30.               In addition to provision of 633 additional classrooms in deficient schools, upgradation of 137 girls and 365 boys schools, 20 middle and 9 high schools for girls are to be established by end FY 06.

31.               To overcome staff shortages besides the rationalization exercise completed in FY 03, 1496 female primary school teachers and 850 male CT teachers were recruited with primary school recruitment being made facility specific, as far as possible, from the union council to ensure presence of the teacher. Another 9873 positions for teachers have been created; process for recruitment of 4000 teachers has been initiated. To strengthen institutional mechanism to monitor and discourage teacher absenteeism an elaborate monitoring mechanism has been developed at the district level to make monthly reporting to the Directorate of Schools & Literacy Department from January 2004. To assist the district supervisory staff in reducing teacher absenteeism, PTAs have been authorized to make spot checks of primary schools and report their findings to the district managers. These efforts have translated in initiation of disciplinary action against 773 delinquent teachers.

32.               Management and teaching cadres have been created in the Schools & Literacy Department to improve the quality of education and management. Service rules for both the new structures have been notified on April 9, 2004. Initially the Management cadre (BS 16-19) will be filled through transfer on competitive basis under the auspices of the Provincial Public Service Commission; unfilled positions will be filled in through initial recruitment by the PPSC.

33.               NWFP was the first province to have gone ahead with making primary education free, provide free textbooks at primary level, and to modernize madrassas to bring them into the mainstream. Till now 2,216,098 textbooks have been provided to primary school students with the remaining to be distributed by mid May 2004. Under the teacher training program initiated at provincial and district level in disciplines of budget & finance, planning & development, establishment & administration, and community participation in school supervision and improvement program capacity building of 24,844 teachers in FY03 and 22,861 in FY 04 was completed.

34.               The Government firmly believes in encouraging public-private partnership and community involvement in the promotion of education. Private sector has been encouraged to use unoccupied government buildings for establishing and running schools, gradually take over the responsibility of publishing and printing textbooks, strengthen PTAs in 21988 primary schools and empower them to spend IM&R funds in consultation with the school head teacher and to monitor and report teacher absenteeism to the respective Monitoring Committee.

35.               The Frontier Education and Frontier Elementary Education Foundations have been established and provided with endowment funds. The Frontier Education Foundation has earmarked Rs. 20 million which the private sector can access through the Bank of Khyber for provision of 70% funding requirements with a maximum of Rs. 0.5 million at subsidized rate of return for a period of five years.

36.               The Provincial Government strongly believes that education has the potential to make inroads in the pervasive poverty and to provide the required impetus for moving the provincial economy. It further believes that focused gains in female education are to result in lifting the cultural barriers and inhibitions albeit gradually, leading to creation of a tolerant motivated society geared to play its due role in the establishment of a vibrant provincial economy.

37.               Government is committed to continuing and improving the reform agenda in the Education Sector. Future plan are to focus on allocating preferential allocations to girls education, creating additional accommodation at the middle level to encourage completion of primary and continue education beyond primary level, continue with provision of free text books and consider provision of free uniform at primary school level, making education compulsory up to class 8 with institution of penalties for parents who do not send their children to school. Keeping in view the cultural constraints inhibiting girls education at the University level, a Women University and Women Medical College in Peshawar shall be established in the public sector.

38.               Third Party Validation Survey information and subsequent CWIQ surveys will be used for impact assessment to steer the reform course. To achieve the targeted enrollment rate of 85% (84% for girls) by end FY 05, the Schools & Literacy Department is working towards setting enrollment targets for each schools and district to achieve Education For All.

39.               Government's medium-term health strategy, prepared in consultation with stakeholders, focuses on organizational and programmatic reforms, and providing increased financial allocations to achieve the objectives. With the objective of significantly improving health indicators implementation of the strategy envisages to:    (i) increasing health sector budget; (ii) improve management structure and build district management capacity; (iii) reorganize health facilities, with a multi-level referral system; (iv) focus on preventive and primary health care; (v) standardization of facilities; and (vi) increase reliance on the private sector with adequate regulation. Major actions in these areas include to: establish a health management cadre, make hiring on facility-specific contracts; increase tertiary hospitals management and financial authority; continue to create additional positions for female nurses; and expand the immunization program with GAVI support and coverage of TB Control using DOTS strategy. The provincial government will also expand the number of Lady Health Workers to improve access to family planning and primary healthcare. The health strategy envisages a stronger emphasis on public private partnerships, and besides the existing partnership, use of NGOs to provide services in the enhanced HIV efforts and TB control.

40.               Allocations for health sector have been made in line with the MTBF; 100% upfront releases have been made to ongoing and approved schemes that have shown significant achievement in expenditure targets. HMIS activities being earlier financed from the development budget have been brought on to the recurrent budget to institutionalize the activity. During FY04 funds have been provided for the activity from both the development and current budgets. The TB DOTS program launched in 13 districts has now been extended to 17 districts in the Province and the desired target of 60% coverage has been achieved.

41.               Progress of the immunization program was hindered due to delays in the approval of GAVI program and subsequent delays in opening of donor fund accounts, however, 50 EPI centers are to be opened by FY 05. Antenatal coverage increased to 39% from 34%.

42.               Creation of charge nurse positions under the Standardization of District Hospitals Program increased the number of positions to 420. Recruitment process for 321 charge nurses has been completed with their assignment to districts, while recruitment process for the remaining 139 is to be completed in FY 05. The LHW and midwifery programs provided improved access to family planning and primary health care services. As of March 31, 2004 the number of LHWs actually in field was 10,516. An advertisement has been placed to recruit another 4034; due to non availability of willing candidates it is expected that another 2110 LHWs will be recruited by end June 2004. As compared to 34 polio virus cases detected in FY 03, 13 cases were uncovered in FY 04.

43.               Preferential budgetary allocations will continue to be made in the medium term with focus on primary and mother and child care, to cover the costs of the reforms and to make them sustainable. Human resource development plan will be finalized and implemented, including initiating of a pilot test performance based payment system. GTZ support will be targeted to improve district health system capacity in terms of administrative and financial management, planning, and monitoring capabilities. The institutionalization of HMIS is expected to enhance accountability of district managers and improve performance assessment and effective implementation.

44.               The approval of GAVI program will translate into opening of 50 EPI centers to supplement the existing EPI program to increase the immunization coverage to 65% by FY 06 from currently 57%, reduce polio cases to zero and increase coverage of pregnant women by health professionals to 40% and TT immunization to 50%. Recruitment of another 1924 LHWs is to be completed in FY 05, provided eligible and willing candidates become available. Access to TBDOTS strategy will be increased to 100% by FY 06.

45.               Government will continue to support the role of the private sector and NGOs in the provision of health services in NWFP. The former presently has been limited mainly to curative services and the latter have mainly been involved in primary health care and reproductive health services largely related to Afghan refugees. The medium-term health strategy envisages a stronger emphasis on public private partnerships and use of NGOs to provide services in the enhanced HIV efforts and TB control.

46.               A promising start at civil service reform was made with implementing measures like enforcing better discipline, restructuring the provincial government in preparation for devolution, preparing for the use of contract appointments, and improving the performance evaluation process (along the lines instituted by the federal government).  In the longer term, four main areas of concern were identified: (i) low compensation at senior levels; (ii) declining quality of new entrants; (iii) very limited resources for adjustment; and (iv) a large base of current/retired government employees.

47.               To confront these challenges the provincial governance and civil service reforms focused on a) devolution, including restructuring the provincial government, budgeting and resource allocation for the future, and setting up the new district arrangements, including assigning staff, identifying new roles in the new structures, introducing new systems, and finalizing powers of the main bodies; (b) personnel management, of which the most radical is the planned move to much greater use of contract and facility specific appointments. Other measures include rightsizing and restructuring government departments, managing staff under the new devolved system, providing more administrative autonomy to the provincial Public Service Commission (PSC), a new performance appraisal system, and pulling together the formerly scattered regulatory framework into a new codified manual; (c) capacity building which, as time and resources permit, will need to include the necessary facilities and equipment for the devolved organizations, training both on and off the job, and appropriate new systems and procedures as well as better information systems.

48.               The gains obtained in 2001 through restructuring and downsizing of provincial departments have largely been retained. Increase in government size did result in the education and health sectors as a consequence of actions initiated under the reforms that saw an addition of teachers, doctors and paramedics raising the government size from 274,261 to 283,745. The Provincial fiscal framework was revised to allow fiscal transfers to the district governments in a transparent and predictable manner, District Government Rules of Business were re-notified in October 2002 to bring clarity and remove ambiguities in the role and responsibilities of the public functionaries working in district governments, and to devolve recruitment and transferring authority of civil servants of devolved departments to the district governments. A local Government Commission was established to resolve differences between departments and district governments and to report on the over all performance of the district governments. Reports on functioning of two district governments have been finalized. A number of teething problems have been resolved that were faced by the district governments with assignment of new responsibilities.

49.               The government did not have a centralized computerized human resource database due to which budgeting was relied largely on manual submissions made by line departments on their current workforce. Government was not in a position to undertake actuarial analysis of pension liabilities. A two stage consultancy has been approved to develop and computerize HR database of the government; the first phase of the consultancy has been completed.

50.               Considerable headway has been made towards contract based employment. All new staff, except judiciary, police and prison department, and some revenue staff, is to be recruited on fixed term contract. All contracts are to be for three year period; the terms and conditions of employment are identical to those of permanent staff except that the positions are not pensionable. Facility based recruitments have been made at the lower tiers of education and health departments to reduce the incidence of staff absenteeism. The Government is working on identifying measures to reduce the risk of regularizing the staff to become permanent and automatic renewal of contracts.

51.               When the present government took office the average tenure of Provincial Secretary was 7.5 months. Except for the initial reshuffling of senior civil servants, Government has been conscious of not disturbing the leadership of a department unless it becomes essential to do so. This conscious decision has led to improvement in the average tenure to 15.2 months that is likely to increase over time.

52.               To protect merit in recruitments the Provincial Public Service Commission (PPSC) is continuing with the policy of making recruitments in BPS 11 and above. To reduce the risk of retrenchment of PPSC mandate due to delays in recruitment process, a monitoring cell has been established in the Establishment Department to periodically monitor completion of recruitment process within six months.

53.               To support institutional reforms, comprehensive capacity building, and training of elected representatives and staff, especially at the district level, Swiss Development Cooperation has agreed to fund the second phase of the Essential Institutional Reform Operationalization Project. The Establishment Department has also carried out an in-house evaluation to identify capacity building needs of the provincial departments over the medium term. In addition to the GTZ continued support for the Health sector, DFID is planning another three year capacity building programs focusing on the elementary and secondary school sectors.

54.               Inspite lack of political alignment between the provincial and district governments, NWFP Government is committed to the devolution process and is undertaking measures to strengthen the process further. The Provincial Finance Commission Award will be for three years, increased transfers will be made to the local governments to ensure sufficient fiscal space to implement the expanded social service programs, salary budget will flow through Account IV of the district governments, and to avoid stoppages and delays from district to town administrations, direct transfer of town administration shares will be made. Control over creation of new positions will continue to stay, for the time being, with the provincial government to discourage diversion of additional resources towards the local government wage bills.

55.               At the provincial level, the size of the government will be maintained allowing expansion only in the health, education, and judiciary sequel to reform initiatives and some positions for law & order. The controlled growth is expected to be within three percent of the existing government size to keep it fully sustainable.

56.               Second phase of the HR Database is expected to be contracted before September 2004 with expectation to have a reliable HR database towards the end of the year with user interfacing for provincial departments and selected district governments. This will help plan timely recruitments, capacity building and forecasting of pension liabilities in a prudent manner. Government will consider the possibility of extending the civil service laws/rules for redressal of their grievances thus reducing risk of pressures for seeking regularization of services.

57.               Key to poverty reduction lies in accelerating economic growth with private sector leading the way as the engine of growth. To achieve this goal, reforms have been directed at improving business environment, changing role of public sector from provider to facilitator and regulator, promoting public-private partnerships, and enhancing agriculture productivity. To provide road map for undertaking initiatives to reach the aforementioned goals, studies have been initiated to reduce distractions being faced by entrepreneurs and over regulation of businesses, and address other factors affecting the investment climate.

58.               Government has made good progress in reducing the number of industrial inspections from 23 to 13 that have to be prenotified, 12 out of 13 POEs (Sarhad Development Authority) have been divested, 7 microhydels constructed and operated by Sarhad Hydel Development Organization have been leased or bidding completed with the remaining two to be leased after refurbishing, training institutes of Small Industries Development Board have been provided one time BMR grant and converted in self financing institutes, and Vocational Training Institutes brought under an autonomous Agency to create linkages with private sector for introducing market driven trainings. A Provincial Privatization Committee has been constituted to offload the remaining public sector commercial concerns. Cabinet has agreed to reduce government equity in Bank of Khyber to 51% by end December 2004.

59.               An Agriculture Strategy has been formulated to address the multidimensional modern day requirements of the agriculture sector. On the one hand it is focused on serving the small and landless peasants, while on the other it strives for income generation, better quality living, encouraging private sector participation in provision of inputs, sustainable agriculture addressing environmental concerns with overall objective of achieving food security and economic self sufficiency. In the Irrigation sub-sector, initiatives are already in hand to improve the irrigation systems to make water available at the tail end, increase abiana annually by 25% till full recovery of O&M costs, transfer of all aspects of operation and maintenance of irrigation systems by the beneficiaries.

60.               Government's efforts, after considerably improving the law & order situation in the province, will work to align perception' corresponding to the ground realities as a first step to improve the investment climate and attract investors. Results from an independent survey indicated that public perception of the  law & order situation in NWFP was the best amongst the provinces. Private Sector representation on Boards of selected autonomous organizations will be considered to provide the hitherto missing market linkages and increase transparency in managing of the organizations. Technical and Vocational Training Agency will adopt demand driven focus in accordance with the Ordinance provisions. Concerted efforts will be made to encourage growth of SMEs.

61.               To achieve higher rate of agricultural growth, enhanced crop diversification, and to improve incomes from livestock, enhanced allocations will be made over the medium term to finance initiatives under the Agricultural Strategy. The number of Farm Service Centers will be increased to atleast one per tehsil to ensure availability of agricultural inputs, including finance, to the small and landless farmers at affordable rates. In addition, local field offices of On Farm Water Management are to be established to strengthen farmer organizations to take over water distribution, collection of abiana, and operation and maintenance of respective irrigation systems. Extension services will be geared to provide information to pave way for adoption of new technologies, switching to high value and off season crops, conservation and application of water as per crop requirements, and adoption of post harvesting and grading technologies.

62.               To exploit the hydel potential of the province, renewed efforts will be made for construction of power generation facilities through public sector and public-private partnerships.  To encourage development of selected cottage industries SHYDO has started working on leasing of mini-hydel sites on major canals for captive power production. The Government has sought donor support for a comprehensive provincial economic study defining course for long term reforms. The study is expected to be initiated from the next financial year.

63.               Monitoring of the reforms program is led in an institutionalized manner with convening of periodic review meetings chaired by the Senior Minister Sectoral monthly meetings are chaired by the respective Ministers or in their absence by the Secretaries. Monitoring weaknesses have been identified at planning cell level in Schools & Literacy, and Health Department and monitoring of district level initiatives. Steps have been initiated to improve Education and Health Management Information systems along with adequate provision of funding. Through the current development program financing has been provided for establishment of planning cells at each district education office.

64.               The Budget Analysis Unit established under the PRP has improved the monitoring of key fiscal indicators and social indicators. Improved efforts at the Accountant General level will be undertaken to compile complete district government data on timely basis. Further improvements are expected with the adoption of the New Accounting Manual and New Chart of Accounts.

65.               The Government is confident in the sustainability of this structural reforms program; the prospects for continuity of the program are high as similar policies are being pursued nationally under the PRSP. The loan negotiations for Structural Adjustment Credit Loan-II have been successfully concluded on May 11, 2004 with International Development Association with a US$ 90 million credit for continued implementation of our Provincial Reforms Program; the release of which is expected in last week of June 2004.