances 785.0 2. Service Charges 1,615.0 Sub-total (B) 2,400.0 Total 14,742.0 Local Currency 13,371.0 2,534.0 268.0 2,804.0 1,654.0 2,953.0 1,953.0 497.0 26,026.0 0.0 0.0 0.0 6,026.0 Total Cost 22,827.0 2,841.0 273.0 3,046.0 3,046.0 3,046.0 1,946.0 497.0 38,367.0 785.0 1,615.0 2,400.0 40,767.0

Source: ( Pakistan economic update, ADB website and Ministry of finance website) Performance of the Asian Development Bank ADB's performance overall was satisfactory. After delegation of the Project to PRM, ADB's performance was increasingly governed by a focus on the Project's development objectives, bearing in mind the institutional, financial, and procedural constraints of the respective governments; and by concerns for governance, transparency, and sustainability. Procedures applied by the PIUs were often inconsistent with ADB procedures and this led to delays in ADB approvalor non-approvalof procurements. These factors resulted in Sindh not exercising an option to re-tender the procurement of

49

equipment for the MST unit, and Balochistan re-tendering of books not being approved. Monitoring by ADB was adequate although more missions could have been fielded. This was largely attributable to stuffing constraints and resulting work pressures at PRM, which precluded more frequent missions critical issues were raised during high-level quarterly provincial project review meetings. Efficiency in Achievement of Outputs and Purpose The Project is rated as inefficient in terms of efficiency of process. Implementation delays affected project start-up, civil works, in country and international training, procurement, and staffing of the PIUs as well as of upgraded schools. Loan extensions spanned a cumulative period of 4 years and 3 months, and even then some activities were not adequately complete. Overall Assessment The Project is rated partly successful. The Project suffered implementation delays and financial mismanagement comprising an embezzlement of $1.03 million and ineligible use of imprested account funds. Government commitment to achieve the Project's development objectives remains elusive as project schools arc partially functional and enrollment less than intended. The potential for quality improvements has yet to be realized, and the impact of teacher training is difficult to assess as teachers trained were mostly from nonproject schools due to delays in recruitment of teachers for upgraded schools. Of the three provinces, Sindh's performance was the weakest. The leadership shown by it in curtailing the civil works' program, regrettably, has not extended to its approach for the 179 upgraded schools. It will require the same leadership, and indeed, on the part of all provincial and district governments, to ensure that investments made are optimized. Under the 2001 devolved system, the focus will shift to district governments, the quality of each district government determining the quality of results.

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4.2

ADB ASSISTANCE FOR THE IMPROVEMENT OF HEALTH AND SOCIAL SECTOR ADB's updated health sector policy, adopted in February 1999,

Asian Development Bank and Health Sector reemphasizes primary health care, including reproductive health, family planning, and selected nutrition interventions, as the best strategy to provide universal access to essential health services. ADB's overall objective in the health sub-sector is to assist DMC governments in ensuring that their citizens have broad access to basic preventive, promotive, and curative services. ADB focuses on 1. Improving the health status of the poor, women, infants, children, and indigenous peoples; 2. 3. Promoting health sector reforms; Enhancing the efficiency of health sub-sector investments through institutional strengthening and capacity building; 4. 5. Achieving tangible, measurable results; and Testing innovative approaches and supporting effective and affordable new technologies. The Asian financial crisis highlighted the need for governments to actively pursue health sub-sector reform and implement effective and costefficient strategies. Reforms in health sub-sector financing aim to mobilize more resources for health and to make better use of available resources, particularly government subsidies. ADB projects support reforms that further decentralize health service delivery, encourage partnerships with the private sector to improve efficiency and coverage, and focus on protecting vulnerable groups, especially the poor, women, children, and indigenous peoples. ADB has financed several health projects and has provided and is providing Technical Assistance for Pakistan.

51

Health Services Provision 1. Maternal and Child Health A facility survey, 29 that was conducted in 1999 to compare the situation in 1993 (with the Project close to completion) with that of 1998 (after the Project was completed), showed an increase in MCH service utilization. The survey also showed an increase of 120 percent in antenatal clients in Balochistan during the same period. The number of female health workers increased by 164 percent, from 243 in 1993 to 641 in 1998, in Balochistan alone. Family planning services, initially provided only by the population welfare centers, are now provided also at the RHCs. Family planning clients in Balochistan increased by 126 percent in 1998 compared with 1993. Currently, 75 percent of primary health care facilities in NWFP are providing contraceptives to their clients. RHCs are the main source of family planning services to the rural population. The contraceptive prevalence rate among the rural population increased from 9 percent in 1990 to 23 percent in 1999 in NWFP, and from 2 to 10 percent during the same period in Balochistan. 2. Immunization Coverage The addition of immunization rooms in the upgraded RHCs under the Project contributed toward the increased immunization coverage in both provinces. The expanded program on immunization has a strong presence in the majority of the facilities, as vaccinators are available in 87 percent of the RHCs. Refrigerators for storing drugs are available in 83 percent of the facilities. Of these, 95 percent are in good/satisfactory condition. The survey conducted in 199031 reported that the proportion of fully immunized children in the age group 12-23 months was only 18 percent in Balochistan. The overall coverage reported in 1997 was 59 percent, and for the rural population 57 percent. 3. Medical Staff Medical officers, being the core staff of an RHC, are available in almost all the RHCs (96 percent). However, some specialists, e.g., surgeons and

52

particularly WMOs, are in short supply, especially in remote areas. Forty percent of RHCs do not have a posted WMO. Constraints related to cultural and traditional practices, security problems, and lack of basic amenities are the main reasons why WMOs prefer urban center rather than rural health facility postings. Regular attendance of doctors has also been a problem in certain places. LHVs are available in 87 percent of the health facilities and are playing an important role in prenatal care. The supply of medical staff, such as vaccinators, laboratory technicians, and drug/medicine dispensers, is adequate, whereas there is a lack of x-ray technicians. Health Impact 1. Improved Diagnosis Basic apparatus/equipment used in the medical officer's examination room includes an examination table, blood pressure apparatus, stethoscope, eye/ear/nose/throat box, laryngoscope, and instruments table. These are available in all the facilities and in good/satisfactory condition in more than 90 percent of the facilities surveyed. The addition of laboratory and x-ray rooms in the RHCs greatly enhanced the diagnostic capabilities of these facilities. They are reported to be in good condition. X-ray machines, provided under the Project, are generally in good condition, and in places where there is an x-ray technician, heavily utilized. 2. Health Indicators Due to the complex nature of health and disease, the impacts of health interventions ate difficult to assess. Each health intervention has a supplementary effect on others. A number of health indicators need to be used to measure health impacts. Health impacts can generally be assessed from 1. 2. 3. 4. Vital health and demographic indicators, Morbidity and mortality indicators, Service provision indicators, and Perceptions of beneficiaries.

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The available vital health and demographic indicators show a progressive improvement in the general health status of the people in the two provinces over the years. Despite the lack of some indicators for certain years (especially for FATA), most indicators improved between 1990 and 1999. Beneficiary Perceptions 1. Community Satisfaction with RHCs Sixty seven percent of respondents to a survey question on whether they were satisfied with the outpatient diagnostic/treatment replied in the affirmative. Eighty percent were satisfied with the availability of the doctors at the center but only 41 percent were satisfied with the availability of WMOs. The majorities were satisfied with the availability of female health workers and labor room staff at the RHCs. Availability of medicines is an area of concern. The majority of the respondents expressed dissatisfaction with the emergency service and emergency medicines. Seventy-five percent were dissatisfied with surgical operations, and 83 percent with postoperative care. 2. Health Personnel Development At the start of the Project in 1988, there was a serious shortage of female nurses and LHVs. Expansion of prcscrvice training of female medical staff was achieved through the upgrading of nursing and public health schools (for LHVs). This initiative has considerably contributed to health personnel development in the two provinces. The number of female paramedical staff has since registered an increase. Strengthening of the Post-Graduate College of Nursing at HayatAbad and the Basic School of Nursing at Lady Reading Hospital in Peshawar in NWFP also contributed to increased availability of nurses and better quality of training. Balochistan and NWFP have all played an important role in enhancing the quality of nurse training. The access to on-the-job training in nearby hospitals and MCH centers has been greatly enhanced by vehicles supplied under the Project. The graduates of the nursing schools are available for posting in government urban and rural health facilities in their respective provinces, as

54

they are under service bond to work for the Government upon completion of their course. However, due to scarcity of sanctioned posts, there is at least a year of waiting time before fresh graduates can join the government service. Some find temporary employment with private clinics. The annual number of nursing graduates in NWFP is around 120, and in Balochistan around 60. In addition, around 70 LHVs a year complete their two-year course in the two provinces. 3. Maintenance and Repair of Medical Equipment There is a substantial amount of medical equipment in health facilities in both provinces. To ensure adequate maintenance and repair of such equipment, seven workshops were established under the Project. Two other workshops, in Loralai and Sibi, have no repair equipment yet, despite an assurance from DOH Balochistan during the PCR review to supply it. While the output of central workshops in Quetta and Peshawar is high, the utilization of divisional level workshops remains low. In places where workshops operate, substantial savings in equipment repair have been realized. 4. Planning and Management of Health Services The Project contributed greatly to establishing the planning capacity at the provincial department level in Balochistan and NWFP. While the operations and performance of the planning units in DOH Balochistan and DOH NWFP are very satisfactory, those of the MOH planning cell need further support. The lack of focus in MOH is attributable to the overlapping functions in planning and management of the Health Division of the Planning Commission, the Basic Health Services Unit of MOH, the National Institute of Health, and the Health Services Academy. At the provincial level, conscious efforts toward collection and use of information are apparent and the staffs posted in the planning units are responsible for development planning and budget preparation. Compared with them, the planning cell established at MOH Islamabad is still lacking in human resources capacity and expertise. Nevertheless, the planning cell and units have played an important role in the preparation of the annual operational plans and the annual development and

55

recurrent budgets for MOH and the two provincial departments a clear indication that the Project has contributed to institutional capacity building in all three organizations. Of the targeted 27 nursing teaching staff for overseas fellowships, 21 nurses were trained in post basic nursing in various fields. More than the targeted 60 nursing trainees attended local training workshops organized by consultants engaged under the DFID grant. Seven MOH and DOH staff were trained overseas for two years in health planning and management. Most of the staff trained under the Project are still employed in different capacities within the DOHs. Trained professionals thus staff the planning units in the provinces. 4.2.2 Analysis of Institutional Development of the Ministry of Population Welfare Introduction In November 1992, the Government of Pakistan requested the Asian Development Bank (ADB) to finance part of the foreign assistance requirement of its Population Welfare program (PWP). The Project was based on this request, and approved on 2 December 1993. The Project was to support PWP in reducing the population growth rate from 3.1% to 2.6% per year by the end of the Eighth Five-Year Plan (1993 to 1998) through an in creased contraceptive prevalence rate (CPR) and a reduced total fertility rate. Specifically, the project aimed to: i. Increase accessibility and coverage of family planning services in rural and underserved areas; ii. Improve the quality, supply, and distribution of doctors and paramedical staff in clinical family planning services, and the training of village family planning workers (VFPWs) and government staff; iii. Increase awareness of the benefits of and demand for family planning services; and iv. Strengthen planning, management capacity, and research activities for population welfare services.

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Component of the Project The Project comprised four main components: i. ii. iii. iv. Service delivery; Human resource development (HRD) and training; Information, education, and communication (IEC); and Planning, management, and research. Attached to the Project was a technical assistance (TA) grant for institutional development at the Ministry of Population Welfare (MOPW).

Objectives of the Program Pakistan formulated its Population Welfare Program (PWP) with the overall objective of reducing the population growth rate from 3.1%among the highest in South Asia to 2.6% per year by the end of the Eighth Five -Year Plan (1993 to 1998). This target was set based on the high population growth rate and the understanding that rapid population growth strains public expenditure for social services, depletes natural resources, and undermines economic growth. The long-term goal of PWP is reducing poverty. Cost, Financing, and Executing Arrangements Cost: The total project cost amounted to $30.6 million, compared with $39.0 million estimated at appraisal. The following table shows appraised and actual project costs. Table 4.7 Appraisal and Actual Cost ($ million)
Item Civil Work Equipment, furniture, and Vehicles Medicines Consulting Services Training, Salaries, Staff, development and Research Study Project Implementation Incremental Recurrent Cost Service Charge Total Foreign 1.089 2.490 2.250 0.282 3.000 0.336 2.000 0.5S8 12.035 Appraisal Local 5.090 2.300 0.711 0.146 11.690 1.528 5.500 26.965 Total 6.179 4.790 2.961 0.428 14.690 1.864 7.500 0.588 39.000 Foreign 1.105 2.930 1.305 4.559 0.058 2.992 0.474 13.423 PCR Local 1.871 2.656 0.396 6.223 0.205 5.855 17.206 Total 2.976 5.586 1.701 10.782 0.263 8.647 0.474 30.629

Source: ( Pakistan economic update, ADB website and Ministry of finance website)

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Financing ADD financed $23.07 million of the total project cost. Substantial loan savings were realized from civil works and incremental recurrent costs, as well as the entire provision for consulting services. Reallocations were made to cover additional requirements for equipment and staff training. The balance of $1.49 million was cancelled at loan closing on 8 June 2000. The Executing Agency for the Project was MOPW. Each PWD had responsibility for implementing the components at the provincial level, including coordination with the department of health and the planning and development department. A project implementation unit (PIU), headed by a project director, was established in each province for day-to-day management, coordination, administration, and implementation. At the national level, an interministerial coordinating committee provided guidance and policy direction, while provincial-level project steering committees provided guidance and resolved interdepartmental problems. Completion and Self-Evaluation The Project was completed in December 1999, compared with the expected completion date at appraisal of March 1999. Total project cost amounted to $30.6 million, compared with $39.0 million estimated at appraisal. ADB financed $23.07 million of the Project. The balance of $1.49 million was cancelled on 8 June 2000. The expected closing date was 31 December 1999, but actual closing was completed on 8 June 2000. The project completion report (PCR), rated the Project successful. The PCR cited the Project's realization of its development objectives by contributing to PWP's achievement in reducing population growth from 3.1% to 2.6% per year. The IEC campaign raised awareness of and demand for family planning services, while VFPWs effectively improved access to these services. The Project made a positive contribution to empowering women by recruiting and training village women as VFPWs. This has enhanced their status in the community, and demonstrated the advantage of educating girls.

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4.3

Analysis of Emergency Assistance for Mitigation and Recovery Component Project Loan Number: Project Title: 1413-PAK (SF)-02

Drought

Impact

Basic Data about Project 1. 2. 3. 4. Drought Impact Mitigation and Recovery Component

Executing Agencies:Ministry of Finance, Planning and Development Division Amount of Loan: SDR 79.443 million

Source: ( Pakistan economic update and Ministry of finance website) Introduction During the late 1990s, severe drought conditions threatened livelihoods and increased poverty levels across Pakistan, especially in rural areas. The drought, which continued over 3 years, aggravated the country's already highly stressed water situation. The dought was worst in rain-fed regions of Balochistan and Sindh provinces and occurred during a severe economic crisis when the Government was also facing demands to finance a variety of development needs. In addition, rural employment was reported to moving to non-farm activities, thereby reducing already difficult agriculture production and increasing migration of affected populations to neighboring regions. Emergency measures were needed to improve conditions for the poor and provide support for poverty reduction and employment generation. In May 2001, the Government initiated a multifaceted approach to address the immediate and medium-term effects of the drought, including a public works program (Khushal Pakistan Programme) to create temporary employment, and promote social protection and the recovery process. The Asian Development Bank (ADB) Fact-Finding Mission, fielded in May 2001, assessed requirements to mitigate drought impacts. To support Government efforts, ADB developed the Drought Impact Mitigation and Recovery Component (DIMRC) to: i. Improve water resources and water supply sub-projects to support efficient water use, and water conservation and harvesting;

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ii.

Improve accessibility by providing rural roads to rural communities to enhance rural employment;

iii.

Support a range of services in agriculture, livestock, forestry, and rangelands to help and protect livelihood opportunities for the poor;

iv.

Enhance health care and other services with a locus on providing nutrition supplementation and maternal health care services for the rural poor in drought-affected areas.

The DIMRC design and formulation were relevant to the Government's efforts to mitigate the adverse effects of drought duly aggravated by the economic crisis and severe resource crunch of the late 1990s. The DIMRC was designed as a quick response to an emergency situation. Rural areas were the primary focus. Project Costs The estimated project cost at appraisal was $125.0 million. The loan did not make provision for allocations to sectors and subproject activities, or for price and physical contingencies. ADB provided a loan of $100.0 million equivalent from savings from 12 ongoing projects. 13 Project beneficiaries were to contribute $9.0 million (7.2% of total cost), and Government $16.0 million (12.8 %) as part of incremental costs, duties, and transfers. The Government contribution reflected its substantial and extensive nationwide involvement. By end September 2005, the actual cost stood at $141.155 million 113% of the original Estimates. Table 4. 8: Project Cost ($ million)
Cost Foreign Exchange cost Local Currency Cost Total Appraisal Estimate Not Specified Not Specified Actual 43.85 97.30 141.16

Source: ( Pakistan economic update, ADB website and Ministry of finance website)

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The major reason for this escalation is due to the beneficiary contribution: Communities contributed in several ways: land for dams, tube wells, drinking water sub-projects, health centers/dispensaries and veterinary centers; earth and stones as input to various structures and roads; water for construction; and care and storage of material brought in by contractors, etc. The Government allocated the DIMRC funds to four provinces, without specifying funds for specific sectors. Provinces and districts could select subprojects and develop a portfolio based on local priorities. In Sindh, 64% of sub-projects focused on rural roads and utilized 76% of the allocated funds. In Punjab, 17% of sub-projects were in irrigation and water management for 32% of the funds; road and drinking water sub-projects utilized 25% of the funds. In NWFP, 55% of all sub-projects were for drinking water and utilized 45% of the funds, and 39% were for irrigation, using 48% of the funds. In Balochistan, 65% of sub-projects were for irrigation and utilized 69% of funds. Project Outputs Project appraisal did not elaborate specific targets to be achieved by the completion date. Rather, it provided a broad scope of work and activities to support achievement of broader objectives of employment generation and income supplementation to the poor. The President of Pakistan approved the provincial distribution of funds based on drought severity and poverty incidence. Sindh and Balochistan were each allocated 30%, Punjab 25%, and NWFP 15%. Provinces adopted varied measures to arrive at district allocations. Given the DIMRC's flexibility, all provinces planned outputs according to approved sub-projects, keeping in view the identified project areas. The scope of approved activities widened tremendously to address emerging local needs, making the project complex and comprehensive. Efficiency in Achievement of Outputs and Purpose The DIMRC is rated efficient. A total of 1,902 sub-projects were undertaken. Punjab, Sindh, and NWFP were able to complete and make a large majority of

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their sub-projects operational well before project completion, while Balochistan completed more than 85% of its targeted sub-projects by 30 September 2005. Most sub-projects were implemented using private sector contractors. The process of open competition, selection of firms based on bids and technical competence, and timely completion of sub-projects with quality outputs are major areas of project efficiency. Where district coordination officers supervised the DIMRC, work was completed on time with local department staff providing the necessary technical supervision. The overall time between sub-project identification and launching of work could have been shortened if the DDACCs had been given approval authority for sub-projects costing less than $50,000. Almost all sub-projects benefited local residents. The sub-projects under implementation including tube wells, when completed by end September 2005, are expected to provide tremendous benefits to the poor living in drought area. Keen interest by provincial coordinators and district coordination officers helped resolve many audit observations by September 2005. Overall Assessment The DIMRC is rated successful; it achieved its objectives and completed a significant proportion of planned tasks and civil work structures. The quality of work is satisfactory. The DIMRC had a national scope prepared to address drought-related emergency conditions, but was not developed with a project framework. Implementation arrangements were quickly designed and put in place. The DIMRC generated many jobs for local skilled and unskilled laborers, and provided employment when poverty and unemployment were increasing.

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Table 4.9: Employment and income Generation from Project (By sector)
Sectors Type of Job No. of Job Created per km 10-15 5-6 6-7(20+in Sindh) 3-4(5+ in Sindh) 1-2 7-8 2-3 6-7 25-35 10-15 4-6 4-5 Monthly Wages/Earning (Rs) 3,000-4,000 5,000-10,000 4,000+ 7,000+ 3,000-4,000 3,500 Plus 5,000 Plus 3500 on Average 6,000 on Average 4,000 on Average 9,000 on Average 4,000 on Average 9,000 on Average Duration of Earning

Road

Unskilled Skilled Unskilled Skilled

5-6 months 5-6 months 3 months 3 months For Sub project life time 3 months 3 months 1 months 1 months 7-8 months

Drinking Water Construction

Operation Irrigation (Water courses) Construction Tube wells Water Conservation (Delay Action or check dams) Health and Veterinary Centers - Civil works

Operator/ Guard Unskilled Skilled Unskilled Skilled Unskilled Skilled Unskilled Skilled

Source: ( Pakistan economic update, ADB website and Ministry of finance website) 4.5 ANALYSIS OF MALAKAND RURAL DEVELOPMENT

Description The Project will comprise; i. Village development services, including agricultural support services, community-managed infrastructure development, and development of community-based health services targeted specifically to women; ii. iii. Rural financial services; Improvement and expansion of the road network in the Project area, and introduction of a toll management and roads maintenance system for annual maintenance of the road network; and

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iv.

Implementation support and capacity building services, to reduce rural poverty in Malakand Division in North West Frontier Province (NWFP) in Pakistan.

Location Malakand Division in North West Frontier Province (NWFP). Executing Agencies i. ii. Planning, Environment and Development Department, NWFP

Basic Data about Cost and Financing: The Board of Directors approved the Loan on 18 March 1999. Table 4.10:Cost and Financing Plan (in US$ million)
Source Bank Co-financing Borrower Beneficiaries Others Project/Program Cost Foreign Loan 15.40 0.00 0.00 0.00 0.00 15.40 OCR Loan Amount 0.00 Local Cost 25.60 0.00 12.10 8.80 1.00 47.50 ADF 41.00 Total 41.00 0.00 12.10 8.80 1.00 62.90 Total 41.00

Source: ( Pakistan economic update, ADB website and Ministry of finance website) Rationale The Project area has largely been neglected in the development of infrastructure, and in the generation of employment and income earning opportunities. It is estimated that 72 percent of the population in the Project area is below the poverty line of $150 per capita. Human development status is also low due to lack of education and health care services. The previous development projects implemented in Malakand and Government service delivery have reached only a small proportion of the rural population, especially in the remote mountainous areas. Beneficiary consultations in the

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area indicate that the rural poor request a better road network, irrigation improvement, improved access to agricultural inputs, agricultural extension advice and credit, access to improved livestock breeds and veterinary services, better health care and education, and potable water supply. The Project is designed to meet these beneficiary needs, and policy dialogue conducted with the Government of NWFP focused on institutional innovations to create a rural support organization to sustain institutional support to the village organizations beyond the Project implementation period. Objectives and Scope The Project aims to reduce rural poverty in Malakand by enhancing household incomes and living standards, particularly for the smallholder and tenant farmers, and the landless, who constitute the rural poor in the Project area. Women's human resource development and improvement of their income earning potential arc specifically aimed at. At the same time, by assisting to create a semi permanent structure to support village-level development and by providing capacity- building assistance and training support, the Project will contribute to institutional reforms for devolution of powers to the local level. The Project comprises village development services, rural financing services, road development, and implementation support and capacity-building services. Environment Impact and Mitigation The impact of the project is overall positive as per appraisal. The Project incorporates environmental awareness raising and training for implementing agencies, and safeguard measures. Social Aspects and Remedies Institutional reforms to be undertaken will contribute to empowerment of local residents and women. Benefits and Beneficiaries The Project will directly benefit approximately 80,000 rural households in 1,000 settlements (villages) in the Project area (close to 50 percent of the rural population). Two thirds of the beneficiaries are expected to be from households

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below the poverty line. The social mobilization process and annual Benefits Monitoring and Evaluation surveys are the targeting mechanisms. The beneficiaries will include all direct users of the Project area transport network; and the region's consumers and producers, who will benefit from lower costs and improved markets as a result of the transport network improvement; farmers and farm families, who will benefit from irrigation, agriculture, and livestock activities; village families, who will benefit from irrigation, agriculture, and livestock activities; village households, who will benefit from rural electrification, drinking water and sanitation improvements, financial services, and strengthened village institutions; and the Project area female population who will benefit particularly from improved health services, access to credit, and improved agricultural and livestock extension services as well as membership in women's organizations and subsequent empowerment as decision makers. Beneficiary Participation in Formulation Three thousand potential beneficiaries in 68 villages of the Project area were consulted through a formal survey, rapid appraisals were conducted, and a series of village dialogues were carried out (separately for women and for men). Beneficiary Participation in Implementation Beneficiaries will take part in decision-making on design, construction, operation and maintenance, and overall management of the village development schemes. Procurement All procurement under the Project will be carried out in accordance with the Bank's Guidelines for Procurement. Civil works under the Project are small and scattered over a wide area. The civil works for rural access roads will be carried out by prequalified contractors through local competitive bidding in accordance with procedures acceptable to the Bank. International competitive bidding (ICB) procedures will be followed for the rehabilitation and improvement of the provincial highways. Civil works for community-managed rural infrastructure, including irrigation schemes; jeep able tracks, drinking

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water and sanitation schemes, and micro hydropower schemes will be carried out by village organizations, which will procure materials directly from local suppliers according to procedures acceptable to the Bank. Procurement of vehicles and office equipment for Project Administration Unit and Rural Support Program will be undertaken through international shopping procedures and direct purchase, as appropriate 4.6 Analysis of ADB Assistance for Energy Sector Development

As shown in the pie chart, ADB has provided large amount of fund to the energy sector. Its assistance has been for improving the technical efficiency of the energy sector as well as for financing critical investments in both the Karachi Electric Supply Corporation (KESC) and the Water and Power Development Authority (WAPDA). Out of total $14.3 billion lending, ADB has provided 21.5% to the energy Sector. Major Energy Sector Development Projects 1. 2. 3. 4. Energy Sector Restructuring Program Ghazi Barotha Hydropower Project Proposed Loan to Laraib Energy Limited for the New Bong Escape Hydropower Project in the Islamic Republic of Pakistan Infrastructure Development

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CHAPTER 5

FINDINGS
1. In ADB's view, poverty is a deprivation of essential assets and opportunities to which every human is entitled. Everyone should have access to basic education and primary health services. 2. Poverty in South Asia is due primarily to 3. 4. 5. Low income Low human development Prevailing inequality Social exclusion Gender bias Basic education Health care Nutrition Water and sanitation Income employment and wages Empowerment Pro-poor economic growth Social development Good governance

Poverty is better measured in terms of

ADB's poverty reduction strategy is anchored on

The total voting power of each member consists of the sum of its basic votes and proportional votes.

6. Japan and USA have the highest number of votes (i.e. 12.900 % of total) each and Tuvalu has the lowest number of votes (0.314% of total votes) 1. Preliminary findings of ADB's Poverty Analysis in Pakistan show extreme pockets of poverty in rural Sindh and southern Punjab, whereas the whole province of Balochistan is poor by all indicators of poverty

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and development. Today, about 32 percent of the population lives below the poverty line. 2. The Asian Development Bank is a long-standing development partner of Pakistan, having provided a total of 14.3 billion in development assistance from 1968 to 2004. 3. ADB have provided a total of $ 15.8 billion to Pakistan in assistance from 1968 to 2005.. The projected assistance for the period 2006-2008 amounts to $3.6 billion. This is nearly a 50% increase in annual lending to Pakistan compared to past four years. A large portion of this assistance is earmarked for infrastructure development in the areas of water, power, transport, and urban development. In addition, ADB is planning assistance in a number of innovative areas, including support for the Karachi mega-city project, a rural modernization project to enhance livelihood opportunities. 4. The major development sectors in which ADB has invested include energy, agriculture and rural development, finance and trade, transport and communications, social sector and governance. (Figure 1). 5. Pakistan has seen rapid economic progress in the last five years, which is a result of the pursuit of sound and pragmatic reform policies, ADB have been a strong supporter of the Government. 6. PRM has initiated a series to provide regular updates on the state of the national economy. It presents an analysis of economic trends in Pakistan and also presents an outlook of the economy for the future. 7. Pakistan is the ninth largest shareholder in ADB among its regional members. Overall, Pakistan is the 13th largest shareholder. (Table 1.1) 8. Pakistan has contributed to the Technical Assistance Special Fund (TASF) $1.60 million. (Table 1.2)

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9.

ADB is Pakistan's longstanding development partner and its assistance is instrumental in assisting Pakistan meet its development challenges.

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CHAPTER 6

CONLUSIONS AND RECOMMENDATIONS

6.1 CONCLUSIONS

Over the years, Asian Development Bank has played a significant role in economic and social transformation in Asia and the pacific-boosting economic growth, fostering social development, and helping improve the quality of life for millions of people. Asian development bank provide loans, technical assistance, and grants to its member countries. ADB approved 11 loans totaling US$709.2 million for seven projects to Pakistan. ADB has also approved twenty-three technical assistance grants totaling US$28.9 million. A cumulative of 293 technical assistance (TA) projects has been approved by ADB for Pakistan with a total amount of $138.65 million as of 31 December 2004. Presently, there are 62 TAs under implementation with a total amount $53.6 million. In December 2005 ADB approved assistance totaling US$1.333 billion for Pakistan, including $300 million in grants and loans for reconstruction of areas worst hit by the October earthquake; up to $770 million for a new financing product and a $3 million loan to promote highway development; $60 million in loans to clean up the urban environment for 1.4 million people in Rawalpindi, Punjab; and a $200 million loan for the second phase of a resource management program in Punjab. Pakistan is one of the founder members of ADB. It is a long-standing partner of Pakistan, having provided a total $ 15.8 billion to Pakistan from 1968 to 2005 of this amount $1.5 billion were provided in 2005 (It must be remembered that in preceding chapters I have mentioned $14.3 billion assistance, the reason is that, my topic is the role of ADB in Pakistan development and most of the assistance provided in 2005 are not put into Operation). The projected assistance for the period 2006-2008 amounts to $3.7 billion. The major Development sectors in which ADB has invested include energy, agriculture and rural, finance and trade, transport and communications, social sector and governance.

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The sectoral composition of ADB's assistance to Pakistan was 21.5 percent for energy sector, 20.9 percent for the agriculture & natural resources, 13.2 percent for finance sector, 1 1.3 percent for transport and communications, 9.4 percent for multisector, 9.0 percent for industry and trade, 6.9 percent for Law, Economic Management, and Public Policy, 3.5 percent for education, 2.7 percent for water supply, sanitation, and waste management, and 1 .6 percent for Health, Nutrition, and social protection. In addition to this assistance portfolio, the Pakistan Resident Mission is actively engaged in Economic and Sector Work to develop an understanding of Important Economic policy and sector topics, particularly with regard to poverty and governance issues. 6.2 RECOMMENDATIONS

Contingent upon the findings of the study, the following recommendations arc made that may help achieve its objectives more effectively. i. ADB project lending may be based upon the economic viability, technical feasibility, and needs of the DMCs. ii. The number of basic votes may be increased up to 50% to decrease the influence of developed countries.. iii. Jobs in ADB may be given on Quota basis to make ADB a true multilateral institution. iv. To increase the literacy rate in DMCs, more funds, at least 8.50% of total lending, may be allocated to educational sector projects. v. Employment may be given on equality basis to decrease gender discrimination. vi. Steps may be taken to make the Asia, borderless Asia, where every Asian is free to travel, to stay, have a job and can invest in, each corner of the continent. vii. Steps may be taken to make the Asia free of poverty, diseases, social and economic injustices, and ignorance.

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BIBLIOGRAPHY
1. 2. 3. 4. 5. 6. Asian Development Bank Website M. Ali Shah Pakistan Economic Survey 2003-2004 Government of Pakistan OEM Estimates of Livestock Ministry of Health, National Feedback Report( 1999) Pakistan economic update (July 2004 - March 2005) Ministry of Finance website