The Khyber Pakhtunkhwa Annual Development Plan (ADP) Policy (2019-23)

In pursuance of Entries 1 and 4 for Planning Development Department. In Schedule II of Khyber Pakhtunkhwa Rules of Business, 1985 And in line with directions given in Judgment and Order of the Peshawar High Court Dated 11.09.2019 in W.P. No. 3206-P/2018

Subject: The Khyber Pakhtunkhwa Annual Development Plan (ADP) Policy.

Section 1. Introduction.

1.1 The Annual Development Programme (ADP) is the instrument through which the Government of Khyber Pakhtunkhwa plans, executes and monitors a significant proportion of development spending in the province. It is placed for approval in the provincial assembly as part of the annual provincial budget, and has the legal backing and approval of the provincial assembly as per Constitution of Islamic Republic of Pakistan, 1973, once the budget is passed. The document in hand i.e. the Khyber Pakhtunkhwa Annual Development Plan (ADP) Policy describes the rules and regulations which will guide how the ADP is planned, executed and monitored.

1.2 The ADP has to be a reflection of the vision and priorities of the Government of Khyber Pakhtunkhwa. Therefore, in its formulation, it should help achieve the goals and objectives of the provincial government.

1.3 The ADP must be made considering a number of factors, including but not limited to: overall and sectorial policy choices; the overall financial outlay available; the need to maximize economic growth and development for the province; the need to maximize public impact; the goal of improving service delivery and infrastructure; the goal of eradicating poverty, the need to address the development lag of specific areas; the population and resource contribution of specific areas; a consideration of past investments made and future investments planned; investments made through other budgetary instruments, such as the current budget or the PSDP; measures to address duplications; and the need to invest in each part of the province, while ensuring value for money (VFM). Naturally, in considering such a large number of factors, a key element of making the ADP is the need to make policy and investment choices and trade-offs.

1.4. Equitable, rather than equal distribution, is an important criterion in ADP design. However, this is a principle that is often misunderstood, without any rational impact per capita, and therefore it needs to be defined and explained well.

1.5 While the Provincial ADP assists in the development of the province, it cannot be seen as an investment instrument in isolation, in particular, to gauge whether spending has been made in an equitable manner across the province. This is because, as a planning instrument for the entire province, the ADP needs to look at investments differently: intra-district projects such as highways; and provincial projects such as specialized service delivery centers, (e.g. the Institute of Kidney Diseases) may be located in one district, but serve the entire province; other projects, such as building up tourism infrastructure, are likely to be region specific; yet other projects, such as the demand for schools, are likely to be based not just on population, but also on policy, as well as on economic affluence of the region (e.g. in more developed areas a greater proportion of parents will choose to send their children to private schools); similarly, over multiple years, investments may be sequenced across the different parts of the province, such as the district beautification schemes in which the first investments were made in the divisional headquarters, followed by the districts.

1.6 These examples clearly demonstrate that a simple distribution of funds across districts and constituencies would actually result in a sub-optimal planning instrument that may actually be construed as a suboptimal use of public money. The intent of the Provincial ADP ought to be, to decide investments across the province, in an integrated and holistic manner, attempting to maximize economic impact. It should attempt to incorporate equitability wherever appropriate; and more importantly, it should attempt to be a fair instrument overall. An ADP should be judged as fair if it can show that as part of the provincial budget, it helps advance the development of each part of the province. In doing so, it should consider the specific economic characteristics and development needs of different areas; as well as other investments in those areas; through the PSDP; the current budget; the district ADP; foreign development assistance; private sector funding; and any other sources, while also remaining cognizant of size of the development kitty qua competing demands and their respective VFM. The District ADP, an important as well integral part of the overall ADP, is the component that is ring-fenced for each district, through the Provincial Finance Commission (PFC) award. It is an important instrument of fairness, since it is the portion of the ADP that is actually dedicated to each district.

1.7 The Planning & Development (P&D) Department, Khyber Pakhtunkhwa intends to ensure that the process of formulation of the ADP results in the best possible outcome, to help achieve the vision, priorities, policies, goals and objectives of the Government. This policy, approved by the provincial cabinet, will help to attain that through the tenure of this government, through to 2023.

Section 2. Key Policy Principles:

The ADP is to be developed and administered according to the set of policy principles below to which the Government, i.e. the Chief Minister and his cabinet, are fully committed. These are:

2.1 The investments made in the ADP need to help develop the provincial economy, and improve the lives of people. This principle needs to be at the heart of designing, allocating and executing development investments in the province.

2.2 The ADP, so formulated, has to aim to maximize the scale and speed of impact, and get as much development done as possible, as quickly as possible; while reflecting the policies and goals of the government. This means that money should be spent where it has the most direct impact on people or the economy. It also means that any administrative spend that has no public impact should be reviewed and minimized. Other traditional planning principles should also be challenged. For example, due for Completion schemes should be prioritized, however only to the extent that they actually result in public or economic impact.

2.3 The ADP is funded by tax payers’ money. It is therefore a public fund to be spent on the people of Pakhtunkhwa and on developing the provincial economy. The Government of the day has the responsibility to develop and administer the ADP in the best interests of the people of the province.

2.4 No public representative or public servant, including the Chief Minister, government ministers, MPAs of government or the opposition, or other public servants, may claim any individual right or discretion over the ADP. In line with multiple decisions of the superior judiciary, the practice of issuing CM Directives, at his sole discretion, for allocation and distribution of funds for umbrella / block development schemes shall be immediately discontinued. As the development plan for the province, funded by tax-payers’ money, the ADP project selection processes will be merit and criteria based, and in line with sectorial policies and need. The project selection processes will however be open to input from all public representatives and private citizens; with their proposals treated on merit in line with government policy and strategy and the principles stated in this document. Nothing in this section or policy shall prohibit CM, any Minister or MPAs (both Treasury and Opposition) from making a proposal, to be evaluated, as per policy.

2.5 In line with the preceding principle, the concept of “Development Funds for MPAs” has already been discontinued. Other than any existing schemes already in the ADP where public fund has already been spent and scrapping the project would mean loss to such outlay, no new schemes will be introduced from now on that are constituency specific. This is because these may be interpreted as effectively being an alternate form of development funds for MPAs. However, all MPAs (both from treasury as well as opposition benches), as well as other private citizens, will continue to have a right to propose viable development schemes for the ADP. These shall be scrutinized according to need and criteria, and in line with government policy and strategy, through well-defined apolitical departmental and government approval processes.

2.6 The ADP will be designed on a sectorial basis. Each sector should develop a sectorial plan that guides ADP project selection. Projects should contribute to achieving the outcomes the sector intends to achieve, and these outcomes should in turn be driven by a clear definition of sectorial needs, and solutions, policies and strategies to fulfil them. The financial constraints at hand must also be considered in developing these plans. 

2.7 The ADP must also ensure regional development across the province. This will be done through a regional planning exercise, to identify the key development needs in each region, and to make a phased plan for those investments, in the context of sectorial policy, and to fit them in the ADP framework.

2.8 Investments in the ADP must also be seen in conjunction with other investments in the sector. These include the current budget, Foreign Project Assistance, the Federal Public Sector Development Programme (PSDP), other private sector investments, district budgets, and funding through any other programme. Investments made in previous years must also be considered. This will ensure that an integrated view of all investments made is taken into consideration when deciding the ADP, and will help to avoid overlapping investments, and encourage synergies.

2.9 The Provincial ADP must be designed in a fair and transparent manner that maximizes economic value for the province, and ensures development, economic growth, improvement in service delivery and the eradication of poverty, amongst other goals. The equitable distribution of resources, wherever appropriate, should be one of the criterion taken into consideration in designing the ADP.

2.10 However, this should not imply that the ADP should be equally, proportionately or formulaically distributed across sectors, regions, districts, tehsils or constituencies. Instead, a fair and transparent ADP should be able to demonstrate that, seen in conjunction with other parts of the provincial budget, the ADP helps advance the development across Khyber Pakhtunkhwa. The fair geographic spread of ADP funds across the province will be addressed through two ways; first, through the District ADP; and second, through the regional planning exercise. Regional investments should be need based, and consider the specific economic characteristics and development needs of different areas; including factors such as the Human Development Index (HDI), fiscal performance and revenue potential; as well as other investments made in each area. 

2.11 In designing the Provincial ADP, provincial government must also consider a multi-year view. The need to make policy choices means that the ADP in a single year cannot be completely reflective of the Government’s intent to invest equitably across the province. In-line with the Government’s policies and plans, a medium-term ADP over the 2019-2023 cycle must be used to ensure that fair investments are made in each part of the province. 

2.12 Investments in the ADP must reduce unnecessary cost but not compromise on impact. Hence investments must be judged not just on cost but the impact and the value-for-money they bring, in particular in the context of scarce financial resources available. 

2.13 To maximize impact, the ADP must move beyond traditional planning principles. For example, sectorial investments must be considered across multiple years, and across the current and development budgets available to the sectors; sectoral allocations will not be preset, and sectors will be able to compete for marginal allocations; and budget processes across finance and the development budgets will be better integrated and coordinated.

2.14 In-year ADP management will be based on giving greater responsibility and flexibility to sectors in terms of making spending decisions, with accountability and oversight processes being strengthened. In addition, approval and release processes will be continuously streamlined and simplified to support faster delivery.

2.15 The ADP throw forward is one of the most important metrics to track. Departments need to preferably keep their throw-forwards within reasonable limits. Departments with a throw forward of greater than five years will need to justify why they should be allowed to maintain a large portfolio they cannot fund or prioritize. In the 2019-20 budget, the P&D department has conducted an extensive exercise to prioritize and rationalize investments, and maintaining this discipline will be a continuous process.

Section 3. Guiding Documents and Goals:

3.1 The ADP formulation needs to take guidance from a number of documents; including the sectorial policies framed within the first 100 Days of Government, published in the policy booklet titled “Delivering on the 100 Days Agenda”; the Sustainable Development Strategy; the Tribal Decade Strategy; and any other sectoral policies or plans.

3.2 The ADP should also be aligned with the Sustainable Development Goals (SDGs) that the Government of Pakhtunkhwa and the Government of Pakistan have subscribed to, and help ensure that the targets underneath them can be attained.

3.3 The ADP formulation process by individual departments should also be cognizant of the Output Based Budget (OBB) stipulations prepared by the provincial government; and the Integrated Sectorial Reviews that will compliment them.

3.4 Considering the points above, it is expected that departments will make every effort to ensure that ADP is not a compendium of PC-Is only but is actually reflective of the priorities and goals set out in these guiding documents, while prioritizing investments that are strategic, sustainable, and have the greatest impact; within a reasonable financial envelope.

3.5 Sectorial interventions in the ADP should contribute to the Government’s mission of achieving accelerated GDP growth, and help ensure the goal of private sector-led economic development, boosting Khyber Pakhtunkhwa economic competitiveness.

Section 4. Improving the integration of different components of the budget:

4.1 The development budget, or the ADP, is not a standalone document and thus cannot fully describe all the development and service delivery related work going on the province. To maximize the service delivery potential of the available funds in the budget, the budgeting process will ensure greater linkages between the current and development budget finalization processes.

4.2 In addition, the budgeting process must ensure that the current and development budgets for individual sectors are not viewed separately, but are viewed as a whole, to be aligned with a sectoral plan for the sector. In addition, in terms of considering the investments made in the sector, the Federal PSDP, Foreign Project Assistance, and other private sector investments shall also be considered while deciding the constitution of a sectoral ADP.

4.3 The calendars for the current and development budget shall be aligned with each other. Therefore, the Budget Call Circular and the ADP calendar should run in parallel, with touch points through the budget cycle at which the overall budget is actually reviewed together. The calendar should begin with a policy / strategy setting phase for each sector; an exercise that reviews and refines sectorial policy, and proposed projects and programmes supporting this policy. This policy level input should have the approval of the respective ministers and secretaries.

4.4. The Budget Call Circular can be used to help support this goal; it contains sufficient provisions to complement the goals of the “Output Based Budgeting / Budgeting for Service Delivery” exercise; by clearly spelling the vision, goal, outcomes and outputs of each department, with SMART output level indicators. All developmental schemes identified for inclusion in the ADP as per the prescribed format circulated should be mapped / incorporated in the forms and formats circulated by Finance Department via Budget Call Circular.

Section 5. The size of the ADP, and sectoral allocations:

5.1 Every effort shall be made during the budget process to maximize the proportion of the development budget; i.e. the ADP; by cutting unnecessary costs on the current side of the budget.

5.2 The ADP and the budget shall be designed on the basis of sectoral allocations. This shall be done by first identifying an overall sectoral share for each sector or department; and then by allowing the concerned department to have a significant say in how it would like to distribute its sectoral share across the current and development budget. In terms of defining sectoral shares, both at the overall level, as well as at the development budget level, a number of factors will be considered; overall fiscal constraints and overall government policy; the sector’s previous years’ budget, actual expenditure and performance; the quality of plans; and the strategic importance of the sector in the government’s overall plans.

5.3 While these factors are to be considered, sectors or departments should not expect that their budgets are fully protected. Government policy will allow for allocating greater resources to strategic sectors, or sectorial plans and projects with the highest demonstrable impact.

5.4 While keeping this in mind, spend in areas that actual improve the service delivery of existing investments shall be prioritized. Spend on productive service delivery staff (e.g. teachers, doctors, rescue staff) is critical and will be prioritized, in comparison to expenditure on support and administrative staff, and administrative expenses. Similarly, specific non-salary expenses such as the spend on the operations and maintenance of roads, schools, hospitals on the current side of the budget should also be recognized as productive spend that actually impacts the performance and service delivery of government, and also be prioritized.

5.5 In particular, spend in the social sector; and sectors that focus on service delivery will be prioritized. In such sectors, such as education and health, every effort shall be made to break the cycle of investing in unnecessary additional brick and mortar expansion. Sectorial budgets in these sectors shall ensure that the consolidation and service delivery from existing investments is prioritized while setting the budget.

5.6 Sectorial allocations (and project allocations within such sectors) will also be driven by departmental throw forwards. In the 2019-20 budget, the P&D department has conducted an extensive exercise to prioritize and rationalize investments, and maintaining this discipline will be a continuous process.

Section 6. Integrated Sectoral Reviews and Regional Planning:

6.1 To support the efforts of the government to make the ADP as fair as possible, two exercises shall occur through the year 2019-20, and then be repeated on an annual basis.

6.2 Integrated Sectorial Reviews, at a Sector or Department level; will review the vision and objectives of the sector / department; broad strategies or sectorial plans that the sector / department has to fulfil its vision and objectives; existing spend across the current and development budget, to see whether it is aligned with this vision, and whether this spend is having the desired impact. The integrated sectorial reviews will also help to guide the sector in ensuring that current and development spend planned for the next year, and over the next 3-5 years is aligned with available resources, and make required trade-offs, both within the sector, and across sectors.

6.3 Regional Planning; will be an exercise that actually looks at the needs of and existing infrastructure territorially in each part of the province; and will result in a set of prioritized investments to be made in each region of the province; in line with need, resource availability, and the policies of government.

6.4 The Integrated Sectorial Reviews, and the Regional Planning exercises, which will cut across the current and development budgets, will both help to formulate a fairer and higher impact budget that maximizes the economic value of the investments being made in the development budget; and will be a cornerstone of the government’s strategy in ensuring fair and equitable distribution of resources across the province.

Section 7. Development Spending in the Newly Merged Tribal Districts:

7.1 Development spending in the Newly Merged Tribal Districts will be given special priority, given the need to accelerate development spending within these areas.

7.2 Development spending will occur through the Merged Areas ADP and the Accelerated Implementation Programme (AIP)

7.3 The Merged Areas ADP shall also be administered in line with the principles for the ADP for the rest of the province.

7.4 The Accelerated Implementation Programme (AIP) will have its own guidelines, and is funded out of the 10-year commitment of the federal government to make at least Rs. 1,000 billion of additional funding available to the merged areas. This funding is to be distributed between additional requirements in the current budget, and projects in the AIP. The AIP shall be used to fund any investments deemed a priority for the development of the merged areas, including investments in areas typically funded by the federal government such as power infrastructure, dams etc.

7.5 All funding earmarked for the merged areas will be ring-fenced, and will not be spent anywhere else in the province including any bridge financing arrangements.

Section 8. The District ADP:

8.1 The District ADP (or any other appropriate tiers as defined under the Local Government Laws, so amended from time to time), to be regulated by the local governments, will complement the Provincial ADP.

8.2 The shares of individual districts and tehsils will be decided by the Provincial Finance Commission (PFC), and the development of the district / tehsil budgets will endeavor to complement provincial investments, in line with relevant laws, rules and regulations.

8.3 The District ADP, however, remain an integral part of the Provincial ADP and will inter-alia be used as one of the tools for territorial fiscal equalization, based on the factors enumerated in the Local Government Laws.

Section 9. The Federal PSDP, and Foreign Development Assistance:

9.1 Two key components that drive development in the province include projects funded by Foreign Development Assistance, and through the Federal Public-Sector Development Programme (PSDP). The investments made through both will be considered while making the overall development plan for the province.

9.2 Both the PSDP, and the Foreign Development Assistance portfolio will be continuously tracked and managed through the year, to maximize spend versus budget, and the impact attained.

9.3 In both the PSDP and the Foreign Development Assistance portfolios, the discretion regarding choice and location of development schemes and programs, however, largely rest with the investing agency. Provincial government may, however, strive to align the priorities of the investors to the principles enumerated herein.

Section 10. Public Private Partnerships:

10.1 The provincial government will encourage and facilitate viable projects that can be executed through the Public Private Partnership mode, to maximize the amount of development expenditure happening in the province.

Section 11. Project Identification & Approval:

11.1 No development funds shall be issued in the names of the Chief Minister, Ministers or any MPAs of the Government or the opposition. The ADP is funded through tax-payers’ money, and therefore the benefit attained through the spending of the ADP is the right of the public of Khyber Pakhtunkhwa, and not a privilege for which public representatives should be thanked or given credits.

11.2 Going forward, no new projects shall be approved that are constituency specific, because this indirectly implies that the funds are the domain of the constituency of an MPA. Instead, the use of public funds needs to be governed based on government policy including this ADP policy and any sectorial policies, need, VFM, and a transparent approval process.

11.3 Elected representatives, as well as the general public, will be able to initiate proposals that are in line with government policy and the development needs of specific areas. All of these requests, as well as any projects proposals initiated by the government or by individual departments will be duly examined through a fair approval process, by the administrative department concerned. Those qualifying to be in line with sectorial policy and needs may be considered for inclusion into ADP, subject to resource envelope constraints of the Provincial Government. Appropriate scrutiny committees may be constituted at department level for initial scrutiny of proposals. The scrutinized requests, in line with sectorial plans, shall be forwarded to P&D along with specific recommendations. P&D Department, being custodian of the Development Plans as per KP Rules of Business, will have the responsibility to scrutinize the recommendations of departments and finalize identification of the projects in consultation with Minister P&D.

11.4 The practice of identification of schemes through Chief Ministers’ Directives shall be immediately discontinued. This shall not preclude CM, any Minister or MPAs (both Treasury and Opposition) from making a proposal, to be evaluated by the administrative departments as per policy.

11.5 Every effort shall be made to ensure that projects in the ADP are approved prior to inclusion by the relevant forum (DDWP / PDWP). However, where this is not done, all unapproved PC-1s should preferably be prepared within three months of commencement of financial year.

Section 12. In year management and monitoring of the ADP Programme:

12.1 The intent of the government is to maximize ADP spend through the year, in line with what is budgeted. A separate set of guidelines has been prepared and approved by cabinet to optimize the management of the ADP through the year.

12.2 In particular, policies and processes should be reviewed and continuously improved, at the level of administrative departments, Finance, and the P&D departments, to minimize unnecessary red tape, accelerate approvals and disbursements, while not compromising on the quality and integrity of spend.

12.3 The philosophy of the overall release policy should be to ensure that administrative departments have both the relevant powers and responsibility to take decisions, and that controls are in place to ensure that they can also be held accountable for those decisions. For example, departments should easily have the right to be able to re-appropriate funds for valid reasons, with relevant checks and balances at the Finance / P&D departments and in the Chief Minister’s office. Current processes should be reviewed to align with this philosophy.

Section 13. Special Development Programmes and Contingencies:

13.1 There shall be no block provisions in the ADP, with block provisions being defined as the traditional non-specific allocation of funds that used to be kept in the ADP with the names/ designations/ offices of individuals.

13.2 Going forward, there shall be no traditional umbrella schemes in the ADP either, where an umbrella scheme is defined as a programme that is meant for distribution at the constituency level of MPAs. Any existing schemes with throw forward in the 2019-20 ADP, since they have been approved by the cabinet as well as the Provincial Assembly and public monies have already been spent thereupon previously, shall be continued and brought to completion, in the interest of public impact.

13.3 Schemes of a general nature, multi-sectorial implications or crosscutting impacts that can be defined as Special Development Programmes, and will continue to be a part of the ADP. These programmes may also be for investment in specific sectors, or geographies, or both. They will however not be subject to specific distribution between MPAs or between constituencies. Instead, they will be driven by programme specific approval guidelines and principles.

13.4 Such schemes will be open to any proposals that are made within the scope of the scheme; these proposals will be evaluated against the specific criteria development for the Special Development Programme. Committees at the department, P&D or government level may be constituted if required to screen these proposals in line with developed criteria for the Special Development Programme; with technical approval at relevant forums such as the DDC or DDWP or PDWP. No projects will be approved in any Special Development Programme without the relevant guidelines being in place and approved by the competent forum.

13.5 The ADP may also contain one or more blocks strictly for emergency or contingencies strictly in line with sectorial plans and government needs.

Section 14. Policy Revisions and Guidelines:

14.1 This policy has been approved by the Cabinet, and enjoy the full commitment of the Government of Khyber Pakhtunkhwa. The Government may however choose, through a cabinet decision, to update from time to time, these guidelines as required.

14.2 The Planning & Development Department in pursuance of this ADP Policy may issue, after approval of Minister P&D, one or more set of appropriate guidelines for implementation of this policy. Any subsequent amendments to these guidelines, within overall framework of this ADP Policy may be issued by P&D department in line with relevant procedures.