Progress Report on Tranche Release

Program Number: 36155

Loan Number: 2270
June 2010

Pakistan: Private Participation in Infrastructure

Program

This consultant’s report does not necessarily reflect the views of ADB or the government concerned. [For
PPTAs: Also, all of the views expressed herein may not be incorporated into the proposed project’s
design.]
 CURRENCY EQUIVALENTS
(as of 31 May 2010)

Currency Unit – Pakistan rupee/s (PRe/PRs)

PRe1.00 = $0.01187
$1.00 = PRs84.3

ABBREVIATIONS

ADB – Asian Development Bank

CWRD – Central and West Asia Department
IMF – International Monetary Fund
IPDF – Infrastructure Project Development Facility
MOF – Ministry of Finance
NHA – National Highway Authority
Pak-IEM – Pakistan Integrated Energy Model
PPI – private participation in infrastructure
PPIB – Private Power and Infrastructure Board
PPP – public–private participation
TA – technical assistance
VGF – viability gap fund

NOTES

(i) The fiscal year (FY) of the government ends on 30 June. FY before a calendar
year denotes the year in which the fiscal year ends, e.g., FY2010 ends on 30
June 2010.
(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations 1

Director General J. Miranda, Central and West Asia Department (CWRD)
Director R. Subramaniam, Financial Sector, Public Management, and Trade
Division, CWRD

Team leader W. G. Settle, Senior Private Sector Development Specialist, CWRD

Team member H. Chen, Counsel, Office of the General Counsel

In preparing any country program or strategy, financing any project, or by making any
designation of or reference to a particular territory or geographic area in this document, the
Asian Development Bank does not intend to make any judgments as to the legal or other status
of any territory or area.
 CONTENTS

Page

I. INTRODUCTION 1
II. RECENT DEVELOPMENTS IN PAKISTAN AND PROGRAM IMPLICATIONS 1
III. PROGRAM PERFORMANCE AND STATUS OF IMPLEMENTATION 1
A. Compliance with Loan Conditions 1
B. Implementation of Policy Actions 2
C. Implementation of Program Technical Assistance 6
IV. CONCLUSION 6
V. THE PRESIDENT'S DECISION 6

APPENDIX
Progress on Monitorable Indicators 7
 I. INTRODUCTION

1. On 31 October 2006, the Asian Development Bank (ADB) approved a: (i) a program
cluster (the program) comprising two subprograms for the Private Participation in Infrastructure
Program to the Islamic republic of Pakistan; and (ii) a $400 million policy reform loan for
subprogram 1, with actions to be completed in two tranches.1 The program aims to increase
private participation in infrastructure (PPI). To achieve this, subprogram 1 was designed to
address constraints in overall policy, legal, and regulatory frameworks. The priority sectors are
power and energy, transportation, and urban services. Subprogram 1 became effective on 19
December 2006, and the first tranche of $200 million was released on 22 December 2006. In
parallel, the government established the Infrastructure Project Development Facility (IPDF) to
develop infrastructure projects for private sector participation. An advisory technical assistance
(TA) of $1 million was approved with the loan.2 The second tranche release of $200 million
under subprogram 1 has been pending since December 2009.

2. This report provides an overview of progress on the reforms. A staff assessment

concluded that all second tranche release actions under subprogram 1 have been accomplished
in a satisfactory manner. This paves the way for the release of the second tranche.3

II. RECENT DEVELOPMENTS IN PAKISTAN AND PROGRAM IMPLICATIONS

3. The PPI Program was approved before the global food and fuel crises. However,
Pakistan started feeling the impact of these crises in late 2007, with the situation becoming
more severe in 2008–2009. The government sought support from the International Monetary
Fund (IMF), which approved a standby arrangement in the amount $7.60 billion in November
2008. In August 2009, the standby arrangement was increased by $3.70 billion. The IMF has
thus far disbursed $7.68 billion, including $1.48 billion for budgetary financing. IMF's most
recent review was completed in May 2010. The authorities have advanced on the stabilization
agenda and structural reforms. This has been done against a background of adverse security
developments, weak external demand, and challenging domestic fiscal circumstances. However,
underlying vulnerabilities remain. In particular, the power sector faces daunting financial
challenges and a capacity shortfall of 5,000 megawatts in the summer months. As part of ADB's
Accelerating Economic Transformation Program, which provides budgetary support under the
overall financing plan for the IMF stabilization program, the government is implementing a range
of measures to address power sector constraints. While the PPI Program was designed prior to
the stabilization program, the proposed second tranche release will provide much needed fiscal
cushion to the Government of Pakistan.

III. PROGRAM PERFORMANCE AND STATUS OF IMPLEMENTATION

A. Compliance with Loan Conditions

4. Despite the global economic environment and political and security challenges, all 11
second tranche release conditions have been fully complied with. The compliance status is

1
ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Program Cluster of
Loans and Technical Assistance Grant to Pakistan for the Private Participation in Infrastructure Program. Manila
(Loan 2270-PAK and TA 4861-PAK).
2
ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Technical
Assistance Grant to Pakistan for Supporting the Private Participation in Infrastructure Program. Manila (TA 4861-
PAK attached to Loan 2270-PAK).
3
The implementation period of subprogram 1 is 3 years, to be closed by 30 June 2010.
2

reported in the Appendix.4 The implementing agencies have made progress in policy, legal, and
institutional reforms specified in the program. Four review missions were fielded to assess
progress under the program.

B. Implementation of Policy Actions

5. The program has two pillars. The first established an overall policy, legal, and regulatory
framework for PPI.
(i) national PPI policy,
(ii) national viability gap guidelines,
(iii) national PPI assessment report and action plan,
(iv) new national arbitration law, and
(v) national PPI tender procedures and concession agreements.

6. The second pillar deepened policy, legal, regulatory, and institutional reforms in priority
subsectors.
(i) hydro and coal-fired generation,
(ii) power,
(iii) road transport,
(iv) highway concessions,
(v) competitive tenders for PPI projects, and
(vi) railways.

1. Policy Objective—Establish a Policy, Legal, and Regulatory Framework for

PPI.

7. This policy is to strengthen the legal and regulatory framework, fundamental for PPI. The
policies, procedures, standards, and best practices for PPI developed under the program
provide clarity and legal protection for investors and reduce the time and expense of project
development and transaction closure. More transparent, competitive, and fair tenders for PPI
projects will help attract more viable private investors.

Policy condition 1 (S.3): The government to adopt the PPI policy, as

defined, and disseminate the policy to domestic and foreign investors.

8. Under the first tranche, a task force was formed to do the technical work required to
implement the program.5 The task force prepared a PPI policy in 2007. At ADB's request, and
with its technical support, a reformulation of the policy was developed in 2008 in consultation
with the IPDF and development partners.6 The policy was further refined in 2009. Operational
4
Of the 21 monitorable indicators, 11 indicate compliance, 7 partial compliance, and 3 work that is ongoing.
5
The task force is chaired by the adviser on finance to the Prime Minister and comprises representatives of line
agencies, regional governments, and the private sector. It was established to promote collaboration in program
implementation among federal, provincial, and local governments and vertically among agencies at the same level
of government.
6
The revised PPI policy specifically outlines the types of infrastructure and utilities eligible for private participation,
establishes the approval authorities for respective PPI projects, and protects investors through a framework of risk-
sharing arrangements and guarantees. The policy also establishes a framework for financial and fiscal incentives
for PPI and guarantees for PPI projects to be adopted by the government. The PPI policy reduces uncertainty for
both private investors and state agencies involved in developing and implementing PPI projects. The policy
outlines a framework for subsector arrangements that is in harmony with PPI polices for roads and railways and
was developed by the government as part of the program.
 3

and promotional work facilitated awareness amongst concerned stakeholders. The government
formally adopted the revised PPI policy in January 2010.

Policy Condition 2 (S.4): The government to adopt guidelines in line with its
PPI policy and satisfactory to the ADB that
(i) establish an empowered committee responsible for approving
viability financing for eligible PPI projects,
(ii) set forth the eligibility criteria for such funding, and
(iii) provide for the procedures to be followed for submission, appraisal,
and approval of such funding.

9. The empowered committee was set up in 2007. "Viability gaps" are addressed through
policy and institutional mechanisms to provide financing for PPI projects in the form of capital
grants, one-time or in tranches during the construction phase of projects. The grants will not
exceed a specific ceiling to ensure that private investment is the dominant mode of financing for
each selected project. To maximize private investment across all PPI projects, clear eligibility
criteria were included for prioritizing PPI projects for this type of financing in line with
international best practice. Such viability gap funding may be particularly relevant in areas such
as the water subsector, in which sponsors are often unable to establish user charges high
enough to make projects financially viable in the short and medium term. These attributes, along
with procedures for appraisal and approval, are embodied in the viability gap fund (VGF)
guidelines. These guidelines were developed by the government based on extensive
consultation with ADB and other development partners in 2008 and 2009. The revised VGF
guidelines were approved by the chairman of the task force in May 2009.

Policy Condition 3 (S.7): The task force to (i) assess the implementation
and impact of the PPI policy, and (ii) develop, based on the lessons learned,
detailed proposals in line with international best practices for (a)
strengthening the policy, legal, and regulatory framework for PPI and (b)
broadening the policy's scope to cover other priority subsectors.

10. With ADB TA support, the task force secretariat assessed the public–private partnership
policy framework and developed an action plan for 2 years. This will be used by the government
and development partners as a basis for further reforms. The assessment was finalized in April
2009 and approved by the secretariat of the task force in May 2009.

Policy Condition 4 (S.10): The government to submit to Parliament the new

arbitration law.

11. The Law on Arbitration was enacted in 1940. It has substantial weaknesses, such as the
requirement to approach a court for settling an award, which defeats the purpose of arbitration.
As a result, the law has not worked well in practice. In 2005 the President promulgated the
Ordinance on the Recognition and Enforcement of Arbitral Awards to ratify the 1958 New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards. While this was a
noteworthy development for investors, the ordinance is an emergency law with limited tenure.
Ordinances lapse after 120 days unless extended or superseded by a new law. ADB and the
World Bank have provided significant technical support to the drafting of this law. ADB is
This consultant’s report does not necessarily reflect the views of ADB or the government concerned. [For
satisfied that the
PPTAs: Also, key
all of thefeatures of an effective
views expressed hereinarbitration
may not be lawincorporated
are included in the
into the proposed
draft submitted to
project’s
Parliament
design.] in April 2009.
4

2. Policy Objective—Deepen policy, legal, regulatory, and institutional

reforms in priority subsectors, including power, transport, and water.

12. This policy objective seeks to deepen reforms by developing frameworks that function at
various levels of government and in various subsectors. With an overall PPI policy in place,
provincial and subsector policies can be developed in accordance with it. Deepening reforms is
also accomplished by transferring PPI experience from those subsectors where PPI has
progressed, such as power generation, into areas that are lagging, such as roads, railways, and
water resources and sanitation.

Policy Condition 5 (S.12): The Private Power and Infrastructure Board (PPIB)
to adopt and disseminate standard processing procedures and documents
for PPI projects in hydro and coal-fired power generation.

13. The PPIB has developed standard documents for projects in hydro and coal-fired energy
generation, including standards for prequalification, letters of intent, guarantees, expressions of
interest, feasibility studies, and power purchasing agreements. The PPIB drafted for hydropower
projects the standard implementation agreement, power purchase agreement, and water use
agreement and disseminated them to various stakeholders, including 20 public departments and
organizations and about 8–10 private sponsors of projects under the PPIB. In addition, two
meetings were held by the PPIB, one in which all public sector stakeholders participated and the
other in which all private sector sponsors provided their inputs. Accordingly, the documents
were finalized in light of the comments of the stakeholders and submitted to the PPIB board for
approval. The PPIB formally adopted these documents in October 2009. The documents are
available on the PPIB website.7 PPIB's processing procedures are effectively captured in its
standardized documents along with the mandate conferred on it by the National Energy Power
Regulatory Agency to facilitate the application of the procurement processes outlined in those
documents.8

Policy Condition 6 (S.14): PPIB to issue letters of approval to the

successful bidders for at least another seven PPI projects in power
generation.

14. Under the first tranche release conditions, the PPIB issued letters of approval (or "letters
of support") for 3 projects. Since then, the PPIB has issued letters of support for an additional
11 projects, for a total of 14 projects with a combined capacity of 3,287 megawatts. Of these
projects, 12 projects with a capacity of 2,539 megawatts have achieved financial closure. In
addition, one project was commissioned in March 2009. 9 This progress notwithstanding,
Pakistan continues to face a severe power crisis, with a demand–supply shortfall of about 5,000
megawatts. Load shedding and blackouts have begun to cripple the economy, as consumers in
urban and rural areas alike across the country go without electricity for several hours daily. In
late April 2010, the government adopted a plan of emergency proportions to address financial
and capacity constraints, working closely with ADB and other development partners.

7
www.ppib.gov.pk/hydelcoal.html
8
National Energy Power Regulatory Agency website: http://www.nepra.org.pk/index.htm.
9
The commissioned project was the Attock Gen Power Ltd.
 5

Policy Condition 7 (S.19): The government to (i) adopt and announce the
policy for PPI in the national highway subsector, and (ii) ensure that its
national transport policy is consistent with the policy for PPI projects in the
highway subsector.

15. In March 2008, the National Highway Authority (NHA) revised an early draft of the PPI
policy with ADB technical support. The NHA executive board cleared the revised policy, which is
consistent with the draft national highway policy of September 2008. The National Highway
Council gave final approval for the policy in May 2009.

Policy Condition 8 (S.21): The government to commission an independent

performance assessment of the concession agreements negotiated by NHA,
including their implementation, and submit the findings of the assessment
to ADB.

16. Only one concession agreement has been signed by the NHA so far, for the Lakpass
Tunnel Project. The government commissioned the IPDF to undertake an assessment of this
agreement, as benchmarked against standard agreements developed by the IPDF in line with
international best practices. The assessment was submitted to ADB in April 2010.

Policy Condition 9 (S.23): NHA to (i) identify PPI projects with a total value
of at least PRs100 billion, and (ii) invite additional bids through an
international competitive tender for PPI projects with a total value of at
least PRs30 billion.

17. The government has renewed its commitment to PPI in the national highway sector,
without which the large financing requirements related to infrastructure development and
maintenance cannot be met. The NHA has achieved the objective by identifying 14 projects for
over PRs108 billion and inviting additional bids with a total value of at least PRs36 billion.
Encouragingly, four projects totaling PRs42 billion had been tendered as of January 2010.

Policy Condition 10 (S.27): The Government to develop and approve a

policy on private participation in operating freight and passenger trains on
Pakistan Railways’ infrastructure.

18. In 2008, the Ministry of Railways developed a draft policy document and terms of
reference for further enhancement with ADB technical support. The Ministry of Railways
finalized and approved a policy document on private participation in operating freight and
passenger trains on Pakistan Railways’ infrastructure in May 2009. The PPI Policy for Railways
was approved by Ministry of Railways in October 2009.

Policy Condition 11 (S.30): IPDF to develop standard tender procedures

and documents, including model concession agreements that include clear
risk-sharing arrangements and guarantees, for federally supported PPI
projects in communal services.

19. The IPDF developed guidelines for PPI project preparation and feasibility studies,
This consultant’s
guidelines report does notand
for procurement, necessarily
model reflect the views ofpartnership
public–private ADB or the government
agreementsconcerned. [For
for federally
PPTAs: Also, all of the views expressed herein may not be incorporated into the proposed
10 project’s
supported PPI projects, and embarked on stakeholder consultations by May 2007. In terms of
design.]

10
The documents are available from the IPDF website at www.ipdf.gov.pk.
6

coverage, these are on par with similar guidelines from comparable countries. Both ADB and
World Bank have provided TA support.

C. Implementation of Program Technical Assistance

20. TA 4861 (footnote 2) has contributed towards building local expertise and capacity in
some aspects of PPI in Pakistan, specifically with respect to six of the 11 policy conditions. It
supported the government's policy-related outputs, including the PPI policy document, VGF
guidelines, PPI assessment, arbitration law, national highway PPI policy document, and railway
PPI policy document. The TA has thus far supported 9 person-months of international
consulting inputs and 4 person-months of national inputs, using about $260,000 as of March
2010. In addition, the TA has supported a strategic evaluation of the PPIB in the amount of
$102,500. In total, 35% of the TA has been utilized. The TA is now being restructured to support
the identification of projects with PPI potential.

IV. CONCLUSION

21. The government has made considerable progress in implementing the reforms agreed
under the program, despite the fragile security environment and technical complexity inherent in
policy reform programs. It has pursued reforms on several fronts simultaneously and remains
committed to further progress. Promoting PPI has become even more critical and relevant in
light of the global financial crisis, given the continuous erosion of fiscal space that constrains
public investments in infrastructure in Pakistan and elsewhere.

V. THE PRESIDENT'S DECISION

22. In view of the substantial progress made in the implementation of the Private
Participation in Infrastructure Program, as evidenced by full compliance with all 11 tranche-
release conditions, the President is satisfied that the necessary requirements for the release of
the second tranche of the loan for the Private Participation in Infrastructure Program have been
met. In accordance with the established procedure, the President will authorize the release of
the second tranche in the amount of $200,000,000 for the Private Participation in Infrastructure
Program. The authorization will be effective not less than 10 working days after the circulation of
this progress report to the Board.

PROGRESS ON MONITORABLE INDICATORS
Summary
Ten monitorable conditions have been fully complied with.
Progress is ongoing for 11 monitorable conditions.
Monitorable Indicators
S.1. The Task Force to prepare its work program for two
additional years and revise the terms of reference for the
working groups, where necessary.
S.2. The Government to announce in a budget speech
that it will provide viability financing for PPI projects, not
exceeding 20% of the total project costs, to support
economically justified but financially unviable projects
implemented by entities with 51% or more subscribed
and paid up equity owned and controlled by a private
entity.
S.5. The Task Force to (i) review the Government’s
concession policies for PPI and assess whether there is
a need for legislation on concessions; and (ii) if needed
to draft a concession law acceptable to ADB.
Appendix 7
Indications of Progress
Complied with. The task force working groups are on
(i) public–private participation (PPP) law, (ii) model
contracts for PPP, (iii) a risk-management framework,
and (iv) viability gap funding.
The core conditionality S.7 task force assessment
describes recent developments in PPP in Pakistan as
well as lessons learned and international best practice
for PPP. Consequently the action plan included under
S.7 proposes a number of key actions within a 2-year
work program over the next 6, 12, and 24 months. One
of the key immediate recommendations of the task
force is to accelerate PPP development by reviewing
and accelerating its own work program, including
revising the terms of reference of its working groups.
The Asian Development Bank (ADB) is actively
considering and planning technical assistance to the
government to support, among other things, PPP
development by the Ministry of Finance (MOF) and the
task force.
Compliance underway. A PPP policy document
adopted by the cabinet in November 2007 declares that
the government will provide a viability gap fund (VGF).
The core condition S.4 specifies the parameters set
forth in the VGF guidelines, which have been
disseminated via Infrastructure Project Development
Facility (IPDF) workshops and its website.
VGF guidelines have been approved by the advisor on
finance to the Prime Minister as head of MOF–PPP
task force. Due to fiscal challenges, the most recent
budgets and budget speeches have not included
specific references to gap financing. Yet, there is work
in parallel on structuring PPP transactions that
specifies the need for viability financing. It is envisaged
that adequate financing can be provided once the fiscal
situation improves.
Compliance underway. The government has prepared
a draft PPP bill; the model concession agreements are
likely to be used for the foreseeable future. The
government has sought ADB's support for drafting a
concession law.
 8 Appendix
Monitorable Indicators
S.6. The Government to (i) adopt the social safeguard
policy after stakeholder seminars at the provincial and
federal level of government, and (ii) disseminate detailed
guidelines clarifying its applicability to PPI projects in the
power and road transport subsector.
S.8. The Task Force to formulate a second round of
policy reforms to be supported under subprogram 2
building on achievements made and lessons learnt under
Subprogram 1.
S.9. The Government to submit to Parliament a law
which ratifies and implements the New York Convention
on the Recognition and Enforcement of Foreign Arbitral
Awards.
Indications of Progress
Complied with. At the PPP project level, IPDF
guidelines on social safeguards and environmental
impact, etc., are quite detailed regarding (i) PPP project
preparation and (ii) project inception guidelines
prepared by the MOF and the IPDF, and they are on
the IPDF website.
PPP project guidelines have been disseminated and
discussed at cross-sector and sector workshops (see
also workshop documentation, e.g., S.31).
The Ministry of Environment and the Ministry of Local
Government and Rural Development disseminated in
2002 a draft national resettlement policy that includes
provisions on indigenous people. However,
consultations with provinces on the draft have not
progressed, and the policy has yet to be adopted.
For externally financed projects, the safeguard policies
of external funding agencies remain the reference point
for PPI projects that are at least partly funded by them,
together with MOF–IPDF guidelines for PPP projects.
With regard to other infrastructure projects, safeguard-
related issues are covered under the framework of the
Land Acquisition Act, 1896. However, this act does not
directly address safeguard issues. On stakeholder
consultations, the government has yet to appoint a
nodal agency or entrust it with responsibility and
accountability. The contracting agency concerned is at
present entrusted with ensuring that the relevant laws
and guidelines on safeguards are followed.
The Ministry of Environment acts as the key agency for
environmental safeguard matters. The Environmental
Protection Law, 1997 provides the legal framework for
environmental protection in line with international
standards and for environmental impact assessments.
Detailed regulatory guidelines have been adopted
under the law to outline the content of environmental
impact assessments and minimal environmental
standards for specific sectors and projects, but many of
them need to be brought in line with recent ADB and
World Bank guidelines on the subject.
Complied with. The task force assessment (condition
3, S.7) provides the basis for reviewing PPP
development, including policy reforms.
Complied with. During 2005–2007, the draft law was
repeatedly promulgated by the President as an
ordinance to provide for the recognition and
enforcement of arbitration agreements and foreign
arbitral awards. (Pakistan is a signatory to the United
Nationals Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 1958, which

Monitorable Indicators
S.11. The High Court to implement Section 89A of the
Civil Procedure Code by adopting regulations setting
forth the rules and procedures for alternative dispute
resolution, so as to provide competing and out-of-court
alternatives to the contracting parties under a PPI if they
so wish.
S.13. The Government to approve at least another 7
projects in power generation for PPI in line with the 2002
national power policy by giving PPIB the mandate to
process these projects.
S.15. The Government to issue letters of approval to the
successful bidders for the privatization of SSGC and
SNGPL.
S.16. The Ministry of Finance in line with the directive of
the Prime Minister (No. 2/67) as of 30 May 2006 to
provide an initial Pakistan Rupees 300 million to PPIB
Thisnext
over the consultant’s
five yearsreport does
to meet its not necessarily
operating reflect thePRs200
expenses.
PPTAs: Also, all of the views expressed herein may not be incorporated into the proposed project’s
design.]
Appendix 9
Indications of Progress
was submitted to Parliament.) The ordinance was then
transformed into permanent law by a judgment of the
Supreme Court by virtue of the Provisional Constitution
Order, 2007, read with Article 270AAA(3) of the
Constitution.
Compliance underway. Progress has been slower
than envisaged in the light of competing priorities
warranted by circumstances in Pakistan. Work is under
way.
Complied with. The PPIB is now processing 32
projects with a total capacity of 8,276 megawatts. This
is more than double the 14 projects with a total capacity
of 2,997 megawatts that the PPIB was processing in
September 2006.
Compliance underway. To divest government
shareholding, the Privatisation Commission began
soliciting expressions of interest for the Sui Northern
Gas Pipelines Limited (SNGPL) on 14 December 2005
(http://www.privatisation.gov.pk/Adds/yr-2005/SNGPL-
Ad.htm)
and for the Sui Southern Gas Company Limited
(SSGC) on 4 January 2006
(http://www.privatisation.gov.pk/Adds/yr-
2006/EOI%20for%20SSGC.htm).
Privatization per se has not been pursued, pending the
outcomes of the approach oriented more towards
corporatization, for a number of reasons. It should be
noted that the privatization process suffered a setback
in 2007 when the privatization of a major state-owned
enterprise was rejected by the Supreme Court.
Following this decision, the government has focused on
floating shares in public entities.
The SNGPL and the SSGC are public limited
companies listed on the Karachi, Lahore, and
Islamabad stock exchanges. Each has a board of 14
members drawn from the public and private sectors.
Currently, the government and government-controlled
institutions hold 54% of the SNGPL, with the remaining
46% held by the private sector. The government holds
60% of the SSGC.
While the final privatization structure for both projects
was approved by the cabinet committee on privatization
in May 2006, the full privatization of the SSGC and the
SNGPL has not progressed.
Complied. The MOF frontloaded its support for
operational expenses and provided PRs100 million to
the PPIB during fiscal year (FY) 2006–2007 and
views ofmillion
ADB or the government
during FY2008. concerned. [For
 10 Appendix
Monitorable Indicators
S.17. The Government to commission an independent
strategic review of PPIB’s performance and disseminate
the findings of the review through a high level
stakeholder seminar.
S.18. The Government to
(i) complete the development of the integrated
energy model,
(ii) determine the host agency in charge for
maintaining the model, and
(iii) Identify suitable opportunities for PPI
investments with the help of the model.
S.20. To facilitate the harmonization of PPI policies in the
road subsector country-wide, the Government to provide
training to development and regulatory authorities from
four provinces on procedures and institutional
arrangements for the promotion of PPI in the road
subsector.
S.22. The NHA to further build its institutional capacity
for interaction with private investors in line with its
development plan for the PPI unit by (i) staffing the PPI
unit with at least four additional qualified professional
staff, and (ii) training staff in areas relevant for its
mandate, as defined.
S.24. NHA to issue letters of approval to the successful
bidders for PPI projects with a total value of at least PRs
20 billion.
S.25. The Karachi Port Authority to select the successful
bidder for leasing the cargo berths at Karachi Port.
S.26. The Government to submit to Parliament
legislation to provide for the establishment of Pakistan
Railways Corporation.
Indications of Progress
Complied with. The PPIB has entered into agreement
with ADB on the scope of the assessment. The review
got underway with ADB technical assistance (TA) in
May 2009.
Compliance underway. In 2007, the government
requested ADB TA for that purpose. As a response, a
TA grant was processed and approved. Consultants
have been fielded and a kick-off workshop was held in
October 2008.
The Pakistan Integrated Energy Model (Pak-IEM) is
under advisory TA 4982-PAKa for $2 million.
The Planning Commission is the executing agency for
this project.
A model review workshop was held in April 2008, and
the model design phase is beginning now.
The data-gathering effort underway and the progress in
designing the Pak-IEM will be presented at the
workshop. Data sources, preparation, assumptions,
and model-development specifics will be discussed,
along with the proposed approach for the Pak-IEM.
Complied with. A 2-day training workshop on PPI in
the road sector was jointly organized by the National
Highway Authority (NHA) and the IPDF for
representatives of provincial authorities on 25–26 June
2007 in Islamabad. Similar workshops are now planned
for the provinces.
Compliance underway. A PPI cell with two staffers
was established in the NHA in 2006 in compliance with
F.18. Since then, several new staffers were recruited
and trained. However, they were subsequently
promoted out of the PPP cell into other parts of the
NHA. The cell currently has three staffers, which are
supported by a TA consultant.
Compliance underway. NHA has issued letters of
approval for two projects: the PRs679 million Lakpass
Tunnel and the PRs6.3 billion Karachi–Hyderabad
Motorway M-9. Full compliance requires an additional
PR6 billion in projects.
Compliance underway. The Karachi Port Authority
has invited applications for leasing the general cargo
berths. Once the successful bidder is selected, 90% of
terminal operations will be handled by the private
sector. Partial compliance awaits documentation of the
selection of the successful bidder for the lease of the
cargo berths at Karachi Port.
Compliance underway. A draft railways act providing
for the corporatization of Pakistan Railways was
developed in 2006–2007 and was initially scheduled to
be discussed at the August 2007 session of the Council
 Appendix 11

Monitorable Indicators Indications of Progress

of Common Interest, which comprises representatives
of the federal and provincial governments and is
chaired by the Prime Minister. Instead, stakeholder
consultations were continued at a lower level.
The policy document provides the overall basis for
achieving such an important funding alternative, which
will contribute to creating an effective and much
expanded railway system and support faster
socioeconomic development in Pakistan, which will
further expand demand for rail services. The Ministry of
Railways intends that the PPP policy be further
developed and detailed with ongoing studies and
through the experience and capacity being developed
in the ministry.
The ministry has suggested that its commitment to
corporatization may focus on PPP or privatization. This
needs further consideration as a draft railways act
providing for the corporatization of Pakistan Railways
was developed in 2006–2007. A consultants’ report on
options for the further commercialization of Pakistan
Railways has not been completed.
S.28. The Government to elaborate procedures for Complied with. The Ministry of Railways has been
interaction with private investors and to build institutional working with the IPDF toward undertaking pre-
capacity accordingly, including the establishment of a feasibility studies for PPI in the railway sector,
focal point for PPI in the railway subsector. specifically in mass transport, and preparing open
tenders. Meanwhile, the ministry has started to build its
own capacity for interaction with private investors by
establishing a separate wing under the executive
director of marketing for non-core business areas and a
steering committee for PPI-related initiatives.
Progress is indicated by the establishment of the PPP
cell and project management unit in Lahore, which is
responsible for a number of studies, including (i)
corporatization of manufacturing units, (ii)
electrification, (iii) a PPP pipeline study and detailing of
PPP policy, and (iv) low-revenue lines and PPP (in
abeyance due to time constraints).
Further progress is evidenced by the existence of terms
of reference for the three studies under the PPP cell.
S.29. The Government to establish a working group with Complied with. The four existing working groups
high-level representatives from provincial governments under the PPI policy task force include representatives
that will draft a concept paper on policy measures from provincial governments. The government is of the
promoting PPI in the municipal services subsector. view that the policies required to promote PPI at the
municipal level are not substantially different from those
needed at the federal level.
From the draft PPP policy for Punjab, para. 6: "This
PPP Policy is consistent with the federal-level Policy on
Public-Private Partnerships: Private Participation in
Providing More and Better Public Services through
Improved Infrastructure, drafted by the Infrastructure
This consultant’s report does not necessarily reflect theProject
views Development
of ADB or the Facility
government concerned.
(IPDF) [Forin
in Islamabad
PPTAs: Also, all of the views expressed herein may not be incorporated into the proposed project’s
design.]
 12 Appendix
Monitorable Indicators
S.31. IPDF to assist provincial authorities in capacity
building and replicating standard tender procedures and
documents for PPI projects in the water supply and
sanitation and other urban services subsectors at the
provincial, district, and subdistrict levels.
S.32. The Government to
(i) establish the Infrastructure Project Financing
Facility for developing infrastructure financing as a
specialized institution under private management,
and
(ii) build its capacity over time.
a
ADB. 2007. Technical Assistance to the Islamic Republic of Pakistan for the Integrated Energy Model. Manila (TA 4982-PAK
for $2 million, approved on 25 October).
Source: Asian Development Bank.
Indications of Progress
January 2009. The PPP Policy describes both what
needs to be done for PPPs and how to do it in a
consistent manner. First, the theoretical foundation of
the PPP concept is provided, the objectives and
principles of the PPP Policy are outlined, and the
sectors of its application are specified. This is followed
by a description of the various components of the PPP
framework providing an enabling environment for
private investments in infrastructure. Finally, the
recommended approach to the preparation and
execution of PPP projects is presented."
Complied with. The IPDF has organized numerous
workshops on private participation in municipal
services. The target audience was relevant officials
from all four provinces, key staff of regulatory
authorities, and managers of public and private utilities.
The IPDF has also embarked on stakeholder
consultations with local governments on standard
tender procedures and documents (see S.30).
Complied with. The Infrastructure Project Financing
Facility has been incorporated. A business plan has
been drafted, and a chief executive officer is being
recruited.