INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA762 Public Disclosure Copy Date ISDS Prepared/Updated: 10-Jul-2012 I. BASIC INFORMATION 1. Basic Project Data Country: Pakistan Project ID: P112901 Project Name: PK: Punjab Cities Governance Improvement (P112901) Task Team Leader: Raja Rehan Arshad Estimated Appraisal Date: 27-Jun-2012 Estimated Board Date: 30-Aug-2012 Managing Unit: SASDU Lending Instrument: Specific Investment Loan Sector: Sub-national government administration (70%), Public administration- Water, sanitation and flood protection (30%) Theme: Municipal governance and institution building (40%), Decentralization (15%), Municipal finance (15%), Public expenditure, financial management and procurement (15%), Other public sector governance (15%) Financing (In USD Million) Financing Source Amount BORROWER/RECIPIENT 5.00 International Development Association (IDA) 150.00 Total 155.00 Environmental Category: B - Partial Assessment Is this a Repeater project? No 2. Project Objectives The project development objective is to support the Punjab large cities in strengthening systems for improved planning, resource management, and accountability. 3. Project Description Public Disclosure Copy Component 1: Performance Grants (US$ 140 million) This component will provide an annual grant to the project cities, based on satisfactory performance in selected governance areas. Disbursements under Component 1 will be made against a set of Eligible Expenditure Programs (EEPs) that reflect non-salary O&M expenditures of existing urban assets and services, such as roads and water supply service in the city. The amount of the performance grant is determined on a PFC formula basis, at an increasing scale of distribution across four years. EEPs would finance two departments/entities for each city included in the project: the Works and Services Department of CDGs and WASAs. Using the 2010-2011 government budget number, the EEPs identified under the project account for about 7.8% of total expenditure of five cities and their service entities (including expenditure of CDGs, DAs, and WASAs), 10.8% of total current expenditure , and 34.8% of total current expenditure related with urban related functions . The EEPs are under the city current budget—they are: (1) power/energy needed for machinery, operations for asset maintenance and service delivery (56% of the EEP expenditures) and (2) repair and maintenance of machinery, equipment, roads, buildings, and water supply/drainage (44% of the EEP expenditures). The Bank’s guidelines on financial management and procurement will be applicable to the EEP and the framework for addressing social and environmental safeguards will be applicable to all activities included in the EEP. The disbursement decision will be based on achievement of pre-specified results, referred to as disbursement linked indicators (DLIs). The achievement of the seven DLIs (Table 2, below) will be individually assessed for each city every year by independent assessment teams. The DLIs have been identified with the Government over the course of preparation to reflect specific areas of improvement. The Government is in full agreement on all DLIs currently proposed. The achievement of all DLIs applicable for the year would be required to ensure disbursement. First-year DLIs were met by Project Appraisal; disbursement for the first year is made on project effectiveness. For following years, a city needs to meet all the DLIs for that particular year in order for disbursement against the next year to be triggered. The funds for the cities which are not qualified for disbursement during the year will be rolled over to the next year for same cities. If cities are not qualified for disbursement for two consecutive years, the funds for those cities will be shared by other participating cities that meet the DLIs. If the DLIs are met for a particular city at a year, the city is also required to spend more than or equal to what it received in the previous year for the EEPs in order for the full disbursement for the following year. If the DLIs are met but the city spends less than what it received, then only the amount which is equal to what they have spent on EEPs for that year will be disbursed toward the following year, while the remaining amount will be rolled over to the following year. In that case, the city needs to meet all the DLISs and spend at least the disbursed amount and the remaining balance from previous year’s disbursement in order for full disbursement for the year after. If the city does not meet the spending requirement for two consecutive years, the difference between project funds going to the city and actual spending on EEPs will be shared by other participating cities. Component 1 focuses on two areas of urban governance and is aligned with the seven DLIs. The first sub-component addresses transparency and Page 1 of 4 voice in the preparation, monitoring and evaluation of plans and programs in urban areas and the second sub-component addresses resource planning and management, seeking to improve decision making, consolidate fragmented revenue sources and strengthen resource mobilization. Sub-component 1.1: Transparency and voice (DLIs 1-3). Three improvements are supported: (i) institutional alignment in spatial planning. The project supports the introduction of an integrated spatial planning process that will use a common urban b oundary definition, and in which all city level institutions participate. In any given urban area there are CDG and other city level service entities, such as WASA and DA. Each of these entities has a different planning remit, and their plans do not cover the same spatial distribution. The resulting lack of coordination hampers the Public Disclosure Copy efficient use of development funding; (ii) public disclosure of information. The project supports improvements in the collection (and up-dating) of data, preparation of periodic reports and disclosure of information to citizens; and (iii) citizen feedback. The project also supports the development of a grievance redressal mechanism for citizens, and a citizen scorecard. Sub-component 1.2: Resource planning and management (DLIs 4 -7): Four improvements are supported: (i) capital improvement and asset maintenance. Cities will prepare three-year rolling DAMP; (ii) arrangements for producing annual consolidated financial statements of CDGs and efficient implementation of procurement procedures. Cities will develop SOPs focusing on streamlining of the procurement rules with other directives; and implementation of procurement rules including but not limited to procurement planning, equal opportunity, transparency and efficiency; (iii) intergovernmental finance. Currently there are multiple funding windows, some supporting CDGs and others service entities (e.g. WASA). Government of Punjab will consolidate these transfers into one window, and provide the funds to the CDG, which will then further allocate the funds. This consolidation will allow improved planning and control of resources for city level development expenditures; and (iv) strengthening own source revenue. Cities will increase revenues through improvements in the property tax regime. Component 2: Project Implementation and Capacity Building (US$ 10 million) This component supports a program technical cell (PTC) under provincial Planning and Development Department’s Urban Unit and City Program Units (CPUs) in the five cities. The project will provide financing through a Designated Account to be held with the Urban Unit for (i) towards office and administrative expenses (goods equipment and operating costs) for the Urban Unit and the five CPUs; and (ii) capacity building activities for entire urban areas in the Province. Funds will disburse against presentation of financial management reports. The Urban Unit is tasked with (i) project management and administration; (ii) project financial management (iii) project reporting; and (iv) monitoring and evaluation; The Urban Unit will also manage the capacity building activities sponsored under the project, including. (i) formulation of TOR/ RFP; (ii) assist in short-listing consultants and manage the selection process; (iii) ensuring quality assurance on the delivery of the capacity building; and (ii) facilitating knowledge sharing between the five project cities. The capacity building will focus on: (i) city-wide urban planning; (ii) resource planning: (ii) urban immovable property tax (UIPT); (iv) procurement; (v) management of environmental and social impacts; (vi) citizen participation and use of social accountability approaches and tools; and (vii) preparation of service delivery investment pipeline for third stage of GoPunjab urban strategy. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) The proposed project is geographically spread over the five large cities of Punjab and includes the cities of Lahore, Faisalabad, Multan, Gujranwala and Rawalpindi. These cities account for almost one-half of the urban population living in the Punjab province. Population pressure on these cities together with industrial activities have led to rise in environmental pollution levels particularly air and water quality. Indiscriminate Public Disclosure Copy pumping of groundwater has also led to groundwater mining at least in Lahore and Rawalpindi. Solid waste management and sewage disposal are also grey areas and need systematic handling to build the image as environmentally responsible cities in the province. 5. Environmental and Social Safeguards Specialists Raja Rehan Arshad (GFDRR) Shahnaz Arshad (SASDU) Ming Zhang (SASDU) Sanjay Srivastava (SARDE) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/BP 4.01 Yes The component 1 on Performance Grants to the five participating cities is to be used for strengthening systems and providing funds for the improved operation and maintenance (O&M) of existing urban assets and services, such as roads and water supply service. Since none of the scheme envisaged to be financed under PCGIP is likely to be large scale, unprecedented and/or irreversible impacts are unlikely, the PCGIP has been classified as Category B, in accordance with OP 4.01. The project has prepared an ESMF in compliance with OP 4.01. Natural Habitats OP/BP 4.04 No Forests OP/BP 4.36 No Pest Management OP 4.09 No Physical Cultural Resources OP/BP 4.11 No Indigenous Peoples OP/BP 4.10 No Involuntary Resettlement OP/BP 4.12 No Safety of Dams OP/BP 4.37 No Projects on International Waterways OP/BP No 7.50 Page 2 of 4 Projects in Disputed Areas OP/BP 7.60 No II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues Public Disclosure Copy 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential l arge scale, significant and/or irreversible impacts: The component 1 (described above) on Performance Grants to the five participating cities is to be used for strengthening systems and providing funds for the improved operation and maintenance (O&M) of existing urban assets and services, such as roads and water supply service. Other eligible expenditures include: (1) power/energy needed for machinery, operations for asset maintenance and service delivery; and, (2) repair and maintenance of machinery, equipment, roads, buildings, and water supply. No new schemes investments to be funded under this component. . Recognizing the fact that the project will finance only O&M activities of existing urban assets and services, which have low to moderate, short duration and reversible environmental impacts, the environmental and social impacts are expected to be marginal. The O&M activities are not anticipated to require land or relocation of structures. Therefore OP 4.12 is not triggered. To deal with the environmental impacts and unlikely situations where unexpected social safeguard impacts materialize, the borrower has considered the project as an opportunity to introduce reforms for the integration of environmental management aspects in the cities’ urban planning and development process. The project has therefore prepared an environmental and social management framework (ESMF) with an aim to guide the five cities on the internalization of environmental and social considerations at large in the cities’ planning and development process. Urban air quality, solid waste management, sewage disposal and water quality, - indicators related with urban development, remain major environmental issues needed to be tackled in a more systematic way than the current practices. Except in Multan, where there exists one sanitary landfill site, which caters for around 30 percent of the solid waste generated there – in all other cities solid waste management remains a major issue. Similarly, PM10 and PM2.5 levels, indicators reflecting the state of air quality, in these five cities are also well above the WHO thresholds. In terms of sewage disposal, except Faisalabad with treatment facility to cater about 20 percent of the sewage generated in the city, no other city has got treatment facilities installed and receiving water bodies, like the river Ravi in case of Lahore, have turned into sort of a drain than a river. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Due to the nature of the proposed project interventions with focus only on O&M activities of existing urban assets in water supply and roads, no long term direct or indirect impacts are envisaged. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. The proposed project activities are for O&M of the service delivery assets, and the only other option is no project’ option, which could have even more significant adverse environmental impacts like affecting human health seriously. In the analytical work carriedout earlier in Pakistan, it is concluded that both ambient air quality and indoor air pollution, together with inadequate water and sanitation facilities are the major contributors in the cost of environment degradation, which amounts to 6 percent of country’s GDP. Further, inadequate water and sanitation facilities are major reason for the morbidity and mortality in the children under the age of 5. No project is therefore not an option from environment perspective. Public Disclosure Copy 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. The borrower has prepared an ESMF, which guides the CGs in the preparation of environmental assessments, identification of potential environmental impacts and to implement the corresponding mitigation measures. The document also suggests the institutional arrangements for the implementation of ESMF. The overall responsibility for the monitoring of ESMF implementation will remain with the Urban Unit, which is an extended technical arm of the Government of Punjab to provide technical back-stopping to the cities in the province. UU has got number of qualified technical specialists including on environment, which will provide support to project implementation unit at UU for compliance monitoring. Under the arrangements, a dedicated Safeguards Coordinator will be appointed in the Urban Unit, who will be responsible for overall implementation of the ESMF, and will coordinate with the implementing agencies at the CDGs and monitor their activities during the implementation phase. The Safeguard Coordinator will also ensure that the cities are properly capacity built to be able to perform the activities as per the requirements of the ESMF by designing training programs and generating discussions on various forums. The Safeguard Coordinator will also be responsible for arranging an independent assessment, a third party validation of ESMF implementation, which will be carried out on an annual basis. At the CDGs, each large city will also have a dedicated Safeguards Specialist, who will ensure effective implementation of the ESMF within the respective city. S/he will prepare the scheme-specific ESMPs, carryout monitoring to ensure effective implementation of the mitigation measures proposed by the ESMPs, and produce regular reports, which will document the process and outcome of the entire ESMF implementation during the reporting period. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. The CGs, its various special agencies like WASAs, DAs, other government departments like the Punjab Environment department, Urban and Public Health Department, activist groups in water and sanitation and solid waste management in the cities, civil society organizations, select group of project beneficiaries, communities benefiting from the project are some of the stakeholders, which are proposed to be consulted during the preparation of environmental assessments as proposed in the ESMF. B. Disclosure Requirements Date Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 03-Jul-2012 Date of "in-country" disclosure 06-Jul-2012 Date of submission to InfoShop 10-Jul-2012 Page 3 of 4 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: Public Disclosure Copy C. Compliance Monitoring Indicators at the Corporate Level (to be filled in when the ISDS is finalized by the project decision meeting) OP/BP/GP 4.01 - Environment Assessment Are the cost and the accountabilities for the EMP incorporated in the credit/loan? Yes [ ] No [ ] NA [ ] The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the World Bank's Infoshop? Yes [ ] No [ ] NA [ ] Have relevant documents been disclosed in-country in a public place in a form and language Yes [ ] No [ ] NA [ ] that are understandable and accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional responsibilities been prepared for Yes [ ] No [ ] NA [ ] the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included in the project cost? Yes [ ] No [ ] NA [ ] Does the Monitoring and Evaluation system of the project include the monitoring of safeguard Yes [ ] No [ ] NA [ ] impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed with the borrower and the same Yes [ ] No [ ] NA [ ] been adequately reflected in the project legal documents? III. APPROVALS Task Team Leader: Raja Rehan Arshad Approved By: Regional Safeguards Coordinator: Name: Sanjay Srivastava (RSA) Date: 10-Jul-2012 Sector Manager: Name Ming Zhang (SM) Date: 10-Jul-2012 Public Disclosure Copy Page 4 of 4