Documentof TheWorld Bank FOR OFFICIAL USE ONLY ReportNo: T7609 - AF TECHNICAL ANNEX FORA PROPOSED GRANT OF SDR 66.1MILLION (US$95 MILLIONEQUIVALENT) TO THE TRANSITIONAL ISLAMIC STATE OFAFGHANISTAN FORAN EMERGENCY NATIONAL SOLIDARITY PROJECT November26,2003 RuralDevelopmentSector Unit South Asia RegionalOffice This document hasa restricteddistributionandmaybeusedby recipientsonly inthe performanceof their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bankauthorization. CURRENCYEQUIVALENT Currency Unit - - Afghani US$1 - 48,90 "(As ofNovember 13,2003) SDRl - US$1.4379 (As o f October 31,2003) GOVERNMENTFISCALYEAR March21-March20 ABBREVIATIONSAND ACRONYMS ARTF Afghanistan ReconstructionTrust Fund M A C A Mine Action Center for Afghanistan CDC Community Development Council M&E Monitoring and Evaluation CDD Community Driven Development MIS Management InformationSystem CDP Community Development Plan MISFA Microfinance Investment & Support DAB Da Afghanistan Bank Facility for Afghanistan EC EuropeanCommission MoF MinistryofFinance ECE&PWP Emergency Community Empowerment & MRRD MinistryofRuralRehabilitation& Public Works Project (H009) Development ENSP EmergencyNational Solidarity Project NGO NonGovernment Organization GMU Grant Management Unit NSP National Solidarity Program IBRD Intemational Bank for Reconstruction& O&M Operationand Maintenance Development PRR Priority ReformandRestructuring IDA Intemational Development Association TISA Islamic Transitional State o fAfghanistan JSDF Japanese Social Development Fund TSS Transitional Support Strategy UNHCR UnitedNations High Commission for Refugees Vice President: PrafulPate1 Country Director : Alastair McKechnie Sector Director: Constance Bernard Sector Manager : Gajanand Pathmanathan Afghanistan Reconstruction Manager : PhilippeDongier Task Team Leader : Asger Chnstensen .. 11 FOROFFICIAL USEONLY TRANSITIONALISLAMIC STATE OFAF'GHANISTAN EMERGENCY NATIONAL SOLIDARITYPROJECT TECHNICALANNEX 8Tableof Contents 1 Page A. BACKGROUNDAND STRATEGY 1 1. * Projict Rationale 1 2. Government Strategy 2 B. BANKRESPONSEAND STRATEGY 3 1. Transitional Suppok Strategy Framework 3 2. Lessons from Earlier Experience inAfghanistan and other Post Conflict 3 Situations 3. Lessons from the current National Solidarity Program 4 4. Rationale for Bank Involvement 5 C. DETAILEDPROJECTDESCRIPTION 5 I. ProjectObjectives 5 2. Project Components 5 3. Project Description 6 4. Monitoring and Evaluation 10 D. INSTITUTIONAL ARRANGEMENTSAND PROJECTIMPLEMENTATION 10 1. Institutional Arrangements 10 2. Budget and Co-financing 15 3. Procurement 15 4. Financial Management, Disbursement, and Audit 16 E. FINAVCIAL AND ECONOMICJUSTIFICATION 18 1. Project Benefits 18 2. Project Risks 18 3. Alternatives Considered 19 F. ENVIRONMENTALAND SOCIALSAFEGUARDS 21 1. Environmental and Social Impacts and Safeguards 21 2. LandMine RiskManagement 22 G. APPENDICES H. MAP: IBRDNo.32863 This document has a restricted distribution andmaybeusedby recipients only in the performance of their official duties. I t s contents may not b e otherwise disclosed lwithout World Bank authorization. Listof Appendices Appendix : ProcurementArrangements 23 Appendix : FinancialManagement,DisbursementandAudit Arrangements 30 Appendix 3: ProjectCostsandDisbursement Schedulefor 2004-2007 38 Appendix4: ProjectImplementationPlan 40 Appendix5: Assessmentofmicro-finance,livelihoodprojects, andincome generating schemes as an optionfor communitysub-projects 41 Appendix 6: PerformanceIndicators 48 Appendix7: Monitoring& Evaluationarrangements 49 Appendix 8: Environmental& Social SafeguardFramework 56 Appendix 9: Proceduresfor LandMineRiskManagement 82 iv A. BACKGROUNDAND STRATEGY 1.Project Rationale 1. Afghanistan i s one o f the poorest and longest-suffering countries among the members o f the WorldBank. More than two decadeso fconflict andpolitical instabilityhaveresultedin severely damaged infrastructure, a degradednatural resourcebase, weakened public institutions, and fragmented political authority. A severe drought lasting from 1999 till 2002 has further increasedrural poverty and depleted assets. Both the conflict and the drought have resulted in massive populationdisplacements and disruption o f livelihoods. Among the country's estimated 22 million people, around a quarter are critically poor, and a larger number are vulnerable to risks o f external economic and natural shocks. 2. About three quarters o f the Afghan populationare estimated to live inrural areas and are mainly dependent on agriculture. Landholdingsvary in size between and within provinces, with an average farm size rangingbetween 1-2 hectares. Absentee landownership i s common as a result o f emigration o f families or family members to neighboring countries, share-cropping seems to be expanding inmost provinces, and rural indebtedness i s widespread. 3. Despite the assistance provided to the rural populationby Afghan and international NGOs as well as the UNsince the late eighties, the needs o f the rural populationregardingassistance to cope with bothreconstruction and the legacy o fmore than twenty years o f deferred development are enormous. Thus, only about a third o f the area under irrigation in 1993 was irrigatedin2002, and local community-based irrigation systems require desilting o f canals and repair o f structures to become fully functional (the area under irrigation only increased by 1%in2003). Most village roads are inneed o f culverts andbridges to make them passable throughout the year, the large majority o f children do not have access to education or are taught under the open sky, there i s almost no access to electricity inrural areas, and the majority o f the country's populationdoes not have access to safe drinkingwater. 4. Addingto the urgency for large-scale assistance to promote the recoveryo fAfghanistan's rural communities i s the return from neighboring countries o f some 2.3 million refugees since late 2001.* Another halfmillion Afghans who were displaced inside the country have also retumedto their homes. Unless economic activity and employment grows inrural areas, returnees will not find itattractive to retumto their villages o f origin, andthe trend o furbanmigration is likely to continue and exacerbate the growthproblems already faced by Kabul and other cities. Since Afghan cities and inparticular Kabul have shown recovery over the past two years, particularly in the construction and service sectors, they attract retuming refugees who expect to find improved stability and betterjob opportunities compared to most rural areas. Approximately 30% o f the returnees have moved to Kabul city and province. As a result, the population o f Kabul has increased from 600,000 inhabitants inthe late seventies to an estimated 3 million today. UNHCR estimates that there remain about 1.5 million Afghan refugees inPalustan and 1.2million inIran. 5. Since the end o f the three year drought in 2002, agricultural production inAfghanistan has continuedits strong recovery for the second consecutive year primarily due to favorable precipitation and the expansion o frainfed farming. Aggregate cereal productionestimated at 5.37 million tons i s the largest on record. However, despite the good harvest there are still a considerable number o fAfghans who face food insecurity and will continue to depend on targeted 1 FAO/WFP Crop and Food Supply AssessmentMission to Afghanistan - Special Report, August 13, 2003. The succeeding informationbelow on agriculture draws o n this report. 2 UNHCRHumanitarian UpdateNo. 68,UNHighCommissioner for Refugees, August 2003. 1 food assistance during2003/04. Inthe northern surplus producing areas (primarily Baghlan, Kunduz, Takhar) there has been major improvement infood security. At the same time there are chronically food insecure areas like the Central Highlands (Hazarajat) and Badakshan. Elsewhere inthe countrythe picture ismixedand areaso fimprovedharvests contrast with pockets ofhigh vulnerability and food insecurity. 6. The description above indicates that reconstruction and development needs differ substantially across regions and even locally. To address this situation, a flexible assistance program is needed, that takes as its point o f departure peoples' own local knowledge about their priorities for reconstruction and development, that facilitates a participatoryprocess to assist communities to agree on the priorities that needto be dealt with and how, and that provides resources which enable communities to implement sub-projects that address these priorities. The National Solidarity Program (NSP) has been designedwith these requirements inmindto provide assistance to rural communities across the country. The proposed Emergency National Solidarity Project (ENSP), supported by the InternationalDevelopment Association (IDA) andby other donors, will assist implementation o fthis nationalprogram 2. Government Strategy 7. The project would support the Transitional Islamic State o f Afghanistan's (TISA) National Programme for Reconstruction, by promoting three o f its key elements, namely the use o f assistance to create conditions for people to live secure lives and buildhuman capital, physical reconstruction, and private sector development. The project would constitute one o f the six nationalpriority sub-programs - the National Solidarity Program -under one o f the 12National Development Programs: Livelihoods and Social Protection. The goal o f the NSPis to reduce poverty through empowering communities with regardto improved governance, and social, human, and economic capital. The key development issues that the project will address are: 0 Ruralreconstruction: The project will provide resources throughblock grants to rural communities for investments inreconstruction or development activities plannedand managedby the communities themselves. Activities will either be implementeddirectly by the communities or through sub-contracting to the private sector. 0 Strengthening o f local governance: Decisions on the use o fblock grants will be made through an inclusive participatory decision making process ledby community development councils elected through secret ballot. This process will facilitate the emergence o f consultative decision making and legitimate local leadership, which can form the basis for cooperationbetween communities and the local government apparatus as well as with other assistance programs. 0 Enhancing government effectiveness: Capacity would be builtwithin the Ministryo f RuralRehabilitation & Development (MRRD)to set and supervise standards and procedures for financial management, disbursement, and implementation of community projects plannedand implementedby local communities and funded byblock grants. 3 Inadditionto the NSP, this nationalpriority sub-programalsocomprisesthe NationalEmergency EmploymentProgram, which receivedinitial fundingunder the EmergencyCommunityEmpowerment & PublicWorks Project(HOOg-AF), and i s nowbeing fimdedunder ARTF andIDA follow-up projects. 2 B. BANKRESPONSEAND STRATEGY 1.Transitional Support Strategy Framework 8. The project i s consistent with the Bank's Transitional Support Strategy (of March2003), and will promote this strategy by (i) strengthening communities to develop and carry out plans for local development, (ii) generating incomes for the poor through wages eamed from community projects and fiom the assets and skills created through these projects, (iii) enabling private sector development through supply and implementationcontracts for community projects, and (iv) increasing access to basic social services. 2. Lessons from earlier experienceinAfghanistan and other post-conflict situations 9. International experience suggests that ina number o f sub-sectors suited for community management, projects that are planned and managedby the communities themselves typically show rates o freturn higher than those planned and managedby government agencies. 10. A growing body o f evidence from Bank-financedprojects demonstrates that community projects are particularly appropriate for post-conflict environments. Inthe Rwanda Reintegration Project, for example, close attention to usingjoint community activities to promote reconciliation between ethnic groups has been successful and led the Rwandan Government to extend the design into its national development plan. Another benefit o f this approach inpost-conflict environments i s its speed. The East Timor Community Empowerment Project was able to attain national coverage within one year of appraisal, albeit ina very small country and buildingon an existing program. 11. Bearing inmindthat the Afghan context i s inmany ways sui generis because o f the extreme levels o f destruction and the long-term nature o f the conflict, the project draws on several general lessons from other community development and post-conflict projects. These include: Community block grant projects can be scaled up very quickly and can function inhighly diverse environments because o f their modular design; Establishinga participatory process and community development councils initially adds time to sub-project preparation butprovides long-term and highlyjustified payoffs interms of sustainability and improved governance; e Open menus allow a better reflection o f local needs than do pre-selected ones; 0 Highquality technical support to communities makes for better outcomes andlonger-term sustainability. Private sector providers and NGOs should be used where available; 0 Community-driven projects should include a strategy for linkingupplanning and investments to district and provincial management, althoughthis linkage should be sequenced carefully, particularly inpost-conflict environments; 12. Three design and management lessons of special relevance stand out for designing the project: 0 Advance clarification and clear communication o f all project eligibility, community procurement, disbursement, and financial management procedures i s essential; Technical support and training is needed to enhance quality o f infrastructure designs, to pre-qualify engineers, agronomists, and other potential sources o f support to the villages; 0 Prompt and decisive use o f sanctions i s neededfor communities and project officials if they do not follow agreed-upon rules. 3 13. There i s also a relevant set o f negative lessons learned: 0 Risks o f elite capture o fbenefits are high, particularly incommunities with pronounced class differences. Mitigation measures will include external facilitation, a focus on public rather than private goods, and an intense programo f outreach and transparency. Communities usually do not have access to formal systems o fredress. Community-based projects thus depend on transparency and social controls to prevent corruption and fraud. Support from civil society groups (NGOs, legal advocacy organizations, press, academics, etc) must be enlisted from the outset. 0 Communities with long histories o f aid dependency or inareas o f extensive government service delivery will not easily provide large contributions for capital costs or maintenance. 14. NGOshave been actively involved incommunity development inAfghanistan since around 1990, and lessons gained from consultations with these NGOs include: 0 Communities should be given enough time duringplanningto ensure full understanding and ownership o f the process. However, with good facilitation, this understanding and ownership can be establishedwithin a fairly short time-span. 0 Labor involved inproject implementation will require payment for labor or else the poor will notbe able to afford to participate; 0 Community contributions towards capital costs inthe form o f labor or reduceddaily wage rates mustbe supplemented with other forms o f contributions (e.g. cash) from more affluent families, who do not have members seeking work at the reduced wage rate; 0 Be selective-areas that are inpractice controlled by militia leaders or single-family elites may have to be excluded from the program ifthey oppose the holding o f elections for Community Councils through secret ballot. 15. Lessons gained from consultation with the government include: 0 Project designs should reflect a long-term rather than short-term vision, with a special focus on developingrepresentative forms o f local leadership; 0 Capacity support provided to provincial and district government should focus on strengthening their planning, monitoring, and coordinationroles but not on implementation. Local government should be involved ina long-termprocess o f responsiveness to bottom-up demand. 3. Lessonsfromthe current National Solidarity Program 16. The project i s a follow-up to the community driven development (CDD) component o f the Emergency Community Empowerment & Public Works Project (H009-AF), that became effective inJune 2002, andthat is currentlysupportingthe implementationofthe National Solidarity Program in87 districts in 31o f Afghanistan's 32 provinces. Program implementation i s managed byMRRDwith support from an internationallyrecruited Oversight Consultant, who began the assignment inearly September 2003. Communities are supported by FacilitatingPartners (at present 20 NGOs plus UN-Habitat) inthe election o f Community Development Councils (CDCs), planning and implementationo f sub-projects, and capacity buildinginfinancial management and procurement. UN-Habitat started field operations inM a y 2003, while the FacilitatingPartner NGOsbegan operations from late July 2003 onwards. By October 2003, the FacilitatingPartners had identified 3,527 villages for the first phase o f operations, and community mobilization was ongoing in 1,450 villages, with elections o f CDCs completedin600 villages, and 350 CDCs engaged inpreparation o f sub-projects. The NSP Oversight Consultant has established its office in MRRD,andintheprovinces where the first disbursementsofblockgrantsto communitiesare 4 taking place. The lessons from the NSP, albeit still at an early stage, demonstrate that it is possible to implement a large scale CDD program involving substantial facilitation at the community level inthe volatile anduncertainsocio-political environment o fpresent day Afghanistan. 4. Rationale for Bank Involvement 17. After nearly 25 years o f conflict, there i s a highneedfor large scale interventions to address rehabilitation and development inrural areas. The acceptance by the rural population o f the transitional administration depends inno small measure on its ability to deliver long awaited assistance to rural communities across the country. Because o f its experience with supporting CDDprograms inother post-conflict countries, the Bank is well positionedto support this program inAfghanistan. While there are anumber ofsmall-scale CDDprojects implementedbyNGOsand supported by bilateral funding, the support for the NSP through the project will vastly expand the scale o f CDD activities. Inaddition, the NSP will build on and strengthen the operational partnership between NGOs and the Government that was started for the first time inAfghanistan under the NSP component o f the Emergency Community Empowerment & Public Works P r ~ j e c t . ~ This partnership will enable the government to further develop its national CDDprogram framework (the National Solidarity Program), while drawing on the strength and experience o f the NGOs for implementation. Inaddition, the program will introduce andbuildcapacity to execute a key feature o f successful large scale CDD projects which involve local level planningprocesses withinpublic sector management systems, namely tight supervision of financial management, disbursement, and technical standards. C. DETAILED PROJECTDESCRIPTION 1.Project Objectives 18. The objective o f the project i s to lay the foundations for a strengthening o f community level governance, and to support community-managed sub-projects comprising reconstruction and development that improve access o f rural communities to social and productive infrastructure and services. The outcomes will be (i) the establishment o f a framework for village level consultative decision making and representative local leadership as a basis for interaction within and between communities on the one hand, and with the administrationand aid agencies on the other, and (ii) local level reconstruction, development, and capacity buildingwhich will lead to a decrease in poverty levels. 2. Project Components 19. The project will finance four components (See Appendix 3 for project costs and disbursement schedule): PartA: BlockGrants for communities (US$72.32 million)to carry out Sub-projects involving reconstruction and development activities through a facilitated participatory planning process. These activities shall focus on, among other things, community infrastructure, development o f human capital, savings and credit schemes for women and disabled, and asset transfers for women and disabled. 4 The related NGO Support Project (TF051247) implemented by MRRD,and funded by a US$2 milliongrant from the Japan Social Development Fund(JSDF) involves 37 Afghan NGOs as implementing partners infour areas (Zabul, Shamali, Bamiyan, Nuristan) selected to ensure equity indistributiono f benefits between ethnic groups (Pashtun, Tajik, Hazara, Nuristani). By October 2003, o f a total o f 37 projects, 23 were completed, 12 ongoing, and 2 postponed due to security risks. 5 Part B: Community Facilitation and Sub-project Preparation (US$13.08 million) to support local communities through: (i) facilitation exercises to establish inclusive community institutions, and identify local development needs and priorities; (ii) assistance for preparing sub-project proposals; (iii) assistance incarrying out sub-projects for which block grants have been made available, and capacity buildingfor members o f local communities. Part C: Capacity Buildingand Implementation Support (US$7.6 million) comprising provision o f consultants' services for capacity buildingin, implementationsupport to, and incremental operating costs for the MRRD. These services will strengthen local communities capacity infinancial management, procurement, and technical skills. The project will also augment the MRRD's human and physical capacity to supervise and implement the project. Part D: External Monitoring and Evaluation (US$2 million) comprising external monitoring, evaluation and studies to verify implementationstatus, assess achievement o f project objectives/outcomes, and undertake researchon specific issues related to programpolicy or implementation. 3. Project Description 20. Project operational policies are described inthe draft Operational Manual for the NSP The operational manual i s expected to be amended from time to time by the government, in consultation with IDA based on lessons from implementation. The following summarizes key sections o f the operational manual.. 21. Approach: The NSP provides a single-window framework for village level reconstruction and development activities. The NSP consists o f four core elements: 0 Facilitationat the community level to assist communities establish inclusive community institutionsthrough elections, reachconsensus on priorities and corresponding sub-project activities, develop eligible sub-proposals that comply with NSP appraisal criteria, and implement approved project sub-proposals; 0 A systemo f direct block grant transfers to support rehabilitation or development activities (sub-projects) plannedand implementedby the elected CDCs; 0 A series o f capacity buildingactivitiesto enhance the competence o fCDC members (both men and women) for financial management, procurement, technical slulls, and transparency, and, 0 Activities linking local institutions to government administration and aid agencies with available services andresources. 22. Coverage: The transitional government intends to have NSP cover the country's estimated 20,000 villages over a four year period. Inthe first year, three target districts have been selected by MRRDineachofthe 32provinces onthe basis ofvulnerability relatedto drought impacts and return o f Internally DisplacedPersons (IDPs) and refugees. The target for the first year o f implementationis to reachmore than 4,100 village communities across the country. Duringyear two, operations will expand to cover the remainingvillages inthe initial districts, and/or villages in new districts. Village communities that successfully implementedprojects duringthe first year would receive a new, but smaller block grant duringyear two, and the same formula would be applied in successive years. The goal o f the government i s to establish a system o f recurrent transfer o fblock grants for all village communities o f the country. 23. Block grant allocations to villages will be based on the following three principles: 6 0 One block grant (budget) will be allocated to each community at a rate o f U S 2 0 0 per family with an upper limit o f US$60,000 per community. This allocationrequires that the community develops one or more eligible sub-project proposals within the framework o f the block grant allocation and its own contributions. Annual follow-up block grants will be allocated at a lower per capita rate to be determined; 0 One DevelopmentCouncil will be established for each community. Development Councils can not be established for sub-sets o f an existingvillage (e.g. a village can not be split into its constituent political or ethnicknship (qaum) sub-divisions); 0 A community is a village ofmore than 25 families. 24. Eliaibilitv: Inorder to be eligible for a block grant allocation, a community mustdevelop one or more sub-project proposals that fulfill the following criteria: 0 Proposed by a representative Development Council elected through a community-wide secret ballot; 0 Endorsedthrough an inclusive community-wide consultation process; 0 Provides equitable access to benefits; 0 Technically and financially sound; 0 Includes an operation and maintenance plan; 0 At least 10%community contributions inestimatedmonetary equivalent towards capital costs and full responsibility for operation and maintenance'; 0 Includes a commitment to and plans for ensuring transparency o fthe use o f block grant funds. 25. Open menu: NSP will use an open menu o f subprojects within four types o f investments, subject to a short negative list (see Appendix 8). The four types o f investments are: 1. Community infrastructure (the investments will comply with definedtechnical standards, and will only comprise public goods)6; 2. Human capital development activities (e.g., time-bound literacy classes, hygiene education etc., that will not incur recurrent costs from the state); 3. Self-help savings and credit schemes for women and disabled; 4. Asset transfers for vulnerable women and disabled. 26. Inthe case o f sub-project proposals involvingrehabilitationor new construction of schools, a condition for approval will be the endorsement by the Ministryo f Educationthat the proposed school fits within the overall planning o f the ministry, and that the ministrywill cover the operating costs of the school (fully or with committed contributions from other agencies). Ifundertaken, rehabilitationand new construction o f clinics will require carefulplanning and coordination, since plans (withdonor fundingcommitted for implementation) exist inthe Ministryo f Healthto provide 500 clinics over the next three years. 27. Microfinance: An assessment will be made o f lessons from micro-finance operations in Afghanistan as well as other post-conflict situations and other social funds to determine whether a simple androbust methodologycanbe developed, that would enable communitiesto use all or part 5 The community contributiontowards capital costs cancomprise cash, labor, or in-kindcontributions such as construction materials and transport. 6 Suchinfrastructure projects would include, but not necessarily be restrictedto irrigation works, roads including culverts and small bridges, erosionprotection, structures promoting watershed management, water supply facilities, micro-hydropower, and school buildings. 7 o f their block grant for micro-finance activities. This assessmentwill also explore the scope for synergies with the ARTF supported Microfinance Investment & Support Facility for Afghanistan (MISFA), e.g. the use o fblock grant funds by communities to leverage funding from micro-credit agencies, which will then be in charge o f managing repayments as part o f their normal operations, and the use o fblock grants for community managed revolving loan funds (Appendix 5). 28. Refugees and Internally Displaced Persons (IDPs): To facilitate re-integration o f IDPs and returningrefugees, villages with a considerable IDP/refugee population, will have the option o f an increasedblock grant allocationifIDPshefugeesretumand participate inproject planning. It i s expected that this incentivemay encourage villages with a highproportionof IDPs or refugees to initiate consultation with these groups about their potential retum duringthe project preparation phase inorder to obtain access to an increased block grant allocation. Where IDPshefugee families or family members actually retum to their village duringthe sub-project preparation phase, a reassessment o f the population size should be undertaken prior to final sub-project development and costing to enable an adjustment o fthe block grant allocation. Where such planningi s undertaken, the FacilitatingPartner should assist the community in assessing whether the additional resources provided through the enhanced block grant and the proposed sub-project activities would enable a sustainable re-integration o fthe returnees. 29. Nomads (kuchi): Before the conflict began inthe late seventies, the Afghan population comprised an estimated 1.5 to 2 million nomads, mostly Pashtun. The population displacements resulting from the conflict have affected both the settled and nomadpopulation, and shifts ininter- ethnic power relations has restricted access for Pashtun nomads to summer grazing areas inthe Hazara highlands. Inaddition, the increase incultivation o frain-fed wheat has made inroads on areas used for grazing, and the drought has reduced animal herds considerably. Lessons from a previous severe drought in 1970-71, which like the recent drought drastically reduced nomad herds, show that these recover fast when grazing improves with increasedprecipitation. The main constraint today to a full recovery o f pastoral nomadism i s probably the increasing restrictions on access to pasture. The project will explore the scope for providing assistance to nomads, which could include facilitation o f consultations between specific nomad and settled groups regarding shared rights to land used for pasture, or facilitation o f access to social services such as healthand education. 30. Community Development Plan and Sub-Proiect Proposals: Inconsultation with the community at large, the CDC will develop a Community Development Plan (CDP) that prioritizes the specific needs o f the community, andproposes sub-projects that address these needs. While the block grant allocationwould enable financing o f one or more o fthe proposed sub-projects, it i s unlikelythat it can address them all. The CDP constitutes amediumterminvestment plan for a particular village, which would provide for the first time ever a bottom-up inputto higher level planningat the district, provincial, and nationallevel. 31. Sustainabilitv: The NSP rules for community sub-project proposals require a commitment to contribute a minimumo f 10% o f capital costs and a plan to cover the costs o f operation and maintenance (O&M) o f community assets. Afghan villages have a `traditional' institutional framework for voluntary labor mobilization (ashar) to create or maintainjoint assets, which can respond to the NSP requirements for community contributions towards capital costs and O&M. Moreover, inthe case o f rehabilitation or improvement o f irrigation systems, which are expected to comprise a significant share o f the sub-projects, `traditional' non-formal water user associations headedby `water masters' (mirabs) exist throughout Afghanistan (although some have collapsed as a result of conflict and population displacement), and undertake water distribution and maintenance o f local irrigation systems. Experience from other NGO implementedprojects inAfghanistan (e.g. drinkingwater supply) have demonstratedthat arrangements for user payment incash, kind,or 8 labor for maintenance services providedthrough the market have resulted inhighlevels o f asset sustainability. 32. Communitv Development Councils: Communities will be identifiedon the basis o f existing local settlement and social patterns. However, this will not prevent different distinct villages, whether small or large, fromjoining together to develop assets (e.g. a school, a pipe water system, or a road) that serves more than one village. The CDC i s responsible for: Overseeingpreparation o f the CDP with prioritised needs and sub-project activities that address these needs ; Convening community wide meetings to ensure community participationduringall phases; Overseeing planning and preparation o f specific sub-projects either directly or through community project management committees; Mobilizing community contributions; Presenting sub-project plans for appraisal; Managing and supervising sub-project implementationwith assistance from the Facilitating Partner agency; Overseeing (or directly handling) procurement and financial management at the community level; Reportingto the community and to MRRDon project progress and use o f funds. 33. Elections: The CDC will be established through an election conducted according to the following rules: Everybody inthe community who i s entitledto vote ingovernment elections i s entitled to be registered as a voter; Eachperson has one vote ; The voting will be conducted through a secret ballot; Both menand women are eligible to vote and to be members o f the CDC; Candidates and electioneering i s prohibited; and At least 40% o feligible voters haveto vote for an election to be valid. 34. Prohibition o f candidature and electioneering i s critical to reduce the likelihood o f elite capture and intimidation, recognisingthat it will not remove it. To avoid selection o funwilling candidates, community members will have an opportunity to declare (prior to the election) that they are not preparedto accept the position ifelected. All members o f the community are eligible candidates untilthey take the positive step to declare themselves ineligible. 35. To ensure inclusiveness interms o f different socio-economic, factional, and ethnickibal (qaum) sub-divisions withinthe community, the election process will be based on a division o fthe community into groups o f families (clusters), which will each elect one representative for the Development Council. Since neighbours are usually also relatives, the division into clusters will also reduce restrictions on women Cpurdah) and thereby facilitate their active involvement in discussions o fthe qualities required for representatives and inthe election itself. The size o f such clusters will vary depending on the size o f the village, but should generally not exceed about 20 families. The clusters would inturn serve as the framework for community wide consultations on proposals from the DevelopmentCouncil, through a process where the elected councillors consult with and seek feed-back from their electorate before decisions on priorities, sub-projects, and community contributions are finalized. 9 36. Where local norms regardingpurdah do not allow women to participate directly in community wide meetings or inthe Development Council, the Facilitating Partner must promote the establishment o f a separate forum where women can define their priorities. The Facilitating Partner would also ensure that the priorities defined by women are discussed with the men, and that those defined by the men are discussed with the women, so that the CDP takes account o fboth. 4. MonitoringandEvaluation 37. Progress monitoring on inputs,process, and outputs will be undertakenby Facilitating Partners andby the NSP Oversight Consultant, which will maintain a Management Information System for the program and provide regularreports onthe overall program status. Workshops to consult with Facilitating Partners will be conducted on a regular basis to distill lessons leamed and adjust the overall approach and implementationarrangements described inthe NSP Operational Manual as required. Independent extemal evaluation by a consultant will be undertaken to verify the accuracy o fprogress monitoring conducted by the FacilitatingPartners and the Oversight Consultant, and to assess achievement o f project outcomes against baseline data. (The project performance indicators are described inAppendix 6 and monitoring and evaluation arrangements are describedinAppendix 7). D. INSTITUTIONALARRANGEMENTSAND PROJECTIMPLEMENTATION 1.InstitutionalArrangements 38. The NSP i s implementedby MRRD. As a result o f more than two decades o f conflict, exodus o ftrained personnel, low pay, and lack o f exposure to new approaches, the government's institutionalcapacity i s generally weak. To address this issue, MRRD's leadership has over the past year instituteda comprehensive reformwithin the ministry. The mandate, principles, policies and objectives o fMRRDhave beenrevisedwith community empowerment at the core o fthe ministry's work to ensure, that communitieshave boththe authority and capacity to own decisions over their reconstruction and development. MRRD'sreformedmandate is policy and strategy formulation, program coordination, programand project execution (involving implementation through contracting partners -NGOs, UNand private sector), monitoring and supervision, and information dissemination. The NSP and other nationalpriority programs managedby MRRD reinforce the govemment's policy and regulatoryrole to support the private sector through competitive contracting. 39. MRRD'sstructure at the nationalandprovincial levels has beenreformedto reflect the functional changes with NSP at the core o fthe ministry. The overall goal o f MRRDi s that inthe course o f the next three to five years, NSP will account for a large part o f the work o fthe ministry. A new department - the Community-Led DevelopmentDepartment has been createdto manage - the NSP, and other departments comprising technical support, livelihoods promotion, finance, procurement, contract administration, monitoring and evaluation, and capacity development have beenrestructured to support this core function. MRRDhas been committed to the principles o f Priority Reform and Restructuring(PRR) even before this process was initiated formally, as reflected by the creation o f the Community-Led DevelopmentDepartment, which i s one o f several departments that are under the purviewo f the PRR. 40. Capacity development, a key aspect o fthe institutional strengthening and reform process, i s a priority programmanaged by the Capacity DevelopmentDepartment. Resources from the National Area Based Development Program support a number of strategically placednational and expatriate advisors indifferent departments. Particular emphasis has been given to financial management and procurement. Additionally, a management advisor i s allocated to each province. 10 Staff have been assigned to NSP inall provinces and an extensive training programbased on "learning by doing" has been instituted. 41. Inadditionto theNSP, MRRDimplements three other programs, namelythe National Emergency Employment Program, the Area BasedProgram, and the Microfinance Investment & Support Facility for Afghanistan. MRRDi s aiming to maximize synergies between these programs, as indicatedby the current assessmento fpotential linkages between the NSP and microfinance (Appendix 5). 42. The Oversight Consultant will be responsible to MRRDfor overall management and supervision o fthe NSP. The NSP Oversight Consultant will have staff at the central level, infive regional offices, and inall provincial level MRRDoffices. The Oversight Consultant i s placed in MRRDandworks withMRRDcounterpartsinthe Community-LedDevelopmentDepartment to strengthencapacity for community development and program management at central and provincial levels. The key tasks o f the Oversight Consultant are: 0 Appraisal o fcommunity project proposals; 0 Management o f the NSP block grants for community projects (including effecting fund transfers, tranche payments, financial management, accounting, and reporting); 0 Supervision o fthe performance o f Facilitating Partners; 0 Planningand conductingtraining for staff o f MRRDand FacilitatingPartners (either directly or through sub-contracting), together with regular workshops to exchange lessons learned and adjust the program implementation approach as required; 0 Undertaking technical and financial monitoring, and producing consolidatedprogress reports, and 0 Management o f an informationand communication campaign on NSP. 43. FacilitatingPartners are agencies (Afghan and internationalNGOsplus UN-Habitat) contracted by MRRDto assist inthe delivery o f the NSP to communities. Ineach province one or more FacilitatingPartners have deployed community facilitators and technical specialists initially for three districts to support the agreed target communities. Dependingon capacity, individual FacilitatingPartners are undertakmg these activities inone or more districts, or inone or more provinces. The primary role o f a Facilitating Partner is to: 0 Facilitateelections o f inclusive CDCs; 0 Facilitateconsultative community project planning comprising Community Development Plans and sub-project proposals; 0 Provide technical assistance to develop sub-project proposals through either: o facilitating community access to technical assistance available inthe market or from other agencies; or, o technical assistance providedbythe FacilitatingPartner,' 0 Provide technical assistance to communities duringimplementation; 0 Provide training to communities (e.g. book-keeping, procurement, contracting); 0 Conduct monitoring and reporting. 44. The expected outputs o f the FacilitatingPartners are: I While the preferred approachunder NSP i s for communities to avail themselves o ftechnical assistance for project design through the market, it is recognized that this may not be feasible inmany rural areas, and that insuch situations, technical assistance will have to be provided by the Facilitating Partner. 11 0 Eligible project proposals (measured by the number o fprojects appraised and approved by the NSP); 0 Implementationo f funded projects (measured by the number o f projects completed in accordance with design standards and ina sustainable manner). 45. Facilitating Partners are expected to recruit and deploy female field staff to enable involvement o f women inthe targeted communities inthe prioritization, decision-making, and implementationo fprojects. 46. p:PartnersandtheOversight Contracts with Facilitating Consultant are performance based, andrenewable on an annual basis. The NSP will hold FacilitatingPartners accountable for performance against outputs, but will provide flexibility to its partners inthe choice o f specific facilitation methods and work planning. The FacilitatingPartners may use facilitation methods that they deem appropriate inorder to assist communities to prepare projects that meet the eligibility criteria o f the NSP. The NSP Oversight Consultant will inter alia be held accountable regardingtimely appraisal o f community sub-project proposals, timely disbursement o f block grant installments to communities, and timely submission o f monitoring reports. NSPgovernance 47. A SteeringCommittee acts inan advisory capacity to MRRDon overall programpolicy formulation and direction, and oversees program implementation. At present, the Steering Committee i s composed o frepresentatives from MRRDand Ministryo f Finance (MoF). An External Review Committee consisting o f donors, UNagencies, the Independent Commission for Human Rights,M o F and MRRDmeets on a regular basis to review and endorse all policy and contractual issues. Discussions are underway to broaden the membership o f the Steering Committee by merging the two bodies. An inter-ministerial committee has been established for policy advice and coordination. The committee i s chaired by MRRD and comprises the ministries o f Finance, Agriculture, Public Health, Education, hgation, Labor & Social Affairs, Women's Affairs, Public Works, Reconstruction, ForeignAffairs, and Refugees. Capacitybuildingfor NSP staff 48. Capacity buildingi s at the core o f the NSP, and the project will support this inthree ways. The Oversight Consultant will train MRRD staff at central and provincial levels to buildcapacity to eventually take over responsibility for management o f the NSP.' Duringthe course o f the proposed Emergency National Solidarity Project, a strategy will be elaboratedto recruit (ifnecessary) and retainhighquality national staff into MRRDand to develop the capacity o f existing staff to manage the NSP. Broader capacity on CDD will also be built by involvingundergraduateswith a social science or engineering background from Kabul University incommunity facilitation through training by Facilitating Partners. Likewise, university undergraduates will be given opportunities to participate inthe monitoring undertaken by the Oversight Consultant, and inevaluationby extemal consultants. 8 The JapanSocialDevelopmentFundsupports a project Capacity Buildingfor NSP Project (TF05 1429) which provides U S $ l.1.48 million for capacity building within the NSP. 12 Linkageswith Sub-National Administration 49. Strengthening local governance requires buildingcapacity beyond elected CDCs and forming meaningful institutional linkages with the sub-national government administration. Recently, the World Bankhas completed a comprehensive study on "How Government Works in Afghanistan" (World Bank, 2003). This study found that government administration i s highly centralized based on the policy of a unitary state, and that this governance model i s unlikely to face a serious challenge inthe near future. The study also found that, despite years o f conflict and neglect from Kabul, administrative and fiscal mechanisms have continued inuse throughout the country, although payment o f staff salaries i s erratic and often partial, and no allocations for operating budgets are as yet made at the district (woluswuli) level. 50. The National Area Based DevelopmentProgram (NABDP) managed by MRRDwith UNDP support i s designed to complement NSP by addressing linkages between communities and government authorities through developingthe capacity o f sub-national authorities, to establish and maintainprovincial and district consultation mechanisms to ensure that all stakeholders views are reflected indevelopment planning and management. A twin-stream capacity development strategy (management and technical services) i s on-going with MRRDprovincial management and technical advisors assignedto eachprovince with international advisors providing technical support. For the first time, a planning exercise has been conducted inall provinces identifying priority projects above the village level ineach district. 5 1. The NSP faces a number o f competingdemands. Onthe one hand, its long-term goal i s to strengthenlocal governance, transparency, accountability andpeoples' participation inthe development process. On the other hand, inorder to establish its credibility, it must quickly finance approved CDC plans that provide tangible benefits to communities. Without gaining credibility inthe short-term, the NSP i s unlikely to achieve its long-term goal o f improving local governance. 52. Strategy for LinhngCDCs and Sub-national Administration: The strategy i s based on a phased approach that recognizes that NSP has some short-term goals. Linkages with sub-national government should not act as bottlenecks to the quick and efficient approval and financing o f CDC plans. The strategy also recognizes that government i s inthe process o f developinga number o f programs to strengthen sub-national administration (such as the NABDP)and also to improve service delivery insome key sectors such as health and education. The NSP therefore mustbe flexible to adapt to these evolving programs; and the program shouldnot inadvertentlyduplicate, or create perverse incentives that undermine the objectives o f other programs. 53. The strategy to be usedby NSP has three dimensions: 0 Encouraging CDCs to create a demand for better services from sub-national government (district andor provincial). 0 Encouraging CDCs to use their allocationo f direct block grants (particularly the Zndand 31d year allocations) to leverage additionalresources from provincial and district levels through the budgetary process. 0 Encouraging CDCs to monitor the quality and timeliness o f service delivery providedby sub-national government. 54. The strategy will be implementedintwo phases. The first phase covers a short-term period o f about one to two years. The second phase covers the period after that. 55. Phase 1: MRRD/Oversight Consultant representatives based inthe provinces will provide the summary Community DevelopmentPlans o fCDCs (drawn from their MIS)to the district level 13 representatives o f each ministryand also the District Administrator (Woluswal)on an annual basis, so that this information can be provided to line ministries intime to informthe annual budget exercise. At the district level, these plans will be provided for informationpurposes only and no direct action i s requiredon the part o f district officials inapproval o fplans or in fundtransfer to CDCs. However, district officials may use this informationto coordinate the efforts o f aid agencies operating or planningto operate inthe district inquestion. 56. Phase 2: After CDCs have developed some experience in implementingtheir plans and managing funds, they will be encouragedto be more proactive indemanding services from district government and inmonitoring the quality o f services delivered at the village level. Specifically: 0 CDCs ina given district will be invited (by Facilitating Partners) to coordinate. This would enable them to exert greater voice on district level government to demand specific improvements inservices. CDCs can determine whether to use their 2ndand 3rdyear allocations individually, or as coordinatingentities, to leverage additionalresources from district or provincial government. CoordinatingCDCs could leverage resources for possible large scale investments such as roads linkingvillages or towns. CDCs will be asked (by FacilitatingPartners) to provide quarterly monitoring reports to district officials o f the Ministries o f Educationand Health. The reports will be simple and will essentially report on attendance o fteachers and healthprofessionals and availability o f text books, teaching materials and medicines. Report formats (e.g. Report Cards) will be developed by MRRDincollaborationwiththe Ministries o f Education and Health. 57. The modalities o f implementing the above strategy will be adapted based on lessons learned duringimplementationo f the NSP. Implementationinhighriskareas 58. The extent to which the NSP will be able to assist communitiesthroughout the country i s critically dependent on the security situation. Security remains problematic throughout large parts ofthe country due to the limited extent o f government authority, and aid agencies face three different lunds o f threats, namely from crime, inter-warlord rivalries, and opponents to the transitional government (primarily from Taliban and the Hizb-e Islami). Since the summer o f 2003, attacks by Taliban have increased inthe South and East, and aid agencies have been explicitly targeted as allies of the transitional government. 59. The deteriorating security situation may result in suspension o f operations by Facilitating Partners inparts (or ina worst case scenario, most) o f the South and East. The options for operating inhighrisk areas o f the country are limited. Some FacilitatingPartners operating in these areas report constraints because they are not able to reach all villages due to security concerns. These FacilitatingPartners use facilitators recruited from the district, who seem to be at less riskthan staff from outside the district. However, in some situations FacilitatingPartners are unable to monitor the work o f these staff raising concerns about the quality o f the planning, approval and monitoring processes. 60. Indistricts where FacilitatingPartnerscannotberecruited, or mayhaveto pullout due to security risks, MRRDhas proposed to manage the implementation o f the programby directly advertising and recruitingmanagerial staff and facilitators. This staff would be placed with a FacilitatingPartner for two months to receive practical training inparticipatoryplanning processes and the rules and procedures o f the NSP. Teams o f trained individuals for a particular district would then be establishedby MRRDand deployed. 14 61, Finally, inareas where security risks are particularly high,MRRDwould consider an alternative approach to provide resources for reconstruction or development activities to communities, which would not call for compliance with NSP appraisal requirements, and which would be financed from other sources. 2. BudgetandCo-financing 62. Programand proiect budget: The goal o f the Government i s to scale-up the National Solidarity Programto cover all the estimated 20,000 villages inthe country within a four year time frame. Total fundingrequirement over the four year period are estimated at aroundUS$781 million (Appendix 3). Fundingrequirements for the first year o fthis program are estimated at close to US$161million. 63. The proposed Emergency National Solidarity Project i s for three years, but ifrequired, IDAwould provide its entire contribution for the first year ofthe program. The project would be funded by an IDA Grant o fUS$95 million and by co-financing from other donors for approximately US$65 million. A number o f donors have committed to support the balance o f US$65 million for this project. 64. Implementationconstraints may not allow the program to actually disburse funds at the pace desired by the government. Therefore, the IDA-supported project has an expected completion date o f September 30,2006, with the expectation that funds may disburse much faster. 65. The Afghanistan Reconstruction Trust Fund(ARTF)represents one mechanismfor cofinancingo f the NSP. The ARTF i s one o f the main instruments available to the Government o f Afghanistan to finance key recurrent expenditures (salaries, capital expenditures, operations and maintenance o f key government institutions), as well as finance urgent investments and reconstruction activities plannedinthe country's economic recovery program. The ARTF can either finance free-standing projects or co-finance IDA or other Donor funded projects. However, donors have expressed concern about ARTF as a mechanism for cofinancing o f NSP, since they can not `earmark` their contributions for a specific activity inthe legal agreement. Modalities have been developed by IDA, as ARTF Administrator, to allow donors to express preferences for a priority program or project includedinthe Government multi-year development budget, and for which the Government has requestedARTF funding. To maintain the integrity and principles underlying a multi-donor Trust Fund, the ARTF cannot be used exclusively for the purpose o f financing specific programs or projects. Donors who express a specific preference are expected to also contribute to the general allocation. The amount for which the preference is being expressed cannot exceed 50% of the donor's total contribution ina given Afghan Fiscal Year (Solar Year - SY). Ina non-legally bindingside letter to the Agreement, IDA will communicate its confidence that ARTF will fund the designatedprogramup to the amount expressed by the donor, and this amount would be transferred from the general fund to the specific project fund. 66. The government's preferredco-financing mechanism would bejoint cofinancing under an arrangement where funds from different donors are channeled through the Treasury. 3. Procurement 67. Procurement under the project will be carried out inaccordance with the "Guidelines for Procurement under IBRDLoans and Credits" (January 1995, revisedinJanuary and August 1996 and September 1997 and January 1999) and "Guidelines for Selection and Employment o f Consultants by World BankBorrowers" (January 1997, revisedinSeptember 1997, January 1999 15 and May 2002). Procurement o f goods, works and services will follow IDA approvedktandard documents (see Appendix 1for details on procurement arrangements). 68. The Community Grant Component consists o fblock grant allocations that contribute to the planned coverage o f the country's estimated 20,000 villages over a four year period. The block grants will be used for community infrastructure, human capital development activities, self-help savings and credit schemes for women and disabled, and asset transfers for vulnerable women and disabled. The physical work will be described inthe approved sub-project contracts. 69. Works will be implementedby community organizations through a community-driven process, incompliancewith para. 3.15 o f the Bank Guidelines. 70. Goods estimated to cost more than US$200,000 or equivalent per contract will be procured through IntemationalCompetitive Bidding. Intemational Shoppingwill be allowed for contracts for goods estimated to cost less than or equivalent to US$200,000 per contract, and National Shopping for contracts estimated to cost less than or equivalent to US$lOO,OOO per contract. Direct Contracting will be used for goods estimatedto cost less than or equivalent to US$lO,OOO per contract. 71. All contracts for goods estimatedto cost the equivalent o fUS$200,000 or morewillbe subject to the IDA'Sprior review. 72. Incases, whereFacilitatingPartnersmayhavetopulloutofdistrictsdueto securityrisks, MRRDwould attempt to directly advertise andrecruitindividuals for implementationsupervision and facilitation as "Service Delivery Contractors". Facilitators recruitedfrom the districts in question would be requiredto have the minimumqualifications o f basic literacy and basic arithmetic skills. 73. Under the component for extemal monitoring and evaluation services, services o f firms estimated to cost US$200,000 or more per contract will be procuredfollowing Quality and Cost Based Selection. Services o f firms costing less than US$200,000 will follow the Consultant Qualification method, and individual consultants will be selected on the basis o f their qualifications for the assignment, in accordance with Section V o f the Consultants' Guidelines. 74. Consulting services contracts estimated to cost the equivalent o f US$lOO,OOO or more for firms and US$50,000 or more for individuals, and any selection o f consultants on a Single-Source basis will be subject to the Bank's prior review. 75. The Facilitating Partners already worlung under ECE&PWP will be continuing under the project selected on a Single Source Basis. Their contracts are performance based, renewable on an annual basis. Incase the performance o f any o f the FacilitatingPartners i s not found satisfactory upon annual evaluation, the contract with that Facilitating Partner will not be extended further, and a replacement would be done through selection o f another FacilitatingPartner following the Quality- and Cost-Based Selection method. The Oversight Consultant was recruitedthrough international competitivebiddingfollowing the Quality Based Selection Method. Inthe event o f replacement, the same method o frecruitmentwill be followed. 4. FinancialManagement,Disbursement, andAudit 76. Through the engagement o f the FinancialManagement Agent, the government i s ina position to ensure proper accountingfor local payments. Inaddition, the government has also put inplace aGrant Management Unitto manage and coordinate all donor projects, anda Cash 16 Management Unitto undertake accounting for all income and manage cash resources under the officer incharge o fthe Treasury at Ministry o f Finance. The government has also engaged the services o f an international firm o f auditors to assist the Government's Auditor General in satisfying the donor community regarding audits. These measures reflect the Government's commitment to transparent and accountable financial management. 77. MRRDhas initiatedreforms ofthe ministry'sadministrative andfinancial functions (including procurement and finance), appointment o f financial and procurement advisers, an ongoing review and modification o f financial management and audit arrangements as well as disbursement systems, and training o f staff at nationaland provincial levels infinancial management and procurement. 78. FundsFlow: The project will be executedbyMRRDwith support from an internationally recruitedOversight Consultingfirm. A key task o f the Oversight Consultant is management o f disbursement o fblock grant funds, which constitute the largest component under the project. To enable this, a specific designated account has been established for block grant funds under management o fthe Oversight Consultant. Inaddition, a Special Account will also be opened at the D a Afghanistan Bank (DAB) and, except for direct payments, this will be the main conduit for payments for goods and for consultant services related to external monitoring and evaluation. In case o fpayments to international firms (incl. NGOs and Oversight Consultant), direct payments can be requestedthroughthe Grant Management Unito f MoF. 79. Responsibilities: The Grant Management Unitwithin M o F has the mainresponsibility for preparingwithdrawal applications, taking steps to transfedmake payments, undertake accounting, reporting, and obtaining audit opinions. At the same time, MRRDhas a Chief Financial Officer who i s responsible for all these activities andwho will support the GMUinfulfillingthese responsibilities. The ChiefFinancial Officer i s also responsible for ensuring that proper financial procedures are followed inthe implementation o fthe project. 80. Accounting Policies and Procedures: The Project will follow standard Afghan government financial managementpolicies and procedures, including use o f the Chart o f Accounts developed bythe Financial Management Agent to recordproject expenditures. The use o fthese procedures will allow for adequate recording andreportingo fthe project expenditures. 81. Overall project accounts will be consolidated centrally inMoF's GMUfor all implementing entities, and consolidated Project financial statements will be prepared for all sources and uses o f project funds. To support this, the financial management department inMRRDhas been strengthened, an accounting system has been set up for the whole ministrythat also includes the NSP, and a detailed accounting system i s set up and maintainedby the Oversight Consultant for block grant funds as well as the consultant's fee. 82. Audit Arrangements: The project accounts will be auditedbythe Auditor General with the support o f the Audit Agent with terms o freference satisfactory to IDA. The annual project financial statement to the Association would include a summary o f funds received(showing funds receivedfrom all sources), and a summary o f expenditures shown under the main Project components/activities and by main categories o f expenditures. 83. A fullassessmento ffinancial management, disbursement andaudit arrangements has been undertaken and the arrangements envisaged for the project are detailed inAppendix 2. 17 E. FINANCIAL AND ECONOMICJUSTIFICATION 1. ProjectBenefits 84. It ispremature to calculate economic andfinancialbenefits insuch a disrupted environment. For this reason the NSP will collect detailed monitoring data to enable an evaluation to make realistic assessmentso f the expectedreturns on individual subproject investments. Cost data reported by NGOs worlung inAfghanistan suggests that the small-scale village investments proposed under the NSP will have a positive return. 85. Beneficiaries o fthe NSP are expected to be the country's poor and near-poor. Sub-project choices by villagers are expected to include physical infrastructure and revolving funds. In addition, direct asset transfers (e.g. tools and equipment for income generation activities) are permitted for vulnerable women and disabled people, and the use o fblock grants for microfinance and income generation activities i s being assessedand may be eligible under the project. Experience inother countries suggests that approximately 60-70 percent of program funds retum to local labor, and virtually all o f the benefits from the physical works accrue to primary producers. 86. Total delivery costs for the program including costs o f Facilitating Partners, Oversight Consultant, MRRDmanagement, training, and M&E are expected to amount to about 20 percent o f costs. This i s comparable to similar projects inother countries. Giventhe circumstances o f Afghanistan, ifrequired, it would bejustified that an even larger proportiono f the budget be used to cover delivery costs inorder to mitigate risks o f capture and to ensure quality o f the program. A reduction o f delivery costs would be sought for subsequent phases o f the NSP. 2. ProjectRisks 87. The context for the NSP o fvarying government authority inthe rural areas, a factional mode o fpolitics and clientism at the village and supra-village levels, warlord rivalry and Taliban resurgence insome areas, and low paid government officials who may receive salaries on an irregularbasis, all contribute to create substantial risks for boththe program at large and for the IDA supported project. Specific risk andproposedmitigation measures, some o fwhich are elaborated elsewhere inthis Technical Annex, are listedbelow: Risk Mitigationmeasures Elite capture o f External facilitation o fthe establishment o f CDCs through secret ballot and the benefits participatory sub-project planningprocess. Focus onpublic rather than private goods, and transparency inbudgeting and the use o f block grants by communities. Corruption Same as above, as well as financial management arrangements where MRRD, FacilitatingPartners, and Oversight Consultant staff do not handle cash. Transparency will be further promotedby the involvement o f the press in monitoring o f the program. Delays inblock Transfer o f funds and disbursement for approved community projects will be grant managed by the Oversight Consultant, initially through the Hawala system until disbursement it is determined on a caseby casebasis that a functioningbanking system is established at the provincial level. Decreasing Current strong support for NSP among cabinet members could seriously political weaken inthe event o f changes inpolitical leadership. A strategic analysis o f support for options for governance and management o fthe NSP will be undertaken to NSP implement institutional arrangements that promote the continuity and integrity of the program. Decreasing Deteriorating security conditions may prevent operations inspecific areas. security Where this happens, and if feasible, operations may be shifted to other districts within the sameprovince (as has already happenedinthe provinces o fZabul, Paktika, and Uruzgan). Perceptions o f Deteriorating security conditions as a result o f Taliban re-infiltration may inequitable require suspension o f operations inthe south and east, which would inturn ethnic coverage foster perceptions o f inequitable ethnic coverage. Proposed mitigation measures include direct implementationby MRRDo fcommunity development activities that would not have to comply with NSP appraisal requirements, and that would therefore be financed from other sources. 3. AlternativesConsidered 88. Approach and scale: The project is a follow-on project to the ECE&PWP. The Community Empowerment component of the first project has supported the establishment o f a methodology for community driven planning, prioritization, implementationand subsequent operation and maintenance o f sub-projects. This methodology i s derived from a series of consultations involving MRRDand Facilitating Partners, and draws on the decade-long experience o fthese partners with implementationo f CDD-typeprojects inAfghanistan. Duringthe appraisal o f the project, considerable time was spent with MRRDto refine and simplify the approval and funds flow mechanisms. 89. Two alternatives were considered duringappraisal o f the project: (i) financing the sub- projects identified by CDCs usingsimilar approaches to those financed under the Public Works component o f the ECE&PWP; and (ii) reducingthe scale o f operations o fthe NSP. 90. The first option was rejected because the public works component includes financing o f larger public goods (road rehabilitation) that are implementedthrough contractors procuredthrough National Competitive Bidding(NCB) by the government. However, an approach that relies on public works contractors directly contracted by the government (as opposed to beingcontracted by the communities) would be inconsistent with the specific objective o fNSP to improve local governance through transparent collective action. Improving local governance requires that the CDCs are in-charge of implementing subprojects that they themselves have identified, and are in charge o f any contracting required to undertake the implementation. 91, The second option was rejected given the need for rapid coverage across the country, the needfor development assistance to be perceived as being equitable by covering all provinces, and the needto limit the proportion o fprogram delivery costs vis-&vis block grants to be disbursed to communities (a reduced block grant fundwould translate ina higher proportion o f delivery costs). Initialprogress under the first project indicates that community demand for the NSP i s high. This i s witnessed by the rapid increase inthe number of CDCs that have been elected duringthe last few months. 92. Lastly, given that the project is a follow-on project, it was consideredprudent not to make major changes inthe participatory approach, implementation modalities, or choice o f funding instrument. Any change at this juncture would carry significant risks because most o f the Facilitating Partners have already started working with communities and have started explaining the rules and procedures of the project as part o f forming CDCs and preparing sub-project proposals. Changes would have resulted inboth the Government and the FacilitatingPartners losing credibility with the communities with whom they are working. 19 93. POPPYeradication: Afghanistanhas emerged as the world's largest opiumproducer, with productionlast year estimated to be around 3,600 tons.' An estimated 200,000 families cultivate poppy providing an annual net income o f around US$2,500 per family, and wage rates for the estimated 1million daily laborers involved duringpeak periods go as highas USSlO per day. Thus, poppy cultivation plays a major role inthe Afghan economy, and a recent reportbythe IMF suggests that the opium drugbusiness accounts for 40-60% o f Afghanistan's GDP." The opium drugbusiness t h v e s ina fragmentedpolitical setting, and there are serious grounds for concern, that those who profit from this business would have a vested interest inunderminingthe governments state buildingefforts, or would command sufficient financial power to influence the elections planned for 2004. 94. The government, with support from donor agencies, i s currentlypreparing an operational strategy for poppy eradication. The strategy may include usingpriority sub-programs such as NSP as part o f a package o f incentives to eradicate poppy. 95. Experiences from the early nineties onwards with the use o f community development projects as incentives to wean farmers from poppy cultivation demonstrate that no single development program can be expected to provide sufficient incentives for farmers to abandon poppy production. However, if supplemented by effective enforcement o f a ban onpoppy cultivation, the cumulative effect o f different development programs may play a positive role as part o f a package o f incentives aimed at providing alternative livelihoods to farmers currently engaged inpoppy production." Ifthe findings o fthe current assessment (paragraph 27 above) o f the scope for usingblock grants for microcredit and income generation activities supports a simple and replicable methodology, this would add another element to a package o f development incentives that incombination with effective law enforcement, could support alternative economic growth and employment. 96. Disarmament, Demobilization. and Reintegration (DDR): Started in September 2003, the government's DDRprogram aims to support the demobilizationand reintegrationo f an estimated 100,000 to 200,000 former soldiers and combatants into the civilian economy. The option o f using the NSP as an instrument to support the DDRprogram has been considered. The block grants furnished by the NSP for community projects will provide direct employment and stimulate economic recovery which will contribute towards creating a setting conducive to reintegration. A more direct linkage could be established ifthe DDR or another program establishes training to buildcapacity among former soldiers and combatants as artisans withinthe constructionsector or to undertake small-scale contracting. However, a direct area targeting to accommodate the DDR program would dilute the ongoing implementation o fNSP, since the NSP target districts have already been selected on the basis o fthe Vulnerability Assessment Map and refugee return data, and implementation has started inthese disticts.I2 9 The Opium Economy in Afghanistan -An International Problem, UN,New York, 2003 lo Islamic State of Afghanistan: Rebuilding a Macroeconomic Frameworkfor Reconstruction and Growth, IMFCountry report No. 031299, September 2003 11 See MRRD's strategy paper titled Counter narcotics and Disarmament, Demobilization, Reintegration: Alternative Livelihoods Interventions Strategy, November 2003. 12 The Vulnerability Assessment Map (VAM) is compiled by World FoodProgramas an instrument to access and map food insecurity. Under MRRD'sleadership, and with assistance from the World Bank and other actors, the World Food Programhas broadenedthe 2003 assessment to include other dimensions of vulnerability and has moved from an income to a consumption focus. 20 F. ENVIRONMENTALAND SOCIAL SAFEGUARDS 1.Environmental and SocialImpacts and Safeguards 97. Sub-projects may comprise small-scale civil works which are not expectedto have any significant negative environmental or social impacts. The Environment & Social Safeguards Framework (Appendix 8) will be operationalizedthrough the project's arrangements for implementation, monitoring, and capacity building. Interms o f social impacts, the project falls in the S-3 category o fthe Framework's Guidelines for Land and Asset Acquisition, Entitlements, and Compensation, and it has a "B" environmental rating. 98. Environmental impacts: Activities envisaged under the project are not expected to entail negative environmental and social impacts, providedthey are designed and implementedin accordance with the design and mitigation guidelines inthe Framework. Certain types o f investments with negative environmental or social impacts cannot be undertaken and are included ina negativelist o fprohibitedinvestments. 99. Landacquisition: N o land acquisition i s anticipated. Inthe current socio-political context inthe rural areas, involuntarylandacquisition basedonthe state's eminent domain isunlikely for the kmdof small-scale activities that will be undertaken under the project for two reasons. The first is, that local authorities do not have access to funds to purchase land or other assets ifland acquisition were to be undertaken. The second is, that the political costs (interms o f opposition from affected landowners/users) would inall likelihood deter the government apparatus from attempting to acquire any land against the will o fthose affected. Ifany minor areas o fland would be needed for a project (e.g. realignment o f an irrigation canal, or land for a school), such land could only be obtained through either private voluntary donations, compensation paid by the community (i.e. transaction between willing buyer-willing seller), or from available government land. Private voluntary donations and community purchases would be documented as requiredby the Framework, and for government land, documentation would be needed that the land i s free o f encroachments, squatters or other encumbrances, and has been transferred to the project by the authorities. 100. Ethnic minoritv aoups: The design for the project defines a strategy, which will ensure that ethnic minority groups are included as beneficiaries, and that their concems are addressed in compliance with the requirements o f OD 4.20 on Indigenous Peoples. The key elements o f this strategy are (i) project is national in scale and coverage, and consequently reaches all the the country's different ethnic groups, (ii) the facilitated participatoryplanning process at the community level includes an approach for electiono f CDCs, which will provide for representation o f all sub-groups inthe community, (iii) both internal monitoring and external independent evaluation will assess the inclusiveness o f CDCs and thus provide information that would constitute the basis for corrective actions, ifnecessary, and (iv) independent monitoringby civil society (NGOs and the press) will provide another mechanism to identify cases where ethnic minority groups would have beenbypassed or marginalized. 101. Cultural property: Chance finds duringimplementation o f sub-projects involving civil works will be reported to the provincial or district governors, who then will inform the Archaeological Committee. 102. Compliance with the safeguardprovisions and the negative list will be ensured through an environmental, social and mine risk screeningprocedure (check lists) required for sub-project proposals, and by internal input,process, and output monitoring, independent external monitoring by consultants, andby Bank supervision missions. 21 103. Consultation and Disclosure. The Environmental and Social Safeguards Framework will be disclosed by the government inboth Dari and Pashto, as well as English,and it will also be made available at the World Bank's Infoshop. Extensive consultations have beenheld with the FacilitatingPartnersregarding the NSP approach and implementation arrangements. Sub-projects will involve consultations withinthe communities regarding(i) holding o f secret ballot the elections for representative CDCs, (ii)prioritization o fcommunity needs, (iii) identification o f projects corresponding to these needs, (iv) development and costing o f sub-project plans, and (v) arrangements to ensure disclosure o f budget and expenditures. The following information on the project would be posted on the government's web-site: summaries o f quarterly NSP implementationprogress reports, summaries o f annual project financial statements and audit reports, and summaries o f findings from monitoring and supervision teams (after a reasonable period allowed for internal review). 2. Land Mine RiskManagement 104. Sub-projects will not be implementedwithout appropriate mine riskmanagement based on the procedures defined for community rehabilitatiodconstctionworks inthe Proceduresfor Mine Risk Management in WorldBank Funded Projects in Afghanistan (Appendix 9). 22 APPENDIX1 PROCUREMENT ARRANGEMENTS A. GENERALDESCRIPTION 1. The project would support the Transitional Islamic State o f Afghanistan's (TISA) National Programfor Reconstruction, bypromoting three o f its key elements, namely the use o f assistance to create conditions for people to live secure lives and buildhuman capital, physical reconstruction, and private sector development. This project i s a follow-up to the community drivendevelopment (CDD) component o fthe Emergency Community Empowerment &Public Works Project (H009)(ECE&PWP). The project i s expected to achieve its objective through laying the foundations for a long-term strengthening o f community level govemance, and to assist the reconstruction and development o frural communities through a program framework, that can form the basis for future development interventions by the state at the village level. The expected outcomes would be (i) the establishment o f a framework for village level consultative decision making and representative local leadership as a basis for interaction between communities on the one hand, and the government and aid agencies on the other, and (ii) local level reconstruction, development, and capacity buildingwhich will leadto a decrease inpoverty levels. 2. The goal o f the Borrower i s to scale-up the National Solidarity Program (NSP) to all the villages inthe country within a four year time frame. The indicative fundingrequirements to achieve this goal are presentedinthe table below: Table 1:ProgramFinancingSummary (US$ millions) 100% coverage Jan-Dec 04 'Jan-Dec 05 Jan Dec 06 JanDec07 (US$ million) (US$million) (Z'SS million) (US$ million) Component 5: IncrementalOperatingCosts 0.6 0.6 0.6 0.6 Total (period) 160.7 247.6 258.8 113.9 Total(Cumulative) 160.7 408.3 667.1 781 3. The NSP would be funded through an IDA Grant o f US$95 million extending over a three year period(Closing Date o f September 30,2006). 4. The project will finance four components: Component 1: Grants for Community Projects (IDA:US$72.32 million) Component 2: Goods (IDA: US$l.l million) Component 3: Consultant Services and Training (IDA:US$18.38 million) Component 4: External Monitoringand Evaluation (IDA: US$2 million) 23 Component 5: Incremental Operating Costs (IDA: US$1.2 million) B. PROCUREMENT METHODS 5. Procurement under the Project will be carried out inaccordance with the "Guidelines for Procurement under IBRDLoans and Credits" (January 1995, revised inJanuary and August 1996 and September 1997 and January 1999) and "Guidelines for Selection and Employment o f Consultants by World Bank Borrowers" (January 1997, revisedin September 1997, January 1999 and May 2002). Procurement o f goods, works and services will follow IDA approvedstandard documents. Component 1:Grantsfor Community Sub-projects 6. The community grant component consists o f Block Grant allocations to the country's estimated 20,000 villages over a three to four year period with the goal to establish a recurrent block grant allocationfor all village communities. One block grant (budget) will be allocated to each community at a rate o fUS$200per family with an upper limit o fUS$60,000 per community. This allocationrequires that the community develops one or more eligible project proposals within the framework o f the block grant allocation and its own contributions. The block grants will be used for community infrastructure, human capital development activities, self-help savings and credit schemes for women and disabled, and asset transfers for vulnerable women and disabled. The physical work will be described inthe approved subproject contract. 7. Sub-projects (goods, works and services) will be implementedby community organizations through a community-driven process, incompliance with paragraph. 3.15 o f the World Bank Guidelines, and will adopt the following methods: Execution o fthe sub-project (works) by the communities themselves by employing labor and byprocuring the neededmaterials, following the community procurement procedures detailed inthe ProgramOperational Manual ;or Award the sub-project (services) on Single-Source basis to community organizations or NGOs, following the procedures detailed inthe Project Operational Manual; or Award the sub-project (works), estimated to cost not more than $5,000, to qualified domestic contractors upon inviting quotations from at least three qualified domestic contractors, following the procedures detailed inthe Program Operational Manual; or Award the sub-project (works), estimated to cost $5,000 equivalent or more, through competitivebidding,advertised locally, inaccordance with the procedures detailed in the ProgramOperational Manual (the threshold o f $5,000 will be reconsidered after 6-12 months to assess whether it can be raised); or Procure goods under contracts awarded on the basis o fnational shopping procedures, as detailed inthe Program Operational Manual. 8. Incaseofemergencies or to complete any unfinishedworks without disruptingother ongoing operations, the Force Account methodmay be applied. Component2: Procurementof Goods 9. The procurement o f goods will consist o f office supplies/equipment, communication equipment, computers and vehicles. InternationalCompetitive Bidding(ICB), InternationalNational Shopping (ISNS) and Direct Contracting (DC) procedures will be used. 24 10. InternationalCompetitive Bidding:This will be used for goods estimated to cost more than US$200,000 or equivalent per contract. 11. International Shopping: This will be usedfor goods estimatedto cost less than or equal to US$200,000 equivalent per contract. Under Shopping procedures, simplifieddocuments and procedures will be used for soliciting, receiving, and evaluating competitive quotation from usually at least three suppliers from two different counties. Inview o f the nature o f this emergency operation, the threshold i s set higher than normal limit o f US$lOO,OOO. 12. National Shopping: This will be used for goods estimatedto cost less than or equal to US$lOO,OOO equivalent per contract. Under Shopping procedures, simplified documents and procedures will be used for soliciting, receiving, and evaluating competitive quotation from usually at least three suppliers. 13. Direct Contracting (DC) Procedures: This will be used for goods estimated to cost less than US$lO,OOO equivalent per contract. Component 3: Consultants' Services & Training 14. As already mentioned, the project is a follow-up to the community driven development (CDD) component o fthe Emergency Community Empowerment & Public Works Project (H009)(ECE&PWP). The communities are being supported by Facilitating Partners (NGOsplus UN-Habitat) inthe election o f Community Development Councils, planning and implementation o f sub-projects, and capacity buildingon financial management and procurement. Due to urgency, these Facilitating Partners were selected based on the Consultants' Qualifications [the contract value ranges from US$0.26 million to US$ 1.6 million] with IDA'Sapproval. 15. The overall management o f the ECE&PWP by MRRDi s supportedby an intemationally recruitedOversight Consultant, whose key tasks include (i) appraisal o f community sub-project proposals, (ii)fundtransfer and disbursement for approved community sub-projects, (iii) management o frelations with Facilitating Partners, (iv) M&E, and (v) capacity buildingo f MRRDcounterparts. The Oversight Consultant was selected throughQuality-Based Selection method. 16. Contracts with FacilitatingPartners and the Oversight Consultant are performance based, renewable on an annual basis. Based on the performance o fthe oversight firm and the Facilitating Partners, their contracts would be extended, under Single-Source Selection, for continuation o fthe same services under the proposed ENSP 17. IncasetheperformanceofanyoftheFacilitatingPartnersisnotfoundsatisfactoryupon annual evaluation, then the contract with that FacilitatingPartner will not be extended further and a replacement would be done through selection o f another Facilitating Partner following the Quality- and Cost-Based Selection method. 18. Incases,whereFacilitatingPartnersmayhavetopulloutofdistricts dueto securityrisks, MRRDwould attempt to directly advertise andrecruitindividuals, withthe minimum qualifications o fhaving basic literacy and basic arithmetic skills, as "Service Delivery Contractors", from the districts inquestion. The individuals can be placedwith a Facilitating Partner for two months to receive practical training inparticipatory planningprocesses and the rules and procedures o f the NSP. Teams o f trained individuals from a particular district can then be establishedby MRRDand deployed. 25 Component 4: External Monitoring and Evaluation services 19. The project entails consultants' services for external monitoring, evaluation and studies to verify implementation status, assess achievement o fproject objectives/outcomes, and undertake research on specific issues related to programpolicy or implementation. 20. Qualitv- and Cost-Based Selection (OCBS): Services through firms estimated to cost US$200,000 or more per contract will be procured following QCBS. 21. Selection Basedon Consultants' Qualifications (CQI: Services through firms estimated to cost less than US$200,000 per contract may be procuredbased on Consultants' Qualifications. 22. Individual Consultants (IC): Individual consultants will be selected on the basis o ftheir qualifications for the assignment, inaccordance with Section V o f the Consultants' Guidelines. c. ASSESSMENTOF THEIMPLEMENTINGAGENCY'SREADINESSTO IMPLEMENT PROCUREMENTACTIVITIES 23. 0 The Project Procurement Planhas been finalized. 0 The Project Operational Manual including the Community Procurement Procedures has been finalized. 0 The format for draft tripartite contract between community organizations, facilitators, and project unit at the provincial level o f MRRDhas been finalized; 24. Most procurement would take place under the Community Block Grant sub-projects, by the Community Development Councils (CDCs). The community sub-projects would involve small value procurement o f goods, works and services, expected to cost not more than $60,000 per contract, through simple procurement procedures, described inthe Project Operational Manual. The FacilitatingPartner NGOs would provide training to the CDCs on the community procurement procedures. 25. The remainingprocurement would be processed by MRRDwith the assistance o f the Government's central procurement consultant, i.e. Crown Agents at present. The Crown Agent's contract i s valid till August, 2004 and the Borrower has initiatedsteps to select a new central procurement consultant. D. PROCUREMENTPLANNING 26. A detailed procurement plan for the Project has been finalized. Procurement o f goods, works and services shall be undertaken inaccordance with the Plan. Incase o f any modification, the plan shouldbe forwarded to IDA for its prior approval. E. PRIORAND POSTREVIEW 27. All contracts for goods estimated to cost the equivalent o f US$200,000 or more will be subject to the IDA'Sprior review. 28. Consulting services contracts estimated to cost the equivalent o f US$lOO,OOO or more for firms and US$50,000 or more for individuals, and any selection of consultants, on a Single- Source basis will be subject to the Bank's prior review. 26 29. Except for the above, all other contracts would be subject to post-review on a random basis duringsupervision missions and audits. 30. Due to the nature o f the operation under the project, the majority o f contracts will be below prior review limits. It i s expected that the project will have about 4,100 small value sub- projects. The project provides for audits to be conducted by independent auditors to be hired by ministries or the Control and Audit Office (the Audit Agent o f the Government) for expenditures incurred as well as asset verification. Inaddition, the projectprovides technical audits by independent consultants for community construction works on a sample basis. The normal Bank requirement o f ex-post review o f one infive contracts for a high-riskproject cannot be achieved inthisproject due to resourceandtime constraints.Giventhe sheernumber ofcontracts envisioned inthis project, the Bank's resource constraints, the mitigating effect o f the self-audit and technical audits mentionedabove, we would consider the "benchmark" review level o f 1in5 contracts to be excessively large for this type o f emergency operation. However, MRRDhas agreed to conduct these post-award audit reviews through an External Monitoring & Evaluation Consultant for a sample o f sub-projects and furnishthe reports to IDA. The Bank will review samples o f these reports as per the regional guidelines. Inaddition to a review o f the independent self-audit reports called for inthis project, Bank staff will conduct post-award reviews during supervision missions. F. PROCUREMENT INFORMATION 31. MRRDwill submitquarterly ProcurementStatus Reports to the Bankwithintwo weeks o f the start o f the next quarter inthe format which will be provided by the Bank. The . Procurement Status Reports will indicate: number o f contracts signed so far, contract amounts, contractor's/supplier's/ consultant's names, deliverylcontract completion dates; revisedcost estimates for contracts yet to be processed; and, revisedtimings o fprocurement actions including advertising, bidding, contract award, and completion. G.ProjectCostsbyProcurementMethods 32. The project categories, their estimated costs, and proposed methods o f procurement are summarized inthe following tables. Expenditure ProcurementMethod TotalCost Category ICB NCB Others NBF Sub-project Grants 0.0 0.0 674.62 0.0 674.6 (0.0) (0.0) (72.32) (0.0) (73.52) Goods 0.9 0.0 0.43 0.0 1.3 (0.8) (0.0) (0.3) (0.0) (1.1) Consultants Services I 0.0 0.0 95.g4 0.0 95.8 27 and Training (0.0) (0.0) (18.38) (0.0) (18.38) Extemal Monitoring 0.0 0.0 7.0 0.0 7.0 and Evaluation (0.0) (0.0) (2.0) (0.0) (2.0) Incremental 0.0 0.0 (1.8) 0.0 (1.8) Operating Costs (0.0) (0.0) (14 (0.0) (1.2) Total 0.9 0.0 777.8 0.0 778.7 (0.8) (0.0) (94.20) (0.0) (95.0) Table3: Consultant SelectionArrangements (US$ millionequivalent) 'Figures inparenthesisare amounts to be financed out of IDA Grant. All costs includecontingencies. 'Includes civil works, goods, and servicesto beprocuredout of ForceAccount andthroughcompetitivebidding, nationalshopping, direct contracting, communityparticipationand single-sourceselectionofNGOs. 31ncludesgoods procuredusingIntemationaU"tiona1 ShoppingmethodandDirect Contracting. 4Referto Table 3 for details. QCBS = Quality-andCost-based Selection; QBS = Quality-basedSelection; SFB = Selectionunder aFixedBudget; LCS= Least Cost Selection; CQ= SelectionBasedon Consultants' Qualifications; Other includesSingle-Source selectionmethod, Individual Consultants. All costs includecontingencies. Table4: Thresholdsfor ProcurementMethodsandPrior Review Expenditure Contract Value Procurement Contracts Subject to Category Threshold Method Prior Review (total value of to be prior review contracts inUS$ million) Goods Less than US$lO,OOO D C Nil Nil Nil All contracts (0.9) us$200,000 28 Expenditure Contract Value Procurement Contracts Subject to Category Threshold Method Prior Review (total value of to be prior review contracts inUS$ million) Consultant Services Firms Equal to or more than QCBS All contracts (15.2) us$200,000 Less than $200,000 CQ All Contracts estimated to cost $100,000 equivalent or more. (1.0) Individuals IC All Contracts estimatedto cost $50,000 equivalent or more (0.2) Total estimated value of prior review contracts (17.3) H.OverallProcurementRiskAssessment 33. Although MRRDhas been executing a number o f donor financed projects, and has contracted an Oversight Consultant to support management o f the NSP including support to and monitoring o f community procurement, the procurement riskhas been appraised as highdue to the post-conflict environment, the geographically remote and dispersednature o fthe works, and the decentralized implementation. Therefore, frequent procurement review missions are proposed (once every four months) duringthe project implementation. 29 APPENDIX 2 FINANCIALMANAGEMENT,DISBURSEMENT, AND AUDIT ARRANGEMENTS Country Issues 1. The World Bank has gained significant experience and understanding o f the financial management issues inAfghanistan from the implementationo f several projects over more than a year. The overall assessment is, that though the country's financial management system i s not fully functional, especially to manage donor projects, appropriate mitigationmeasures, general and project specific, have been introducedinorder to ensure fiduciary financial accountability for the project funds. Inan effort to strengthen key institutions, the IDA i s financing a Financial Management Agent to assist the Ministryo f Finance (MoF), and an Audit Agent to assist the Control and Audit Office. USAID and IndianAid assistance programs are financing consultants/advisors to assist the D a AfghanistanBank (DAB) inlocal as well as foreign currency operations. Strengthsand Challenges 2. Strengths: The characteristics listed below constitute major strengthsthat would help the project meeting challenges related to the financial management: 1. One o fthe greatest strengths o fTISA i s the commitment towards accountability and transparency inits operations, as this provides IDA management confidence inensuring the proper utilization o f funds. The measures to strengthen institutional capacity referred to above reflect this commitment and will help inproper accounting and auditing o f financial transactions. 2. Through the engagement o fthe Financial Management Agent inMoF, the transitional government i s now in a positionto ensure proper accounting for local payments. It i s the responsibility o f the FinancialManagement Agent to provide the necessary support to the TISA inensuring all aspects o f accounting and reporting, including compliance with the necessary fiduciary controls. 3. Inaddition, TISAhasalsoputinplacecertain supplementarymechanismssuchasa Grant Management Unit (GMU) to manage and coordinate all donor projects, and a Cash Management Unit to undertake accounting for all income and management o f cash resources, under the overall management of the Treasury Department at Ministryo f Finance. 4. By engaging the services o fAudit Agent, an international firmo f auditors to assist the Country's Auditor General, TISA i s able to further satisfy the international donor community regardingproper auditing. 5. One o f the specific strengths o f the project i s that this i s a follow-up project, and that it already has a number o f mechanisms inplace which will significantly reduce the preparation time. These mechanisms include 0 MRRDhas initiatedreforms ofthe ministry'sadministrative andfinancial functions (including procurement and finance), appointment o f financial and procurement advisers, an ongoing review and modification o f financial management and audit arrangements as well as disbursement systems, and training of staff at national and provincial levels infinancial management and procurement. 30 0 Appointment o f a ChiefFinancial Officer at MRRD,who i s responsible for financial management tasks related to the project. 0 The contracting o fan Oversight Consultant for implementationand financial management o f grants to village communities, which constitutes the largest portion o f the NSP funds (approx. 75%). 0 The Oversight Consultant's tasks also include management of transfer o fblock grant funds to communities. Inthe absence o f a functioning banlung system at the provincial level, this will initially be done through Hawala operators. This i s an intermediate measure, and when it i s established that functioningbanks exist inparticularprovinces, the disbursementofblock grants to communitieswill henceforth take place through the banking system. Hawala dealers will be selected based on criteria definedinthe NSP Operational Manual. 0 The Oversight Consultant's staff includes a Block Grant Manager, and Financial Management staff i s being engaged for each o fthe provinces, who will be responsible for ensuringthat the financial managementrequirements o f the Operational Manuali s compliedwith ineach o fthe provinces. 0 The project has developed an Operational Manual with a section on `Funds Flow and Financial Management' which covers procedures as well as internal controls o f various aspects o f the overall flow o f funds, the fund transfer mechanism, disbursement to communities, and fundmanagement at the community level. 0 The responsibilities o fFacilitatingPartners (20 Afghan and InternationalNGOs plusUN-Habitat) include facilitation o fcommunitymobilization and sub-project preparation, support for sub-project implementation, monitoring and reporting on mobilization, project preparation and implementationincluding compliance with NSP transparency rules for sub-project expenditures. FacilitatingPartners also provide capacity buildingon simple financial management inbeneficiary communities. 3. Challenges faced by the project regardingfinancial management are: 4. The primary challenge i s the transfer o f funds to almost 6,000 villages duringthe first year o fimplementation, and the issue o f the use o fbankingchannels vis a vis Hawala dealers. Considering that there are no commercial banks operating at any significant level inAfghanistan, most commercial operations are undertakenby DABitself. DABi s currently inthe process o f reviving its operations inthe provinces. However, at present, except for a few large provinces, the revival i s still inits initial stages. Inview o f the lack o fbanlung facilities, the project has opted to adopt transfer o f funds through Hawala dealers. Studies o f the Hawala system havebeen undertaken on behalf o fthe World Bank and IMF. The usefulness o f the Hawala system under the present conditions was recognized, and IDA has accepted this method for transfer o f funds as an transitional measure under circumstances where on functioning banking system exist at the provincial level. The arrangements for usingHawala under the NSP are based on the findings o f these studies. 5. The risks associated with the Hawala operations are mainly relating to (i) potential the use o f the system for money launderingoperations, and (ii) to loss o f funds insuch operations. The risk derivingfrom potential money launderingwill be mitigatedby only usingHawala dealers who are registered with DAB. The riskregardingloss o f funds will be managed through an arrangement as that usedbyNGOs and UNagencies who all rely on Hawalas for money transfers, where all funds to the Hawala dealers will be transferred only after the actual delivery to the destination and after proofo fthe delivery i s provided. (iii) Another riskrelatedto the use 31 o f Hawala dealers i s that there i s often no audit trail left o f transactions undertaken. However, the project has developed systems and documentation to record all transactions ina transparent manner. Under the project, Hawala dealers will perform the role o f fund-transfer agents as an intermediate measure until a functioning banking system i s inplace at the provincial level. The procedures for this are defined inthe NSP Operational Manual. Funds Flow 6. The main component under the project i s community Block Grants for sub-projects. Funds for these grants are transferred by the Oversight Consultant from a DesignatedAccount maintainedby the Oversight Consultant. Fundsto the designated account are transferred through direct payment by the World Bank. Details o f operating the account are given below, under the heading o f Community Block Grant account. 7. All the other components will be funded either through directpayment mode or through payment from a Special Account. The Special Account will be maintainedat the Da Afghanistan Bank. Contracts by MRRDhave already been entered with the Oversight Consultant and with FacilitatingPartners comprisingnational and international NGOs as well as UNHabitat. 8. All direct payments will berequestedthrough Grant Management UnitofMinistryo f Finance. Retroactive Financing 9. No retroactive fundingis envisagedunder the project. Accounting Policies and Procedures 10. For accounting purposes, the Government's budgetingand accounting systems will be used. The Project will follow standard Afghan government financial management policies and procedures, including using the Chart o f Accounts developed by the Financial Management Agent to recordProject expenditures. Ultimately, the GMUwill be responsible for accounting o f all expenditures and receipts inthe Government's accounting system, which will be the basis for preparation o freports to IDA as well as to TISA. 11. The Oversight Consultant has put inplace a computerized, tailor made accounting system for the sub grant component o fthe project. The system will generate both financial monitoring reports (FMRs) and statements o f expenditures (SOEs). While this system has not yet been tested, it appears that it hasbeen designed to record all grant transactions and to generate periodic summary reports for this component (including Financial Monitoring Reports as indicated below). The systemwill be tested only as the first grant operations beginto be recorded during November 2003. 12. Annual project financial statements to be provided to IDA will be consolidated centrally at the GMU. The statements would include a summary o f funds received (showing funds receivedfrom all sources), and a summary o f expenditures shown under the mainProject components/activities and by the main categories o f expenditures. These statements should also disclose a statement o f financial affairs at the end o f the year and describe all major accounting policies used inpreparingthe statement. The project CFO will assist the GMUinthis regard. 32 13. GMU, which is responsible for the accounts o fthe Grant projects, hasnow been managing a number o f Grant/Credit projects for last 9-10 months and has sufficient experience to handle such accounting andreporting responsibilities. Ithas also developed procedures and systems, which are inplace to ensure a systematic process o f disbursement. However, there are still certain weaknesses inaccounting o f expenditures on a day to day basis, and these needto be worked on by the Financial Management Agent on a priority basis. It i s expectedthat the GMU will have a proper accounting system inplace to ensure day to day accountingbefore the project becomes effective. Reporting and Monitoring 14. GMUis responsible for reportingto IDAunderthe overall supervisiono fMoF, and with assistance o f the Financial Management Agent. However, it will be the responsibility o f the project CFO to facilitate this process. One o f the reportingrequirement is submission o f FinancialMonitoring Reports (FMRs) each semester. The reports will be preparedby the CFO and forwardedto IDA through the GMU. It i s important that the reports are generated from the financial management system available at MRRD. The Bank's guidelines for FMRs have been provided to CFO-MRRD and the Oversight Consultant. and it has been agreed that, usingthe examples inthe guidelines as basis, the project will need to design formats proposed for FMRsby the time o fnegotiations. GMUshould also be consultedwhile finalizing these formats. 15. Itwill bethe responsibility o f GMUto ensure that the informationas contained inthe reports i s inagreement with the information as per its FMS system. FMRs should show: (i) sources and uses o f funds by disbursement category and project component; (ii) o f status procurement activities; and (iii)physical progress. These will be submitted to the Association within 45 days o f the end o fthe semester. Guidelines for borrowers on FinancialMonitoring Reports on World Bank-Financed projects are available at the World Bank office. 16. Monitoring o f Outputs and Achievements: The project has a component for independent external agencies to monitor the processes and results o f the project implementation. It i s essential that the team contains Financialmanagement expertise who examines the effectiveness o f FMprocesses being undertaken and comment upon improvements required inthese processes particularly relating to the management o f Block Grants. 17. Formats have been designed for the Oversight Consultant's reporting on Statement o f Expenditures, Advances on Block Grant Funding, and Three MonthEstimate for Block Grant Disbursements. These formats are part o fthe contract between MRRDand the Oversight Consultant. Inaddition, formats have been developed for progressreportingon the process and outputs o f community projects for boththe Oversight Consultant and FacilitatingPartners (see Attachment 1and 2 inAppendix 7). Staffing and Training 18. The project CFO, who is placed at MRRD,i s inoverall charge o fthe execution o f detailed financial management tasks, including accounting, periodic reporting, establishment o f appropriate intemal procedures and controls to ensure that project funds are utilized for the purposes intended, preparation o f annual financial statements, and organizing audits in compliance with the audit requirements under the Grant agreement. H e will function inclose coordination with the Block Grant Manager o f the Oversight Consultant. As part o f the Oversight Consultant's staff, the project will have a Finance Officer at the provincial level, who will be responsible for ensuring compliance with financial management requirements for the NSP ineach 33 province. The Oversight Consultant's Block Grant Manager and the project CFO will ensure that adequate training i s provided to these officers to enable them to undertake their responsibilities successfully. 19. At the GMUlevel, as the number ofprojects increase, and its overall capacity is under pressure and M o F should undertake an assessment o f GMU's workload to ensure that adequate staff i s available to manage its responsibilities effectively. Audit Arrangements 20. The accounts o f the Project will be audited by the Auditor General, with the support o f the Audit Agent, with terms o freference satisfactory to the Association. The audit o f the project accounts would also include an assessment of: (a) the adequacy o f the accounting and internal control systems; (b) the ability to maintain adequate documentation for transactions; and (c) the eligibility o f incurred expenditures for IDA financing. The annual project financial statements audited by the Auditor General, supported by the Audit Agent, would be submitted within six months o f the close o f fiscal year, i.e. by September 22 o f each year. All agencies involved in implementationand holding records o f expenditures would needto retaintheir financial records as per the IDA retention policy. 21. The following audit reports will be monitored inthe Audit Reports Compliance System (ARCS): ResponsibleAgency Audit Auditors MOF, supported by SOE, Project Accounts and Auditor General Grant Management Special Account 22. Risks Non-absorption o f funds: One o f the mainrisks for the project i s that o f the project not being able to absorb the funds at the scale envisaged. While not affecting the viability o f the project, this would extend the implementationperiod. While disbursement o f the IDA Grant may take place duringone year after effectiveness if the funds transfer arrangements function as envisaged and security conditions permit operations across the country, the three year project period defined for the project will mitigate this risk. Transfer o f funds to remote locations: As mentionedabove, undertahng transfer o f fundsinsuch a large volume o ftransactions does initselfpose a challenge. While the project has designed a system to meet this challenge, it has not yet undertaken a substantial volume oftransfers, andthe practical problems associated with such a major task are yet to be leamed and mitigated. Henceproject management mustkeep a close watch on this critical aspect and be ready to make the necessary changes as required. Custody o f Grant Funds: It i s planned that large tranches o f funds will be transferred to the provincial centers where the funds will be then be provided to nominated community representatives. As the block grant allocations to communities can be quite large (upto US$60,000 depending on the size o f the community) and considering the insecure environment in some of the regions, this poses a real risk. To mitigate this risk and ensure that funds are used for the purpose intended, 34 disbursement o fblock grants will be made intranches based on achievement o f agreed project milestones. Furthermore, as long as Hawala dealers are used for fund transfer, they retain responsibilityfor the funds untilthe payments are made to communities at the provincial MRRDoffices. Thus, no block grant funds will be physically kept inMRRD's provincial offices. Finally, payments for local contractors or goods under approved community sub-projects will be made at the provincial MRRDoffice inthe presence o f the nominated community representatives, the Facilitating Partners, and MRRD/Oversight Consultant staff. This arrangement will limitthe amounts o fcashthat has to be transported by community representatives from the provincial centers to the villages. When a functioning banlung system i s established at the provincial level, communities would open bank accounts, and funds would be transferred to these. Payment can then be made by check to further limit the risks associated with transport o f cash under the present conditions. 23. The Operational Manual describes the above arrangements. Ifcertain forms and procedures are found not to be practical and require amendment, these will be reviewed during the workshops with Facilitating Partners scheduled to take place at least bi-annually, and the required revision o f the Operational Manual will be undertaken. 24. While certain aspects o f the project appear to be highrisk, implementationo fthe mitigation measures described above together with regular and effective supervision o f the project would reduce the risk to medium. DisbursementArrangements Amount of the Expenditure Category Credit Financing Allocations Percentage (Million USD) 1. Grant for Sub-projects 73.52 100% 2. Goods 1.1 100% 3. Consultants Services 18.38 100% 4. External M&E 2 100% Total 95 25. Financing Percentage: Since collection o f tax revenue by TISA has just begun and i s sporadic, disbursement percentages have been set at 100%with the understanding, that MoF will submit withdrawal applications on anet-of-tax basis. The tax structure o fthe government willbe reviewedperiodically by IDA and decision made whether standard disbursement percentages needto be set and financing percentages amended accordingly. 26. Disbursement Method: Disbursements from the IDA Grant would be transaction-based (replenishment o f special account, reimbursement, direct payment, and payments under Special Commitments) with full documentation or against statements o f expenditures as appropriate. 27. Use o f statements o f expenditures (SOEs): Disbursements will be made on the basis o f SOEs for all expenditures under block grants; for contracts for goods costing less than 35 US$200,000 equivalent, consultants' services for firms costing less than US$lOO,OOO, for individual consultant less than US$50,000 equivalent, and audits. 28. Special Account: A special account will be opened and maintained inDAB on terms and conditions acceptable to the Association, and will be operated by MoF-GMU inaccordance with the Association's operational policies. The special account will finance only Categories 2,3, and 4. The Authorized Allocation o f the Special Account would be set not to exceed $1 million. 29. Minimumapplicationsize: Applications for replenishment to the Special Account will be submitted at a minimumon a monthly basis, regardless o f amount. The minimumapplication size for withdrawal applications for reimbursement, direct payment, or for applications for Special Commitments is 20% o f the authorized allocation o f the Special Account. 30. Community Block Grant Account: The Oversight Consultant shall open and maintain separate U S Dollar and Afghani bank accounts ina bank inAfghanistan, through which all receipts and disbursements for the purposes o f the Block Grant Fundshall be channeled. For all payment requests, the Client will request the World Bank to make direct payments inU S Dollars to the Consultant's bank account inAfghanistan. The Consultant will convert the U S Dollars into Afghanis at the bank inAfghanistan where the accounts are held as and when needed in accordance with community subproject payment schedules. The Consultant shall submit its first payment request to the Client, once the initial batch o f the sub-project applications have been appraised and contracts with the communities for the eligible sub-projects have been signed The request will be for the amount neededfor those sub-projects for the first six months. Thereafter, the Consultants shall submit quarterly payment requests to the Client for estimated expenditures for the ensuingthree months, adjusted for any uncommitted balance (including any interest eamed on payments previouslyreceived) along with a statement o f expenditures (SOE), inthe format shown inAppendix G o f the Oversight Consultant contract. 31. Authority to withdraw Credit funds: MoF-GMU will retainthe right to sign and submit withdrawal applications to the Association. ActionPlan 32. Before the project becomes effective: 0 Operations manualto be finalized after considering the lessons from the first transfer of funds under the Community EmpowermentProject (H009). 0 Confirmationthat the functions o f CFO will include FMresponsibilities for NSP as indicated above; 0 CFO inconsultation with GMUto establish an accounting system and procedures for components other than block grants to communities; 0 Submit audited financial statements o f Community Empowerment and Public Works Project for fiscal year ended 21 March, 2003. 33. After the project becoming effective: 0 Appointment o f a Finance Officer inthe province before transfer o f funds to that province. 0 Monitoring & Evaluationteam to include FMexpertise. 36 Supervision Plan 34. As mentionedunder the riskassessment above, the Project will needintensive financial management supervision. The focus of the financial management supervision will be on financial reporting, funds flow, accounting systems, financial management capacity inthe provinces, counterpart capacity, internal controls, effectiveness o f the NSP Operational Manual, financial management at the community level and audit arrangements o f the Project. 37 I - 0 d APPENDIX 5 ASSESSMENT OFMICROFINANCE, LIVELIHOOD PROJECTS,AND INCOME GENERATINGSCHEMESAS AN OPTIONFORCOMMUNITY SUB-PROJECTS 1. The National Solidarity Program (NSP) has been established by the government to provide resources throughblock grants for community managed small-scale reconstruction and development in rural areas, and to promote more participatory and inclusive decision making and governance at the village level. NSP promotes a new development paradigmwhereby communities are empowered to make decisions and control resources duringall stages o f the project cycle. NGO best practices inAfghanistan have demonstratedthat community-driven projects can succeed even ininhospitable environments providedthat certain principles o f participatory planning and technical quality management are followed. The NSP is implementedby the Ministryo f Reconstruction & Rural Development (MRRD). Rationale 2. Microfinance (MF)' has proved that sustainability and poverty outreach are compatible goals, by providing credit facilities to poor and vulnerable groups on a sustained basis and enabling them to improve their standard o f living. This has been confirmedby the better social fund and multi-sectoral projects that have included microfinance.2 Inthe past, social funds similar to the NSP have been used to deliver microfinanceincountries where there were no Microfinance Institutions(Yemen and Bosnia) and also as a means to encourage existing Microfinance Institutions(MFIs)to expand into new regions, serve new types o f clients, and develop new financial products for the target group. The IDA funded project to support the National Solidarity Program, includes an assessmentto determine whether a simple approach can be developed for NSP block grants to be used, either partially or fully, for microfinance activities, livelihood activities and income generating schemes. Scope 3. This assessment comprises a review o fthe microfinancesector MISFAInstitutional Partners inAfghanistan -both existingproviders3as well as anticipatednew entrants. It will explore the scope for synergies with the World Bank BRAC CARE supported Microfinance Investment and Support Facility for Mercy Corps FINCA Afghanistan (MISFA). MISFA i s the multidonor, apex microfinance CHF wocuu facility inAfghanistan. It i s an independent organization with WfW AREA Save the Children(US) AKDN oversight by MRRDand participating donors. It aims to support the development o f a strong, sustainable microfinance sector in Table 1 Afghanistan. MISFA has partnered with 10microfinance providers (Table 1) to work on capacity buildingand outreach. 1 The term "microfinance" is oftenusedina narrow sense to refer principally to microcredit for tiny informal business. Ths assessmentuses the termmore broadly. The clients are notjust micro entrepreneurs, but a whole range o f poor clients who also use financial services to manage emergencies, acquire householdassets, smooth consumption and fimd social obligations. The services also include savings. 2 Alexandra Gross and Samantha de Silva, " Social FundSupport o f Microfinance: A Review o f Implementation Experience," SP Discussion Paper No. 0215. 3 The term microfinance institution and microfinance provider are usedinabroadsense to refer to avariety o f institutions, including butnot limitedto, NGOs, credit unions, savings and loans cooperatives and microfinance banks. 41 4. Inadditionto the above, the assessmentwill also lookat experiences with livelihood andincome generation activities inAfghanistan and elsewhere to determine whether inclusion o f such activities inthe NSP can constitute a viable and sustainable option for the utilization o fblock grants by communities. Methodology 5. The methodology employed thus far consists o f secondary data collection and document review, discussions with staff o f microfinance programs and livelihood projects, and with MISFA staff. This Appendix represents an early stage o f the assessment, limited due to the time constraints and lack o f recorded information available with microfinance service providers. It i s anticipated that the more detailed review will be completed by January 15,2004. 6. Over the next two months extensive interviews will be carried out with all MFproviders, MISFA, the Oversight Consultant for the NSP, and the Ministryo f Rural Rehabilitation and Development (MRRD). Visitswillbeconductedto locations (includingvillages) where microfinanceprograms, livelihoodprojects, and income generating schemes are already being implemented. Bearing inmindthat Afghanistan i s ina unique situation, lessons learned from similar projects in other post-conflict situations will also be drawn upon. Challengesandopportunitiesfacing the microfinance sector inAfghanistan 7. More than two decades o f conflict have left Afghanistan's economic and physical infrastructure significantly damaged. Inthe recent past, the situation has been exacerbated by severe drought and it i s estimated that over a quarter o f the population are critically poor. Life expectancy inAfghanistan is only 46 years and the unemploymentrate i s estimated to be 50% or higher. 8. A report commissioned by the World Bank andpreparedby EnterprisingSolutions Global Consulting inM a y 20034,suggests that inthe foreseeable future, micro and small enterprises will be the most important source o f employment for Afghans. The report estimates the current marketpenetration o f microfinance to be less than 1%. Access to financial services and credit i s a key constraint to business growth. Financial services are needed for a range o fneeds: to develop entrepreneurial activities, to cope with crises andto meet plannedexpenditure. 9. Preliminary assessments carried out by Save the Children (US) suggests that boththe need and the demand for microfinance, particularly by women, i s extremely high. On the other hand, introducing credit services will be complicatedby existing levels o f indebtedness5. CHF International, CARE and IRC have found a highrate o f indebtedness among micro enterprise target clientele inboth urban and rural areas. These findings highlightthe need for a range o f financial services, including savings facilities which play a particularly important role inreaching the poorest segments o f society and improving coping mechanisms. 10. The lack o f formal employment, the need for funds to invest inbusiness and other financial services such as savings, combined with the historically trade orientedtraditions o f the Afghan people implyan environment ripe for increasedfinancial services. "Micro finance Providers inAfghanistan", Enterprise Solutions Global Consulting, M a y 2003. 5 It is important to analyze existing levels o findebtedness before giving a loan. While indebtedness might prevent clients from timely repayment, depending on the client and the structure o f the loan (e.g. a longer repayment period), MF could also help raise clients out o f indebtedness. 42 11. Challenges confronting the expansion o f microfinance services inAfghanistan comprise: (1) Political instability and lack o f security (ii) Corruptionandpatronagestructure (iii) Underdevelopedformalbanlungsector (iv) Complex, monetary arrangements (US $, Afghanis, Pakistani Rupees) (4 Lack o f regulatory, legal and commercial framework (vi> Rural indebtedness (vii) L o w level o f education and rate o f literacy (viii) Lack o f slulled labor (ix) Difficulty inincluding women (XI Remoteness o f some areas (xi) Islamic banlungprinciples (xii) Badpractice programs 12. Opportunities include: (i) Entrepreneurial spirit and traditions which are expressed inthe interest by villagers to use block grants for income generation activities (ii) Trade economy (iii) Tradition o f informal bankingpractices - e.g. hawala6 (iv) Interest being shown by domestic and international organizations (VI Donor availability (vi> Willingness on part o fplayers to launch a coordinated and cohesive effort (vii) The establishment o fMISFA as an apex organization for the microfinance sector. CurrentMFproviders 13. There i s reason to believe that though the development o f MFwill be highlychallenging inthe Afghan context, the sector could take o f f ifthe challenges outlined above are addressed. What i s urgently needed i s funds to grow the loan portfolio and further buildthe capacity o fthese microfinance institutions. MISFA i s working with its 10partner institutions to address these issues. (1) Currently there are 12-15 providers extending micro loans (excluding very tiny micro lending components i.e. less than 100 active loans or $25,000 outstanding loanbalance) (ii) Total outreach i s somewhere between 30-40,000 clients and the outstanding loanbalance i s less than $1 million according to market surveys undertaken in20027. (iii) Most programs operate inthe middle andnorthernpart o f Afghanistan. Kandahar and Farahin the southalso have MFprograms. Nimroz, Hilmand, PaktikaandKhost inthe South are not covered at all and nor are Ghor, Baghlan, Samangan, Kunduz and Takhar inthe north. Within provinces, MFprograms operate inno more than 2-4 districts. (14 All providers have multi-sectoralprograms, i.e. are more thanjust microfinanceproviders. (VI Generally, the MFexperiment inAfghanistan has not been well informed by lessons learned from MFelsewhere inthe world. Some NGOs active inthe country have treated MF as a charitable undertaking and are less concerned about sustainable financial service delivery to the poor. (4 The majority o f current providers focus exclusively on the provision o f credit, though some require forced savings and a few promote savings. ~~ 6 Estimates of the number o funregisteredmoney exchange dealers inAfghanistan vary widely from 500- 2000. 7 BRACmakes up for 15,000 ofthese clients. This figure also assumes that national organizations such as NPORAA,CHA and ADA contribute approximately 10,000 clients. 43 Current New Entrants NGO's BRAC, Save the ChildrenUS, Mercy Corps, CHF, FINCA, CARE, Madera, DACAAR, WfW, IAM,ACTED IRC, ADA, AREA, CHA, RRAA,AKDN, Parwaz CreditUnions woccu Banks DAB FMBA Others UNHabitat, UNOPS,CDAP ILO, UNDCP Implementation 14. The NSP will seek to buildon the expertise o f the micro finance providers, the experience o fthe facilitating partners, and traditions o f community management. 1. Microfinance Schemes -alternatives for implementation 15. Discussions between the World Bank's MicroFinance Project and MRRDinMay 2002 concluded that there needs to be close collaborationbetween MISFA and the NSP for the benefit o f the Afghan people, particularly as bothprograms have some commonpartner institutions. Inaddition, it was agreed that microfinance funds involving onlending to the community need to be channeled through institutions which are qualifiedto undertake these programs, preferably through MISFA. The two alternatives suggested inthis assessment, take these discussions into account. (1) Invillageswith pre existingMFIswithprovencapacity (as determined byMISFA), the amount o fthe block grant chosen by the Community to be used for microfinance will be transferred to the MFI. These funds will not be included inthe general portfolio o fthe MFI, but will be managedthrough a separate account exclusivelyfor disbursement to the community. The exact methodology i s to be worked out inconjunction with MFIs and MISFA. (ii) Invillages where MFIsare notpresent, fundscanbetransferredto MISFAwho will consult with itspartners to see who would bebest suited to serve the community. Ifit is established that microfinance services can be provided to the community inquestion, the funds will then be usedto help the MFIincrease outreach to include the community. Incase of the latter scenario, microfinance services will be implementedonly iffunds over a certain amount are committed to it. This amount will be decided collaborativelyby the microfinance providers and MISFA. Ifneeded, villagescanbe allowedto submitproposalsjointly andpoolfundsto achieve this critical mass. Funds will be channeled, administered and monitoredthrough MISFA. The exact methodology i s to be determined inconjunctionwith MISFA and MFIs. Funds will be divided into two portions. One section will go to the MFIto cover its infrastructure cost in expansion while the other will be usedby the MFIfor distribution to the community. The division o f funds will be determined by the community, the MFIand MISFAjointly and be dependant on the costs incurredby the MFIto expand services. The benefit to the community will be access to credit facilities on a sustained basis. 16. Itis importantto keep inmindthat integratingmicrofinancewithinthe NSP carries significant risks if initiatedbefore adequate capacity has been builtinthe microfinance sector. Lessons learned in post conflict situations such as Bosnia, Kosovo and Mozambique demonstrate that microcredit can assist 44 even the vulnerable and displaced to support themselves economically'. However, these experiences also show that ifa `charity' or grant culture i s allowed to prevail, then microcredit will not only prove ineffective, it will harm the development o f the (micro) finance and entrepreneurial sector. Inthe Afghan context, to ensure quality, microfinance institutions need to develop the infrastructure and capacity to start or grow existing programs. 17. The preliminary assessment indicates that it would be preferable for NSP to work through existing microfinance providersbecause experience has shown that ingeneral it i s better to avoid creating new institutionsgwhere possible. MISFA i s actively involved inhelping MFIsbuildcapacity and expand outreach. It is anticipated that most o f MISFA's ten partner institutionsat least will be up to the task o f coping with NSP demands by late 2004 - early 2005. The MFIsto be involved will be decided by MISFA depending on scale o f operation, depth o f outreach, commitment to sustainability, and adequate capacity. The fourth quarter o f 2004 should see the development o f a comprehensive strategy to offer microfinance through pilot projects in 10-15 villages, spread out geographically across NSP implementing districts, with a demand for financial services. These villages will be ones where MFIs are already operating or are willing to start operations. 2. Revolving Loan Fundsand Income Generating Schemes 18. Revolving Loan Funds and Income Generating Schemes are already open to women and disabled under the current NSP Operations Manual. Access for the entire community to such schemes can be introducedon a pilot basis inthe first quarter o f 2004. These would be project grants to a community as a whole, but would be administered by the community as a revolving loan fund and used for follow-up activities agreed on by the Community Development Council (CDC). 19. Initially, 10-15 pilots villages will be selected. Selection will depend on traditions o f communal management o f community-owned assets and a demonstrated track record o f the FacilitatingPartners' success with similar schemes. Clear indicators to determine prior experience incommunal management bythe community and success o fthe FPwill be determined inconjunction with the FacilitatingPartners. Indicators for community management could include functioningtraditional communal management o f irrigation systems (mirab system), andjoint decision-making regardingzakaat funds collected by mosques. These experiences ensure thatjoint management i s not a new idea being introduced. 20. Experience on the part o f the FacilitatingPartner is necessary to develop sustainable oversight and maintenance procedures to continue after it withdraws. Indicatorsto gauge experience will be developed inconjunction with the Facilitating Partners themselves and will include the number o f similar projects managed inthe past, sustainability o f these projects, experience inestablishing oversight and maintenance procedures etc. These prior experiences on the part o fboththe community and the Facilitating Partners will be built upon to ensure against elite capture o f community-owned assets or fraud. 21. Inthe initial pilotphase (first quarter o f2004), these schemes wouldinvolve the establishmentof a revolving loan fund from the amount the community selects to use for this purpose from its block grant. As with other sub-projects, a community contribution o f 10% would be required. This loanfundwould be used for income generating activities decided upon and managed by the CDC. The Facilitating Partner will supervise establishment o f sustainable oversight and management bytraining andhelpingthe 8 DougPearce ,"Lessons learnedfrom the World Bank supported Apex Facility inBosnia,", Afghanistan Microfiance Review Mission, May 2002. . Alexandra Gross and Samantha de Silva, "Microfinance and RuralFinance OperationalNotes for World Bank Staff', CGAP,August 2003 45 community build capacity. Loanrepayment and profits generated (ifany) would be managedby the CDC and usedfor second generation activities, whether community infrastructure, new revolving fund loans for income generation, or community welfare activities such as literacy classes. The exact methodology i s to be worked out inconjunctionwith FacilitatingPartners. 22. Based on lessons learned inthese pilots, activities may be expanded to villages where FacilitatingPartner have no prior record of implementing Revolving LoanFunds and Income Generating Schemes duringthe second quarter o f 2004. Inthe third quarter o f 2004, a comprehensive review should be conducted to determine whether these schemes can be offered on an enlarged scale. 23. To avoid elite capture or fraud, the design for this type o f activities must establish checks and balances as well as community management procedures that enable effective use o f social controls. A detailed supervision plan that Facilitating Partnersneed to follow i s required, as experience with other decentralized, community-based, poverty reductionprojects" have proved the role o f the facilitator to be critical not only for start upbut also for follow-up and reinforcement. Loansversus Grants 24. This assessmentwill also draw up an initial list o fproposed community projectsand distinguish their eligibility for loans (microfinance) or grants (income generating/ livelihoods). The list o fprojects will be compiledbased onpreliminary findingso f Facilitating Partners regardingprojects that communities express an interest in. This list i s expected to be dynamic as NSP expands and communities come up with varying requests. 25. Broadly speahng, infrastructure projects are usually public goods and therefore eligible for grants, whereas income generating projects will needto be assessedon a case by case basis to determine whether CDCs envision that the asset inquestion will be a public or private good. Private goods (e.g. a tractor or truck) will not be eligible to receive grant fundingfrom the NSP block grants, but mightqualify as loans channeled through a microfinance institution, or as a second generation loan from a revolving fundmanagedby a CDC . However, anumber o fprojects straddlethe linebetweenpublic infrastructure and income generation. Examples are hydro-electric facilities and flour mills. Ifjointly managed by the community, both o fthese activities would be eligible for block grant fundingunder the current NSP guidelines, but ifprivately held and managed as an enterprise, they would currently not be eligible untila methodology i s inplace, that provides for use o f block grants for microfinance loans. ImmediateNeeds (i) UNHabitathas carriedout aninformal survey insome ofthe villages where itis anNSP Facilitating Partner to establish the types o fprojects communities are interested inselecting. Other FacilitatingPartners should be encouraged to carry out similar surveys (on a small scale) or establish through discussion, the level o f interest infinancial/ credit services and/or income generating schemes and livelihood projects. (ii) A workshop shouldbe held withNSP FacilitatingPartner involved inrevolving funds andIG schemes to provide inputsfor the design for a pilot project. (iii) Simultaneously, the current assessment, with support from MISFA, will determine key players, new entrants, regions covered, and best practice. The assessment will conclude with a detailed methodology for introducing livelihood schemes and income generating projects into the NSP inthe first quarter o f 2004. This methodology will be determined in lo An example of such aproject is the KecamatanDevelopment Project inIndonesia. 46 collaborationwith facilitating partners, microfinanceproviders and MISFA. The reviewwill further lay out a preliminary strategy to integrate microfinance into NSP by end 2004. This strategy will take into consideration the development of the microfinance sector over 2004. AbbreviationsandAcronvmsUsed AKDN: Aga KhanDevelopment Network M U : Afghanistan Researchand EvaluationUnit BRAC: BangladeshRural Advancement Committee CDAP: Comprehensive DisabledAfghans Program CDC: Community Development Council DAB: Da AfghanistanBank FMBA: FirstMicrofinanceBank ofAfghanistan IAM: InternationalAssistance Mission ILO: InternationalLabor Organization ME: MicroEnterprise MF: MicroFinance MFI: MicroFinanceInstitution MRRD: MinistryofRehabilitationandRuralDevelopment MSP: MicroFinance Service Provider NGO: Non-Governmental Organization sc: Save the Children (US) UNAMA: UnitedNational Assistance Mission inAfghanistan UNOPS: wocuu: UnitedNationalOffice for Project Services World Council of Credit Unions 47 Appendix 6 PERFORMANCE INDICATORS 1(i) Decrease inpoverty level, I 1Externalevaluation, I Mid-termevaluationI Development Councils --i---------- I I Capacity Development Number o f community members >9,000 M I S & extemal trained (financial Management evaluation I I 90%-of O&Mexpenses are being projects whichrequire evaluation months after sub- collected Icost recoverv for O&MI Droiect comdetion 48 APPENDIX 7 MONITORING AND EVALUATION ARRANGEMENTS The NSP's monitoring and evaluation (M&E) system i s intended to provide adequate information to the relevant stakeholders on project implementationperformance, process, outputs, and outcomes. The mainpurpose o f the monitoring system i s to provide timely feedback to key stakeholders, so that lessons can be leamed on a real time basis and mid-course corrective action initiated where necessary. The M&E system has four components: (i) implementationmonitoring -physical/financial; (ii) process monitoring; (iii) post-implementation monitoring, including sustainability monitoring o f completed sub-projects and audits; and (iv) outcome evaluation. A computerized MIS system will ensure that information flow takes place smoothly at all levels, and that data are electronically processed from provincial level upwards. -momtonng.: At the village level, communities will assisted bytheir Facilitating Partner to monitor their own progress based on a few self-selected key indicators (e.g. on process/participation, implementationprogress/results, and expenditures). Simple formats will be developed for this purpose and maintainedat the villageiFP level. The effort would be to widely display and communicate the results o f such monitoring within the village. At the next level, the Facilitating Partner, usingthe village as the basic unit o f monitoring, will provide a comprehensive report, including physical (and other outputs) and financial progress, on a quarterly basis to the NSP-Province office. The FacilitatingPartner's quarterly report will include the findings o f the community monitoring. A briefer, summary report on the status o f implementation will be submitted on a monthly basis (Attachment 1below). The Facilitating Partner's quarterly progress reports will cover the district(s) or province(s) in which the particular Facilitating Partner i s responsible for facilitation of the NSP. Where more than one Facilitating Partner i s involved infacilitation ina particularprovince, their reports will be aggregated at the NSP-Provincelevel. Provincial quarterly progress reports will then be aggregated at the national level by MRRD/Oversight Consultant (Attachment 2). At the national level, quarterly progress reports for the project as a whole will be generated and shared with key stakeholders, including the NSP Steering Committee, Facilitating Partners, and donor agencies. Monitoring data for aggregated reporting for the provincial level will be entered into a standardized electronic MIS, and the flow o f monitoring information and findings deriving from this informationcanbe depicted as follows: Village Facilitating Partner field staff reports to FacilitatingPartner district andprovincial management on progress and findings o f community self-monitoring. Results are communicatedto the public and discussedwith the with Development Council a monthlyor triggered I District Facilitating Partner district management staff process the village reports, add comments, file one copy, forward one copy to FacilitatingPartner HQand follow-up on issues 11- monthlysummaryandquarterly@JIS or Province Facilitating Partner Provincial office (or MRRD,ifthere i s more than one 49 Facilitating Partner inthe province) inputs data from reports (including comments) into computerizedMIS and generates simple province reports, by district and village. Follow-up for sites that seem to need special attention a monthly summaryand quarterly62 National MRRD/Oversight Consultant inputs data into the main M I S system; conducts analysis and generates nationalreport, as well as comparative province and district reports monthlysummary and quarterly62 Province Public display o fprovince datdanalysis. Comparisons with other provinces and between districts within the province as a basis for discussions between FacilitatingPartner and NSP A 3 monthlysummaryand quarterly @ or 62 District Public display o f activity datdanalysis and district comparisons; discuss progress and problems with FP field staff monthly summary and quarterly H or El Village Periodic public meetings with Community Development Council and community wide assembly to discuss progress and problems Post-imulementation monitoring: The purpose i s primarily to determine whether communities are operating and maintaining their facilities ina sustainable manner. This will be carriedout through random sample monitoring by the Oversight Consultant three months and six months after sub-projects are completed ina particular village, and through external evaluation. Process monitoring: Process indicators are included inthe FacilitatingPartners' quarterly progress report. Inaddition, MRRD/Oversight Consultant will separately conduct, on a sample basis, a bi-annual process monitoring exercise. This will involve the hiringo f an external agency to spendsignificant time inthe field to monitor key processes at the village level, make cross- village/province comparisons and suggest remedial action where required. Evaluation: To evaluate project outcomes interms o f assessing whether the NSP i s meeting its Program Objectives, key performance indicators have been developed (Appendix 6). Achievements against these will be evaluated on a bi-annual basis by an external evaluation consultant. Inaddition, regular supervision, and a mid-term review will be conductedby IDA. At the end o fthe projectperiod, IDAwill produce an ImplementationCompletion Report, which focuses on evaluating whether the project objectives and targets for key performance indicators have been met. Institutional arrangements for M&E: The M&Esystem will be managedby MRRD/Oversight Consultant at the provincial level and national level with inputsfrom FacilitatingPartners. While it is expected that the MRRD/Oversight Consultant staff at the provincial level will frequently make village visits, it is important to stress that senior personnel from MRRD/Oversight Consultant's HQand the NSP Steering Committee should also go to the field periodically, to get better acquainted with ground realities. MRRD/Oversight Consultant will also holdmeetings and workshops with FacilitatingPartners (at least quarterly) to share the results o f monitoring and receive feedback from them. The monitoring system and the NSP OperationalManual will thus be periodically updated and improved, malung both live instruments for improving project performance. 50 I I- 1 t- t E I I sarnpaioid $isquo3 MID0 lu!daay yoog ut----- APPENDIX 8 ENVIRONMENTAL & SOCIAL MANAGEMENT FRAMEWORK FOR THE NATIONAL SOLIDARITY PROJECT Background 1. The proposedNational Solidarity Project would support the Transitional Islamic State o f Afghanistan's National Programme for Reconstruction, by promotingthree o f its key elements, namely the use o f assistance to create conditions for people to live secure lives and buildhuman capital, physical reconstruction, and private sector development. The project would constitute one o f the six nationalpriority sub-programs- the National Solidarity Program (NSP) -under one o f the 12 National Development Programs: Livelihoods and Social Protection. The key development issues addressed by the project are: 0 Ruralreconstruction: More than two decades o f conflict have resulted inextensive destruction o finfrastructure and massive population displacements. A severe drought lasting from 1999 till 2002 has further increasedrural poverty, depleted available assets, and led to further displacements. The project will provide resources through block grants to rural communities for investments inreconstruction or development activities planned and managed by the communities themselves. Activities will either be implemented directly by the communities or through sub-contracting to the private sector. 0 Strengthening o f local governance: Decisions on the use o f block grants will be made through an inclusiveparticipatory decisionmalung process ledby community development councils elected through secret ballot. This process will facilitate the emergence o f consultative decision making and legitimate local leadership, which can form the basis for relations between communities and the local govemment apparatus including other assistance programs. 0 Enhancing govemment effectiveness: Capacity would be built within Ministry of Rehabilitation& Rural Development (MRRD) to supervise the standards andprocedures for financial management, disbursement, social and environmental management and community projects that would be a requirement for the local level planning and management o fblock grants, which i s the core o f the NSP. 2. The project i s a follow-up to the community driven development (CDD) component o f the Emergency Community Empowerment & Public Works Project (H009), that became effective inJune, 2002, andthat is currently under implementationin87 districts in31ofthe country's 32 provinces. The current NSP project has demonstrated, that despite a volatile security situation and limited government authority inmuch o fthe rural areas, it has beenpossible to launch a large scale CDD project across the country. Project Objective 3. The objective o f the project is to lay the foundations for a long-term strengthening o f community level governance, and to assist the reconstruction and development o frural communities through a program framework, that can form the basis for future development interventions by the state at the village level. The outcomes will be (i) the establishment o f a framework for village level consultative decision making and representative local leadership as a 56 basis for interaction between communities on the one hand, and the government and aid agencies on the other, and (ii) local level reconstruction, development, and capacity buildingwhich will lead to a decrease inpoverty levels. Project Description 4. The goal o f the Government i s to scale-up the NSP to cover all the estimated 20,000 villages inthe country within a four year time frame. This would require fundingduringthe first year o fimplementationo fUS$160 million, and a total fundingrequirement over the four year period o f around U S 7 8 0 million. The project to be supported by IDA would contribute to achieve the targets o f the larger program, and would be funded through an IDA Grant o fUS$95 million plusestimated co-financing o f US$65 million from other donors. While the IDA supported project would be for three years, it would at the same time support the achievement o f the first year implementationtarget. 5. The project will finance four components: Component 1: Grants for Community Projects(US$73.52 million)comprises block grants to communities for reconstruction and development activities selected by the communities through a facilitated participatory planning process with elected Community Development Councils. Component 2: Goods (US$1.1 million)comprises additional equipmentfor MRRDsuch as vehicles, radio equipment, computers, and furniture for field offices Component3: ConsultantServices andTraining (US$18.38 million)comprises implementationsupport and capacity buildingby Facilitating Partners to communities and by the NSP Oversight Consultant to MRRDand Facilitating Partners. Component4: ExternalMonitoringandEvaluation(US$2 million) comprises external monitoring, evaluation and studies to verify implementationstatus, assess achievement o fproject objectives/outcomes, and undertake research on specific issues relatedto program policy or implementation. Potentialimpactsofvarious components 6. Activities envisaged under the project should not entail significant and negative environmental and social impacts, provided they are designed and implementedwith due consideration o f environmental and social issues. Rather, most sub-projects envisaged under the project should contribute to improving environmental and social conditions inrural Afghanistan. Adverse impacts may arise due to depletion or degradation o f natural resources such as stone, earth, water etc. used for construction o f small-scale infrastructure. Construction activities may cause limited, temporary, and localizednegative impacts that can be mitigatedthrough the implementation o f an appropriate social and environmental management plan. Certain types o f investments with negative environmental or social impacts cannot be undertaken and are included inanegative list ofprohibitedinvestments. Interms ofsocial impacts, theprojectfalls inthe S-3 category o fthe Guidelines for Land and Asset Acquisition, Entitlements, and Compensation (Attachment 3). 7. No landacquisition is anticipated. Inthe current socio-political context inthe rural areas, involuntary land acquisition i s unlikely for the kindo f small-scale activities that will be undertakenunder the project for two reasons. The first is, that local authorities do not have access to funds to purchase land or other assets ifland acquisitionwere to be undertaken. The second is, that the political costs (interms o f opposition from affected landownershsers) would inalllikelihooddeter the government apparatus fromattempting to acquire any landagainst the will o fthose affected. Ifany minor areas o flandwould be neededfor a project (e.g. realignment o f an irrigationcanal, or land for a school), such land could only be obtained through either private voluntary donations, compensation paidby the community (i.e. transaction between 57 willing buyer-willing seller), or from available government land. Private voluntary donations and community purchases would be documented as requiredby the Framework, and for government land, documentation would be needed that the landis free o f encroachments, squatters or other encumbrances, and has been transferred to the project by the authorities. 8. The design for the project defines a strategy, which will ensure that ethnic minoritv groups are included as beneficiaries, and that their concerns are addressed incompliance with the requirements o f OD 4.20. The key elements o fthis strategy are (i) the project i s national inscale and coverage, and consequently reaches all the country's different ethnic groups, (ii) the facilitated participatory planningprocess at the community level includes an approach for election o f Community Development Councils, which will provide for representation o f all sub- groups inthe community, (iii) internal monitoring and external independent evaluation will both assess the inclusiveness o f Community DevelopmentCouncils and thus provide information that would constitute the basis for corrective actions, ifnecessary, and (iv) independent monitoring by civil society (NGOsand the press) will provide another mechanism to identify cases where ethnic minority would have been bypassed or marginalized. 9. Chance finds o f cultural proper& (archaeological artifacts) duringimplementationo f sub- projects involvingcivil works will be reported to the provincial or district governors, who then will informthe ArchaeologicalCommittee. 10. Compliance with the safeguard provisions and the negative list will be ensured through an environmental, social and mine risk screeningprocedure (check lists) required for sub-project proposals, andby internal input,process, and output monitoring, independent external monitoring byconsultants, and by Bank supervision missions. Purpose of the Environmental and Social Management Framework 11. Currently social and environmental management inAfghanistan is suffering from critical capacity constraints. Since there i s potential for adverse environmental impacts, albeit limited, from the proposed activities under the NSP, their mitigation and management i s key to the wholesome development o f rural communities throughout Afghanistan. Hence, keeping inview the existingmanagement capacity, as well as the flexibility required due to the demand-driven nature o f the project, a framework approach i s adopted. Itprovides for early identification o f potential adverse impacts, without the requirement o frigorous analysis through quantification, and also provides broad guidance for their effective mitigation. Consistent with existingnational legislation, the objective of the Framework i s to help ensure that activities under the project will: 0 Protect human health; 0 Prevent or compensate any loss o f livelihood; 0 Prevent environmental degradation as a result o f either individual subprojects or their cumulative effects; 0 Enhance positive environmental and social outcomes; and, 0 Ensure compliance with World Bank safeguardpolicies. General Principles 12. Recognizingthe emergency nature o f the proposed reconstruction operation, and the related need for providing assistance, while at the same time ensuring due diligence inmanaging potential environmental and social risks, this Framework i s based on the following principles: 58 0 The project will support multiple sub-projects, the detailed designs o f which i s known at appraisal. To ensure the effective application o fthe World Bank's safeguard policies, the Frameworkprovides guidance on the approach to be taken duringimplementationfor the selection and design of sub-projects, and the planning o f mitigation measures; 0 Allproposedsub-projects will be screened (usingMatrix 1) to ensure that the environmental and social risks can be adequately addressed through the application o f standardized guidelines (usingMatrix 2); 0 The design o fthe NSP aims at ensuring regionalbalance interms o f coverage o f ethnic and religious groups, as well as gender equity with regardto decisionmalung on sub-project selection and projectbenefits. Employment opportunities withinthe projects will be available on an equal basis to all, on the basis o fprofessional competence, irrespective ethnic or religious group affiliation. Inall projects which require consultations with local communities or beneficiaries, gender-separated consultations will be conducted to elicit the views o f the female population, along with that o fthe male population; and, Consultation and disclosure requirements will be simplified to meet the special needs o f these operations. Prior to approval by the World BankBoard, this Environmental and Social Safeguards Framework will be disclosed inAfghanistan inDari and Pashto, and inthe World Bank Infoshop. Safeguard Screening 13. Additionally, the selection, design, contracting, monitoring and evaluation o f subprojects will be consistent with the following guidelines: 0 A negative list o fcharacteristicsthat would make aproposed subproject ineligible for support (Attachment 1); Guidelines for land and asset acquisition, entitlements and compensation (Attachment 2); 0 Procedures for the protection o f cultural property, including the chance discovery o f archaeological artifacts, and unrecorded graveyards and burial sites (Attachment 3); Mitigation measures 14. Sound design will ifnot eliminate, then at least diminishto the extent possible, most o f the potential adverse impacts o fproject activities. Good Engineeringdesign will, inmost cases, have a positive impact on the environmental conditions inthe project area. Constructionand operation stage impacts will be addressed through a simplified Environmental Management Plan. Social and environmental guidelines and codes o fpractice will be includedinthe Project's technical manual, that i s currently under preparation. Responsibilities for Safeguard Screening and Mitigation 15. The overall responsibility o fproject implementationrests with the Ministry o f Rehabilitationand Rural Development (MRRD). A designated Safeguards Nodal Officer will be identifiedwith responsibility for overseeing the implementationo f the Environmental and Social Safeguards Framework and Management Plan withinthe Project Management Team (PMT) at the MRRD.TheMinistry's FocalPointwillbe supportedbythe OversightConsultant firmmanaging 59 the implementation o f the project, which will be responsible for (i)appraising sub-project proposals, and (ii) monitoring that sub-project implementation is inaccordance with the provisions o f the social and environmental management framework CapacityBuilding 16. As part o fthe social andenvironmental capacity buildingthat willbeprovided for implementationo f IDA-financed operations inAfghanistan, the Safeguards Focal Points and relevant staff o fthe MRRDand implementing agencies/Consultants will receive training inthe applicationo f the SafeguardFramework. Iti s proposedto prepare specific materials, hold a workshop, and arrange site visits to other countries inthe region on similar projects inprogress to provide hands-on training to the Ministry and implementing agency staff. Specialist training modules may be considered after an acceptable level o f base knowledge has been established. This capacitybuildingactivity will be implemented under a separate Technical Assistance program for Environmental and Social management. 17. Duringsupervision o fthe project, IDAwill assessthe implementationo fthe Framework, and ifrequired will recommendadditional strengthening. ConsultationandDisclosure 18. This Environmental and Social Safeguards Framework will be disclosed by ITSA inboth Dari and Pashto, as well as English, and it will also be made available at the World Bank's Infoshop. It i s worth noting that ITSA intends to make all project documentation publicly available through the Afghan Information Management System (AIMS). 19. Extensive consultations have been held with the Facilitating Partner NGOsregarding the NSP approach and implementation arrangements. Sub-projects will involve consultations within the communities regarding (i) holding o f secret ballot elections for representative community the development Councils, (ii) prioritization o f community needs, (iii)identificationo f projects corresponding to these needs, (iv) development and costing o f sub-project plans, and (v) arrangements to ensure disclosure o f budget and expenditures. The following information on the project would be posted on TISA's web-site: summaries o f quarterlyNSP implementation progress reports, summaries of annual project financial statements and audit reports, and summaries o f findings from monitoring and supervision teams (after a reasonable period for internalreview). 60 Attachment 1 NegativeList of Subproiect Attributes Subprojects with any o f the attributes listedbelow will be ineligible for Block Grant Funding under the proposedEmergency National Solidarity Project:. Attributes of IneligibleSubprojects Involves the significant conversion or degradation o f critical natural habitats. Including, but not limited to, any activity within: 0 Ab-i-Estada Waterfowl Sanctuary; 0 Ajar Valley (Proposed) Wildlife Reserve; 0 Dashte-Nawar Waterfowl Sanctuary; 0 Pamir-Buzurg (Proposed) Wildlife Sanctuary; 0 Bande Amir National Park; 0 Kole Hashmat Khan (Proposed) Waterfowl Sanctuary. Will significantly damage non-replicable cultural property, includingbutnot limited to any activities that affect the following sites: monuments o f Herat (including the Friday Mosque, ceramic tile workshop, Musallah complex, FifthMinaret, Gawhar Shahmausoleum, mausoleum o fAli Sher Navaii, and the Shah Zadehah mausoleum complex); monuments o f Bamiyan Valley (including Fuladi, Kakrak, Shar-I Ghulghular and Shahr-i Zuhak); archaeological site o f Ai Khanum; site and monuments o f Ghami; minaret o f Jam; mosque o f HajiPiyadaNu Gunbad, Balkh province; stupa and monastry o f Guldarra; site and monuments o f Lashkar-i Bazar, Bost; archaeological site o f Surkh Kotal. Requires involuntary acquisition o f land, or any resettlement o fpeople. Requires: 0 equipment or materials that are included inthe annual implementationplans by other agencies (e.g. by other government or NGOprojects that are operating inthe area); 0 political campaign materials or donations inany form; weapons including (butnot limited to), mines, guns and ammunition; 61 Attributes of Ineligible Subprojects b chainsaws; b pesticides, herbicides and other chemicals;' b investments detrimental to the environment; b motorizedextraction o f groundwater;' b involuntary land acquisition under any conditions; b construction, rehabilitation, or maintenance of any government office buildings; b payments o f salaries to government servants or the salaries o f the staff o f government subsidized organizations; b any activity on land that i s considered dangerous due to security hazards or the presence o f unexploded mines or bombs; b any activity on land or affecting landthat has disputedownership, tenure or user right^.^ b any activity that will support drug crop production or processing o f such crops. 1 Exceptions may be considered basedo n an assessment by the NSP (with specialized consultant assistance, ifrequired, and after no objectionfrom IDA) inspecial situations such as eradication o f infestations o f locusts or sen pest. 2 Indiscriminate installation o f irrigation wells using motorized extraction o f ground water have in some areas contributed to lower the ground water table, and constitute a threat to the traditional sustainable irrigation by karez. Untilwater resource assessments o f a particular catchment area or basin has been undertaken and has establishedthat irrigation is feasible, investments inmotorized irrigation wells is not permitted. 3 Thus, investments involving an expansion ofthe command area o f an irrigation systemcan only take place with agreement from the owners (or users incase o f tribal common land) o f the land brought under new irrigation. 62 Attachment2 Guidelinesfor LandandAsset Acquisition, Entitlements andComuensation I.Objectives Landacquisition will be kept to a minimumand no person will be involuntarily displaced under sub-projects financed by the proposed emergency reconstruction operation. Sub-project proposals that would require demolishinghouses or acquiringproductive land should be carefully reviewedto minimize or avoid their impacts through alternative alignments. Proposals that require more than minor expansion alongrights o fway should be reviewed carefully. No land or asset acquisitionmay take place outside o f these guidelines. A format for LandAcquisition Assessment i s attached as Attachment 2(i). These guidelines provide principles and instructions to compensate affected persons to ensure that all such persons negatively affected, regardless o f their land tenure status, will be assisted to improve, or at least to restore, their living standards, income earning or productioncapacity to pre-project levels. Categorization Based on the number o f persons that may be affected by the project (Project Affected People, PAPs) and the magnitude o f impacts, projects may be categorized as S-1, S-2, or S-3 projects: a. S-1 projects are those that will involve the resettlement o f more than 200 PAPs and where a full Resettlement Action Plan (RAP) must be produced. Such interventions willbe ineligible for support under the proposedemergency reconstruction operations. b. S-2 projects are those which will involve the resettlement o f less than 200 persons. In such cases, the following documentation i s required: (1) a land acquisition assessment, (2) the Minutes or record of consultations which assess the compensation claimed and agreement reached, and (3) a record o f the receipt o f the compensation, or voluntary donation, by those affected (see below). C. S-3 projects are not expected to have any land acquisition or any other significant adverse social impacts; on the contrary, significant positive social impact and improved livelihoods are expected from such interventions. 11.Eligibility PAPs are identifiedas persons whose livelihood i s directly or indirectly affectedby the project. PAPs deemed eligible for compensation are: (1) those who have formal legalrights to land, water resources or structureshuildings, includingrecognizedcustomary and traditional rights; (2) those who do not have such formal legal rightsbut have a claimto usufruct right rooted incustomary law; (3) those whose claimto land and water resources or building/structures do not fall within (1) and (2) above, are eligible to assistance to restore their livelihood. Acquisition ofProductiveAssets and Compensation PAPs are eligible for replacement costs for lost assets as describedbelow: 63 a. Voluntaly contributions. Inaccordance with traditionalpractices, individuals may elect to voluntarily contribute land or assets and/or relocate temporarily or permanently from their landwithout compensation. b. Contributions against compensation. A contributorlasset loser considered "affected" will be eligible for compensation from the local community or alternatively from the Government. A PAP shall lodge hisher claim for compensation to the local community representativeshhura head and it shall be verified by the implementingagency. The claim shall be lodgedwithin 2 weeks o f completion o fthe consultations with the concerned community, and before project implementation begins. Voluntary contribution, or contribution against compensation, should be documented. The documentation should specify that the land is free o f any squatters, encroachers or other claims. A format is attachedinAttachment 2(i), which includes a Schedule to be followed to assess any compensation claimed and the agreement reached. 111.CompensationPrinciples The project implementing agencies shall ensure that any o f the following means o f compensation are provided ina timely manner to affected persons: (1) Project affected persons losing access to a portion o f their land or other productive assets with the remaining assets beingeconomically viable are entitledto compensation at replacement cost for that portion o f land or assets lost to them. Compensation for the lost assets will be according to following principles: a. replacement land with an equally productive plot, cash or other equivalent productive assets; b. materials and assistance to fully replace solid structures that will be demolished; C. replacement o f damaged or lost crops and trees, at market value; d. other acceptable in-kindcompensation; e. incaseofcashcompensation, the delivery o fcompensation shouldbemade in public, i.e. at the Community Meeting. (2) Project affected persons losing access to a portion o f their land or other economic assets rendering the remainder economically non-viable, will have the options o f compensation for the entire asset by provision o f alternative land, cash or equivalent productive asset, according to the principles in(1) a-d above. ConsultationProcess The implementing agencies will ensure that all occupants o f land and owners o f assets locatedin a proposed sub-project area are consulted. There will be gender-separate community meetings for each affected mantaqa/gozar (urban infrastructure) or village (other projects) to informthe local population about their rightsto compensation and options available inaccordance with these Guidelines. The minutes o f the community meetings shall reflect the discussionsheld, agreements reached, and include details o f the agreement, based on the format provided in Attachment 2(ii). The implementing agency shall provide a copy o f the Minutes to affected persons and confirm in discussions witheach o f them their requests and preferences for compensation, agreements 64 reached, and any eventual complaint. Copies will be recorded inthe posted project documentation and be available for inspection during supervision. Subproject Approval Inthe event that a subproject involves acquisition against compensation, the implementing agency shall: a. not approve the subproject unless a satisfactory compensation has been agreed between the affected person and the local community; b. not allow works to start untilthe compensationhas beendeliveredina satisfactory manner to the affected persons; c. ifmorethan200personsare affected andrequirecompensation, the subproject shall be deemed ineligible for support under the emergency reconstruction operations. Complaints and Grievances All complaints should first benegotiated to reachan agreement at the local community/village level. Ifthis falls, complaints and grievances about these Guidelines, implementation of the agreements recorded inthe Community Meeting Minutes or any alleged irregularity incarrying out the project can also be addressed by the affected persons or their representative at the municipal or district level. Ifthis also fails, the complaint may be submitted to the relevant implementing agency for a decision. Verification The Community Meeting Minutes, including agreements o f compensation and evidence o f compensation having beenmade shall be provided to the Municipality/district, to the supervising engineers, who will maintain a record hereof, and to auditors and socio-economic monitors when they undertake reviews andpost-project assessment. This process shall be specified inall relevant project documents, including details o f the relevant authority for complaints at municipal/district or implementing agency level. 65 Attachment2(i) LandAcquisitionAssessment Data Sheet (To be usedto recordinformationon alllandto be acquired) 1. Quantities o f land/structures/other assetsrequired: 2. Date to be acquired: 3. Locations: 4. Owners: 5. Current uses: 6. Users: 0 Number o f Customary claimants: 0 Number o f Squatters: 0 Number of Encroacher: 0 Number o f Owners: 0 Number o fTenants: 0 Others (specify): Number: 7. H o w land/structures/other assets will be acquired (identify one): 0 Donation 0 Purchase 8. Transfer o f title: 0 Ensure these lands/structures/other assets free o f claims or encumbrances. 0 Written proof mustbe obtained (notarized or witnessed statements) of the voluntary donation, or acceptance o f the prices paid, from those affected, together withproof o f title being vested inthe community, or guarantee o f public access, by the title-holder. 9. Describe grievance mechanisms available: 66 Attachment 2(ii) Formatto DocumentContributionofAssets The following agreement has been made on............................ day o f............................. between............................................... resident o f ............................................. the Owner) and ...................................................... .(the Recipient). 1. That the Owner holds the transferable right o f ............................................ .jerib o f landstructure/asset in.,.................................................................................. 2. That the Owner testifies that the landstructure is free o f squatters or encroachers andnot subject to other claims. 3. That the Owner hereby grants to the Recipient this asset for the construction and development o f ................................ for the benefit o f the villagers and the public at large. (Either, in case of donation:) 4. That the Owner will not claim any compensation against the grant o f this asset. (Or, in case of compensation:) 4. That the Owner will receive compensation against the grant o fthis asset as per the attached Schedule. 5. That the Recipient agrees to accept this grant o f asset for the purposes mentioned. 6. That the Recipientshall construct and develop the.. ..................... .andtake all possible precautions to avoid damage to adjacent landstructure/other assets. 7. That boththe parties agree that the.. ........................ .so constructeddeveloped shallbe public premises. 8, That the provisions o fthis agreement will come into force fiom the date o f signingo f this deed. Signature o f the Owner: Signature o f the Recipient: Witnesses: 1. 2. (Signature, name and address) 67 Scheduleof Compensationof Asset Requisition Summaryof Unitsto beCompensated Agreed Compensation affectedunithtem a. Urbadagricultural land (m'): b.Houses/structures to be demolished (units/m2): c. Type o f structure to be demolished (e.g. mud, brick, etc.) Not Applicable. d. Trees or crops affected: e. Water sources affected: Signatures o f local community representatives, shura head: Include record o f any complaints raised by affected persons: Map attached (showing affected areas and replacement areas): 68 Attachment 3 Protectionof CulturalPropertv Physical culture includes monuments, structures, works o f art, or sites o f "outstanding universal value" from the historical, aesthetic, scientific, ethnological, or anthropological point o f view, including unrecorded graveyards and burial sites. Within this broader definition, cultural property i s defined as sites and structures having archaeological, paleontological, historical, architectural, or religious significance, and natural sites with cultural values. The proposed emergency reconstruction operations are unlikely to pose a risko f damaging cultural property, as the sub-projects will largely consist o f small investments incommunity infrastructure and income generating activities, reconstruction o f existing structures, and minor urbanpublic works. Further, the negative list o f attributes, which would make a subproject ineligible for support (Attachment I), includes any activity that would significantly damage non- replicable cultural property. Nevertheless, the following procedures for identification, protection from theft, and treatment o f chance finds should be followed and included in standard bid documents. ChanceFindProcedures Chance find procedures are definedinthe law on Maintenance o f Historical and Cultural Monuments (Official Gazette, December 21, 1980), specifying the authorities and responsibilities o f cultural heritage agencies if sites or materials are discovered inthe course o fproject implementation. This law establishes that all moveable and immovable historical and cultural artifacts are state property, and further: 1. The responsibility for preservation, maintenance and assessmento fhistorical and cultural monuments rests with the Archaeological Committee under the Ministryo f Information and Culture, which has representation at provincial level. 2. Whenever chance finds o f cultural or historical artifacts (moveable and immovable) are made the Archaeological Committee should be informed. Should the continuation o f work endanger the historical and cultural artifacts, the project work should be suspended untila solutionis found for the preservationo fthese artifacts. 3. Ifa moveable or immovable historical or cultural artifact i s found inthe countryside o f a province, the provincial governor (wali)or district-in-charge (woluswal)should be informed within two weeks, and they should informthe Archaeological Committee. In case the immovable historical or cultural artifact i s found ina city, the provincial branch o f the Department o f Maintenance o f Historical Values of the Ministry o f Information and Culture shouldbe informed within two weeks (art. 18). Ifthe find i s made within the center, the Archaeological Committee must be informed directly within one week (art. 25). 4. Failure to report a chance find withinthe stipulated time limit will bepunishedwitha fine or imprisonment for a period o f one week or upto one month (art. 72). 5. Ifsomeone intentionally damages a historical or cultural artifact, the culprit shallpay compensation inaccordance with the value o f the artifact plusbe imprisoned for a period o f one month to ten years depending on the gravity of the crime (art. 71). 69 Incase o fa chance find o fmoveable or immovable historicalor cultural artifact, the implementing agency i s responsible for securing the artifact fi-om theft, pilferage and damage untilthe responsibilityhasbeentaken overbythe relevant authorities as specified above. These procedures mustbe referred to as standard provisions inconstruction contracts, when applicable. Duringproject supervision, the Site Engineer shall monitor that the above regulations relating to the treatment o f any chance find encountered are observed. Relevant findings will be recorded inWorld Bank Project Supervision Reports (PSRs), and Implementation Completion Reports (ICRs) will assess the overall effectiveness o f the project's cultural resources mitigation, management, and capacity buildingactivities, as appropriate. 70 Matrix 1 Impact Identification and Assessment for Afghanistan Kational Solidarity Project Name o f the sub-project: Location: Code: - /(Important: Ensure that section F, & only 1o f sections A, B, C ,D or E have been filled up)/ Part A: Sub-projects related to Irrigation andWatershed Management structures (Rehabilitation / construction of water retaining structures, rehabilitation / construction of new drains, erosion protection, etc.) Assessment (Put only one 1 Scheme Potential Impacts requires I Reduced measures downstream water availability Floodregime change Waterlogging Less dilution o f discharges from settlements 1 Pesticide I Toxic comDound uresence Streammorphology and regime change Pollution fi-om disposal of sediment accumulated inchannels I structures Sedimentation Damage to cultural I archaeological siteslproperties Weed Removal causing loss o f Important species surviving due to improper operation Drainage of water bodies Barrier to migration o f local species o f fauna r u s e o f water channels as wastewater drains ~ ~~ ~ Incidence o f diseases such as Dengue, Malaria, etc. Income and amenity changes Safetv o f children 1 Emergence o f PestsI Weeds IncreasedAnimal diseases Land acquiredthrough (i) donation,, (ii)purchase, (iii) govt. Presence o flandmines or unexploded ordinance 71 Part B: Sub-projects related to community infrastructure construction (School, market sheds, etc.) Assessment {Put only one 1 tick (4in NO Impact Scheme PotentialImpacts or Impact Impact requires NOT miti ation ifany significant measures I Removal o f vegetation Damage to cultural / archaeological sites/properties Dustgeneration duringconstruction activities IncreasedNoise due to construction activities Potentialfor spread o f water-borne diseases due to improper sitinn o f ancillarv facilities Land acquired through (i) donation, (ii) purchase, (iii) govt. Presence o f landmines or unexploded ordinance PART C: Sub-projects related to transport infrastructure (roads, culverts, smallbridges, etc.) Assessment {Put only one Scheme PotentialImpacts Impact specific Impact requires observations, if any Land acquired through (i) donation, (ii) purchase, (iii) govt. Severance o fproperties or land Damage to cultural / archaeological sitedproperties Increased landslides duringand after construction Pollution during construction activities Risko f accidents involving hot material, pollution o fwater courses and agriculturallands Pollution from ancillary activities like preparation o f asphalt, crushing o f aggregate, concrete mixing, etc. Increased erosion downstream o f channels being crossed Disruption o f aquatic ecosystem duringconstruction due to excessive sediment, discharge o f waste concrete or accidental spillage o f oil & grease Noise due to increased traffic Increasedrisk o faccidents due to increased and faster traffic Severance o f wildlife habitat which may have established duringyears o fneglect Presence o f landmines or unexploded ordinance 72 PARTD: Sub-projectsrelatedto water supply (communityponds, openwells, pipedsupply or gravityschemes, etc.) 1Assessment (Put only one 1 tick (4in NO Impact Scheme PotentialImpacts or Impact requires NOT miti ation ifany significant measures Land acquired through (i) donation, (ii) purchase, (iii)govt. Submergence o f new areas Damage to cultural / archaeological sites/properties I Safety hazards duringconstruction Visual blight and dirt due to imDroDer disDosal o f material Increasedbreeding o f mosquito incase o f inadequate drainage near water abstraction point / locations Pollution o f water from leaves, dust and other nuisance due to open surface Unnoticedcontamination by wastes incase of faulty layout Presence o f landmines or unexploded ordinance PART F: Summaryof Environmentalimpactsof the proposedactivity (from only one PartA, B, C,or D) KEYIMPACTSIDENTIFIED 1. 2. 3. 4. MITIGATION MEASURESTO BE IMPLEMENTED(REFER TO MATRIX& ATTACHMENTS & 4) 2 1,3 1. 2. 3. 4. AGENCY RESPONSIBLEFORIMPLEMENTATION / SUPERVISION(REFER TO MATRIX 2) 1. 2. 3. 4. TIMING OFIMPLEMENTATIONWITH REFERENCETO STAGEOF CIVILWORKS CYCLE(DESIGN, CONSTRUCTIONOR OPERATION) 1. 73 2. 3. 4. Stamp(s) and Stamp(s) and Stamp(s) and Stamp and Signature Signature(s) of the Signature(s) o f the Signature(s) of the o f Authorized Officer Authorized Official(s) Authorized Official(s) Authorized Official(s) of the Facilitating o f Headof theCDC) o f Heado fthe CDC o f Heado f the CDC Partner retained by MRRD Date: 1Date: Date: Date: Place: 1Place: Place: Place: 74 Matrix 2 Menu of mitigation measures for Afphanistan National Solidaritv Proiect Part A: Sub-projects related to Irrigation and Watershed Management structures (Rehabilitation / construction of water retaining structures, rehabilitation / constructionof new drains, erosion protection, etc.) Sub-part (i) ConstructionPhase Potential Impacts -Mitigation lIeasure(s) Identified Implementation Arrangements Execution Supervision Downstreamwater availability Maintain flow requiredfor downstream contractor4 MRRD/Oversight uses (drinking, other domestic, industry, Consultant hvdrooower. etc.I Waterlogging Constructimproved liningof canals Contractor MRRD/Oversight Consultant IncreasedSalinity Meticulous provision of drainage as per Contractor MRRD/Oversight design or directions of MRRD/Oversight Consultant Consultant Local erosion, dust Ensuresufficient channel sectionis Contractor MRRD/Oversight availablefor flow during construction Consultant Spray water on exposed surfaces (material Contractor MRRD/Oversight piles, freshlycut slopes, etc.) Consultant Cover the material during transportation Contractor MRRD/Oversight Consultant Streammorphology and Careful constructionwith aview to limit Contractor MRRD/Oversight regime change change to streammorphology andregime Consultant change to the minimum Disposal of sediment No disposalof spoils on fertile lands Contractor MRRD/Oversight accumulatedin Consultant channelshtructures Secure writtenpermissionof the owner Contractor before disposal canbegin MRRD/Oversight Consultant Use of some material from dredging for Contractor limingofnearbyacidic soils MRRD/Oversight Alternatively, consider use of sediment as Consultant part of rehabilitated embankment Drainageof water bodies Minimisedrainageofwaterbodiesacting Contractor MRRD/Oversight as habitat Consultant Incidence of diseasessuch as Properdrainage of the area Contractor MRRDIOversight Dengue, Malaria, etc. Consultant This canbe individual, group of individualsor firmpreferablylocalbut not necessarily 75 Sub part (ii) OperationStage PotentialImpacts MitigationMeasure(s)Identified Implementai nArrangements Execution Supervision Downstream water Appropriate operation o f dams WUA5or Locally elected availability Mirab council (CDC) Flood regime Appropriate operation o f dams WUA or Locally elected Mirab council (CDC) Waterlogging Increase efficiency o f operation o f the WUA, Mirab Locally elected system council (CDC) Match supply with requirement o f water WUA, Mirab Locally elected users council (CDC) Less dilution o f discharges Maintain minimumflow as required WUA, Mirab Locally elected from settlements council (CDC) Pesticide I Toxic compounds Encourage alternative cropping techniques WUA, Mirab Locally elected to avoid monocultures which are more council (CDC) dependent on pesticides for highyields Excess nutrient Disseminate goodpractices for efficient WUA, Mirab Locally elected concentration I utilization o f fertilizers council (CDC) Eutrophication Increased Salinity Management techniques that can be WUA, Mirab Locally elected employed include: leaching, altering council (CDC) irrigation methods and schedules, installing sub-surface drainage (?),changing tillage techniques, adjusting cropping patterns, and adding soil ameliorates. EXTREMELY COSTLY Changes in Structure o f soil Limingor spreadofGypsumfor reversing WUA, Mirab Locally elected the sodic conditions council (CDC) Saline drainage Avoid salt concentration increase by WUA, Mirab Locally elected providing 10-20% extra water, if available council (CDC) Stream morphology and Systematic operation o f sediment exclusion WUA, Mirab Locally elected regime change structures, ifany. council (CDC) Drainage o fwater bodies Protect water bodies acting as habitat WUA, Mirab Locally elected council (CDC) Use o f water canals as Allow partial use, ifrisks are not very high WUA, Mirab Locally elected wastewater drains council (CDC) Incidence o f diseases such as Maintainproper drainage o f the area WUA, Mrab ~ ~~ Locally elected Dengue, Malaria, etc. council Periodic flushing o f the canals WUA, Mirab Locally elected council Liaisonwith health authorities o n early warning sign communication CDC MRRD/Oversight Consultant Resettlement Compensate as per the Entitlement Facilitating MRRD/Oversight framework for the project Partner, Consultant Locally elected council WUA = Water Users' Association (to be confirmecUstrengthened/established) 76 PotentialImpacts MitigationMeasure(s) Identified Implementat n Arrangements Execution Supervision Safety (especially of children Maintainprovided signages and bamers Facilitating MRRDIOversight and vulnerable groups) such as fencing Partner, Consultant Contractor, Locally elected council Pests I Weeds Use integratedpest management techniques Facilitating MRRD/Oversight to prevent harmbypestdweeds Partner, Consultant Locally elected council 77 Part B: Sub-projectsrelatedto communityinfrastructureconstruction (School,communityhall, marketsheds, etc.) Sub-part (i) Construction stage PotentialImpacts Mitigation Measures Implementatic Arrangements Execution Supervision Land andor property Voluntary donation, willing buyer-willing seller, Locally Elected MRFWOversight acquisition or government landwithout encumbrances only or Council Consultant procedure to be followed as per Attachment 1to Environmental and Social Management Framework (ESMF) Removal o f 0 Plantingsaplings as compensation@ 2 Locally Elected MRRD/Oversight vegetation saplings for each tree felled. This mustbe done Council Consultant after the construction activities have been completed on site. Altematively, planting must be done well in advance o f beginning o f construction so that the trees have grown strong enough to resist accidental hitsduringmovement o f construction equipment Damage to cultural / Avoid sites where such properties are located. If Contractor Locally Elected archaeological bychance, any such locationis found, adopt Council sitedproperties procedure as per Attachment 3 to the ESMF Dust generation 0 Provide temporary enclosures to the site Contractor Locally Elected duringconstruction using GI sheets and poles Council activities Provide cover on trucks carrying construction material. 0 Provide protective masks for workers 0 Sprinkle water within site, especially on windy days IncreasedNoise due 0 Avoid noise generating activities during Contractor Locally Elected to construction particularperiods-times o fprayers, school Council activities hours, etc. 0 Discontinue all operations duringnight except ifconcreting requires work to continue during the night. 0 Provide ear plugsto construction workers manning noisy equipment. 0 Consider provision o fnoise barriers by landscaping, tree plantation or even double- glazing. 78 PART C: Sub-projects related to transport infrastructure (roads, culverts, small bridges, etc.) Sub-part(i) Construction Phase ~ Mitigation Measures Imnlementatic Arrangements Execution Supervision Land acquisition Voluntary donation ,willing buyer-willingseller, Locally Elected MRRD/Oversight or government landwithout encumbrancesonly or Council (CDC) Consultant procedure to be followed as per Attachment 1to Environmental and Social Management Framework (ESMF) Severanceo f Voluntary donation, willing buyer-willingseller, Locally Elected MRRD/Oversight properties or land or government landwithout encumbrancesonly or Council (CDC) Consultant procedure to be followed as per Attachment 1to Environmental and Social Management Framework (ESMF) Damage to cultural I Avoid sites where such properties are located. If Contractorl MRRD/Oversight archaeological by chance, any such locationis found, adopt Community Consultant sitedproperties procedure as per Attachment 3 to the ESMF Increasedlandslides Provide vegetative protection as far as possible on Contractorl MRRD/Oversight duringand after the uphillsides. Use `hard' engineering structural Community Consultant solutions as last resort 0 Provide temporary enclosures to the site Contractorl MRRD/Oversight and asphalt during usingGIsheets andpoles Community Consultant construction activities 0 Provide cover on trucks carrying constructionmaterial. 0 Provide protective masks for workers 0 Sprinkle water withinsite, especially on windy days Riskof accidents 0 Provide adequate signagesandfencing around Contractorl MRRD/Oversight involvinghot the site. Community Consultant material, pollution o f 0 Trainworkers to follow safety instructions. water courses and 0 Preparecontingency plans for spillages, and agricultural lands carry out mock drills. 0 Provide adequatenotice ofsitelroad closures to locals. 0 Provide adequate detoursaround construction areas. Pollution from 0 Locate the hotmixplant at least 500maway Contractorl MRRD/Oversight ancillary activities like from habitation Community Consultant preparation o f asphalt, 0 Locate crushers and concretebatchingplants crushing o f aggregate, at least lOOmfrom habitation concrete mixing, etc. 0 Provide and operate emission control devices like ESP or wet venturi scrubber 0 Provide dust control devices on crushers and concrete batching plants 79 Potential Impacts Mitigation Measures Implementatic IArrangements Execution Supervision Increased erosion 0 Prevent direct discharge from site with a fall Contractor/ MRRD/Oversight downstream o f o f more than 0.6m. Community Consultant channels being 0 Avoid spillingconstruction material and crossed waste into the channel. This will prevent reduction in section o f the channel andhence erosion. Disruptiono f aquatic Prepare and implement spill prevention plan Contractor/ MRRD/Oversight ecosystem during for the site. Community Consultant construction due to 0 Train staffto handle spillage o fmaterial and excessive sediment, affected sections o f stream. discharge o f waste concrete or accidental spillage o f oil & mease Sub-part (ii)Operation Stage Potential Impacts Mitigation Measures Implementatior Arrangements Execution Supervision Noise due to increased Provide for silence zones near sensitive receptors - NGO, Locally MRFW traffic clinics, schools, mosques Elected Council Oversight Consultant Increased risk o f 0 Provide adequate signages andspeedcontrol NGO,Locally MRRD/ accidents due to within settlements Elected Council Oversight increased and faster 0 Provide adequate ROWfrom planning stage itself. Consultant traffic 0 Protect this ROWusing appropriate devices - notification, planting inarea currently not used for NGO, Locally MRRD/ Elected Council Oversight established during Consultant 80 PART D: Sub-projectsrelatedto water supply (communityponds,openwells, dugwells with handpumps, pipedsupply or gravityschemes, etc.) Sub-part (i) Construction Phase Potential Impacts I MitigationMeasures Implementation xrangements Execution Supervision Land andproperty Voluntary donation, willing buyer-willing seller, or Locally Elected MRRD acquisition government landwithout encumbrancesonly as per Council procedure to be followed as described inAttachment 1 to Environmental and Social Management Framework (ESMF) Submergence o f new Identifyareas which are currentlynot inproductive Locally Elected MRRD areas use. Procedure to be followed as described in Council Attachment 1to Environmental and Social Management Framework (ESMF) Damage to cultural I Avoid sites where suchproperties are located. Ifby Contractor Oversight archaeological chance, any such location is found, adopt procedure as Consultant siteslproperties per Attachment 3 to the ESMF Safety hazards during 0 Providewhere feasible personalprotective Contractor Oversight construction equipmentsuch as masks, hardhats andearplugsto Consultant all workers. 0 Prepareand implementa safety planfor the entire operation Visual blight anddirt 0 Dispose ofthe dirt and other excavatedat Contractor Oversight due to improper designated locations only. Consultant disposal o fmaterial 0 Explore the possibility ofdisposingoftank bottomsilt on farms as it can work as soil conditioner Sub-part (ii)Operation Stage PotentialImpacts MitigationMeasures Implementatioi 4rrangements Execution Supervision Increased breedingo fmosquito in 0 Designfor proper drainage andraise NGO, Locally MRFW case o f inadequate drainage near awareness among users and CDC. Elected Council Oversight water abstraction point I locations (CDC) Consultant Pollutiono f water from leaves, NGO, Locally MRRD/ dust andother nuisance due to Preferably use handpumpson dug Elected Council Oversight open surface Unnoticed contamination by 1I1 wells (CDC) Consultant 0 Use alum or other appropriate coagulant before supplying water. Periodically inspecthest the quality o f . . NGO, Locally MRRDI wastes incase of faulty layout water supply andwastewater collection Elected Council Oversight networks. (CDC) Consultant 81 APPENDIX 9 PROCEDURESFOR MINE RISKMANAGEMENT INWORLD BANK FUNDED PROJECTSINAFGHANISTAN Background: 1. The following procedures are designed to respond to the risks caused by the presence o f mines inAfghanistan, inthe context of: Community rehabilitation /construction works to be identified and implementedby the communities themselves (for small projects o f up to $100,000 each); Small and medium-size works to be identifiedby local authorities (or Community Development Councils) and implemented by local contractors (for projects up to $5m each)(projects implementedby contractors for Community Development Councils would generally be below $60,000, but could conceivably be o f higher value, ifcommunities choose to implementjoint projects funded throughthe block grant allocations under NSP); Works to be implementeddirectly by Governmentdepartments/agencies,without use o f contractors [not applicable]; Large works to be implementedby contractors (for projects above $5m) [not applicable]; 2. General comment applying to all following procedures: All risk assessment and clearance tasks shall be implementedincoordinationwith the Mine Action Center for Afghanistan (MACA). These procedures may needto be amended inthe future depending on evolving circumstances. Procedurefor Communitv-ManagedWorks 3. Applicability: This procedure applies to community rehabilitation / construction works to be identifiedand implementedby the communities themselves (for small projects o f up to $100,000 each). 4. Overallapproach: The communities should be responsible for malung sure that the projects they propose are not inmine-contaminated areas, or have been clearedbyMACA (or a mine action organization accreditedby MACA). 5. Rationale: Communities are best placedto know about minedareas intheir vicinity, and have a strong incentive to report them accurately as they will carry out the works themselves. Procedure: 6. Communities are required to submit a reply to a questionnaire regarding the suspected presence o fmines inthe area where Bank-funded community-managed projects will be implemented. This questionnaire should be formally endorsedby the Mine Action Programfor Afghanistan(MAF'A). Itwill be a mandatory attachmentto the project submissionbythe communities and shouldbe signed by community representatives and the external project facilitator. Extemal project facilitators will receive training from MAPA.Financingagreements with the communities should make clear that communities are solely liable incase o f a mine- related accident. 82 7. Ifthe communitycertifies thatthere isnoknown minecontamination inthe area, the ministryresponsible for the selection o fprojects should check with MACA whether any different observation i s reported on MACA's data base. o IfMACA's information is the same, the project can go ahead for selection. The community takes the full responsibility for the assessment, and external organizations cannot be made liable incase o f an accident. o IfMACA's informationis different, the project shouldnot go ahead for selection as long as MACA's and community's statements have not been reconciled. 8. Ifthe community suspectsmine contamination inthe area, o Ifthe communityhas includedan assessment/ clearance task inthe project agreed to be implementedby M A C A (or by a mine action organization accredited by MACA), the project can go ahead for selection. o Ifthe communityhas not includedan assessment/ clearance task inthe project, the project should not go ahead for selection as long as this has notbeen corrected. o Mineclearance tasks mustbe implementedbyM A C A or by a mine action organization accredited byMACA. Communities will be penalized (subsequent fundingby World-Bank fundedprojects shall bereducedor cancelled) ifthey elect to clear mines on their own. Procedurefor SmallandMedium-size Works ContractedOut 9. Applicability:This procedure applies to small- andmedium-size works to be identified by localauthorities andimplementedbylocal contractors (for projects upto $5meach). 10. Overallapproach:M A C A (or a mine action organization accredited byMACA) should provide detailed information on the mine-related risks (either based on previously done and updated general survey or on a new general survey) beforeprojects are considered for selection. Onlyproject sites assessedto have a nil-to-low riskwould be eligible for selection, unless they have been demined by MACA or by a mine action organization accredited by MACA. 11. Rationale:Neither local authorities nor local contractors have the capacity to assess the mine-related risks in a systematic way, while they may have incentives to underestimate them. Procedure: 1. Prior to puttingup a project for selection, a general survey should be carriedout by MACA (or a mine action organization accreditedbyMACA) to assessmine-related risks inthe areao ftheproject (thisshould include checkmginformationavailable inthe MACA database). 2. If A C A provides information suggesting a nil-to-low riskinthe project area, the project M can go ahead for selection. 83 3. The contract between the responsible ministryand the contractor will include a clause stating that incase o f an accident, legal liability would be fully and solely borne by the contractor. 4. IfMACA assesses a potentially highriskinthe area (whether due to the presence o f mines or uncertainty), o Ifthe project includes an assessment/ clearance task agreed to be implemented byMACA (or by a mine actionorganization accreditedbyMACA), it can go ahead for selection based on agreed funding modalities (clearance may be funded either under a contract with a Bank-funded project or under existing donor agreements with the mine action organization); o Ifthe project does not includedan assessmentI clearance task, it shouldnot go ahead for selection as long as this has not been corrected. 84 MAP SECTION MapIBRDNo. 32863 85