Pakistan: Sindh Cities Improvement Investment Program

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Lessons

An incremental, phased approach to implementing transformational reforms can help reduce political resistance and enhance the sustainability of reforms.

Political and social realities in north Sindh rendered the potentially transformational Tranche 1 nearly impossible to implement. From being initially smooth, the transition to professional management of local government-owned municipal services, the core reform agenda, became increasingly difficult in 2010 onward. It did not help that the then newly-established NSUSC was itself struggling with a lack of capacity to perform its dual function of managing both the physical investment and service delivery components of Tranche 1. It would have been better if the NSUSC and other key institutions were given the opportunity to first gain experience, create a track record, and establish their credibility, before going full blast in their implementation functions. This could have been done by proceeding with the transfer of operations only after the physical infrastructure improvements have been completed. An incremental, phased approach to implementing transformational reforms, which demonstrates the viability of these reforms while improving the capacity of key institutions, can help reduce political resistance, and build a strong constituency for and enhance the sustainability of reforms.

Effective institutional arrangements enable the successful implementation of urban reforms.

Weaknesses in the institutional arrangements established under Tranche 1 hampered implementation. For instance, the designation of P&DD as executing agency dissociated the implementation process from the Local Government, Rural Development & Housing, Town Planning Department (LGRD&HTPD), the custodian of all municipal infrastructure in the province, alienating and fueling resistance among the taluka municipal administrations (TMAs) that traditionally managed the municipal infrastructure services and were under the supervision of the LGRD&HTPD. Furthermore, the PSU and urban unit, both within the P&DD, had overlapping mandates that led to confusion and more inefficiencies. The absence of baseline data, performance indicators, service standards, and service standard cost, which resulted in highly ambiguous contracts, made matters worse as it became hard for any reliable performance monitoring to be undertaken. Putting in place a rightly sized and competent machinery, which builds on and strengthens the positive, relevant aspects of existing mechanisms and processes and is supported by a clear responsibility and performance monitoring system, would help enable more effective implementation of similar future projects.

Investing in comprehensive, integrated sector packages with a focus on priority cities have a stronger impact in achieving urban sector reforms.

Tranche 1 covered a large area that included two towns without a tariff structure. This overstretched the capacity of the NSUSC and exacerbated budgetary shortfalls in civil works. Subsequent adjustments, consisting mainly of reducing the scope of physical investments but not the coverage area of Tranche 1, caused a disconnect in the attainment of the planned outcomes and outputs, which were interdependent and, to have an impact, had to be achieved or delivered in full. Restricting the investments to a limited number of cities with more comprehensive, integrated sector packages could have yielded better results, and may be considered in future sector-wide urban reform projects.

Background

Sindh is the second most populous province in Pakistan. In 2006, it had a total 38 million people, nearly half of whom lived in the urban areas. Karachi and Hyderabad, the province’s two largest cities, accounted for about 70% of the urban population. The remaining 30% were in 20 secondary cities which, during project appraisal in 2008, showed signs of severe stress from acute poverty and the growing inability of urban infrastructure and services to meet the demands of increasing populations.

Increasing urban poverty in Sindh, estimated at 40%-50% in secondary cities, was a consequence of economic growth that lagged those of Karachi and cities in neighboring Punjab. Barriers to economic growth included poor water and power supplies, inadequate connectivity to Karachi, insufficient skilled labor, and political uncertainty. The small infrastructure investments that had been made were inadequately planned and poorly managed, resulting in less-than optimal use and unsustainable operations. Deteriorating urban services increased business costs, damaged the urban environment, diminished the quality of life, and discouraged potential investment.

To help address the situation, the Asian Development Bank (ADB) approved a 10-year, $300 million multitranche financing facility (MFF) for the Sindh Cities Improvement Investment Program (SCIIP). Through institutional and sector reforms, institutional and capacity development, and priority infrastructure investments, SCIIP will enhance the urban environment, public health, and economic opportunities for an estimated 4 million residents in the participating secondary cities. Delegation of urban services delivery to professional management comprises the core reform agenda.

SCIIP implementation commenced with the approval of MFF Tranche 1 in December 2008. Tranche 1 was to support the establishment and/or operationalization of key agencies involved in SCIIP implementation, including the provincial government’s Program Support Unit (PSU) and urban unit, and the autonomous, nonprofit North Sindh Urban Services Corporation (NSUSC). It would also finance urban policy and strategic planning, and physical investments to improve water supply and wastewater and solid waste management in 6 secondary cities in north Sindh. However, design and capacity issues, flaws in institutional arrangements, and most importantly, lack of government commitment to the devolution of urban services delivery had resulted in a less-than-successful Tranche 1 performance. Budgetary shortfalls, due to an underestimation at appraisal of the cost of civil works, also cut the scope of infrastructure improvements. Nevertheless, physical investments in improved water supply did help reduce the incidence of diarrhea among children under-5.

From an estimated $50 million at appraisal, the actual total cost of Tranche 1 was $49.1 million, $37 million of which was financed by ADB and the rest by the Government of Sindh (GOS). Implementation, originally scheduled from January 2009 to June 2012, was extended twice, initially to June 2013 and then to June 2014.

The GOS Planning and Development Department (P&DD), through the PSU, was the executing agency. The NSUSC was the main agency responsible for day-to-day implementation of Tranche 1 in all participating cities, while the urban unit within P&DD was responsible for providing strategic policy and planning guidance for province-wide reforms.

Project Information

Report Date:

September, 2017

Main Sector:

Multisector

Country:

Pakistan

Project/Modality:

MFF

Themes:

Environmentally Sustainable growth

Gender Equity and Mainstreaming