Technical Assistance Report

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Technical Assistance Report The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s
members, Board of Directors, Management, or staff, and may be preliminary in nature.
Project Number: 38612
February 2007


Islamic Republic of Pakistan: Support to Governance
Reforms in Pakistan (Financed by the Government of the United Kingdom)
CURRENCY EQUIVALENTS (as of 7 December 2006) Currency Unit – Pakistan rupee/s (PRe/PRs) PRe1.00 = $0.016 $1.00 = PRs60.85
ABBREVIATIONS ADB – Asian Development Bank AJDF – Access to Justice Development Fund AJP – Access to Justice Program APR – annual performance review DFID – Department for International Development DSP – Decentralization Support Program DSSP – Devolved Social Services Programs EA – executing agency IA – implementing agency LGO – local government ordinance NAB – National Accountability Bureau NACS – National Anti-Corruption Strategy PFC – provincial finance commission PFM – public financial management PLC – performance and learning cell PRM Pakistan Resident Mission PSC public safety commission TA – technical assistance TAC – technical assistance cluster
TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification – General intervention Sector – Law, Economic Management and Public Policy Subsector – Public finance and expenditure management Themes – Governance, capacity development Subthemes – Civil society participation, institutional development NOTE In this report, "$" refers to US dollars. Vice President L. Jin, Operations Group 1 Director General J. Miranda, Central and West Asia Department (CWRD) Country Director P. Fedon, Pakistan Resident Mission, CWRD Team leader S. Nicoll, Senior Governance Specialist, CWRD Team member W. Hasan, Project Officer (Governance), CWRD I. INTRODUCTION 1. Improving governance and preventing corruption are strategic priorities for the Asian Development Bank (ADB) under the Medium-Term Strategy II. ADB’s governance interventions
give priority to public financial management, as well as to legal and regulatory frameworks and
capacity development in those sectors and subsectors where it is active. ADB is working with
other multilateral development banks to develop a uniform framework for preventing and
combating fraud and corruption. ADB supports national and subnational government
governance initiatives where there is demand and ADB has significant operations in national
and subnational governments. At the Government’s request, ADB has been providing support in
Pakistan to (i) justice sector reforms through the Access to Justice Program (AJP); (ii)
devolution reforms through the Decentralization Support Program (DSP) and provincial
Devolved Social Services Programs (DSSPs); (iii) public financial management reforms through
provincial public resource management programs in Punjab and Balochistan; and (iv)
accountability, transparency, and anticorruption through support to the National Accountability
Bureau (NAB).

2. It was agreed with the Government that the TA cluster (TAC) modality would be appropriate to provide flexible programmatic support to a range of demand-driven governance
interventions in the Government’s priority governance and to foster policy dialogue on related
issues. The TA cluster will enable the Government to advance the crosscutting governance
theme, including support to reforms and capacity building, across the spectrum of governance
domains. It will allow ADB to provide subprojects to various entities, with clear foci on their
respective areas of responsibility, and yet link these closely within the overall framework
provided under the cluster. The TAC will support the implementation of ADB’s Second
Governance and Anticorruption Action Plan (GACAP II), including support to preparation of
governance, institutional, and corruption risk assessments and risk management plans. In line
with the Government’s reform priorities, four areas for support have been agreed between ADB
and the Government: justice sector, devolution, public financial management, and accountability
and transparency. A performance and learning cell (PLC) will be established to review
performance, distill lessons learned, and disseminate results to interested stakeholders.

3. Given the strong support for reform and keen interest expressed by the ministries of law and finance, as well as the NAB and Punjab planning and development department in their
respective subclusters, agreement on the impact, outcome, outputs, implementation
arrangements, cost, and financing arrangements was reached with the Economic Affairs
Division in November 2006. 1 The design and monitoring framework is in Appendix 1. II. ISSUES
4. One of the four pillars of the Government’s poverty reduction strategy paper 2 is improving governance and consolidating devolution as a means of better developing and
ensuring social and economic justice. It also argues that poverty is “highly conditioned” by
governance factors and that to address the “governance deficit” there must be commitment to
fundamental transformations that include devolution of power, decentralization, improved
access to justice at the local level, transparency, and accountability. These issues are further
discussed below in the context of the subclusters proposed for the TAC. 1 The TA first appeared in ADB Business Opportunities on 16 March 2005. 2 Ministry of Finance. 2003. Accelerating Economic Growth and Reducing Poverty: The Road Ahead, Pakistan Poverty Reduction Strategy. Islamabad. 2

A. Justice Sector
5. Lack of expeditious and inexpensive access to justice has caused the poor in Pakistan disproportionately to consume their scarce resources for dispute resolution and to claim their
entitlements, thus exacerbating their poverty and vulnerability. Under the Local Government
Ordinance (LGO) 2001, it is mandated that musalihat anjumans 3 be established in each union as an alternative dispute resolution mechanism to shorten the time to resolve disputes, lower
the costs involved, and reduce the workload of the courts. LGO 2001 further prescribes
establishment of district ombudsman offices in every district (in addition to provincial and federal
ombudsman offices) where citizens can take complaints against public servants in local
government (including elected representatives). The offices, however, have not yet been
established in most districts.

6. According to the 2002 national baseline survey of 57,321 households by the National Reconstruction Bureau, 4 only 22% of households would approach the police to report a matter of personal safety and just 25% for a threat to property. Nationally, only 12% of households
reported any contact with the police during the 5 years prior to the survey. Women and the most
vulnerable are the least likely to approach the police. The Police Order 2002 is the key
legislation driving reform of police services. It has introduced many reforms, including to
establish new institutions to oversee accountability and transparency of policing operations. The
main objectives of Police Order 2002 are to (i) establish a professional and efficient service that
is able to detect crime and ensure public order, (ii) reduce political interference in the policing
function, and (iii) establish a service that is accountable and operates within the rule of law.

7. The National Reconstruction Bureau’s survey further found that nationally only 46% thought the courts were there to help them, and just 8% had any contact with the courts during
the 5 years prior to the survey. Respondents reported that (i) one needs money to engage with
the courts, (ii) courts do not provide justice, (iii) courts are not helpful, (iv) the courts did not
contact them, and (v) the court process takes too long. The main issues identified in the poverty
reduction strategy paper concerning the judiciary are case management, the need to reduce
delays, inadequate infrastructure, and lack of court automation, all of which are being addressed
through ADB’s Access to Justice Program.

8. In December 2001, ADB approved a $350 million loan package to the Government of Pakistan in support of justice sector reform in the areas of judiciary, public safety, legal
empowerment and education, administrative justice, and fiscal reform (the AJP). The $330
million program loan, including a $25 million endowment fund, was supplemented by two
funding modalities to support capacity required to effectively achieve the policy actions and
thereby contribute to the justice sector reforms. These were (i) a $20 million technical
assistance (TA) loan, and (ii) advisory technical assistance. In December 2004, a TA grant was
approved to support police reforms in four districts in Punjab province. The endowment, called
the Access to Justice Development Fund (AJDF), was designed to provide sustainable annual
funding for reform activities of the judiciary.

3 Musalihat anjumans (conciliation committees), provided for under Chapter XI of the provincial Local Government Ordinance(s) 2001, are bodies mandated to achieve out of court amicable settlement of disputes among the people
through mediation, conciliation, and/or arbitration. 4 National Reconstruction Bureau, Government of Pakistan. 2003. Baseline Survey 2002, National Report: Social Audit of Governance and Delivery of Public Services. Islamabad (pp. 55–57). 3 9. After signing of a memorandum of understanding in May 2006, implementation arrangements for the AJP were devolved to the provinces to address slow utilization of the TA
loan. The current TA grant resources supporting the AJP are expected to be exhausted by
February 2007. The Ministry of Law and implementing agencies will need further technical
assistance to (i) complete and consolidate the policy actions under the AJP program loan; (ii)
design capacity building initiatives under the AJP TA loan, monitor implementation, and ensure
quality of consultant outputs; and (iii) consolidate capacity building support to the AJDF to
ensure sustainability of management and operational arrangements in the future.

10. The focus under the AJP to date has been on strengthening justice sector institutions. A challenge for the future is to institutionalize justice reforms by engaging civil society in creating
an informed and articulate constituency. Organized elements of civil society—including the
policy research institutions; such statutory bodies as local justice committees, public safety
commissions, and dispute resolution bodies; political parties; the legal profession represented
by bar associations and councils; law schools; and rights advocacy groups—are critical to
embedding reforms under the AJP. The provinces (Punjab and Balochistan, in particular) have
expressed keen interest in a second generation of justice sector reforms, and they have clear
ideas about future priorities.

B. Devolution
11. Prior to implementing LGO 2001, development, social regulation, and service delivery were directly administered by the provinces through the bureaucracies at the division, district,
and tehsil 5 levels. Deputy commissioners held important executive and judicial authority. There was little scope for elected representatives or the public to participate in local administration.
Civil servants were not answerable to the public, and therefore there was little incentive for them
to ensure high-quality service delivery. 12. Under devolution, in principle, citizens are empowered to participate, in concert with accountable elected local representatives, in decision making about public resource allocations.
Local government reforms are intended to promote citizens’ voice in how priorities for delivery of
basic social, economic, administrative, and political entitlements are determined. Local
governments—appropriately empowered, staffed and resourced—are expected to deliver
improved quality of public services. LGO 2001 assigns clear powers, responsibilities, and
service delivery functions to three levels of local government: district, tehsil, and union. Districts
are responsible for delivering primary health, education, and social welfare. Tehsils are
responsible for water, sanitation, and urban services. Unions are responsible for birth and death
registrations, small municipal infrastructure projects, and parks.

13. The provincial finance commissions (PFCs), established under the LGO, are statutory bodies responsible for establishing grant systems for intergovernmental transfers to local
governments in each province. Local governments have distinct revenue and expenditure
assignments, but they have differing rural-urban population patterns and varying levels of
development. Intergovernmental transfer systems, therefore, need to address horizontal and
vertical imbalances across and between tiers of local government. Technical capacity of the
PFCs needs to be further improved to enable these bodies to carry out their functions effectively.
5 A tehsil is a local administrative unit equivalent to a sub district and is notified under the provincial Land Revenue Act(s). A district in Pakistan comprises one or more tehsils. 4 14. Provincial local government commissions are responsible to conduct annual and special inspections and audits of local governments, as well as to resolve conflicts between local
governments and province departments. Made up mainly of provincial government officials and
appointees, such a commission is not widely perceived as a neutral body adjudicating between
provincial and local governments. Rather it is seen more as a tool of the provincial government.

15. Vertical programs 6 represent a major issue that has been identified by the Government. The draft poverty reduction strategy paper II notes that a detailed review of donor projects in
Pakistan shows that most projects are not compliant with LGO 2001. A parallel system of
planning, approving, and implementing schemes has been introduced that undermines the
legally notified framework. It is also perceived that vertical programs distort the PFC award by
transferring large amounts of resources in a discretionary manner. A “Devolution Compliance
Action Plan” is proposed to ensure that all donor supported programs and projects comply with
provisions of the Constitution and laws of the country, LGO 2001, and Police Order 2002.

16. ADB has been supporting the Government’s devolution reform efforts through the DSP, approved in November 2002 and comprising (i) a program loan of $270 million, (ii) a technical
assistance loan for local government performance enhancement (1937-PAK) of $23 million, (iii)
a technical assistance loan for gender and governance mainstreaming (1938-PAK) of $7 million,
and (iv) advisory TA grants totaling $6 million. ADB also supports province-led devolved social
development programs. Sindh DSSP ($220 million), approved in 2003, aims to improve
governance and financing of social services in Sindh. Punjab DSSP ($200 million), approved in
2004, is aimed at achieving progress on the Millennium Development Goals related to poverty,
gender, education, health, and water and sanitation services. Balochistan DSSP ($205 million),
approved in 2005, has the objective to improve governance and financing of social services.

17. Potential new devolution initiatives are emerging to complement DSP and DSSPs, such as federal to provincial devolution and devolution in urban large city districts. Now, 5 years into
the Government’s devolution reform agenda, it would be useful to begin to assess the impact of
political, administrative, and fiscal devolution and to review the synergies between ADB’s
devolution programs (AJP, DSP, DSSP) and the public resource management programs.

C. Public Financial Management
18. Pakistan’s budget development is based on well-defined timetables in the federal and provincial governments. However, budget formulation is largely incremental with a lack of
attention to expenditure prioritization and operational efficiency. Rigidities in expenditure
structures, absence of a performance orientation, insufficient coverage of development projects
and public enterprises, and uneven quality and classification of accounts are some of the
weaknesses hindering budget management processes at federal and provincial levels. Budget-
related discussions between governments and the public vary. At the federal level, pre-budget
seminars are held by the Ministry of Finance in the federal and provincial capitals, where private
sector, academic, and nongovernment organizations representatives attend. There is no
government feedback, however, as to how inputs from these seminars have been incorporated.
Discussions on provincial budgets, which account for about 80% of national expenditures on
such key service areas as education, health, agriculture and irrigation, and public works, are
more limited. Budget deliberations between Parliament and the public are infrequent. 6 In the context of the LGO (2001), “vertical programs” are defined as those development programs dealing with local government functions as specified in the provincial LGOs but that are either executed or controlled by the federal or
provincial government or other agencies in contradiction to the authority granted by the LGO (2001). 5
19. There is a need to improve predictability of fund flows to spending units. Off-budget accounts and other shortcuts have emerged to speed up funds to essential programs, but these
irregular practices decrease the government’s ability to accurately track and report on fund
usage and related outcomes. Unpredictable budget execution severely limits financial reporting
and accountability frameworks.

20. Accounting, financial reporting, and internal controls are generally inadequate due to inaccurate and incomplete data below the federal level. Accounting skills of staff, internal
controls, processes, and infrastructure are weak. Accounting and financial reporting does not
conform to international public sector standards. The internal control audit function does not
currently exist. Capacity in Punjab and Sindh is relatively stronger than in other provinces.

21. External audit skills and infrastructure are generally uneven. There is a shortage of staff with adequate skills, especially in certification audits. Although audit quality has improved over
the past 3 years, the Auditor General’s reports on the annual accounts are heavily qualified and
refer to many breaches of financial regulations and controls. The vision to move beyond
compliance auditing to systems and performance auditing depends upon establishing and
implementing appropriate performance-based management systems and accurate recording of
information in an IT-based environment.

22. Legislative oversight has been effective when public accounts committees have been functional, but long breaks in the accountability cycle have resulted in backlogs of pending audit
reports. There is still a need for building awareness, information sharing, and strengthening
technical capacity of legislative review committees through capacity building programs at federal
and provincial levels to improve legislative scrutiny. Public accounts committee oversight should
be enhanced through informed legislative debate and formal executive response to its reports.

23. ADB, in collaboration with the World Bank, Department for International Development (DFID) and the European Union, is seeking to adopt a more streamlined approach to public
financial management (PFM) performance measurement that could form the basis of joint
donor-government harmonized dialogue on the PFM reform agenda. In March 2006, ADB and
its development partners agreed to collaborate in carrying out PFM accountability assessments
and public procurement assessments at the federal level and in the four provinces. PFM
accountability assessments will adopt the June 2005 Public Expenditure Financial
Accountability measurement framework, 7 and the public procurement assessment will apply the OECD-DAC baseline indicators for procurement performance.

24. ADB has been supporting public resource management in two provinces. In Punjab, the Punjab Resource Management Program (Cluster Program I for $204 million and Cluster
Program II for $200 million, approved in 2003 and 2005, respectively) has the objective of
supporting the Government of Punjab in reforming governance structures to strengthen
provincial finances, improve pro-poor service delivery, and create opportunities for growth and
income generation. The Balochistan Resource Management Program ($130 million), approved
in December 2004, aims to improve fiscal and financial discipline, enhance public service
delivery, improve the business environment, and ensure sustainable water resource
management. 7 This framework has been developed by a number of stakeholders to assess and develop essential PFM systems. The framework provides a common pool of information for measuring and monitoring PFM performance progress
and a common platform for dialogue. 6
25. The PFM accountability assessments and public procurement assessments are
expected to act as catalysts for government reform initiatives and capacity development
programs at federal, provincial, and local levels in areas of public financial management and
procurement.

D. Transparency and Accountability
26. Pakistan ranked 144 out of 158 countries surveyed for Transparency International's corruption perception index 8 in 2005. People believe few aspects of life are untouched by corruption, and it is widely accepted as a norm and regarded as inevitable. Many people do not
understand the damage corruption does to the national economic, social, and cultural fabric.

27. In a 2006 Transparency International survey, 9 respondents ranked the following institutions as most at risk from corruption: police, power, judiciary, land, taxation, customs,
health, education, railway, and banks. Lack of accountability, low salaries of government
employees, and discretionary powers were perceived as the main reasons for corruption in
these key service delivery departments. Rural lower-income groups have additional concerns
about corruption in water, land revenue, irrigation, forestry, zakat, 10 and sources of credit. In all these sectors bribes are routinely paid or other influence brought to bear—through coercion or
collusion—to be relieved of a traffic fine, get a connection, reduce a tax bill, have a case heard
by a favored judge, get access to medical care, or be exonerated from an investigation or audit.

28. Combating and eradicating corruption has been one of the top priorities of the present Government, and it featured in the President’s seven-point reform program pursued during the 3
years leading up to the return of elected government in November 2002. The establishment of
the NAB and a host of new laws and institutions at federal, provincial, and local levels
supporting governance reform reflect the Government’s commitment. The drive against
corruption comprises a range of legal measures, including laws relating to freedom of
information, contempt and defamation, national accounts and auditing, local government, and
the police. However, the NAB has not been free of criticism. Concerns about its political role,
selective accountability, and slow speed have been raised in recent years.

29. The National Anti-Corruption Strategy (NACS), introduced in 2002, recognizes that controlling corruption on a sustainable basis requires a broad vision and a targeted strategy that
incorporates prevention, monitoring, and combating, with design and implementation by a
coalition of the state, civil society, and the private sector. Studies informing the NACS found that
Pakistan’s national integrity system—its institutions, political processes, and civil society in
particular—are extremely weak. The NACS reflects a comprehensive review and assessment of
the causes, nature, extent, and impact of corruption. It is a broad-based, high-level and
integrated strategic framework for tackling corruption. The strategy focuses on prevention as
well as monitoring and combating corruption, and it ensures consistency with the good
governance reforms. It includes an implementation plan based on the strategic framework.

30. ADB provided TA of $440,000 in 2005–2006 to strengthen NAB’s institutional capacity to perform its growing functions and assume new responsibilities in the context of a medium-term
8 Transparency International. 2005. Annual Report. Karachi. 9 “In the opinion of the 4000 respondents the four top most corrupt Government departments were Police, rated as number one by (64%) followed by Power (11%) third being Judiciary (9%) and fourth being Land (4.48%) [sic].”
Transparency International 2006. National Corruption Perception Survey. Karachi. 23. 10 Department for Administration of Religious Welfare Tax. 7 framework of activities contained in the NACS. NAB and civil society organizations will continue
to play critical roles in implementing the strategy to improve public sector transparency and
accountability.

E. Performance and Learning Cell
31. The scope of governance reforms is challenging in terms of its magnitude, diversity, and expected impact. In order to effectively and efficiently capture, analyze, and document lessons
learned to inform ongoing program implementation and design of future programs, institutional
learning capacity must be a key dimension of the performance review function. A performance
and learning cell will be established for this purpose.
III. THE PROPOSED TECHNICAL ASSISTANCE
A. Impact and Outcomes
32. The expected impact of the TAC is improved aid effectiveness and efficient use of public resources. The outcome of the TAC will be improved performance of devolved service delivery
and justice sector institutions for improved service delivery and better access to justice,
especially for the poor and vulnerable.

B. Methodology and Key Activities
33. The TAC will have five subclusters: (i) support for justice sector reforms; (ii) support for devolution reforms; (iii) support for strengthening PFM; (iv) capacity building for accountability,
transparency, and anticorruption; and (v) performance and learning cell (PLC). Each subcluster
will have one or more subprojects. Further details of proposed subprojects identified for
commencement shortly after approval of the TAC are in Appendix 3. Additional subprojects will
be identified and processed in a sequenced manner.

34. Subcluster 1 will support the demand side of reforms by engaging with civil society to undertake initiatives focused on increasing citizens’ demand for implementing justice sector
reforms, as well as for improved access to, and quality of, justice sector services. These
initiatives may include support to civil society organizations, including nongovernment
organizations, policy think tanks, researchers, and the media.

35. Subcluster 1 will also support second-generation justice sector reforms at provincial level. Provincial governments are increasingly requesting province-specific justice sector reform
programs. Provinces’ identified priority areas include (but are not limited to) social audit of police
departments, support to establishment and capacity development of independent prosecution
service, deepening reforms in prison systems, public grievance redress mechanisms, social
regulation, consumer protection, small claims courts, and bar reforms.

36. Support will also be provided to ADB’s ongoing AJP program by providing advisory TA. The subcluster will assist the AJP’s executing and implementing agencies (EA and IAs) to
consolidate and sustain the ongoing justice sector reforms, by (i) supporting policy actions
under the AJP program loan; and (ii) implementing technical investment projects under the AJP
TA loan, in the following areas: (a) judicial performance, (b) legal empowerment and education,
(c) public safety and prosecution, (d) administrative justice, and (e) fiscal reforms.
8 37. Subcluster 2. ADB’s cluster of devolution programs include the federal-led DSP; the province-led DSSPs in Balochistan, Punjab, and Sindh; and public resource management
programs in Balochistan and Punjab. AJP also supports new devolved structures supporting
improved access to justice, especially for the poor. Subprojects under this subcluster could
provide dedicated support to improving the synergies and learning among these devolution
projects, with a view to disseminating those lessons learned more broadly within ADB, the
Government, as well as among donors and stakeholders in Pakistan and internationally.

38. The subcluster can provide technical advice on designing urban sector development projects with a view to ensure consistency with LGO 2001 and other policies and procedures
related to devolution. More needs to be learned about providing strategic support to
metropolitan governments. Mega-city projects are planned for Karachi, Lahore, and possibly
Peshawar. These city districts have special “devolved governance” needs demanding focused
responses. Federal to provincial devolution reforms are expected in the future, and support
could also be provided in this area.

39. The 2004 Devolution in Pakistan Study 11 identifies seven strategic goals and practical steps that are achievable given progress made to date. Support for advancing these goals and
practical steps could be provided under subcluster 2. Policy research and dialogue are crucial
for learning more about stakeholders’ views and for seeking ways to address diversity across
provinces while maintaining the integrity and spirit of devolution principles. Studies assessing
the impact of political, administrative, and fiscal decentralization will be supported.

40. Subcluster 3 will support (i) governance, institutional and corruption risk assessments and diagnostics in areas of public financial management, procurement, and combating
corruption; (ii); preparation of roadmaps and planning for interventions in areas of public
financial management, including capital and financial markets; and (iii) design and support to
federal, provincial and local government action plans for improvements in defined areas of
weakness.

41. Subcluster 4 will provide support to capacity building of governance accountability institutions. This will include assistance to the NAB, provincial and local government
accountability institutions, and civil society organizations. Two key result areas will be (i)
implementing NAB’s organizational restructuring recommendations, and (ii) undertaking priority
activities from the NACS implementation plan.

42. Subcluster 5 will support establishment of a PLC to undertake regular review of all subproject initiatives under the TAC. Lessons learned will be distilled, analyzed, and
disseminated through both national and international forums, conferences, and workshops. The
PLC will be comprised of international and national consultants with expertise in justice sector
domains, devolution, PFM, civil society-state relations, anticorruption, capacity development,
monitoring and evaluation, research and communications, and analysis of poverty dimensions
and the nexus with governance structures. The PLC will also contribute to ADB’s efforts toward
improving development effectiveness.


11 ADB, World Bank, DFID. 2004. Devolution in Pakistan, Islamabad. The study was undertaken at the request of the Government of Pakistan. Available: http://www.adb.org/Documents/Studies/Devolution-in-Pakistan/default.asp 9 C. Cost and Financing
43. The total cost of the TAC is estimated at $14.50 million equivalent, of which $11.50 million will be financed by the DFID, Government of the United Kingdom on a grant basis and
$3 million will be contributed by the Government of Pakistan for office accommodation and
counterpart staff support. ADB will administer the DFID grant. The cost estimates and
financing plan are in Table A2.1 of Appendix 2. Estimated funding requirements for each
subcluster are in Table A2.2. These subcluster estimates are tentative and subject to budget
requirements determined during design and implementation stages. Approval of the TAC does
not commit ADB to finance subclusters according to these estimates.

D. Implementation Arrangements 12
44. Pakistan Resident Mission (PRM) will be the principal EA responsible for overall coordination of the TAC. PRM will recruit one national project officer and one project analyst, as
supernumerary ADB staff, to support this coordination role. The ministries of law and finance,
the Punjab planning and development department, and the NAB have indicated strong interest
to participate in the TAC, and act as EAs for subprojects in areas consistent with their
jurisdictions and mandates. Other relevant government departments and agencies can act as
EAs for subprojects to be identified in the future.

45. A TAC Steering Committee will be established and will be chaired by ADB, with representatives from participating executing agencies, selected implementing agencies, and
DFID. The Committee will be responsible for (i) approving criteria for selecting subprojects
consistent with the TAC design and monitoring framework; (ii) reviewing and approving TAC
work plans, including subproject concept papers and indicative budgets, to ensure coherence
for effective program delivery and avoid duplication of effort across subclusters and subprojects;
(iii) reviewing progress and annual reports, including refining indicators and reporting
mechanisms; (iv) providing technical and management guidance on issues concerning
subcluster and subproject activities; (v) reviewing recommendations submitted by the PLC; and
(vi) sharing lessons learned from subprojects.

46. The TAC will commence from March 2007 and be implemented over 36 months. Subprojects will be designed and implemented under each subcluster. PRM will start recruiting
consultants and activities for the PLC upon signing of the TA letter by the Government. For
subprojects under subclusters 1, 2, 3, and 4, a separate fact-finding mission will be undertaken
for each subproject and an understanding on the project outcome and outputs, detailed scope of
work, cost estimates and budget, and implementation arrangements will be agreed with the
identified EA for the subproject. Relevant ministries and departments will be identified as IAs, as
appropriate. Each subproject EA will designate a project director or project manager and appropriate staff to implement the subproject and will ensure that IAs assign appropriate staff.
Where required for a particular subproject, implementation arrangements may, subject to
financial management capacity of the concerned EA and/or IA, provide for advance payment
facility to be administered by the subproject’s EA or IA. The procedure for administering the
advances and subsequently liquidating them will be clearly defined in the implementation
12 The TAC implementation arrangements incorporate lessons learnt during implementation of TA3079-PRC: TA Cluster for the Promotion of Clean Technology and recorded in its technical performance audit report
(http://www.adb.org/Documents/TPARs/PRC/tpar_prc_2003-23.pdf). Synergy between interventions under different
subclusters will be ensured through the TAC steering committee and regular reviews by the PLC. The TAC will be
implemented over 3 years and, at the Government’s request, ADB shall serve as principal EA for overall
coordination of TAC activities. 10 arrangements in consultation with ADB’s Controller’s Department. Details will be agreed in a
memorandum of understanding between ADB and the respective EA for each subproject and will constitute the basis for implementation. The memorandum will be approved by the Country
Director, PRM. A TAC implementation memorandum will be prepared to clearly identify
responsibilities of the subproject and/or subcluster EA and IAs, the TAC Steering Committee,
PRM, DFID-Pakistan, and internal ADB departments for administering the TAC. The
implementation arrangements outlined in a memorandum of understanding signed with the
respective subproject and/or subcluster EA will be consistent with the provisions of the TAC
implementation memorandum.

47. The consultants will be selected and engaged by ADB and procurement will be carried out either by ADB, or by consultants, as appropriate, in accordance with ADB’s Guidelines on
the Use of Consultants (2006, as amended from time to time). Suitable selection methods may
be identified during processing of individual subcluster(s) and/or subproject(s) and may, as
appropriate, include firms, civil society organizations, and/or individuals. Based on broad
estimates aggregated from the TAC subclusters, the costing for consulting inputs is estimated at
200 person-months of international consultants and 1,200 person-months of national consulting
services. Given the large requirements for consulting services, project officers will be
encouraged to use the services of consulting firms where possible. Small contracts will be
awarded, and equipment will be purchased, following ADB’s Procurement Guidelines (2006, as
amended from time to time). Equipment procured will be handed over to the respective IA(s), as
detailed in the subcluster(s) and/or subproject(s) design documents.
IV. THE PRESIDENT'S RECOMMENDATION
48. The President recommends that the Board approve ADB administering technical assistance not exceeding the equivalent of $11,500,000 to the Government of Islamic Republic
of Pakistan to be financed on a grant basis by the Government of the United Kingdom for Support to Governance Reforms in Pakistan. Appendix 1 11 DESIGN AND MONITORING FRAMEWORK Design Summary Performance Targets/Indicators Data Sources/Reporting Mechanisms Assumptions and Risks Impact
Improved aid effectiveness
and efficient use of public
resources by 2015


Improved performance of
service delivery structures
(including devolved social
services departments,
justice sector and
accountability institutions)

Improved level of
satisfaction amongst
general public
Social audit ratings

Corruption Perception
Index Surveys

Independent poverty
assessments


Assumption • Government and stakeholders remain
committed to
governance reforms
Risk • Federal and provincial assemblies reverse
the reform process Outcome
Improved performance of
devolved service delivery
and justice sector
institutions for improved
service delivery and better
access to justice,
especially for the poor and
vulnerable
By 2010

Improved governance
performance ratings by
independent surveys

Increase in pro-poor
spending and improved
governance frameworks to
cater to vulnerable and
marginalized groups

Number of justice sector,
accountability, and local
service delivery institutions
with demonstrably
improved internal
performance indicators
including financial
management, cost and
quality of service delivery,
speed of decision making
and access to information

At least 10 activities under
subclusters involving civil
society participation

Independent baseline and
annual surveys

Minutes of TAC Steering
Committee meetings,
tripartite meetings,
inception meetings, project
review missions

Budget books (data on
pro-poor spending)

Performance audit reports

Annual and midterm
project review reports

Approved subclusters and
respective implementation
plans

Performance and learning
cell progress reports

Federal and provincial
enactments

Annual TAC
disbursements

Auditor General’s annual
reports and annual
departmental reports laid
before parliament Assumptions • Active cooperation of implementing
agencies (IAs) • TAC Steering Committee capable of
providing strategic
leadership and
promoting policy
dialogue on ongoing
governance reforms • Willingness and active participation of civil
society Outputs
Effective policy dialogue
on governance reforms

Incorporation of policy
recommendations in
subcluster and subproject
action plans

At least 150 workshops,
seminars and conferences
held

At least 60 research and/or
policy papers published
Subcluster and/or
subproject action plans



Workshop, seminar, and
conference reports


Research and/or policy
reports Assumptions • IAs will be able to identify and prioritize
interventions • Policy dialogue is effective, and strong
linkages established
with subclusters
and/or subprojects
work planning process 12 Appendix 1 Design Summary Performance Targets/Indicators Data Sources/Reporting Mechanisms Assumptions and Risks
• IAs provide committed counterpart support
and/or contribution Subcluster 1: Support to
Justice Sector Reforms
Technical support and/or
outputs for compliance
with all Access to Justice
Program third tranche
outstanding policy actions

Technical assistance (TA)
loan technical investment
projects and quality
assurance reports




Subprojects supporting
improved access to justice,
especially for the poor,
including province-specific
second-generation reforms
projects

AJDF investments and
utilization plans

Instruments to
institutionalize public
safety reforms, including
effective functioning of new
institutions introduced
under Police Order 2002
and Local Government
Ordinance 2001 for
successful piloting in
selected districts

Research and policy
dialogue on areas key to
sustainability of justice
sector reforms

Compliance achieved by
June 2007




At least 100 technical
investment projects
approved and
implemented
Increased annual TA loan
disbursements

At least 10 subprojects
completed




Implemented by 2008


Public safety institutions in
selected districts
performing their mandated
functions by 2008







At least 80 consultations,
workshops, seminars, and
conferences held
At least 20 research and/or
policy papers published

At least three performance
reviews conducted

Board information paper
and annual performance
review



TA loan work plans and
disbursements






Subprojects reports






Annual AJDF report


National, provincial and
district public safety
commissions’ annual
reports

District police plans

Provincial legislation
regulating public safety
institutions

Workshop, seminar, and
conference reports


Research and/or policy
reports

Review reports

Assumptions • Devolved management
arrangements are fully
operationalized
• IAs are fully committed to reform
agenda • Program management units are able to
provide timely and
effective technical
assistance to IAs


Subcluster 2: Support to
Devolution Reforms
Governance designs
and/or components to
ensure that principle of
devolution adhered to in
design and implementation
of development projects
including mega-city
projects

Project designs include
governance components in
line with devolution

Government takes
necessary steps for
aligning to devolution the
ongoing service delivery

Project documents and
implementation plans


Devolution compliance
action plans and/or reports


Risks • Vertical programs continue • Government starts recentralizing
responsibilities and
devolution
marginalized Appendix 1 13 Design Summary Performance Targets/Indicators Data Sources/Reporting Mechanisms Assumptions and Risks


Technical proposals for
improved delivery of public
services at local level
through selected devolved
governance structures



Contributions to provincial
finance commission (PFC)
design



Research and policy
dialogue on areas key to
sustainability of devolution
reforms and workable
state-civil society relations
in post-devolution context

operations and
development projects

At least 20 proposals
approved and
implemented

Number of local intuitions
with improved quality of
service delivery

Intergovernmental
transfers become more
predictable and
performance and/or
formula based by 2009

At least 20 consultations,
workshops, seminars and
conferences held

At least 10 research and/or
policy papers published

At least three performance
reviews conducted


Subcluster work plan and
disbursements


Perception surveys, annual
reports


PFC award reports





Workshop, seminar, and
conference reports


Research and/or policy
reports

Review reports
Subcluster 3: Public
Financial Management
Reforms
Technical outputs including
public financial
management (PFM)
assessments, action plans,
and project specific risk
mitigation plans for
strengthened PFM for
improved efficiency and
effectiveness of resource
allocations for poverty
reduction








Common information pool
for Government-donor
dialogue made available
for measurement and
monitoring of PFM
performance progress

Federal and provincial
government actions plans
as per PFM assessments
recommendations adopted
by the Government

At least four PFM
assessments conducted

At least 7 projects that
address risks identified in
fiduciary and procurement
assessments


PFM progress report






Federal and provincial
government reports




PFM assessment plans


Project designs and
progress reports

Assumptions • Donors maintain commitment to
harmonizing
diagnostic tools for
improved aid
effectiveness • Government maintaining
commitment to engage
in meaningful dialogue
Risk • Team leaders unwilling to
incorporate
assessment findings in
their project designs
and implementation
plans Subcluster 4:
Transparency and
Accountability Reforms
Project proposals and
instruments for
strengthened
accountability,
transparency, and
anticorruption institutions

Capacity building plan for
anticorruption agencies


National Anti-Corruption
Strategy substantially
implemented by 2009




Plans implemented by
2009


National Anti-Corruption
Strategy Implementation
Committee annual reports
and minutes of meeting



Agency reports


Risk • Accountability institutions lose public
confidence and
credibility 14 Appendix 1 Design Summary Performance Targets/Indicators Data Sources/Reporting Mechanisms Assumptions and Risks



Proposals designed and
implemented by 2009 on
awareness campaigns and
civil society engagement
supporting demand
mobilization for
anticorruption measures
and better performance of
accountability frameworks









Trainings, bench books,
and case studies for
introducing an effective
consumer protection
regime

At least 700 anticorruption
agencies officers trained

At least 20 awareness
campaigns conducted to
address public tolerance
and acceptance of
corruption

At least three civil society
organizations engaged as
watchdogs on service
delivery operations

Study on corruption in
private sector conducted
and disseminated

At least 10 dissemination
sessions

At least 30 trainings
conducted on consumer
rights related to public
interest litigation

At least 1,200 lawyers and
judges trained

Bench books introduced by
2007

Number of annual
consumer protection cases
instituted

At least 30 consumer
rights case studies
developed
Training reports


Awareness campaign
reports

Workshop, studies, and
survey reports

Project reports and media
coverage



Activity progress and
completion report


Session and media
coverage reports

Training reports







High court annual reports


Courts annual reports



Media coverage, progress
reports Subcluster 5:
Performance and
Learning Cell
Policy dialogue on
governance reforms by
distilling, analyzing, and
disseminating through
appropriate forums,
conferences, and
workshops, both national
and international


At least 30 consultations,
workshops, seminars, and
conferences held

At least 30 research and/or
policy papers published,
studies conducted, and
effectiveness reports
prepared

Number of lessons learnt,
disseminated and
incorporated in TAC
interventions

Cell providing timely and
effective support to TAC
operations


Workshop, seminar, and
conference reports


Research and/or policy
reports, studies, and
reports



Session reports and
project designs



TAC Steering Committee
minutes, progress reports


Assumption • Pakistan Resident Mission provides
effective strategic
guidance and
management support
to the cell Appendix 1 15 Design Summary Performance Targets/Indicators Data Sources/Reporting Mechanisms Assumptions and Risks
At least three reviews held
and findings shared with
IAs and stakeholders

Number of coordination
meetings held
Review reports



Meeting minute Activities with Milestones Inputs A. By Government and IAs
1.1 Prepare, process and certify counterpart funding commitment proposal (by March 2007 prior to signing of TA letter) 1.2 Notify project cells and nominate counterpart staff (before respective subcluster and subproject inception meetings) (by end March 2007) 1.3 Regularly work with consultants by providing necessary surveys and other support, as well as by organizing meetings (March 2007 through February 2010) 1.4 Provide, as and when required, office space, data and/or information and documents, as well as other support required for undertaking TAC activities (March
2007 through February 2010) B. By Consultants (engaged under subclusters)
2.1 Undertake designated TAC activities in close interaction with the Government, IAs, stakeholders, and ADB. (March 2007 through February 2010) 2.2 Support in preparing and implementing subcluster and subproject intervention plans, progress reviews, and recommendations for effective program delivery 2.3 Institutional strengthening for program delivery
C. By Asian Development Bank (ADB)
3.1 Notify TAC steering committee members (at the TA launch)
3.2 Recruit consultants and procurement of goods according to the ADB Guidelines on the Use of Consultants and Procurement Guidelines, respectively. 3.3. Regularly hold TAC Steering Committee meetings and keep its members informed
on project activities. 3.4 Provide guidance and management support to PLC
3.5 Regularly monitor and supervise TAC activities
3.6 Correspond with Government, IAs, and other stakeholders on project activities
3.7 Submit progress reports to co-financier in accordance with the co-financing
agreement Provision of counterpart
staff (400 person-months),
office space, and other
implementation expenses
with a total outlay of $3
million (as agreed through
counterpart project
documents[s])


Capable international (200
person-months) and
national (1,200 person-
months) consultants.


Pakistan Resident Mission
internal staff resources (1
professional staff, 2
national officers, 2
analysts)

Inception, midterm, and
review missions ADB = Asian Development Bank, AJDF = Access to Justice Development Fund, IA = implementing agency, PFC =
provincial finance commission, PFM = public financial management, TA = technical assistance, TAC = technical
assistance cluster.







16 Appendix 2
COST ESTIMATES AND FINANCING PLAN Table A2.1: Overall Cost Estimates ($ million) Item Total Cost A. Asian Development Bank (ADB) Financing a 1. Consultants a. Remuneration and Per Diem i. International Consultants ii. National Consultants b. International and Domestic Travel c. Reports and Communication 2. Field Studies, Surveys, and Stakeholder Consultations
3. Training, Conferences, Seminars, and Workshops b 4. Equipment
5. Miscellaneous Administration Costs c 6. Contingencies
2.80
4.75
0.35
0.20
0.70
0.73
0.20
0.27
1.50 Subtotal (A) 11.50 B. Government Financing 1. Counterpart Staff Support
2. Office Accommodation and Support Services
3. Communications, Office Supplies, and Equipment
4. Miscellaneous Administrative Expenses
5. Contingencies 1.50
0.75
0.25
0.35
0.15 Subtotal (B) 3.00 Total 14.50 a Administered by ADB and financed by the Government of the United Kingdom. b Including dissemination of regional and national best practices and capacity development of
executing and implementing agencies. c Including Government representative at negotiations. Source: ADB estimates.
Appendix 2 17 Table A2.2: ADB Financing of Technical Assistance Cluster, by Subcluster ($ million) a

Subcluster ADB Financing A. Justice Sector Reforms 4.00 1. Support to Access to Justice Program 2. Implementing Public Safety Reforms in Punjab B. Devolution Reforms 1.50 C. Public Financial Management 2.00 D. Accountability, Transparency, and Anticorruption 3.00 1. Capacity Building of NAB and Implementation of NACS E. Performance and Learning Cell 1.00 Total 11.50 NAB = National Accountability Bureau, NACS = National Anti-Corruption Strategy. a The allocations are tentative and may vary depending on design and budget requirements of subclusters during implementation. Source: Asian Development Bank estimates. Appendix 3 18 TECHNICAL ASSISTANCE SUBCLUSTERS A. Subcluster 1: Support to Justice Sector Reforms 1. Subproject 1: Support to Access to Justice Program a. Background
1. In December 2001, the Asian Development Bank (ADB) approved a $350 million loan to the Government of Pakistan in support of justice sector reform through the Access to Justice Program
(AJP). The $330 million program loan, including a $25 million endowment fund, was supplemented
by two funding modalities to support capacity required to effectively achieve the policy actions and
thereby contribute to the justice sector reforms: (i) a $20 million technical assistance (TA) loan, and
(ii) advisory technical assistance (TA) funded through two grants. 1 This combination of program and TA loans and grants for capacity development of the 31 agencies involved in these reforms
reflects the complex nature of reform processes addressing legislative, regulatory, institutional, and
human resource development aspects. The endowment, Access to Justice Development Fund
(AJDF), was designed to provide sustainable funding annually for reform activities across seven
windows, supplemented in the first few years with dedicated technical advice from both TA loan
and TA funds.

2. The AJP is being implemented through a program management unit established in the ministry of law, justice and human rights and four provincial program management units. At the
federal level, the implementing agencies (IAs) are (i) the law and justice commission, (ii) the federal
ombudsman, (iii) the federal judicial academy, (iv) the ministry of interior, and (v) the higher
education commission. At the provincial level, the IAs are the departments of law and home, with
the planning and development department playing a coordination role. The provincial IAs work
closely with (i) the provincial ombudsman, (ii) the high court, (iii) the provincial public safety
commission (PSC), and (iv) the police. Following recommendations of the AJP’s 2005 annual
performance review (APR), implementation arrangements for the AJP were revised to address
slow utilization of the TA loan. The revised arrangement 2 allowed delegation of contract management and program monitoring responsibilities to the provincial governments. The ministry
of law, justice and human rights, at the federal level, continues to provide strategic leadership
through integrated and coherent work planning. The revisions provided more flexibility for program
management and are expected to impact positively on both the pace of reforms and capacity
building activities. Following the change in implementation arrangements, the closing date of the
TA loan (Loan 1899-PAK) was extended from 30 June 2006 to 30 June 2008.

3. The 2005 APR frequently noted that implementation of the TA loan, AJDF management, and technical assistance to a wide range of IAs for achieving compliance with policy actions relied
on support from advisory TA engaged under grant resources. Given the technical nature of
designing interventions, the 31 IAs of the AJP across Pakistan require constant advisory TA
support throughout the life of the project, but resources are inadequate under the two TAs
mentioned above to support the advisory TA team beyond February 2007.

1 ADB. 2000. Technical Assistance to the Islamic Republic of Pakistan for Strengthening of Institutional Capacity for Judicial and Legal Reform. Manila (Loan 3433-PAK, approved on 27 April); and ADB. 2001. Technical Assistance to
the Islamic Republic of Pakistan for Access to Justice Program. (TA 3823-PAK, approved on 20 December). 2 A minor change in implementation arrangements of ADB. 2006. Report and Recommendation of the President to the Board of Directors on Proposed Loans and Technical Assistance Grant to the Islamic Republic of Pakistan for the
Access to Justice Program. Manila (Loan 1899-PAK, approved on 29 June). Appendix 3 19 b. Outcome and Outputs
4. The subproject outcomes are (i) support to the federal and provincial IAs in achieving compliance with policy actions to which the Government has committed under the AJP, (ii) support
to the federal and provincial IAs in implementing and monitoring the AJP TA loan, (iii) support for
strengthening national and provincial PSCs, and (iv) support to the law and justice commission in
strengthening the secretariat for the AJDF.

5. Outputs will include (i) compliance with AJP program loan policy actions to enable release of the third and final tranche by June 2007; (ii) technical investment projects effectively
implemented at national level and in Balochistan, North-West Frontier Province, Punjab, and Sindh
to support completion of justice reforms by June 2008; (iii) effective functioning of national and
provincial PSC secretariats; and (iii) the secretariat of the AJDF is functioning effectively and
autonomously by June 2008.

c. Methodology and Key Activities
6. To consolidate and sustain the ongoing justice sector reforms, the subproject will assist in achieving and monitoring policy actions under the AJP program loan and in implementing and
monitoring technical investment projects under the AJP TA loan. It will address the following areas:
(i) judicial performance, (ii) legal empowerment and education, (iii) public safety and prosecution,
(iv) administrative justice, and (v) fiscal reforms.

d. Indicative Budget
7. The indicative budget for the subproject is $1.5 million over 18 months from March 2007 to August 2008.
2. Subproject 2: Support to Implementing Public Safety Reforms in Punjab a. Background
8. The so-called Police TA 3 approved by the Board in December 2004, has programmatic linkages with the AJP and was introduced to pilot public safety reforms in four districts of the
Punjab—Faisalabad, Gujranwala, Gujrat, and Multan. The aim is to pilot the reform agenda in
these four districts, capture the lessons learned, and adapt and replicate across the entire province
of Punjab. The planning and development department is the executing agency (EA), while the
home department and Punjab police are the IAs for the TA.

9. The project is being managed through a project implementation unit staffed by 18 positions funded by the government of Punjab. Project activities are supported by a team of 9 consultants
funded from the TA. Continuance in the implementation unit is also subject to an annual
performance review by the same committee. The unit reports to the provincial program review and
coordination committee through the chairman of the planning and development department.

b. Outcome and Outputs
10. The expected outcome of the TA is to support Police Order 2002 implementation in four pilot districts of Punjab province so that policing will be more responsive to the needs of the poor
and vulnerable. Thereby a safer and more secure environment will develop that is based on
3 ADB. 2004. Implementing Public Safety Reforms in Four Districts of the Province of Punjab. Manila (TA 4537-PAK). Appendix 3 20 respect for human rights and equitable access to justice. Project components and outputs are as
follow: (i) community-based policing (outputs: high-quality investigations, implementation of
community policing programs in selected police stations), (ii) public oversight bodies (outputs: effective functioning of public oversight bodies,
Police Order 2002 and Local Government Ordinance [LGO] 2001 institutions
functionally integrated in pilot districts), and (iii) policy dialogue (output: contribution to national and provincial police reforms).
c. Methodology and Key Activities
11. High-Quality Investigations. The aim is to build capacity to undertake high-quality investigations in a timely and professional manner to facilitate effective prosecution and
adjudication of cases. Key activities include: (i) formulation and implementation of 3 year district
strategies, annual work plans, and budgets for effective separation of watch and ward from
investigation; (ii) formulation and implementation of district human resource development plans
and budgets ensuring sufficient personnel trained in: Police Order 2002, investigation, training
needs analysis, curriculum design and development, senior investigating officer skills (including
management of investigations, watch and ward, community policing, human rights, gender, and
local and special laws); (iii) strengthening district police inspectorate system, including formulation
and implementation of performance management indicators and measures; (iv) establishment of a
performance-based system of rewards and promotions; and (v) amendment of the performance
evaluation systems system.

12. Community Policing Program. The aim is to implement community policing programs in selected stations in pilot districts. Key activities include: (i) formulation and implementation of
strategies for increased citizen participation in the delivery of police services to ensure that
vulnerable sections enjoy equality of access to quality police services and protection; (ii)
formulation and implementation of community policing plans in consultation with local stakeholders
and consolidation in policing plans; (iii) establishment of mechanisms to ensure regular
consultation with civil society organizations concerned with the rights of the poor, women, and
vulnerable groups (including children and excluded minorities); (iv) development of the awareness
of members of public oversight institutions covered by Police Order 2002 and the LGO of
community policing principles; and (v) build the capacity of women police in at least one model
police station in each pilot district.

13. Public Oversight Bodies. The aim is to support capacity development of public oversight bodies to ensure these are functioning effectively in pilot districts. Key activities include (i)
establishing an adequately resourced and trained district PSC in each pilot district with agreed
rules of business and standard operating procedures, including performance monitoring and
information systems; (ii) building the capacity of the pilot district PSCs to facilitate a participatory
process that includes civil society in preparing strategic (3 year) and annual policing plans; (iii)
building capacity of the district criminal justice coordination committee to facilitate a participatory
process that includes civil society in preparing strategic (3 year) and annual local justice policies;
(iv) formulating standard operating procedures between the coordination committee’s member
institutions; and (v) training members of that committee on Police Order 2002.

14. Statutory Bodies for Public Participation in Government Decision Making. The aim is to ensure that statutory bodies prescribed under Police Order 2002 and the LGO for public
participation in government decision making are functionally integrated in pilot districts. This
includes work with PSCs, district criminal justice coordination committees, insaaf committees, Appendix 3 21 musalihat anjuman, 4 union council safety committees, and citizen community boards. Key activities include to (i) formulate and implement strategies, procedures, and rules to enable effective and
efficient engagement between the district police officer and district nazim (the chief elected local
official) on law and order issues; (ii) review and recommend measures to strengthen the regulation
of police services through the Police Order (district PSC and criminal justice coordination
committee) and LGO institutions (insaaf committee, musalihat anjuman, union council safety
committee, citizen community boards), including standard operating procedures for common
reporting standards; (iii) formulate and implement strategies, procedures, and rules for efficient and
effective enforcement of municipal and administrative laws; (iv) formulate and implement an
integrated district information system on crime and police services; and (v) strengthen the capacity
of members of the Police Order 2002 and LGO institutions to effectively engage with the police in
pilot districts.

15. National and Provincial Police Reform Policy Dialogue. The aim is to ensure that lessons from pilot projects contribute to national and provincial police reforms and policy dialogue.
Key activities include: (i) formulating and implementing technical assistance performance monitoring and evaluation systems; (ii) commission baseline and ongoing research in pilot districts;
(iii) formulating and implementing national public access to information policy and a public
awareness campaign on the Police Order; (iv) analyzing and documenting police engagement with
the Police Order and LGO institutions and the criminal justice system; (v) workshops on pilot
lessons with policymakers in the justice sector; (vi) devising a roll-out program for the remainder of
the Punjab; (vii) developing a guidance manual for implementing police reform; (viii) commissioning
research, analyzing, and proposing revisions relative to Police Rules 1934; (ix) establishing a
mechanism for feeding lessons learned to all districts in Punjab; and (x) establishing mechanisms
to depoliticize the police to produce a professional and nonpartisan police force.

d. Indicative Budget
16. The project is supported by a $950,000 grant from ADB with a TA completion date of December 2007. However, the TA resources are projected to be exhausted by June 2007. The
consultant costs had been underestimated and the project objectives and outputs will not be fully
achieved by June 2007. A request for a reduction of scope will be processed to address this issue.

17. The government of Punjab has requested to add two more pilot districts, Lahore and Chakwal, into the scope activities.

18. The government of Punjab has also requested support for two new outputs: (i) a social audit of police functioning, and (ii) institutionalization of mandatory referrals of criminal cases to
community-based conciliation councils in the pilot districts. 19. The indicative budget for the new subproject, including completion of unfinished activities and outputs of TA 4537, two additional pilot districts, and social audit and work with community-
based conciliation councils in pilot districts, is $1 million. The details of the new subproject activities
will be agreed through a memorandum of understanding with the government of Punjab. 4 Musalihat anjumans (conciliation committees), provided for under Chapter XI of the provincial Local Government Ordinance(s) 2001, are bodies mandated to achieve out of court amicable settlement of disputes amongst the people
through mediation, conciliation and/or arbitration whereas insaaf committees, selected by local councils, are
responsible for the selection of the panel of conciliators of musalihat anjumans. Appendix 3 22 B. Subcluster 2: Support to Devolution Reforms 1. Subproject 1: Review of Implementation of Fiscal Decentralization System a. Background
20. Fiscal decentralization is critical for devolution to succeed, and this fact has made it an intensely deliberated issue at various forums. The LGO 2001 transfers specified expenditure and
revenue assignments to subnational governments. A key focus area of the Decentralization
Support Program (DSP) has been to support the institutional mechanism to strengthen and
augment the fiscal decentralization process. It has provided support to the provincial finance
commissions (PFCs), supported the development of revenue databases of selected local
governments, and been instrumental in streamlining the budget-making processes of local
governments. PFCs in three of the four provinces have announced their awards, thereby bringing
relative predictability and transparency to the fiscal transfer mechanism. However, local
governments in general have been raising the issue of fiscal autonomy at various forums. It has
been 5 years since fiscal decentralization was introduced in Pakistan, and it is an apt time to
ascertain whether the design and implementation of a fiscal decentralization system has achieved
its objectives and to determine the issues responsible for low fiscal autonomy at local levels.

b. Outcome and Outputs
21. Major outcomes of the study will be analysis and supporting recommendations on the following aspects of fiscal decentralization: (i) a predictable and transparent fiscal transfer mechanism (outputs: regular PFC
awards; fiscal need, fiscal capacity, fiscal effort, and fiscal performance clearly
manifested in the PFC awards); (ii) adequate own-source revenues for the local governments (outputs: financial and
fiscal autonomy in policies and development of the local governments); and (iii) reducing the number of vertical programs (outputs: effective functioning of local
planning institutions).
c. Methodology
22. A comprehensive field study will be undertaken under the subproject to review the implementation of fiscal decentralization during the last 5 years. The study will be undertaken in
select local governments. The sample will include all three tiers of local governments (district, tehsil,
and union) in all four provinces.

23. The study will require highly technical expertise to analyze the fiscal devolution system by conducting research as well as carrying out and supervising surveys. A team of international and
national consultants will be recruited. At the end of the study, an international conference will
compare Pakistan’s experience with other countries that have undergone similar experimentation.

d. Indicative Budget
24. The subproject will be implemented over 12 months (June 2007-May 2008) and the indicative budget is $ 0.4 million.
Appendix 3 23 C. Subcluster 3: Support to Public Financial Management

1. Subproject 1: Support to Public Financial Management Assessment and
Procurement Assessment a. Background
25. Public sector financial management reforms are a key component of governance reforms. To support the Government in these areas, ADB has been supporting public resource
management programs in two provinces—Punjab and Balochistan. In Punjab, the Punjab
Resource Management Program aims to support the government of Punjab in undertaking reforms
in governance structures for strengthening provincial finances, improving pro-poor service delivery,
and creating opportunities for growth and income generation. It has two clusters: Cluster Program I
for $204 million (approved in December 2003) and Cluster Program II for $200 million (approved in
December 2005). The Balochistan Resource Management Program, for $130 million, was
approved in December 2004 and aims at improving fiscal and financial discipline, enhancing public
service delivery, improving the business environment, and ensuring sustainable water resource
management in the province.

26. ADB intends to complement these initiatives with support for public sector financial management by (i) assisting federal and provincial governments in preparing public financial
management accountability assessments and public procurement assessments, and (ii) helping to
design and implement government-owned federal and provincial action plans aimed at
improvements in the defined areas of weakness.

b. Outcome and Outputs
27. The subproject outcome is a strengthened financial management system encompassing reliable budget management processes, strong accounting, and financial reporting and audit
controls as per international standards.

28. Outputs will include the likes of (i) a common pool of information for Government-donor dialogue to be made available for measurement and monitoring of public financial management
performance progress, and (ii) actions plans developed and adopted by the Government.

c. Methodology and Key Activities
29. Key activities include: (i) federal and provincial public financial management accountability assessments and public procurement assessments, (ii) design of federal and provincial
government action plans aimed at improvements in the defined areas of weakness, and (iii)
support to implementing action plans.

d. Indicative Budget
30. The indicative budget for the subproject is $ 0.2 million. Appendix 3 24 D. Subcluster 4: Capacity Building for Accountability, Transparency and Anticorruption
1. Subproject 1: Capacity Building of NAB and Implementation of NACS
a. Background
31. Combating and eradicating corruption has been one of the top priorities of the present Government and featured in the President’s seven-point reform program pursued during the 3
years leading up to the return of elected government in November 2002. To put this policy into
effect, the Government established the National Accountability Bureau (NAB) under the NAB
Ordinance 1999 and provided legal durability for the NAB through amendments to the Constitution.
NAB requested ADB technical assistance to strengthen its institutional capacity for managing its
growing portfolio of functions and assuming new responsibilities in the context of a medium-term
framework of activities contained in the National Anti-Corruption Strategy (NACS) announced
during mid-2002.

32. ADB’s goal in its TA 5 to strengthen the NAB was to improve the Bureau’s capacity to perform broader functions in preventing corruption while becoming more effective, scientific, and
integrated at all levels of government in performing its functions. The TA aimed to enable NAB to
better prioritize its functions, strengthen its investigative capability, and enhance its performance in
identifying, preparing, and prosecuting corruption cases. NAB’s dependence on other government
agencies for performing such functions had to be reduced in order to enhance its capacity for
combating and preventing corruption. The TA assisted NAB in developing better coordination with
agencies and activities to prevent corruption at the provincial and local government levels by
developing its capacity to provide advice and training.

33. NAB has requested further assistance from ADB to (i) prepare operational manuals, and (ii) support implementation of the NACS.

b. Outcome and Outputs
34. The outcome is strengthening overall capacity and capability of NAB. Outputs are (i) high- quality manuals in selected priority functions prepared and disseminated, and (ii) implementation of
selected aspects of NACS.

c. Methodology and Key Activities
35. International consultants will be hired to prepare the selected manuals. NACS is being implemented by a high-powered implementation committee, chaired by NAB’s chairman. Its
members include federal secretaries of establishment, finance, law, interior, and information; the
chairman of the central board of revenue and all provincial chief secretaries; along with
representatives of the auditor general, federal ombudsman, securities and exchange commission,
civil society, media, academia, nongovernment organizations, and the business community. Priority
activities of the NACS that could be supported under the TAC include: (i) Executive—public sector management. Training courses on "ethics management
systems" in leading civil service training institutions. (ii) Executive—public interface functions. Business process assessments of key
departments (police, customs, income tax, land revenue, judiciary, education, 5 ADB. 2002. Strengthening the National Accountability Bureau. Manila (TA 4043-PAK). Appendix 3 25 health) having greater public interaction with a view to evolving a smooth,
non-fatiguing, cost-saving, and efficient interface. (iii) Legal system and judiciary. Review of the appointments and promotion policy in
subordinate, specialized, and superior courts in Pakistan. Support in establishing
provincial law commissions. (iv) Civil society. Interventions to address public tolerance and acceptance of
corruption. Supporting demand mobilization for anticorruption measures and better
performance of accountability frameworks. (v) Private sector. Support for undertaking a study on corruption in the private sector.
Support in introducing an effective consumer protection regime.
36. The above does not constitute an exhaustive list of interventions. It may be amended and prioritized further after consultation with stakeholders, including NAB.

e. Indicative Budget
37. The indicative budget is $1 million over 3 years commencing from March 2007.
E. Subcluster 5: Performance and Learning Cell 1. Background
38. Accountability, quality assurance, and learning from experience are the key principles embodied in ADB’s programs supporting governance reforms. These principles focus on four areas:
(i) legal and policy basis of reforms, (ii) budget management and accountability, (iii) institutional
strengthening and capacity building efforts, and (iv) performance of endowment and grant fund
resource pools. Effective monitoring and evaluation is also essential to the annual performance
review approach adopted by DSP and AJP that provides for systematic input by district-level
authorities and civil society, extending to province and then federal level. This “bottom-up”
monitoring process is unfamiliar, and, in many respects, contrary to the culture of executive and
judicial practices in Pakistan.

39. In addition to the imperative to monitor, evaluate, and provide coherent program and policy advice to DSP and AJP IAs, analytical reports must be available to enable program managers and
policymakers to learn lessons from experience. Additional support is essential for effective
monitoring and evaluation of governance programs and policy outcomes.

40. The scope of governance reforms is challenging in terms of its magnitude, diversity, and expected impact. In order to effectively and efficiently capture, analyze, and document lessons
learned to inform ongoing program implementation and design of future programs, institutional
learning capacity must be a key dimension of the performance review function. Given the
complexity of the issues being addressed under the technical assistance cluster (TAC) for support
to governance reforms, it is imperative to involve consultants who have the capacity to contribute
to the learning process with some continuity over time.

41. The Performance and Learning Cell (PLC) will comprise a core team of international and national consultants with expertise in the broad range of TA initiatives undertaken through all
subprojects under the TAC. The PLC will undertake periodic (biannual) reviews of TAC activities. It
can also provide more specific technical inputs in areas where international experience is sought.
Options for locating the PLC, or selected functions of the PLC, within an appropriate national Appendix 3 26 development organization will be further explored. It is anticipated that some functions of the PLC
will be managed by the Pakistan Resident Mission directly (i.e., through the APR).

2. Outcome and Outputs
42. The outcome is enhanced quality of review and evaluation of TAC subprojects and the TAC as a whole. The outputs are annual performance reports and periodic technical reports, as required,
over 3 years.

3. Methodology and Key Activities
43. The PLC will be comprised of a governance specialist and sector experts on justice sector domains (judiciary, police and public safety, administrative justice, bar reforms, alternative dispute
resolution), devolution (political, administrative, and fiscal), public financial management, civil
society-state relations, anticorruption, capacity development, monitoring and evaluation, research
and communications, as well as analysis of poverty dimensions and the nexus with governance
structures. The governance specialist will have expertise in a broad range of governance issues,
with specific expertise in at least two of the four technical subproject disciplines (justice; devolution;
public financial management; and transparency, accountability, and anticorruption).

44. The team will undertake APRs over the 3 year duration of the TAC, as well as periodic technical reviews, as required. The APRs will encompass all TAC initiatives and will assess the
contribution of the subprojects and TAC initiatives to the expected impact of the TAC as a whole.

45. In addition to the aforementioned functions, the PLC will be in particular responsible for
(i) providing secretarial services for the TAC Steering Committee. (ii) supporting APRs of the TAC. The APRs shall evaluate performance of all TAC
initiatives, including subprojects reports of which shall be shared with all IAs and
stakeholders. (iii) providing specific technical inputs in areas where international experience is sought. (iv) carrying out impact studies to assess contributions from ADB’s support to improving
development effectiveness. For this, coordination meetings will need to be held,
studies conducted, and effectiveness and impact reports prepared. (v) compiling and reviewing lessons, followed by dissemination through appropriate
forums, conferences and workshops, both national and international. (vi) providing timely and effective secretarial support to TAC operations, including
design of subclusters and/or subprojects. (vii) holding policy dialogues on governance reforms, publishing research papers and/or
policy briefs, and ensuring wide dissemination through conferences and workshops.
Resulting feedback and inputs should then be incorporated into TAC interventions.
4. Indicative Budget
46. The indicative budget is $1 million over 3 years from March 2007 to February 2010.