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Photos credits: World Bank Photo Library Cover Design and Text layout: Duina Reyes ECONOMIC OVERVIEW ernment has also continued to manage expendi- tures carefully, with total expenditures increasing only marginally over the year, from 26.2 percent of The withdrawal of international security forces GDP in 2014 to 27 percent in 2015. since 2014 and continuing political uncertain- RECENT SECTOR ties have resulted in significant deceleration of economic growth, with fiscal pressures in- creasing as security threats mount. However, to a significant extent Afghanistan has successfully DEVELOPMENTS managed the immediate challenges resulting from the transition. It has maintained macroeconomic Financial Sector stability and established the conditions for a slow economic recovery. Risks to the economy remain The Afghan financial sector remains nascent significant, and it is vital that the Government iden- and dominated by banks. The sector’s resil- tify new sources of growth to replace the declining ience is challenged by the conflict environment. donor inflows over the longer-term. More efforts are needed to reinforce financial sta- The medium-term outlook points towards a bility, strengthen soundness and governance, and slow recovery over the next three years. In foster financial stability. 2015, Afghanistan recorded an estimated econom- The banking sector is faced by many challenges ic growth rate of 1.5 percent, a marginal increase mainly driven by the Kabul Bank crisis that is from the 1.3 percent recorded in 2014. Growth is projected to remain low at 1.9 percent in 2016. If overshadowing the sector. It is dominated by 15 the political situation stabilizes and planned re- banks including 3 state-owned banks, 9 private sec- forms are successfully implemented, growth is ex- tor banks and 3 branches of foreign banks. The sec- pected to increase to 3.6 percent in 2018. On the tor balance sheet still shows weak intermediation, other hand, any deterioration in the security envi- but banks’ loan portfolios and deposits increased ronment could weaken growth prospects, with this by 10 percent in 2016Q2 compared to 2015Q2. risk being the most significant faced by the coun- On asset quality, non-performing loans (NPLs) are try. With the population growth rate estimated at reported at 17.1 percent of gross loans. However, 3 percent per year, sluggish GDP growth and the these figures need to be treated with caution con- deteriorating security situation have resulted in sidering the possible large margin of error in finan- increases in poverty, with the poverty rate increas- cial sector performance indicators as demonstrat- ing from 35.8 percent in 2011-12 to 39.1 percent ed by the Kabul Bank crisis. This reflected on low in 2013-14. This increase also reflects the limited financial intermediation as domestic credit to the number of employment opportunities. The esti- private sector was just 4.0 percent of GDP in 2015. mated unemployment rate almost tripled in the This compared with 15.4 percent for Pakistan and period from 2011-12 to 2013-14, reaching 22.6 22.2 percent for Tajikistan and was far below the percent of the labor force. region’s average of 47 percent. The fiscal position has continued to improve These challenges require swift action and sig- with the implementation of key policy reforms nificant reforms to restore soundness and help related to revenue mobilization and expendi- the sector perform its functions. The Afghan ture controls. Domestic revenues increased to government is looking into either privatizing the 10.4 percent of GDP in 2015, significantly higher New Kabul Bank or maintaining the status quo of than the figure of 8.7 percent in 2014. Given cur- state ownership while taking the action needed to rent progress in revenue collections, we anticipate restructure it. A decision should be reached as soon that collections will exceed the revenue target in as possible on this issue in order to strengthen 2016 as well. These improvements in fiscal perfor- banking sector stability. Pursuing recovery of Ka- mance arise mostly from the implementation of tax bul Bank assets and holding perpetrators account- policy reforms as well as the introduction of new able is a critical priority. This would signal a shift tax measures in late 2015 which strengthened tax in governance and accountability of the banking administration and collection of arrears. The Gov- sector. Afghanistan Country Snapshot 1 Da Afghanistan Bank (DAB - The Central Bank The Government can play an enabling role to of Afghanistan) requires significant technical increase access to financial services, but inter- assistance to improve banking supervision and national experience shows it should avoid be- strengthen its prudential oversight. The central ing a direct provider, particularly in weak gov- bank also needs to scale up its capacity to exercise ernance environments with fiscal constraints. effective Anti-Money Laundering / Counter Financ- Microfinance Investment Support Facility for Af- ing of Terrorism (AML/CFT) supervision of all fi- ghanistan (MISFA) provides an interesting example nancial institutions through effective enforcement of such indirect government support. Augmented of recently enacted AML/CFT legislation and the by DAB’s efforts to strengthen the financial sector approval and enforcement of necessary accompa- infrastructure (public credit registry, movable col- nying regulations. This is in addition to investing lateral registry and modernization of payment sys- in DAB’s technical capacity and building up the tem), it should continue to be pursued to facilitate needed infrastructure to be able to respond to cri- financial access, ensure allocative efficiency and ses and perform critical functions in the event of a support credit decisions. build-up of stress. Technology should also be used as a catalyst to en- Access to finance remains low. This impairs fi- hance access to financial services, particularly in nancial intermediation and represents a major con- rural areas by using mobile financial services. Af- straint to economic growth. This is more evident in ghanistan could invest early in options to develop Afghanistan’s agriculture sector where credit is a a crop insurance program to help mitigate risk for constraint for intensive livestock and horticultural farmers, facilitate credit and encourage productive production. On the demand side, the 2014 Enter- investments. prise Survey reports only 5.7 percent of firms have a bank loan and just 2 percent of firms are using The World Bank Group Supports the Develop- banks to finance investments. Access to financial ment of the Afghan Financial Sector services for the poorest 40 percent of adults stood at 7 percent in 2014 up from 1 percent in 2011. De- The World Bank Group remains committed to sup- spite the progress, this is still far below South Asia’s porting the development of the financial system average of 37 percent, whereas on the supply side, through a multi-pronged programmatic approach access to credit is overwhelmingly concentrated in spanning (i) strengthening the regulatory and urban areas with 80 percent of the bank credit re- banking supervision capacity of Da Afghanistan ported in Kabul province. Bank with emphasis on integrity and governance, (ii) building up a reliable financial infrastructure, Microfinance has faced a major consolidation (iii) deepening the financial sector and facilitating phase following a repayment crisis in 2008. The SME’s and households access to finance and ex- sector counts around 483,000 clients with around ploring possible introduction of innovative finan- 229,000 active borrowers (25 percent women) cial services (e.g. agricultural financing, disaster and a total portfolio of $141 million as of end-June risk insurance for farmers, Islamic finance). 2016. The sector has had positive growth in most of the key indicators compared to the 2nd quarter of Business Environment 2015; 7.3 percent in the number of active borrow- ers, 10 percent in GLP, 5.5 percent in the number It is vital to restore confidence in Afghanistan’s of active savers and 23.3 percent in the amount of private sector. Afghanistan ranks 177 (out of 189 savings. The number of sustainable microfinance economies) in the 2016 Doing Business report with institutions (MFIs) has remained the same at 5, many of the indicators faring worse or having no but the operational sustainability of the rest of the change from the past year.1 The findings show Af- MFIs has improved considerably. The Percentage of women borrowers remains stable at 40 percent. The sector is dominated by one commercial bank 1  The 2014 DB report ranking for Afghanistan is not direct- that focuses on micro, small and medium enter- ly comparable to the 2015 report, given data corrections and prises, representing 44 percent of the total lending changes in methodology. The comparable ranking for 2014 is and 23 percent of borrowers. explained and reflected within the 2015 DB report. 2 2014, according to the U.N. Conference FIGURE1: ENTERPRISE SURVEY FOR AFGHANISTAN, 2014 (in percent) on Trade and Development (UNCTAD). Gross domestic private investment as a percentage of GDP has remained at low levels, declining from 6.6 in 2013 to 5.9 in 2014, according to the IMF. During the pre-transition period, aid-led growth was not able to signifi- cantly accelerate poverty reduction in Afghanistan. In 2007-08, 36 percent of the population in Afghanistan was poor, that is more than one in every three Af- ghans was living on levels of expenditure insufficient to satisfy basic food and non- food needs. Four years later, in 2011-12, the poverty rate in Afghanistan remained Source: 2014 Enterprise for Afghanistan substantially unchanged despite a mas- sive increase in international spending, both on military and civilian assistance, ghanistan particularly low on protecting investors and an overall strong growth and labor market (189); trading across borders (174); registering performance. Rural areas accommodate a large property (184); enforcing contracts (172); and majority of the Afghan population and the high- dealing with construction permits (185). The 2014 est concentration of poverty: four out of every five Enterprise Survey said the biggest obstacles to poor Afghans live in rural areas. More than half of firms in Afghanistan were political instability, lack the poor population was represented by children of access to land, corruption, financing and electric- below the age of 15. Moreover, 75.6 percent of the ity shortages. poor above the age of 15 are illiterate (against 63.4 percent of the non-poor), and only 7 percent have Foreign Direct Investment (FDI) continues to completed primary education. The human capital remain low. Inflows steadily increased between disadvantage of the poor is reflected in their weak 2001 and 2005, reaching $271 million. With the labor market outcomes, i.e. in their higher risk of deterioration in national security, FDI inflows unemployment, underemployment and vulnerabil- have decreased and been more erratic since 2006, ity in employment or employment in agriculture. standing at $69 million in 2013 and $54 million in Poverty and Labor Market FIGURE2. FOREIGN DIRECT INVESTMENT INFLOWS FROM 2000-2014 In spite of rapid growth between 2007 and 2012, poverty levels remained stubbornly high FDI at 36 percent of the population. In 2014, after two years of falling growth, poverty levels had 300 increased to nearly 40 percent. In 2012, about 9 250 million Afghans, 600,000 more than in 2008, had consumption levels below the minimum necessary 200 to satisfy basic food and non-food needs. Female- 150 headed households are disproportionately af- 100 fected. Rural poverty rates are about 10 percent- age points higher than urban, but the urban-rural 50 poverty gap has remained stable. Rural areas ac- 0 counted for 76 percent of the population and 81 2002 2002 2004 2006 2008 2010 2012 2014 percent of the poor in 2011-2012, but urbanization has led to an increase in the number of poor people Afghanistan Country Snapshot 3 poverty in the lagging Northeast, West Central, TABLE 1: POVERTY TRENDS BY SURVEY YEAR and East regions of the country. (See Figure 4). Survey year According to the 2011-2012 National Risk and Poverty indicators Vulnerability Assessment (NRVA), poverty rates 2007-08 2011-12 ranged from 27.7 percent in the Southwest to 49.7 Poverty Headcount 36.3 35.8 percent in the Northeast. Poverty trends either re- Poverty Gap 7.9 8.4 mained flat or declined in most regions. Without Squared Poverty Gap 2.5 2.9 the Northeast, nationwide poverty incidence would Notes: Provinces of Helmand and Khost were excluded from the original sample in have fallen by 3 percentage points. The lagging re- both survey years. gions were not those which experienced the most Source: Authors’ calculation using NRVA 2007-08 and 2011-12. conflict. The conflict has had the perverse effect of increasing economic integration and employment living in urban areas. Inequality has also increased. in the better off but more conflict-affected regions, The poorest 20 percent of the population saw a 2 while the more remote Northeast, dependent on percent decline in real per capita consumption, the agriculture and vulnerable to natural disasters, re- bottom 40 percent little change, and the richest ceived relatively less attention from government 20 percent a 9 percent increase. Had the country’s and donors.3 economic growth been distributed evenly across the population, poverty would have declined by 4.4 Labor market dynamics induced by aid-led percentage points. growth also contributed to widening inequali- ties between the poorest and the richest seg- Population displacement caused by conflict and ments of the population. Between 2007-08 and poverty is a growing challenge. Historically, Af- 2011-12, labor market outcomes improved. The ghanistan has had a long history of displacement, economy added approximately 490,000 new jobs with many Afghans fleeing the country after the for men in the 25 to 50 age group and unemploy- Soviet invasion in 1979 and during the civil wars ment and underemployment were successfully of the 1990s. Currently there are an estimated 3.5 reduced, together with the share of informal em- million Afghans living in Pakistan and Iran as reg- ployment. However, the improvement in labor mar- istered and unregistered refugees. There has also ket opportunities did not benefit Afghan workers been a recent upsurge in the number of Afghans equally. Employment growth was mostly led by the fleeing to Europe. According to The Economist,2 service sector – where 80 percent of the new jobs nearly 200,000 Afghans applied for asylum in Eu- were in informal day labor arrangements – followed rope in 2015, but only 69 percent of them were by the public sector and employment in health and granted refugee status while the rest have been or education-related services – where most of the jobs are in the process of being repatriated. Internally were highly skilled and formal. Lacking the human as well, conflict is causing increasing numbers of capital necessary to take advantage of better qual- Afghans to flee the countryside and move to urban ity jobs, the only change in labor market opportu- areas, where they make up a large proportion of nities available for the poor was to substitute vul- those who are poor. The number of internally dis- nerable employment in agriculture with vulnerable placed persons (IDPs) is estimated in excess of 1 employment in the service sector. million. Increasingly, with potentially large num- bers of returning refugees or internally displaced Public Sector Governance Structures who have lost their livelihoods, government and host community resources are stretched to break- Afghanistan’s public sector is highly central- ing point. ized. Only central ministries and similar admin- istration units receive funds from the national A key factor behind stagnant poverty nation- budget. Services at the provincial level are deliv- wide is regional disparities, with the highest 3  See recent paper by Vincent Floreani, Gladys Lopez-Acevido 2  The Economist, Europe’s migrant crisis in numbers, March and Martin Rama (World Bank, 2016) on Conflict and Poverty in 23, 2016. Afghanistan’s Transition. 4 FIGURE3: POVERTY HEADCOUNT, BY REGION FIGURE 4: POVERTY HEADCOUNT AND MEDIAN PER CAPITA EX-PENDITURE, BY REGION 50 Northeast WestCentral 45 % population that is poor East 40 South 35 North 30 West Southwest Central 25 1500 2000 2500 3000 Median per capita expenditure Notes: (a) Classification of provinces by regions is as follows: Southwest: Nimroz, (Helmand), Kandahar, Zabul, Urozgan; Central: Kabul, Kapisa, Parwan, Wardak, Logar, Panjsher; West: Badghis, Herat, Farah; North: Samangan, Balkh, Jawzjan, Sar-e-Pul, Faryab; South: Ghazni, Paktika, Paktya, (Khost); East: Nangarhar, Kunarha, Laghman, Nooristan; West-central: Ghor, Bamyan, Daykundi; Northeast: Badakhshan, Takhar, Baghlan, Kunduz. (b) Provinces of Helmand in the Southwest and Khost in the South have been excluded from the analysis because of a lack of reliable consumption data. (c) Figure 9: Area of symbol proportional to the size of poor population. Source: Authors’ calculation using NRVA 2011-12. ered by line ministries, agencies and provincial ad- ernance through the establishment and funding of ministrations. community development councils. The central administration level consists of Afghanistan is divided into 34 provinces that about 50 government units. These comprise min- vary widely in their population. Provinces are istries, departments, agencies, offices, independent not designated budget units and there are over- directorates, and other budgetary units. These lapping roles and responsibilities between differ- central government ministries and institutions are ent units at provincial level, including the role of considered primary budgetary units, and the re- provincial governors (appointed by the president), spective budgets of these entities are determined line ministries and provincial councils elected di- by the annual budget law. The Finance Ministry rectly by citizens. Provincial councils exercise only has prepared a provincial budget policy that could limited oversight over the provincial governor and significantly enhance the role of provincial line de- provincial line departments. The provincial depart- partments and administrations in both planning ment of the Ministry of Economy coordinates the and budget execution. The policy has now been ap- preparation of the Provincial Development Plan, proved by Cabinet and its effectiveness is expected but this has little connection with the budget pro- to be tested during the next budgeting cycle. cess. Two other central institutions help the finance ministry manage government relations: The Inde- Provincial offices have very limited capacity pendent Directorate for Local Governance (IDLG) and staff. They wield influence primarily through and the Ministry of Rural Rehabilitation and De- their ability to shape the national budget and its ex- velopment (MRRD). The IDLG is responsible for ecution through the provincial departments of line the overall system of inter-governmental relations, ministries. The governor has signatory power over including provincial, district, village and municipal most procurement at the provincial level and cer- affairs. Among line ministries, the MRRD plays an tain powers of appointment. Some governors will important role in rural development in the provinc- exercise significant de facto authority at the pro- es. This includes managing the National Solidarity vincial level. Furthermore, the governor has signifi- Program and the upcoming Citizen’s Charter Pro- cant authority over the police in the province, and gram, which promote local development and gov- direct authority over the district governors. Afghanistan Country Snapshot 5 There are 398 districts in Afghanistan, with an av- rated under studies on Afghanistan by Public Ex- erage population of about 67,000. The constitution penditure and Financial Accountability (PEFA), a is vague on the legal nature of district entities. Dis- multi-donor partnership. trict governors report to the provincial governor, and represent the IDLG at the district level. The dis- Afghanistan’s Supreme Audit Office conducts trict governor is part of the Office of the Provincial financial and compliance audits. The 2012 pub- Governor in organizational and budgetary terms. lication of a new audit law provides the legal frame- work for a modern external review. The role and There are currently no formal governance institu- responsibilities of the supreme audit organization tions at the village level. The constitution does call are clearly established, and it has a wide mandate for the election of village councils, but these have with guarantees for access. Some concern remains not yet been constituted. There are, however, other over its independence, and there are capacity lim- governance structures, such as community devel- its that prevent it from conducting audits to a high opment councils, that help administer the National standard without extensive technical assistance. Solidarity Program and other development pro- grams, as well as other formal and informal local Medium-term budgetary framework. The Fiscal groups. The cabinet has endorsed a policy to con- Policy Department of the Ministry of Finance has solidate district coordination through a District Co- developed a medium-term fiscal framework tool ordination Committee, and at village level through that is regularly updated and used in preparing existing community development councils. the annual pre-budget statement. The document provides a preliminary draft budget that assesses Municipalities are constitutionally recognized the government’s existing budget policies, as well as local government entities, created to manage as new funding priorities for the next fiscal year urban affairs. As such, municipalities have their and over the medium-term. The document also in- own separate budgets. Urban affairs are mostly cludes revenue and expenditure analysis that pro- managed in a rather top-down manner by the vide the basis for sector expenditure reviews and, IDLG’s General Directorate for Municipal Affairs; within these, calculation of budget ceilings for the mayors are centrally appointed, and budgets are primary budgetary units. centrally approved. Municipalities are largely self- sustaining entities that fund the provision of urban Afghanistan’s scores in the PEFA 2013 are rela- services with local revenue collections. tively strong. Performance indicators are superior to fragile state and other low-income countries’ re- PUBLIC FINANCIAL sults on all dimensions except budget credibility, MANAGEMENT and they equal middle-income country results for control, reporting, and external scrutiny. The 2013 PEFA assessment portrays a public sector in which Afghanistan has a well-developed infrastruc- financial resources of the general government sec- ture for public financial management (PFM). tor are, by and large, tracked and reported within a PFM’s foundation is a comprehensive budget that budget which is processed with transparency and is prepared in an orderly, transparent fashion. Giv- has contributed to aggregate fiscal discipline. The en the centralized nature of the budget, it practi- expenditures and financial position of the GoA are cally gives the entire general government sector’s reported regularly in an understandable format financial position. The Ministry of Finance plays a and Parliament reviews the fiscal reports of the pivotal role in budget preparation and expenditure executive. Based on the 2013 PEFA, the GoA’s com- control. Line ministries, departments and agen- mitments to financial transparency and account- cies have well-defined roles in implementing the ability have engendered confidence from donors budget, but no role in accounting or reporting. The resulting in mobilization of high levels of external Ministry of Finance’s Treasury Department makes support for both the recurrent and development all payments (both for central units and in all 34 budgets. However, Afghanistan’s rating by the in- provinces) and maintains an integrated financial dependent Open Budget Survey which measures management system. This system is at the heart of budget transparency, participation and oversight, control and reporting functions, which are highly dropped in 2015 to 42 (compared to 59 in in 2012 6 and 21 in 2010). An updated PEFA assessment will 164 MW from Iran, 433 MW from Tajikistan and 77 be carried out in the financial year 2017. MW from Turkmenistan. Energy Energy demand, usage and capacity are increas- ing from a very low base. Growth in demand for electricity was 17 percent in the last four years and Despite significant progress in developing the there has been a four-fold increase in the custom- electricity grid, Afghanistan retains one of the lowest rates of electricity usage and access to er base. Installed energy capacity has increased electricity in the world. Per capita consumption significantly, from 430 MW in 2001 to 622 MW in average is 154 kWh per capita per year, which is 2015. Supply has also increased through greater significantly lower than the South Asia average of use of imported energy. These imports consist of 667 kWh per year and the average electricity us- power purchase agreements with Uzbekistan (37 age per person world-wide of 3,100 kWh (based on percent of total imports), Turkmenistan (10 per- 2012 data). Only about 30 percent of its population cent) and Iran (23 percent), mostly from thermal is connected to the grid, up from 6 percent in 2002. generation, and Tajikistan (29 percent) from hy- Afghanistan’s power utility DABS has been able to dropower. grow its customer base steadily, and adds about 6 percent additional customers every year. In 2015, Progress on increasing the energy mix has been Afghanistan’s peak demand was 1,500 MW, and limited in the midst of decreasing domestic overall consumption was about 5,000 GWh. Af- production. Domestic generation has been domi- ghanistan benefits from cheap imported power nated by hydropower, which accounts for around that in 2015 met about 55 percent of Afghanistan’s 49 percent of the total installed capacity, followed demand, with the remainder supplied from domes- by thermal (32 percent). The share of hydropower tic hydropower and thermal plants. The reliabil- has fluctuated, but diesel-based generation has in- ity of the grid, particularly in Kabul, has improved creased exponentially since 2003. significantly over the past few years. Nevertheless, Losses, and the performance of the national load shedding and outages are still sufficiently utility, remain a challenge. Distribution losses common that few have given up their private gen- have declined over the last years, attesting to better erators. A large part of the population also owns management of the power utility DABS since it was small solar devices, such as solar lanterns, mainly spun off the Ministry of Energy and Water (MEW). to meet the lighting and cell phone charging needs. While in 2010 distribution losses were in the range The National Risk and Vulnerability Assessment of 25 to 28 percent (up from 20 percent in 2005), report (2013/14), indicates that 46 percent of Af- losses at distribution level were about 14 percent ghan households own a solar device, and 58 per- in 2015. While donors support has been important cent in rural areas. to help, overall better governance of Da Afghani- stan Breshna Sherkat (DABS) has been key to im- Low connectivity to the grid conceals a vast dif- proved performance. Improvements were made ference between rural and urban access. While in the area of loss reductions and cash collections. over 89 percent of the population in large urban Nevertheless both commercial and technical losses areas like Kabul, Kandahar, Herat, and Mazar-e- need to be further improved to meet international Sharif have access to grid electricity, less than 11 standards. percent of the rural population has access to grid- connected power. About 77 percent of the Afghan Northern Afghanistan contains large oil and population lives in rural areas. Large parts of Kabul, dry gas prospects. One of the most important gas Mazar-e-Sharif and Pul-e-Khumri have a 24-hour field projects is Sheberghan, which is supported power supply. These cities are part of the North by the U.S. Agency for International Development East Power System (NEPS), which imports up to (USAID). The potential for cheap gas, due to a lack 300 MW from Uzbekistan throughout the year, sup- of alternative uses and the resulting low opportu- plemented by up to 300 MW from Tajikistan during nity cost, means that a gas-fired generation plant the summer. Currently total installed transmission could potentially be competitive with imported lines carrying capacity is: 326MW from Uzbekistan, power from Uzbekistan, currently priced at 8.5 Afghanistan Country Snapshot 7 cents/kWh. However, gas refining is difficult, and 500kV line; (ii) the NEPS-SEPS interconnector; financing agencies have been reluctant to proceed and (iii) the Ghazni 220kV line, all financed by the without further seismic work to confirm the pre- Asian Development Bank (ADB). The World Bank dictability of supply, as well as a clear contractual recently approved two projects: (i) Rehabilitation framework. Also, the gas is high in sulfur, requiring of Naghlu Dam, which will restore generation ca- investment in a plant to make it suitable for power pacity to 100MW and may increase the amount of generation. In 2016, the Government made good energy generated from the plant; and (ii) a techni- progress on the preparation of a medium-sized In- cal assistance project with DABS to increase capac- dependent Power Plant (IPP), which would run on ity building. DABS, with USAID financing, plans to gas from the Sheberghan field. This could provide install a third turbine at the Kajaki power plant in for an important stepping stone for the develop- Helmand Province, augmenting supply to the South ment of Afghan gas. East Power System (SEPS). Additional investment in generation capacity, particularly to address peak Domestic coal resources exist in the North- winter demand, is a high priority. West Bamyan province. The use of coal (or coal- bed methane) for power generation is a potentially Regional energy projects can also provide op- attractive option for Afghanistan, but until the re- portunities. The Central Asia-South Asia Electric- sources to power these options are verified with ity Transmission and Trade Project (CASA-1000, confidence, coalmine and power plant planning is a regional IDA-financed project), will use surplus premature. Unless an exploration program is start- hydro generation in Central Asia to supply both ed today, the large future benefits of coal-fired gen- Afghanistan and Pakistan, without the need for eration (as opposed to imports of baseload power) new investments in power generation. Afghanistan cannot be realized. The results of a recent World would also gain a new source of revenue from tran- Bank analysis (2016) show that the expected value sit fees. CASA 1000 would enable a transfer of up to of future benefits of a government-financed explo- 1,300 MW of electricity via a DC transmission line ration program outweighs its upfront costs. between the two regions. Afghanistan would gain access to 300 MW of power under the project. The More needs to be done to strengthen capacity first electricity is due to flow in 2019. and accountability, to ensure clearer explana- tion of responsibilities and better collaboration across government agencies. The sector’s legal Agriculture Development framework remains weak. There is a lack of sector- specific laws and regulations, leading to poor gov- Agriculture still remains the main source of ernance. This needs to be tackled if the sector is to real GDP growth, employment and subsistence establish pricing that allows for full cost recovery. for the Afghan population. Only 12 percent of Af- While regulation by contract is feasible for larger- ghanistan’s 65 million hectares of land area is ar- scale energy investments, these shortcomings must able, and the actual cultivated area is substantially also be addressed if the Afghan energy sector is to less, due to a lack of irrigation. Between 2003/04 attract foreign investment. and 2011/12, real agricultural growth ranged from -22 percent to 45 percent, reflecting the continu- Financing future energy projects will require ing importance of rain-fed agriculture. The sector investment. Afghanistan’s energy infrastructure is also dominated by smallholder production. Av- requires significant capital investment. To date, erage farm size ranges from 0.4 to 1.0 hectare for this has largely been met through grants financing, small-scale producers and one to two hectares for with DABS only needing to recover the O&M costs large-scale producers. Similarly, the average size for most investments. Going forward, DABS will for livestock farming is 1.3 cows and 10 sheep and need to increasingly be able to recover the invest- goats. ment costs of projects, as grant financing is getting increasingly scarce. Three decades of conflict have destroyed much of the agricultural infrastructure, and eroded Current investment plans are limited in the institutional capacity to provide technical ser- sector. The main energy investments in 2016 are: vices, such as regulations or the teaching of new (i) the Turkmen 500kV line and the cross-Salang techniques. Before the conflicts, Afghanistan was 8 a top international supplier of horticultural prod- utes $1.4 billion to national GDP, equivalent to ucts, supplying about 20 percent of the raisins in 34 percent of agricultural GDP and 6.7 percent of the world market in the 1970s. That share has national GDP. It extends to about 360,000 ha, cov- fallen to two percent. It also was self-sufficient in ering almost 14 percent of the total irrigated land meat and milk and was a significant exporter of area and involving more than 2 million people. The wool, carpets, and leather goods. Afghanistan was country’s diverse geographical and climatic condi- also self-sufficient in cereals and, at times, was a tions allow a wide range of crops to be produced small exporter. However, rapid population growth at different times of the year. The most prominent coupled with the destruction of much of the coun- crops are grapes, almonds, apple, pistachio, apri- try’s irrigation systems, storage facilities and rural cots, pomegranates and melon, most of which are roads network during the years of conflict, have exported. Some of the horticultural products, such turned Afghanistan into a net importer of wheat. as pistachios are believed to be native to the coun- try, Even today, most agriculture is subsistence. Food crops account for over two-thirds of the cul- The Livestock subsector. Livestock currently con- tivated area and are typically grown for household tributes about 15 percent of agricultural GDP, or consumption, including perennial horticultural $680 million annually, and creates about 1.1 million crops and vegetables. The country lost its horti- FTE jobs, 15 percent of which are off the farm. Af- culture market to China, India, and Turkey. These ghanistan exports some livestock products—most- nations made significant investments in produc- ly skins, wool, and cashmere—but it imports much tion, processing and marketing, resulting in state- larger amounts (by value) of live animals, meats, of-the-art perennial fruits industries. Afghani- eggs, and dairy products. The livestock subsector stan has now embarked on developing promising has good catch-up potential. It could contribute horticulture value-chains, such as almonds, fresh much to growth and employment, substitute for grapes, raisins and pistachios. Although, the major imports, and exploit more export opportunities. farming system of the poor is cereal production for household food security, most families are still only Transport food sufficient for a few months each year. To meet steadily growing domestic demand, Afghanistan Afghanistan heavily relies on road transport to imports between 30 and 60 percent of cereals an- move people and freight. The country has a road nually, particularly from Pakistan. It also depends network of about 123,000 km, of which seven per- on imports of live and frozen chicken, eggs, and cent is regional and national highways (see figure dairy products. below). The country has a scant 75 km of railway The most important crop is wheat. Afghans con- line and just three international airports – Kabul, sume wheat with every meal and boast the world’s Mazar-e-Sharif and Kandahar. highest annual wheat consumption, at 160 kilo- grams per person. Wheat flour contributes 57 per- Rehabilitation and extension of road networks cent to the total caloric content of the average bas- ket of food items of the poor. Despite the large area ROAD NETWORK STATISTICS devoted to wheat cultivation, Afghanistan remains a highly food-insecure country. Productivity is low, due to a lack of improved seeds and the poor trans- fer of modern farming skills. Local milling capacity is very weak, the quality of local wheat flour is infe- rior, and milling costs are significantly higher than in neighboring countries. Boosting agricultural productivity will generate income, as well as widen the range of nutritious dietary choices for Afghans. The horticulture subsector is key for employment and growth. The horticulture subsector contrib- Afghanistan Country Snapshot 9 is a high priority. Over 40,000 km of rural roads FIGURE 6. GROWTH RATE OF URBAN SHARE OF POPULATION and more than 5,000 km of highways have been BY COUNTRY, 2000–10 rehabilitated or improved over the past 13 years. But much remains to be done to improve re- gional integration, national connectivity and access % 60 to local markets. Around 85 percent of roads are 50 in poor shape and the majority are not all-season roads. Action to improve operation and mainte- 40 AI nance is urgently needed. Afghanistan is establish- 30 ing an independent road authority to manage and UN 20 maintain the network, supported by a road fund mechanism to help with finance, but the progress 10 has been very slow. 0 Bhutan Afghanistan Nepal Pakistan Sri Lanka Bangladesh Maldives India Access to urban transport services is another challenge. Rapid urbanization has complicated the provision of affordable, safe and clean transport in towns and cities. Rehabilitation of urban roads and the restructuring and improvement of urban trans- portation remains a priority. Traffic management Urban Development and safety are challenges that particularly impact the urban poor. Afghanistan’s urbanization rate is increasing faster than that of most South Asia region coun- The railway system is underdeveloped. Afghani- tries. 27 percent of its population was living in ur- stan has only border railway links connecting Naib- ban areas in 2014. This is lower than the average in abad to Uzbekistan in the north and Herat to Iran South Asia of 32.6 percent but in recent years the in the west, hampering the development of mining, rate of change has been the highest in the region. shipment of goods and agriculture. The govern- Between 2000 and 2014, the urbanization rate has ment has established a railway authority, but the been 4.9 percent per annum, increasing from 1.2 country still needs a railway strategy and signifi- percent per annum in the 1960s. 24 percent of Af- cant improvements in operations and maintenance ghanistan’s population of about 32 million people capacity. was estimated to live in urban areas in 2012 – these estimates are likely to be an under-estimate. An in- Airports have been rehabilitated and expanded complete 1979 census and the definition of urban in the past 10 years, but civil air service lags be- enshrined in the Municipal Law of 2000 (currently hind international standards and practices. The under revision) underpin the data so far used to nation urgently needs a regulatory framework that estimate the figure 6. The country’s official defini- encourages free entry of civil aviation transporters tion of “urban” forms the basis for the United Na- and maintains international safety standards. tion’s World Urbanization Prospects, and the fig- ure below highlights the discrepancy between the Public sector technical and organizational ca- urban share of the population as estimated using pacity is limited. The past 10 years have seen a the government’s official statistics in South Asian significant improvement in the basic technical skills countries and using the Agglomeration Index (AI). of private design and consulting firms. But public The share of the population living in areas officially sector capacity, in terms of budgeting, procurement classified “rural”, meet the criteria which the AI and contract management, and transport-related uses to characterize them as “urban” – a population asset management, is lagging. Moreover, the sec- density of at least 150 people per square kilome- tor’s lack of regulatory and enforcement frame- ter, and location within 60 minutes of travel time works, overlapping ministerial responsibilities, of an urban settlement of at least 50,000 people. and a lack of coordination among ministries also This discrepancy suggests that large portions of the have hampered productivity. population are living in settlements that exhibit ur- 10 TABLE 2: SPATIAL URBAN EXPANSION IN AFGHANISTAN’S CITIES (K¬M2) (2001-2012) City 2001 2012 Change (%) Mazar-e-Sharif 207.3 855.0 312 Kunduz 24.8 346.3 1297 Pul-i-Khumri 73.0 279.2 283 Kabul 429.9 2920.7 579 Jalalabad 132.1 446.5 238 Subtotal 867.0 4847.7 459 ban-like characteristics but are officially governed largest area in absolute terms (2,491 km2) since as rural areas. This compromises potential agglom- 2001. Even accounting for potential measurement eration benefits in the form of higher productivity errors from night-time-light data, this represents a and resulting wage premiums, which can be in the significant amount of land. The “locked in” spatial order of two to five percent for every doubling in structure that has emerged is nearly impossible to population size. So, for example, a city of six mil- reverse – the expansion is outside current “munici- lion people could be 20-30 percent more produc- pal” boundaries and has “locked-out” a large part of tive than a city of 100,000 people. The difference the municipal revenue base. between the two estimates of the share of urban population is also indicative of the extent of “unof- Most of the urban area in Afghanistan is located ficial” urban settlements. along the ring-shaped road circulating the coun- try and other arterial roads connected to adjacent Urban sprawl is taking place in Afghanistan twice countries for trade. Kabul, Kandahar, Herat, Mazar- as fast as in South Asia as a whole. The urban land e-Sharif, and Pul-i-Khumri are on this main circu- requirement in 2050 could be up to 12 times higher lar transport route. The most noticeable branch of than in 2010 in a worst case scenario that assumes the ring road is the route from Kabul to Pakistan, urban population densities continue to decline at where Jalalabad is located. Another branch is the the same rate as over the 1999-2010 period. Af- route from Pul-i-Khumri to Tajikistan, along which ghanistan experienced a 3.8-fold expansion in night Kunduz lies. Herat also has a string of nearby ur- light4 areas between 2001 and2012: Kunduz (1,300 banized areas along the route to Iran. This pattern percent), Herat (690 percent) and Kabul (580 per- of urbanization highlights the role of trade in the cent) (see Table 2).5 6 Although Kabul is the third development of major cities connected to smaller highest in terms of percentage, it has consumed the trading towns. While Afghanistan’s population is most con- 4  Raw night light data is collected every night typically be- centrated in the Kabul region the overall dis- tween 8:30 and 9:00 pm by satellites orbiting the earth. Re- tribution of poor people is dispersed across search has led to an expanding use of lights data to proxy for the country. The growth of poverty in Kabul was levels of economic activity. Given the suseptivity to power out- ages in South Asia, the estimates of the pace of urban expansion higher at 5.9 percent per annum compared to the presented is if anything, biased downwards. growth of poverty in other provinces at 4.6 percent 5  The size is calculated by the assumed metropolitan bound- average per annum. Poverty incidence (headcount) ary of each city, and the boundaries are not the same as the ad- in the Kabul region home to 16 percent of the coun- ministrative district boundary of each city used for census data. try’s population, is the lowest in Afghanistan and Therefore this kind of figure is intended to present a rather rough comparison between demographic increase and spatial stands at 24 percent. expansion, rather than a very precise measurement. The proportion of Afghanistan’s population liv- 6  Zhou, N. (2014). Using Night Time Light (NTL) to Analyze Ur- ban Growth in the Corridor. Background Paper for the Afghani- ing in un-serviced or informal settlements is stan Urbanization Review. the highest amongst countries of the South Asia Afghanistan Country Snapshot 11 FIGURE 7: SPATIAL DISTRIBUTION OF URBAN AND RURAL POPULATION IN AFGHANISTAN, 2011 Urban Population Rural Population (Red/peaks indicate highest concentration of population) Source: Spatial analysis – IDW interpolation using NRVA 2011-12 FIGURE 8: SPATIAL DISTRIBUTION OF POPULATION AND POVERTY IN AFGHANISTAN, 2011 Population, 2011 Rural Population (Red/peaks indicate highest concentration of population) Source: Spatial analysis – IDW interpolation using NRVA 2011-12 Region. In many ways the growth of informal set- in such settlements (estimated to be 90 percent tlements has been beneficial for the government as in 2015) is estimated to be astronomically higher an agent of poverty reduction, a rational econom- than the poverty rate (estimated to be 30 percent ic choice preventing a further slide into poverty. in 2015), the biggest such gap in the SAR (see Table These settlements represent an enormous private 2). One third of all housing units in urban areas al- investment in housing (estimated to be $2.5 billion ready accommodate two or more families. In 2015 in 2005 in Kabul alone), financed through informal the overall housing deficit in Afghanistan was es- credit from relatives and friends, with savings on timated to be 1.5 million units, with an additional construction costs due to “ashar” or the practice of incremental annual demand of 200,000 to 230,000 reciprocal sharing of labor. Eighty-eight percent of units. By 2030, the cumulative housing deficit Afghanistan’s urban population lived in unserved could be up to 4.95 million units, with 70 percent or underserved housing in 2005, and 98 percent of this deficit being urban based. Housing supplied in 2013, according to the 2013-2014 National Risk by the formal sector is limited and unaffordable for and Vulnerability Assessment (NRVA). The pro- most Afghans, and multiple constraints impede the portion of Afghanistan’s overall population living delivery of adequate housing. Only 2 percent of Af- 12 FIGURE 9. SLUM SHARE COMPARED TO POVERTY RATES Afghanistan developed a remarkably progres- (2005-2011) sive policy for regularizing informal settle- ments three years ago.7 This policy legitimizes a community-based and simplified land-recording system for defined “schemes” (areas). However, the policy requires that each resident’s claim of right of occupation or ownership be recorded. This slows the process and prevents the government from le- gitimizing or regularizing the settlements as quick- ly as is needed. Since 2009, it appears only 85,000 properties have been formalized, i.e. about 14,166 properties per year. To expedite regularization, there is an urgent need for Afghanistan to learn from international experience to expedite regular- ghans earn more than $800 per month – housing ization. Focusing on the establishment of a modern for the majority therefore has been feasible only and fully integrated land-registration system (that through informal housing mechanisms. Informal- recognizes collective or community rights) appears ity represents a wide variety of shelter locations, suitable for Afghanistan in this regard. The system conditions, and tenure statuses. Direct provision can be adapted and refined over time, but would of formal housing, usually ownership driven, is un- have the advantage of adding almost two million affordable. The rental market for Afghans is even properties to the registry within three to five years, more constrained for households from the lower at almost no cost to the public sector and with sig- income tiers. nificant potential for revenue benefits for local gov- ernments, as well as for increasing housing supply. Repatriation of all or even a substantial propor- In the absence of such a system that recognizes col- tion of the estimated 1.6 million documented lective or community rights as per the “Upgrading and 1.5 million undocumented Afghans in Paki- Informal Settlements Policy, 2013” developed by stan, a plausible prospect, would aggravate the the Ministry of Urban Development Affairs, large already poor living conditions in unplanned de- swaths of unplanned development will not come velopment in Afghan cities. Over 5,000 displaced within the public sector domain. Until the “for- Afghans are already returning from Pakistan every malization”, development through market driven day. People displaced by on-going conflict will in- transactions over the medium to longer term will creasingly end up in urban areas: “If the current not happen, the control of the State over land will trends persist and the security situation continues continue to be at risk, and investments in housing to remain the same or worsen, the new arrivals will and real estate which typically contribute to rapid- likely compound the already overstretched housing ly increasing rental housing supply, will be elusive. and essential services capacity in many of the main Securing tenure may be the fastest and most cost- urban centers.” (UN Population Movement Bulletin effective way (in fact at no cost to the public sector) September 2016). Given the housing situation in of increasing housing supply in Afghanistan’s cities. Afghan cities, it is the informal settlements where Security of tenure leads to investments in home im- significant pressure will come and overcrowding provements, expansion of home-based businesses, increase, but also where a significant opportunity and other activities. This may also be the only way for a plausible solution may lie. The current esti- for unplanned development to be absorbed into mate of 1.4 million properties in unplanned areas the formal urban economy, as the settlements are could grow to 2.0 million by 2030. Access to rental here to stay. Studies in Brazil and India found that accommodation is a key tenure solution for the ur- unplanned development was not a temporary de- ban poor generally, but it is particularly relevant for mographic transition process in those countries— the urban displaced. Stimulating affordable rental many of the people living in those developments supply is likely to be the most affordable and fast- est option which is likely to have multiple beneficial impacts over the longer term, provided the govern- 7  Policy on Upgrading of Informal Settlements in Afghanistan, ment creates the appropriate policies. Ministry of Urban Development Affairs, 2013 Afghanistan Country Snapshot 13 were not recent immigrants from rural areas, but no transfers from the central budget. All the various second-generation residents. The difficulty of ac- regulations, procedures, and de-facto restrictions cess and the lower standards of infrastructure in constrain the ability of municipalities to plan, bud- unplanned settlements guarantee low rents in the get, collect and spend their own revenues, which future, and these settlements have the potential to limits their power. The unclear and unfunded man- be ideal for recent migrants (and refugees) who dates for municipalities and their weak political have few resources and whose main priority is to status have created an accountability deficit at the find employment (most likely in cities). Linking un- municipal level, where services delivery is divided planned development to sources of microfinance between national, provincial, and local providers. should be pursued in Afghanistan, as microfinance Additionally, legal constraints to raising resources, institutions have already performed well. The port- coupled with the lack of a system of intergovern- folio of the First Microfinance Bank tripled in six mental transfers, exacerbates resource deficits at years. One possible path to follow in the short term the municipal level. is expanding microfinance for incremental housing improvements (the estimated annual microfinanc- Education ing need for home improvement and new construc- tion in Kabul alone is $276 million). But insecure The public education system in Afghanistan property rights preclude microfinance supply suffered decades of upheaval in the 1980s (So- meeting the demand because lending institutions viet occupation) and 1990s (civil war and the need collateral against which to advance loans. emergence of the Taliban). In 2001, no girls at- tended formal schools, and boys’ enrollment was Like other South Asian countries, Afghanistan’s about 1 million. However, education has become municipalities face empowerment, accountabil- one of Afghanistan’s success stories since early ity, and resource deficits. Although Afghanistan’s 2002. The number of girls enrolled in higher edu- constitution defines the general legal context for cation increased from zero in 2001 to more than the relationship between the central and provincial 29,000 in public universities (21% of the total levels, and between the central and local govern- enrolment) and more than 22,000 in private uni- ments, the fiscal institutional structure of the sys- versities (21% of the total enrolment) by 2014. By tem of intergovernmental relations is still evolving. 2015, there were more than 9.2 million students, The Constitution requires the choice of mayors and of which 39% were girls. The Gender Parity Index municipal councils through “free, general, secret, in primary education increased from 0.50 to 0.68 and direct elections”. These have not taken place over the same period, and the number of teachers so far. Aside from the Constitution, the Municipal grew from 20,000 to more than 187,000. In 2015 Law of 2000, which has not as yet been superseded there were nearly 300,000 students in public and or repealed, confers legitimacy for municipalities private institutions of higher education from a low and gives municipal administrations and mayors a baseline of less than 10,000 students at the end of mandate to manage municipal affairs. Although Af- 2001. ghanistan’s Constitution provides a framework for a unitary and highly centralized public sector, while The education sector, while growing steadily, recognizing the importance of subnational gover- faces a number of supply and demand challeng- nance, the legal framework for municipal gover- es. Only about half of the total registered schools nance is derived from a combination of municipal- have proper buildings, while the rest operate in specific laws and national public-sector laws. The tents, houses and under trees. Only 55 percent Presidential Decree 73 (2007) granted oversight of the teachers meet the minimum requirements authority of municipalities to the Independent while the rest get in-service training to upgrade Directorate of Local Governance (IDLG), which as their skills. National student learning assessments an independent directorate, reports directly to the are yet to be mainstreamed and the quality of edu- President. IDLG appoints all provincial and district cation and administration remains relatively weak. municipality mayors, except for Kabul. Municipali- ties are thus subject to full oversight from the cen- An estimated 3.5 million children of primary tral government over municipal affairs despite the school age do not attend classes. Furthermore, fact that they are fiscally autonomous, and receive girls’ drop-out rates are high in secondary grades 14 TABLE 3: SPATIAL URBAN EXPANSION IN AFGHANISTAN’S CITIES (K¬M2) (2001-2012) Key Indicators 2002 2014 Gender Parity Index (MDG3) at the primary level 0.50 0.68 Number of students enrolled in primary education 1,168,629 6,037,663 Number of students enrolled in secondary education 467,452 2,546,043 Number of students enrolled in tertiary education 5,108 162,042 Number of students enrolled in TVET 2,896 80,830 Number of children enrolled in ECD 797 36,223 GER for primary education 49% 79% GER for secondary education n/a 43% GER for tertiary education <1 5% % of government spending on education No Data 17% Public expenditure on education as a share of GDP No Data 4.3 with gender disparity considerably high in many tation capacity, and weak links between the central parts of the country. Only 21 percent of girls com- and sub-national level. Meeting further education plete primary education. The causes of non-en- goals requires sustained commitment from the rollment or early drop-out by girls include a lack government and development partners. The gov- of female teachers, long distance to schools, early ernment, having focused for a decade on expanding marriage, safety concerns and a lack of sanitation access, has turned its attention to strengthening facilities and surrounding walls once there. There systems and ensuring education quality. A number are stark differences in enrollment between rural of reforms and assessments have been initiated in and urban areas, with girls from rural poor families the past three years. For instance, the Global Part- being most affected. Secondary school attendance nership for Education (GPE) was launched in 2012 is 32% (girls 21%, boys 43%), but it is only half this to expand education to insecure areas and get chil- rate in rural areas. dren back to schools. Application for the second round of the GPE is currently being worked out. Nevertheless, there is a steady increase in the A first learning assessment of students in grade 6 number of girls completing secondary educa- was completed in 2014 and an assessment of grade tion, with a growing demand for higher educa- 3 is under way to inform policy decisions and show tion. In higher education, the quality and relevance how much learning actually happens in classrooms. of the teaching still requires significant reform and The government is in the process of finalizing the more resources. In addition, the adult literacy rate Third National Education Strategic Plan (NESP III) is one of the lowest in the world. The higher edu- and the Second National Higher Education Strate- cation gross enrollment ratio is about five percent, gic Plan (NHESP II). Important analytical work is which is one of the lowest participation rates in the also underway such as an education expenditure world. As a new generation of primary and second- review and a study of teacher practices. ary school students come of age, enrollment and the demand for school places is increasing sharply. As Health the number of school and university graduates in- creases, it puts pressure on the absorption capacity The Afghan health system has made consider- of the labour market. Education faces significant able progress during the past decade. This has challenges, which are compounded by insecurity, been thanks to strong government leadership, diminishing resources, low government implemen- sound public health policies, innovative service de- Afghanistan Country Snapshot 15 livery, careful program monitoring and evaluation, scheme, a non-contributory pension program for and development assistance. Data from household Martyrs and Disabled, and a number of small social surveys (between 2003 and 2015) show signifi- assistance schemes that transfer cash and in-kind cant declines in maternal and child mortality. The benefits to various groups or provide social care under-5 mortality rate and infant mortality rate services. The government also administers a num- dropped from 257 and 165 per 1,000 live births to ber of labor market interventions, including skills 55 and 45 respectively. The maternal mortality ra- development programs, and has recently launched tio is 327 per 100,000 live births, compared with a short term labor intensive public works program 1,600 in 2002. The number of functioning health to respond to unemployment in rural areas. Still, facilities increased from 496 in 2002 to more than most interventions addressing poverty and vulner- 2,000 in 2012, while the proportion of facilities ability are financed and implemented off-budget, with female staff increased. by humanitarian partners who struggle with de- creasing resources and coordination challenges. Since the establishment of a new administra- tion in 2002, the government has placed the ut- The sector faces a number of challenges related most importance on addressing high maternal to program coordination, effectiveness and fi- and child mortality, especially in rural areas. nancing. Human resources constraints and organi- The Ministry of Public Health defined a Basic Pack- zational complexity hampers the Ministry of Labor, age of Health Services and an Essential Package Social Affairs, Martyrs and Disabled in performing of Hospital Services, and established a system for its coordination function as the lead agency for so- large-scale contracting with non-governmental or- cial protection. The Government channels most of ganizations (NGOs) for delivery of these services. its social assistance resources to the Martyrs and The Basic Package of Health Services has recently Disabled program (1.1 percent of GDP), with rather been expanded to include mental health, disability, negligible resources allocated to safety net schemes and nutrition services. The ministry also priori- targeted to the poor and vulnerable. The country’s tized the monitoring and evaluation of health sec- safety net has low coverage and weak targeting, tor performance. Through the deployment of pre- with about nine million people living in poverty dominantly local consultants, it addressed human and not covered by social protection. Those safety resource capacity constraints in terms of manag- nets that do provide sizeable coverage of the poor ing NGO contracts, tracking health sector progress consist mainly of cash-for-work or food-for-work through rigorous impact level monitoring, and ef- programs concentrated in regions/ provinces with fectively performing its stewardship. high exposure to natural hazards, and are mainly financed and implemented by donors and NGOs. Afghan health indicators still remain below av- WORLD BANK GROUP erage for low income countries, indicating the need to further lower barriers for women ac- cessing services. Afghanistan has one of the high- est levels of child malnutrition in the world, with PROGRAM IN AFGHANISTAN about 40.9 percent of children under five suffering from chronic malnutrition while both women and The Systematic Country Diagnostic (SCD) for children suffer from high levels of vitamin and min- Afghanistan was completed in February 2016. eral deficiencies. It identifies three critical constraints to poverty re- duction: fragility and conflict; demography and ge- ography; and declining aid. It also identifies three Social Protection priorities for poverty reduction: Strong economic growth and job creation, improved prioritized ser- The Social Protection sector in Afghanistan is vice delivery, and support toward fiscal stability. still fragmented. Afghanistan does not have an overall strategy or framework for social protec- The World Bank Group is currently preparing its tion, and the transition from primarily humanitar- Country Partnership Framework (CPF) in line with ian relief-based interventions to social protection the findings of the SCD and priorities laid out by systems is still in its infancy. The Afghan social government in the Afghanistan National Peace and protection system includes a public sector pension Development Framework. The CPF is expected to 16 be finalized by November, 2016. established in 2015 and is intended to finance ana- lytical work linked to ARTF programs and the gov- The World Bank with support from donors and ernment’s policy reform agenda. Several of the pro- other development partners oversees a large posed studies continue to explore themes around portfolio in Afghanistan. It supports key areas the economics of transition, a strand of work start- including human development, governance and ed in 2011,8 and address cross-cutting issues. For state building, rural and urban development, in- example, the study Navigating Risks and Uncertain- frastructure as well as domestic and regional con- ty examines Afghanistan’s growth model, identify- nectivity. In addition to IDA financing, the Bank ing broad drivers of growth consistent with current also administers the Afghanistan Reconstruction challenges, while revisiting the role of the state in Trust Fund (ARTF), the World Bank Group’s largest supporting growth. The Bank is also conducting single-country multi-donor trust fund. The ARTF provides grant support to Afghanistan based on a studies on migration and displacement, service de- 3-year rolling financing strategy. Together, ARTF livery, human capital development and labor mo- and the International Development Association bility as well as on natural resources and regional (IDA) provide close to $1 billion per year in grants integration, options for improving private sector ($150 million from IDA and about $800-$900 mil- investment and measures to mitigate risks faced by lion from the ARTF). firms and households, including food price shocks. The WBG Strategic Operational Model for Af- The Bank has a strong focus on gender issues ghanistan balances the presence of resident in- throughout its portfolio. The Bank’s gender strat- ternational staff and visiting missions, a model egy in Afghanistan involves building a knowledge that mirrors World Bank Group global opera- base and improving the collection of gender-disag- tions. The World Bank will ensure high level client gregated data, empowering women economically engagement and active engagement with develop- in key markets, enhancing their role as producers ment partners through local staff taking on a stron- in the rural economy, and increasing opportunities ger role as well as proximity support to clients for employment and entrepreneurial activities. The through the new guest house in Mazar-e Sharif. An Bank also focuses on strengthening women’s in- office in Dubai allows for wide access to the insti- volvement in the more socially-acceptable sectors, tution’s global knowledge and talent pool. Client like health, education, and the civil service. ministries are equipped with IT facilities to ensure real-time connectivity, and all Kabul staff has home The Bank has a social development advisor and based connectivity. a national gender specialist in Kabul who work with task teams on social inclusion and gender Portfolio management is quite strong. The mainstreaming. Gender disparities remain pro- Bank’s portfolio (including ARTF projects) com- nounced in Afghanistan and gender issues con- prises 30 ongoing operations across a wide range tinue to be integrated across the Bank’s portfolio.  of sectors. The Bank together with the govern- In 2013/14, the Bank updated its Country Gender ment continues to take steps to improve portfolio Assessment and published a report in English and performance by restructuring projects, adjusting Dari titled “Women’s Role in Afghanistan’s Future – procurement plans based on risk analysis and an Taking Stock of Achievements and Continued Chal- appraisal of government fiduciary responsibilities, lenges.” and improving project readiness, to name just a few initiatives. Supervision is also being enhanced A Country Gender Action Brief has been devel- through use of partner organizations in many proj- oped which helps identify key gender gaps and ects, third party monitoring, and innovative infor- instruments to address them. A platform on mation technology. gender and social inclusion is being developed to help the government promote gender equality and A Strong and enhanced program of analytical and knowledge services is at the forefront of the Bank’s engagement. Much of this is financed 8  Afghanistan in Transition: Looking Beyond 2014, the World by the ARTF’s new Research and Analysis Program Bank, 2013. Afghanistan Country Snapshot 17 contribute to achieving the objectives of the gov- the Business Edge program has successfully ernment’s National Priority Program on Women’s trained almost 10,000 individuals, of whom Economic Empowerment. 43 percent are women and reached out to 842 smaller enterprises. IFC has also been provid- INTERNATIONAL FINANCE ing support to SMEs in the Agribusiness sector by helping farmers improve productivity and CORPORATION supporting the expansion of market opportu- nities both nationally and internationally. IFC’s key engagement has been through advi- • Investment Climate - IFC has two primary in- sory support focused on improving the invest- terventions aimed at reforming the business ment climate, building capacity, while support- regulatory environment. The first is an ongo- ing selective investments in sectors with high ing engagement with the Kabul Municipal- development impact and job creation. IFC’s cur- ity reforming the construction permit process. rent strategy is in line with the ongoing World Bank The second is the newly funded Afghanistan Group’s Interim Strategy Note for Afghanistan Investment Climate Reform Program (USAID), (ISN-FY12-14). The Team is working closely with implemented by IFC teams as part of the WBG the World Bank on the preparation of the Country Trade & Competitiveness Global Practice. The Partnership Framework with expected delivery in program has three components: Licensing September 2016. Reform Phase 2, Sub National Doing Business Survey and a new Doing Business Reform proj- IFC’s investments have had a transformational ect. impact in terms of access to finance and out- reach, particularly in the microfinance and tele- A strong Advisory services program has been communication sectors. The investment pipeline supporting the investment program in the ar- for FY17 looks promising and includes investments eas of access to finance, small and medium in the power sector and agribusiness. IFC will enterprise (SME) capacity development, horti- continue to seek new investment opportunities, culture/agribusiness, investment climate, and public-private partnerships and engage with local public-private partnerships. At present, there players to support the development of Afghani- are 6 active mandates across the following global stan’s private sector, particularly in infrastructure, practices: Trade & Competitiveness, FIG, CCAS, finance and microfinance, manufacturing, agribusi- MAS and Finance & Markets Global Practices. ness, and services. • Finance and markets - IFC helped establish MULTILATERAL INVESTMENT regulatory frameworks for leasing and will now in the second phase of the project focus GUARANTEE AGENCY on building the strengths of commercial banks and other financial institutions to offer asset- MIGA currently has $117.5 million of gross ex- based lending products and to achieve a great- posure for three projects in Afghanistan, relat- er utilization of the registries, with a view to ing to three projects. The largest project, support- further expand outreach of financial services ing investment into MTN, is a joint effort with the to more small and medium enterprise (SMEs) IFC in the country’s critical telecoms sector. The in country. other two projects are MIGA-only, supporting dairy and cashmere production. • Energy space - IFC has launched the pre-imple- mentation phase of the Lighting Afghanistan In 2013 MIGA launched its “Conflict Affected and Program which aims to expand the off grid Fragile Economies Facility” that uses donor partner market and facilitate access for 180,000 house- contributions and guarantees as well as MIGA guar- holds to affordable and solar lighting solutions. antees to provide an initial loss layer to insure in- • Enterprise Development - The Business Edge vestment projects in difficult contexts. This facility initiative has been facilitating business skills is another means by which the Agency could sup- training to individuals and SMEs. To date, port further investments in Afghanistan. 18 AFGHANISTAN: ACCESS TO FINANCE PROJECT KEY DATES: Approved: November 26, 2013 Effective: April 17, 2014 Closing: December 31, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 50 1.9 44 Borrower MISFA and Ministry of Finance Co-financing None Total Bank Financing 50 IDA 50 IBRD Trust Fund BACKGROUND AND OBJECTIVES: Deepening the Afghan financial system and fostering financial inclusion are key pillars for sustainable growth and development. The “Access to Finance Project “contributes to strengthening the institutional capacity of the sector and builds on WBG’s successful engagement in the development of the microfinance sector in Afghanistan since 2003 setting up the Microfinance Investment Support Facility for Afghanistan (MISFA). This project is implemented by MISFA and the Ministry of Finance, to support and complements the government of Afghanistan’s efforts to implement a fully-fledged financial sector development strategy that focuses on increasing access to finance for micro, small and medium enterprises. To build institutional capacity to improve access to credit of micro, small and medium enterprises. Key component include: ■■ Improving access to financial services for micro and small enterprises by strengthening the microfinance sector through MISFA, scale up of the Targeting the Ultra Poor Program and supporting the facility’s strategy and programs in increase access to financial services for micro and small enterprises. ■■ Improving access to financial services for small and medium enterprises by supporting the expansion of the Afghanistan Credit Guarantee Facility (ACGF) and increasing commercial bank and microfinance investment lending. KEY ACHIEVEMENTS: ■■ Disbursements have picked up, reaching 11% in July, compared with 4 % last December. There has significant improvement under Targeting Ultra-Poor com- ponent. ■■ Implementing Partners have made significant progress in the past few months. ■■ 93 percent of beneficiaries have received livestock. The procurement and distribution of the livestock to the target beneficiaries is almost complete; distribution has been completed in Kunar, Laghman, Balkh and Takhar. KEY PARTNERS: ■■ Microfinance Investment Support Facility for Afghanistan (MISFA) ■■ Ministry of Finance (MOF) ■■ Afghanistan Credit Guarantee Facility (ACGF) ■■ Note: The original project cost was 50 million, but due to currency fluctuation between XDR and USD the disbursement figures do not add up to the same total. Afghanistan Country Snapshot 19 AFGHANISTAN: AGRICULTURE INPUTS PROJECT (AAIP) KEY DATES: Approved: June 30, 2013 Effective: June 30, 2013 Closing: June 30, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 74.75 16.62 58.13 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund (ARTF) 74.75 16.62 58.13 BACKGROUND AND OBJECTIVES : Limited access to quality inputs at affordable prices is a key constraint to higher agricultural productivity in Afghanistan. The agricultural inputs delivery network re- mains underdeveloped, weakly regulated, and distorted, requiring investments and action at the institutional, policy and farm levels. The project will build institutional capacity in the Ministry of Agriculture, Livestock and Irrigation (MAIL) required for overseeing input quality control, safety and reliabil- ity, and availability. It will support the infrastructure and human resources needed to exercise and enforce quality control for fertilizers and other agro-chemicals, and improve functioning and transition of the seed sector toward a market for certified wheat seed with minimal external support. The project objective is to strengthen institutional capacity for the safety and reliability of agricultural inputs and the sustainable production of certified wheat seed. The components are: ■■ Improved Wheat Seed Production supports (a) varietal selection and production of breeder seed; (b) production of foundation and registered seed; and (c) coordination of the seed sector. ■■ Plant Quarantine Networks and Quality Control of Agro-chemicals supports enhancement of MAIL capacity to implement the quality control of agro-chemicals, including: (a) establishment of an office for pesticides registration; (b) construction of various laboratories; (c) provision of pesticide bio-efficacy trial equipment; and (d) strengthening the fertilizer quality control inspection system. ■■ Input Delivery Systems supports the analysis of the recipient’s current agricultural input delivery systems and assists in the development of an action plan for investment activities in inputs delivery systems. ■■ Project Management and Monitoring supports management and monitoring of the project. KEY ACHIEVEMENTS: ■■ Designs for the renovation of all the target research and quarantine stations were completed. Civil work contracts for the renovation of 5 research farms have been awarded and physical works have begun. ■■ Ninety improved lines have been grown in the 3rd (final) year of trials and the best will be entered for registration during 2016. These include varieties suitable for irrigated and rain-fed conditions. ■■ A wide range of supporting trials, including 1,904 lines tested for disease screening (against a target of 200) and 42 Agronomic experiments (target 28) covering seed rate, planting date, planting method, fertilizer rates, water stress have been carried out according to the agreed program. ■■ On the Legal Reform Program, the parliament has finally approved the Plant Protection and Quarantine Law which is now awaiting presidential endorsement. ■■ Following objections in Parliament, the Pesticides Law which had been approved via a decree by the President has now been referred back to Parliament for consideration and approval. The project has also drafted a regulation to support the Fertilizer Law KEY PARTNERS: Ministry of Agriculture Irrigation and Livestock 20 AFGHANISTAN: SECOND SKILLS DEVELOPMENT PROJECT KEY DATES: Approved: 19-Mar-2013 Effective: 01-Jul-2013 Closing: 30-Jun-2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 55.0 Borrower Ministry of Finance Co-financing Total Bank Financing 55.0 IDA 55.0 25.8 24.3 IBRD Trust Fund BACKGROUND AND OBJECTIVES : The project supports the Government of Afghanistan in its strategy to build market relevant vocational and technical skills for economic growth and development. Building on the ongoing Afghanistan Skills Development Project, this program will strengthen the Technical Vocational Education Training (TVET) institutional system, improve performance of TVET schools and institutes, improve teacher competencies, and strengthen monitoring and evaluation systems. To increase the potential for employment and higher earnings of graduates from Vocational Education and Training institutions through improvements in the skills delivery system. Components are: ■■ Strengthening of the TVET institutional system ■■ Improving the performance of TVET schools and institutes ■■ Improving teacher competencies ■■ Project management, monitoring and evaluation and public awareness KEY ACHIEVEMENTS: ■■ The National Institute of Management and Administration (NIMA) has been accredited by an international body (the Accreditation Council for Business Schools and Programs, ACBSP), recognizing the high standard of teaching and learning at the institute ■■ The share of female beneficiaries in project-supported institutes increased from 21 to 23 percent, while the share of those enrolled in 2016 is 44 percent as a result of targeted efforts by ASDPII. ■■ The training for 790 technical teachers at the Technical Teacher Training Institute (TTTI) to improve technical competencies and pedagogical skills ■■ The successful training of 15 school administrators to improve leadership and management skills ■■ The employment rate of graduates from project-supported institutes has increased from 52 to 68 percent for those who have been employed for over a year. ■■ The training of 30 master assessors to conduct competency-based assessments and certifications of previously acquired skills ■■ Award of Voucher Program to 522 TVET graduates to upgrade and strengthen their competencies by pursuing an International Certification program ■■ Award of Development Grants ($400,000) to scale up good practices in 8 TVET schools/institutes of DMTVET. ■■ Award of the Second round of Recognition Grant ($30,000) to 22 TVET schools/institutes to support the development of strategic business plans KEY PARTNERS: Ministry of Education, Deputy Ministry of TVET Ball State University for NIMA Institute International Labor Organization (ILO), GIZ, KOICA Afghanistan Country Snapshot 21 AFGHANISTAN: TRANS-HINDUKUSH ROAD CONNECTIVITY PROJECT KEY DATES: Approved: October 07, 2010 Effective: March 24, 2011 Closing: February 29, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 178 9.6 168 Borrower Co-financing Total Bank Financing IDA 178 9.6 168 IBRD Trust Fund (SRF Catalytic Fund) BACKGROUND AND OBJECTIVES: The project aims to improve connectivity across the Hindukush mountain range between Bamiyan and Kabul, through Afghanistan’s mineral belt and a part of its agricultural heartland. This will spur economic development, support one of the planned “Resource Corridors”, foster domestic and regional trade by strengthen-ing the transport network and promote social integration by reducing time and cost of travelling, particularly for the poorer citizens of the central, northern and southern provinces. The project also directly eliminates the existing transport bottleneck for the development of some agricultural and mining areas which is likely to create jobs for many Afghans. The project development objective is to improve road transport connectivity across the Hindukush mountain range ■■ Road construction and rehabilitation. Component 1 will include (i) civil works for the construction of the B2B road and the rehabilitation of the Salang road and tunnel, (ii) consulting services, including for the supervision of works for the same roads and for regular technical audits by an independent inter-national auditor to verify that road works have been executed in compliance with the technical specifications, and (iii) goods, which will include a small number of equipment items which MPW may need to keep the two roads open during the project period. ■■ Institutional support and project management. This component will be comprised of several subcomponents including road safety, implementation of asset management arrangements for the roads, community engagement, training and capacity building, and project management support. KEY EXPECTED RESULTS: ■■ Reduction in average travel time for trucks on the Baghlan to Bamiyan road. ■■ Year-round usability of the Baghlan to Bamiyan road. ■■ Reduce Road Fatality Rate on the B2B road and Salang pass. ■■ Sustainable mechanism put in place for the management, maintenance and operation of the two project roads. KEY PARTNERS: Ministry of Public Works (MPW) 22 AFGHANISTAN: RURAL ACCESS PROJECT KEY DATES: Approved: June 26, 2012 Effective: August 12, 2012 Closing: March 13, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 332 248 81 Borrower Co-financing Total Bank Financing IDA 125 122 0 (3 million SDR loss) IBRD Trust Fund (ARTF) 207 126 81 BACKGROUND AND OBJECTIVES: Two decades of civil war severely damaged Afghan road network at all levels: regional and national highways, provincial roads and local access roads. Prolonged conflict denied most of the rural population access to essential social services including markets, health centers, schools and government offices. Formulated in 2002, the National Emergency Employment Program funded short-term employment through restoration of the dilapidated rural infrastructure. This initiative evolved into the National Rural Access Program from 2005, with a strong focus on the provision of year-round rural access to basic social services. More than 11,000 km of rural roads and related drainage structures have been upgraded or rehabilitated under these programs through four projects financed through IDA, ARTF, and other funds. The objective of the Afghanistan Rural Access Project is to enable rural communities to benefit from all-season road access to basic services and facilities. Compo-nents are: ■■ Improvement and maintenance of secondary roads: Supports rehabilitation of about 1,000 km roads; 250 km of upgrading existing pavement to bituminous standard; about 1,000 km of routine and periodic maintenance of paved and unpaved secondary roads, and construction of about 1,000 linear meters of bridges. ■■ Improvement and maintenance of tertiary roads: Will support about 1,300 km of rehabilitation and 2,000 km of routine and periodic maintenance of tertiary roads, and construction of about 1,600 linear meters of bridges. ■■ Program planning and development, institutional strengthening and program coordination support: Will support human resource and institutional capacity building, program monitoring and evaluation, and program development activities. KEY ACHIEVEMENTS: ■■ Construction of 600 km of secondary gravel roads, 200 km of secondary asphalt roads and over 1000 linear meters of secondary bridges; ■■ Construction of 1200 km of tertiary roads and 1300 linear meters of tertiary bridges; ■■ Routine maintenance of 1,300 secondary road and periodic maintenance of 132 km of secondary road; ■■ Routine maintenance of 3,250 km of tertiary road and periodic maintenance of 1000 km of tertiary road; ■■ Establishment of new GIS based network planning; ■■ Roll out of first nationwide inventory and condition survey of rural roads. KEY PARTNERS: Afghan Ministries of Public Works; Rural Rehabilitation and Development; and Finance.. Afghanistan Country Snapshot 23 AFGHANISTAN: RURAL ENTERPRISE DEVELOPMENT PROJECT KEY DATES: Approved: March 09, 2010 Effective: June 14, 2010 Closing: December 29, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 34.6 34.2 .4 (9.77 cancelled) Borrower Co-financing Total Bank Financing IDA 28.4 28.0 .4 IBRD Trust Fund 6.2 6.2 0 (9.77 cancelled) BACKGROUND AND OBJECTIVES: Over 75 percent of the Afghan population live in rural areas where agriculture is the primary activity and contributes about one-third of GDP. But poor govern-ance, weak factor markets, inadequate marketing infrastructure, ineffective business development services, and poor post-harvest practices limit the develop-ment potential of this sector. The Afghanistan Rural Enterprise Development Project aims to ensure the social, economic, and political well-being of rural communities, especially the poor and the most vulnerable, while stimulating the integration of rural communities within the economy. The overall development objective of the project is to improve employment opportunities and income of rural men and women, and the sustainability of target-ed local enterprises. Components are: ■■ Community-led enterprise development: Creates savings groups, enterprise groups and village savings and loans associations. These institutions are assisted in building their own capacities, increasing the value of trade; ensuring production is oriented towards identified market opportunities, and creat-ing access to credit through internal lending. ■■ Small and medium-sized enterprise (SME) development: Supports the emergence of a stronger SME sector with improved trading linkages with the rural econ- omy and adequate access to financial services. The project finances a sequenced approach for SME support, i.e. identifying key value chains in each province, working with the stakeholders to identify choke points constricting growth, identifying opportunities for value chain linkages and defining skill gaps. ■■ Project implementation support: Project management, monitoring and evaluation. KEY ACHIEVEMENTS: ■■ The project is currently undergoing an Additional Financing of $4.7 million and an extension of the closing date up to June 30, 2017. The project has so far established 5,832 saving groups (52 percent female), 510 Village Saving and Loan Associations (VSLAs), and 1,623 Enterprise Groups (65 percent fe-male). It has supported 571 (13 percent female) Small Medium Enterprises. ■■ The project beneficiaries have saved over AFG 250 million and have internally lent over AFG 255 million to over 20,000 borrowers (54% females) with a recovery rate of over 95%. The project has emerged as the leading rural financial services provider. ■■ A total of six Provincial Situations Analysis (PSA) are completed and 10 PSAs are underway. A total of 113 pastoral nomads referred to as Kochies and 143 Persons With Different abilities (PWDs) were supported to enhance their enterprise development skills and productivity. As whole, more than 60,000 direct and indirect jobs were created. KEY PARTNERS: Afghan Ministry of Rural Rehabilitation and Development, UK’s Department for International Development (DFID) and Swedish International Development Cooperation Agency (SIDA). 24 AFGHANISTAN RECURRENT AND CAPITAL COST WINDOW KEY DATES: Approved: May 13, 2002 Effective: May 13, 2002 Closing: June 30, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 4,305 4,100 205 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund (ARTF) 4,305 4,100 205 BACKGROUND AND OBJECTIVES: A coordinated funding mechanism to support Afghan reconstruction is essential to help the country return to normalcy. Such an instrument needs to be aligned with national priorities, should promote transparency and accountability of reconstruction assistance, and reinforce the national budget as the primary policy instrument. The international community and the Afghan government have recognized that the Afghanistan Reconstruction Trust Fund (ARTF) should be used to fund the essential recurrent costs required for the government to function effectively. The objective of the recurrent cost component of the ARTF is to provide a coordinated financing mechanism enabling the Afghan government to make predicta- ble, timely, and accurate payments for approved recurrent costs related to salaries and wages of civil servants, and non- security related government operating and maintenance expenditures. Components are: ■■ Reimbursements of civil servant salaries: Establish an amount via grant renewals for reimbursement of civilian expenditures. With the assistance of a third party monitoring agent, the government submissions are then reviewed to determine that these have met the eligibility criteria. ■■ Reimbursement of operating and maintenance costs: Establish an amount via grant renewals for reimbursement of civilian expenditures. With the assis-tance of a third party monitoring agent, the government submissions are then reviewed to determine that these have met the eligibility criteria. ■■ Incentive program: Introduced in 2009, it refers to a series of policy actions and revenue benchmarks agreed to between the World Bank and the govern-ment that align with development priorities and which, if attained, entitle the government to an agreed amount of additional funding for the first two components. KEY ACHIEVEMENTS: ■■ Over 14 years, the project has disbursed nearly $4.1 billion against legitimate recurrent costs in a timely fashion. ■■ The process provided an opportunity for donors to conduct monitoring of all civilian costs for adherence to financial and eligibility standards. ■■ The incentive component led to significant reforms in revenue generation, public sector governance, and private sector development. KEY PARTNERS: Government of Afghanistan, all the ARTF donors (34 countries). Afghanistan Country Snapshot 25 AFGHANISTAN: CAPACITY BUILDING FOR RESULTS FACILITY KEY DATES: Approved: January 15, 2012 Effective: January 20, 2012 Closing: December 31, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 150 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund (ARTF) 150 48.29 51.71 BACKGROUND AND OBJECTIVES: The Capacity Building for Results Facility (CBR) is a key ARTF investment that supports government in developing its internal human capacity, organizational structures and functions over the medium term to improve service delivery to the population. It is demand driven and open to all line ministries and independent agencies. Based on pre-agreed criteria including service delivery potential and reform readiness, line ministries and agencies are grouped as either Category 1 (high priority) or Category 2. Category 1 ministries/agencies receive full CBR reform support whereas Category 2 ministries receive foundational (“CBR—readiness”) inputs designed to upgrade them to Category 1. Both Category 1 and Category 2 CBR ministries/agencies must develop a comprehensive reform plan (to be implemented with existing donor and government resources) with a results framework to which it is held accountable. CBR enables a ministry/agency to hire skilled Afghans into civil service positions at more competitive rates. The project’s development objective is to improve the capacity and performance of priority line ministries and independent agencies in selected reform areas. Components are: ■■ Technical Assistance Facility in Support of Civil Service Reform: Provides short-term technical assistance to support the participating ministries and agencies to develop and implement their reform plans. ■■ Building Human Resources: Supports the continued implementation of broad civil service reform efforts and placement of critical managerial and profes-sional staff resources in participating line ministries. ■■ Project Management, Monitoring and Evaluation: Focuses on overall project management, monitoring and reporting, and consultancy services for appraisal and review of implementation progress and results of Capacity Building for Results programs. KEY ACHIEVEMENTS: ■■ Nine of thirteen priority ministries/agencies as well as five Category 2 ministries/agencies have approved and are implementing CBR reform programs. Two more Category 1 and one more Category 2 ministries/agencies have developed CBR reform programs that are currently under approved. ■■ Recruitment of senior and mid-level civil servants funded through CBR is progressing; a total of 222 positions have been selected through CBR with around 750 more in various stages of recruitment. ■■ CBR has also been a front-leader for and is supporting salary harmonization efforts for donor-funded consultants (NTA). KEY PARTNERS: Afghan Ministry of Finance, Independent Administrative Reform and Civil Service Commission (IARCSC), key Afghan line ministries, USAID, DFID and European Union 26 AFGHANISTAN: SECOND EDUCATION QUALITY IMPROVEMENT PROJECT KEY DATES: Approved: January 31, 2008 Effective: March 20, 2008 Closing: December 31, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 438 366 72 Borrower Total Bank Financing IDA 30 30 0 IBRD Trust Fund (ARTF) 408 336 72 BACKGROUND AND OBJECTIVES: The Second Education Quality Improvement Program (EQUIP II) has expanded the scope of education sector investments into a national, multi-donor supported project that is fully aligned with the vision and goals set out by the Ministry of Education. Institutionally, EQUIP II seeks to consolidate the following implementation systems: (i) the community and school-based management education system; (ii) the supervision and monitoring systems through the provincial and district education departments’ teams; and (iii) the systems, procedures and skills within key departments of the Ministry of Education to continue to guide education services in a systematic and results-oriented approach. The objective of the Project is to assist the Recipient in increasing equitable access to quality basic education – especially for girls. The project Components are: School Grants provided to develop linkages between schools, communities, and local governments while supporting and empowering schools and communi-ties as local education managers. Infrastructure Development School Grants provided to rehabilitate and construct schools using community participation and community based decision making for small school and national competitive bidding for larger and more complex buildings. Teacher and Principal Training and Education: The objective of this component is to create sustainable systems which will increase the level of professional knowledge and skills of educators throughout Afghanistan by providing training to teachers and principals. Project Management and Monitoring and Evaluation: The objective of this component is to build on and support the existing administrative structures in MOE as well as at the provincial and district levels, and establish and implement an M&E system for the project. KEY ACHIEVEMENTS: ■■ There are 8.7 million children enrolled in schools in General Education in Afghanistan of which 3.4 million are girls. The number of Teaching Assistants financed under the EQUIP project has been substantially reduced from approximately 1,500 to 695. All of these now follow the CBR scale and subse-quently the National Technical Assistance (NTA) scale. ■■ Under both phases of the Education Quality Improvement Program, social mobilization activities have resulted in the establishment of 14,932 school Shuras (community-based consultative bodies) ■■ 16,588 schools have received Quality Enhancement Grants for purchase of school supplies, laboratory equipment, and other purposes. ■■ 154,699 teachers have been trained in INSETs 1-5, of which 35 percent teachers are female KEY PARTNERS: Ministry of Education, ARTF donors (US, UK, Denmark, Canada, Sweden, Australia, Germany, and Norway Afghanistan Country Snapshot 27 AFGHANISTAN: HIGHER EDUCATION DEVELOPMENT PROJECT KEY DATES: Approved: January 31, 2008 Effective: March 20, 2008 Closing: December 31, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 50 8.7 41.3 Borrower Total Bank Financing IDA IBRD Trust Fund (ARTF) 50 8.7 41.3 BACKGROUND AND OBJECTIVES: The Higher Education Development Project (HEDP) supports the national priorities of the sector as outlined in the Second National Higher Education Strategic Plan (NHESP II), with a focus on increasing access, improving the quality and the relevance of higher education for economic development. In addition to NHESP II, the project builds on the experience of implementing the previous Bank funded higher education project as well as the sector analysis. HEDP follows a results-based financing modality through the DLI (Disbursement Linked Indicator) approach. The Project development objective is to increase access to, and improve the quality and relevance of, higher education in Afghanistan. The project compo-nents include: ■■ Higher Education Development Program. This component supports the implementation of the NHESP-II through a Results–Based Financing (RBF) modality. Disbursements are associated with specific results called Disbursement Linked Indicators (DLIs). Financing is provided against Eligible Expendi-tures Programs (EEPs) selected from annual MoHE budgets, rather than against specific inputs. Increasing Access to Priority Degree Programs for Econom-ic Development, b) Modernizing and Enhancing the Quality of Teaching and Learning, c) Improving the Qualifications and Skills of University Staff Mem-bers, d) Strengthening Governance, Quality Assurance and Accreditation, and e) Stimulating Development Oriented Research. ■■ Program Operations and Technical Support. This component aims to strengthen the capacity of MoHE and universities to implement the reforms of the NHESP-II. Support under this component will cover coordination, capacity building, innovations, monitoring and evaluation, research and communica-tion. KEY ACHIEVEMENTS: ■■ Access to priority degree programs for economic development includes provision of a number of services especially aimed at promoting female enrolment. Construction of the residential facilities and provision of transport arrangements for female students are under the procurement process. Workshop and training programs have been organized on counselling and orientation services provided to female students. ■■ Twenty-four champions for Outcome-Based Education and Student Centered Learning have been identified, who will undergo advanced training at the Malaysian University of Technology (UTM) by October. Lessons learned from the first round of the scholarships will be applied to the selection process for the next 100 schol- arship slots to be awarded by December 2016. More than 100 scholarships have been awarded so far and one third of these were allo-cated to female academics from public universities. These scholarships are for priority discipline areas such as Engineering, Medicine, IT and Agriculture that are important for economic development. The candidates are younger male and female academics from the public universities whose qualifications need to be up graded to a Master’s level. ■■ Findings from a university benchmarking exercise facilitated by the Bank will be incorporated into the development of Strategic Institutional Development Plans. Three universities are expected to develop and finalize their SIDPs by the end of October this year. The revised scorecard for internal quality assur-ance has been endorsed by the MOHE. ■■ Four additional Internal Quality Assurance Units (IQAU) will be established with Managers selected from among the respective university faculty. ■■ External peer review of 8 universities for 2016 will soon be underway in line with a revised accreditation framework. Research projects for 20 individual and 10 group research projects have been awarded and the call for a proposal for an additional 30 research projects has been announced. KEY PARTNERS: Ministry of Higher Education, ARTF Donors (USAID has been a key partner, including through their off-budget support to the sector). 28 AFGHANISTAN: FINANCIAL SECTOR RAPID RESPONSE PROJECT KEY DATES: Approved: August 25, 2011 Effective: September 06, 2011 Closing: June 30, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 25.7 9.8 13.2 Borrower DAB/ Finance Ministry Co-financing Total Bank Financing 25.7 IDA 25.7 IBRD Trust Fund (ARTF) BACKGROUND AND OBJECTIVES: Financial stability is central to sustainable development and financing growth in Afghanistan. Central Bank of Afghanistan (DAB) is requires to play a pivotal regulatory role to maintain financial stability and health of the financial system. Moreover, investing in financial infrastructure is a key to enhance financial intermediation and boost the system’s efficiency. This project is run by the Central Bank of Afghanistan (DAB) and aims at supporting the following activities: (i)undertaking financial audits in accordance to international standards, portfolio audit and institutional audit of 10 key commercial banks operating in Afghani-stan; (implemented) (ii) modernization of the Afghanistan national payment system to facilitate payments within the country; (iii) support for the development of the Afghanistan Institute of Banking and Finance; and (iv) technical assistance and training for project implementation. In May 2016, a level 2 restructuring of the project was undertaken to extend the closing date of the project from June 30, 2016 to June 30, 2018 to give DAB and the project team enough time to complete implementation of ongoing activities under the original project and preparation of the new Additional Financing, requested by the Government. The project assists DAB in developing action plans for improved banking supervision and to establish key building blocks of financial sector infrastructure: payment system, movable collateral and public credit registry. Components and subcomponents are: ■■ Strengthening of DAB’s capacity: This component includes i) financial, portfolio and institutional audit of 10 commercial banks operating in Afghanistan, ii) Stock taking on capacity building efforts on financial supervision over the last 10 years and development and implementation of a capacity building plan to sustain- ably strengthen the Financial Supervision Department; iii) Review of banking regulation framework, and iv) Development and implementation of action plans following audits of commercial banks ■■ Development of the financial sector infrastructure: This component involves modernization of the national payment system, and support to the Afghanistan Institute of Banking and Finance. ■■ Technical assistance and training for project implementation KEY ACHIEVEMENTS: ■■ Under this project a fully-fledged audit of the key 10 commercial banks operating in Afghanistan was completed and provided DAB with detailed and thorough guidance on the state of financial stability within the banking system. ■■ The Movable Collateral Registry established in February 2013 and the Public Credit Registry launched in December 2013 are key building blocks in the infra- structure if the Afghan financial system. Having both systems fully functional streamlined SME’s application to banking loans and well supported bank’s lending decisions. ■■ Establishment of the national card and mobile payment switch is underway at the Afghanistan Payment System. The procurement process for development of the Automated Transfer System (ATS) is complete and the contract was awarded to the recommended firm on April 15, 2016. ATS is meant to modernize the na- tional payment system for efficient and transparent payment transactions. The ATS and its subcomponents will support enhancing financial interme-diation and enabling safety and efficiency of the financial system. KEY PARTNERS: Da Afghanistan Bank (Afghan central bank or DAB), Afghanistan Payment System (APS) Afghanistan Country Snapshot 29 AFGHANISTAN: ICT SECTOR DEVELOPMENT PROJECT KEY DATES: Approved: April 26, 2011 Effective: June 14, 2011 Closing: June 30, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 50 30.863 15.772 Borrower Co-financing Total Bank Financing 50 30.863 15.772 IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: Since 2002, Afghanistan has made considerable progress in telecommunications connectivity, and mobile telephony has become widespread. A high-capacity fiber optic backbone network connects many provinces and provides international connectivity to neighboring countries. The information and communications technology (ICT) sector offers opportunities to expand the reach and delivery of government services and stimulate private sector-led economic growth and em-ployment generation. This Project builds on the strong growth seen thus far in mobile services to expand service delivery while accelerating expansion and improvements in backbone network connectivity. It also seeks to expand broadband connectivity and accelerate the development of the local private sector IT industry. The goal is to expand connectivity, encourage widespread use of mobile applications in strategic sectors in the government, and support the development of the local information technology (IT) industry. Components are: ■■ Expanding connectivity: Finances the expansion of the national backbone network by 1,000 km and supports the creation of an enabling policy and regula-tory environment to increase the reach of high quality mobile telephone and Internet services to more users. ■■ Mainstreaming mobile applications: Supports activities that build on the high penetration of mobile telephones in Afghanistan to expand the reach and improve the quality of public services and applications that support program management. ■■ IT industry development: Supports the definition of an IT sector development policy; an IT skills development program to expand the pool of skilled IT profes- sionals as a key building block for sector development in Afghanistan; and the setting up of an incubator for ICT firms in the ICT Village. KEY ACHIEVEMENTS: ■■ The deployment of the fiber optical backbone network in the North East section was completed and handed over to Afghan Telecom. Work on the central route to Yakawlang is almost completed, and contracts for Kunar, Kapisa, Ghulam Khan Office and Bamiyan-Mazar-e-Sharif routes have been signed. Im-plementation progress will be closely monitored by MCIT and the Bank team. ■■ The m-Government service delivery platform (Mobile Platform) was soft launched on Afghan Telecom’s network. Selected m-Government Application and Services are expected to be launched through all GSM/3G Operators of Afghanistan for selected Ministries, after the MoUs are signed with the MNOs and the selected Ministries by MCIT in October, 2016. Implementation of the Innovation Support Program (US$1m) continues to be slow due to limited level of partic-ipation by ICT Professionals of the Country and there is a significant need for capacity building of the potential beneficiaries. To date, over 2,300 people (in-cluding 400 Females) have been provided ICT skills training. The incubator program is progressing well, with 20 startups already active. MCIT and the ICT institute are encour- aged to develop internal capacities to ensure sustainability of the program beyond the project closing. KEY PARTNERS: Afghan Ministry of Communication and Information Technology, World Bank Task Team, U.S. Government, International Security Assistance Mission for Afghani-stan, Afghan ICT firms. 30 AFGHANISTAN: IRRIGATION RESTORATION AND DEVELOPMENT PROJECT KEY DATES: Approved: April 28, 2011 Effective: June 15, 2011 Closing: December 31, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 215.8 92 116 Borrower Co-financing Total Bank Financing IDA 97.8 71 19 IBRD Trust Fund 118 21 97 BACKGROUND AND OBJECTIVES: The Irrigation and Restoration and Development Project (IRDP) is designed as a follow-up initiative to the IDA-funded Emergency Irrigation Rehabilitation Project (EIRP). While various bilateral and multilateral donors supported the reconstruction or development of specific dams or river basins, the EIRP was instrumental to the government’s launch of a national irrigation rehabilitation program in 2004. The EIRP had a national coverage and was designed to respond to requests and demands of local communities. The project was restructured and received an Additional Financing of 70 million through the ARTF. The objective is Improve access to irrigation in targeted areas and strengthen capacity for water resources management. Components are: ■■ Rehabilitation of irrigation systems: Supports the rehabilitation of irrigation schemes covering total irrigated area of about 217,000 hectares. ■■ Dam Development and O&M, : Supports the preparation of three multi-purpose small dams in the northern river basin and undertaking of critical repair works for at least two dams ■■ Water Resources Management and Development: Continued support for restoration of the hydromet data collection networks, technical support for hydrom-et data analysis and update of river basin management plan for the key river basins ■■ Project management and capacity building: Includes (i) project management and construction supervision; (ii) support for capacity building; and (iii) incre- mental contract staff. KEY ACHIEVEMENTS: ■■ A total of 98 irrigation schemes have been rehabilitated, benefiting 100,000 ha of irrigation command area (compared to the end project target of 300,000 ha) and 63,000 farmers. ■■ Feasibility studies of 6 small dams in the northern river basin have been completed. Detailed social and environmental studies will be done. ■■ Regular data collection is under way from 127 hydrological stations and 56 snow and meteorological stations at various locations on the five-river basin and work started on an annual Hydrology Book. Forty cableway stations for flow measurement at selected hydrology stations are installed. KEY PARTNERS: Afghan Ministry of Energy and Water, U.N. Food and Agriculture Organization Afghanistan Country Snapshot 31 AFGHANISTAN: NEW MARKET DEVELOPMENT PROJECT KEY DATES: Approved: May 30, 2011 Effective: July 12, 2011 Closing: February 29, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 22 16.1 3.5 Borrower MOCI Co-financing None Total Bank Financing 22 16.1 3.5 IDA 22 16.1 3.5 IBRD Trust Fund BACKGROUND AND OBJECTIVES: The Afghanistan New Market Development Project (ANMDP) is the first World Bank funded project to be implemented by Ministry of Commerce and Industries since the World Bank’s re-engagement in Afghanistan. It seeks to support the development of the Afghan private sector. The objective is to help revitalize private sector activities in the four major cities – Kabul, Mazar-e-Sharif, Jalalabad, and Herat – by providing business development and technical assistance to support private firms’ initiative to gain market knowledge, improve product quality and processing technologies, and increase their presence in both domestic and export markets. Components are: ■■ Facility for New Market Development: Establishes a cost-sharing mechanism to support small- and medium-sized enterprises (SMEs) and business associa-tions to access business development services in order to enhance productive capacity and encourage innovation through product or market diversification. ■■ Project implementation support and technical assistance to the Ministry of Commerce and Industry (MOCI): Supports MOCI with: (i) the establishment and opera- tion of a project management unit for the New Market Development Project; and (ii) technical assistance to develop a strategic plan to access support from the recently approved Afghanistan Capacity Building for Results (CBR) Facility. KEY ACHIEVEMENTS: ■■ ANMDP has largely met its development objectives as measured by the monitoring indicators. ■■ Based on the latest information provided by GIZ IS, there are indications of significant progress towards achieving the ANMDP PDO and its associated results tar- gets. Under the ANMDP, the Facility for New Market Development (FNMD) was launched in March 2013 and in the two and a half years of its core imple-mentation, received 1,050 applications across the four cities of Kabul, Mazar-e-Sharif, Jalalabad and Herat. ■■ To date, 376 firms against a revised target of 375 and 54 associations against a revised target of 30 have been assisted. Sales have increased by an aver-age of 24 percent against a target of 20 percent over pre-grants levels across the four cities. 1,516 jobs, of which 30 percent are filled by women, have been created against a target of 1500 of which 5 percent were targeted at women. ■■ 21 new or improved products have been introduced and 25 new international markets entered against a target of 20 new/improved products created or new markets entered. Out of the total funding envelope of US$ 11.2 million for matching grant to SMEs and US$ 0.8 million for Business Planning Supplemen-tary Program Assistance under the FNMD component of the current Project, approximately US$ 10.3 million has been reimbursed to SMEs to date. ■■ Throughout the three-year implementation period, FNMD was well established, recognized by the private sector, and active in Kabul, Mazar, Herat and Jalalabad. KEY PARTNERS: ■■ Afghanistan Ministry of Commerce and Industries (MOCI) ■■ Note: The original project cost was 22 million, but due to currency fluctuation between XDR and USD the disbursement figures do not add up to the same total. 32 AFGHANISTAN: NATIONAL HORTICULTURE AND LIVESTOCK PROJECT KEY DATES: Approved:December 18, 2012 Effective: December 22, 2012 Closing: March 13, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 218.2 61.86 156.3 Borrower Co-financing 28.2 Total Bank Financing IDA IBRD Trust Fund 190 16.86 128.14 BACKGROUND AND OBJECTIVES: The agriculture sector accounts for 31 percent of GDP, but provides employment to 59 percent of the labor force. The government’s strategy for economic growth and poverty reduction includes development of perennial horticulture and livestock as key activities. The project will build on achievements made by a previous initiative in promoting adoption of improved production practices. Its main focus will be on effectively graduating from an emergency phase and into a development approach. The objective is to promote adoption of improved production practices by target farmers, with the gradual rollout of farmer-oriented agricultural services, delivery systems and investment support. Components are: ■■ Horticultural production: Provides target beneficiaries with demand-driven extension and productive investment support, including organizational support (e.g., orchard management, value addition and marketing) for farmers and extension support for the successful adoption of improved technology. ■■ Animal production and health: Provides beneficiaries with investment support for animal production and animal health, and extension support for adopting improved technology packages. It also supports public investments for the establishment of an animal health surveillance and control system, and in the devel- opment of improved models of intervention through trials and studies to inform policy on possible future private investment. ■■ Implementation management and technical assistance: Supports implementation management at national and regional levels, and technical assistance to inform implementation, policy development and capacity building at the Ministry of Agriculture, Irrigation, and Livestock. KEY ACHIEVEMENTS: ■■ Reached over 287,205 farmers and herders of which 119,694 are women, introducing improved production practices, extension services and technologies. Financed the establishment of 12,595 ha of improved land in 28 provinces. Rehabilitated more than 70,000 ha of orchards and established 58,116 kitchen gardening schemes. ■■ To date, 358 raisin drying houses have been completed and an additional 639 houses are planned to be completed by the end of 2016. Construction was com- pleted of 403 water harvest structures that are being used by farmers with a high level of satisfaction. ■■ 89,090 farmers (57,150 female and 31,940 male) have been organized into 1,590 producer groups, including poultry producer groups, to receive regular train- ing in animal production and health practices. ■■ Under the National Brucellosis Control Program in 360 districts 1,250,880 young female calves and over 6,279,200 young female sheep and goats have been vaccinated. KEY PARTNERS: Afghan Ministry of Agriculture, Irrigation and Livestock (MAIL). Afghanistan Country Snapshot 33 AFGHANISTAN: NATIONAL SOLIDARITY PROGRAM KEY DATES: Approved: June 29, 2010 Effective: October 06, 2010 Closing: March 31, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 1,158.82 1,115.56 43.26 Borrower Co-financing 9.59 9.4 0.19 Total Bank Financing IDA 41.98 41.97 0.01 IBRD Trust Fund 1,107.25 1064.19 43.06 BACKGROUND AND OBJECTIVES: The National Solidarity Program (NSP) is a flagship program of the government of Afghanistan and is currently operating in all 34 provinces. The Afghan govern-ment launched NSP to lay the foundation for a sustainable form of inclusive local governance, rural reconstruction, and poverty alleviation. In late 2015, the National Unity Government began the ‘Jobs for Peace’ initiative and the NSP was the first to respond by creating the ‘Maintenance Cash Grants (MCG) scheme’ that would demonstrate to the rural populations the presence and ability of the GoA to continue to deliver services and benefits. By working through CDCs it also supports the sustainability of these local institutions as development platforms across the country. The objective is to build, strengthen, and maintain community development councils (CDCs) as effective institutions for local governance and socioeconomic development. The project components are: ■■ Capacity building: Establish CDCs to (i) function as village-level governance bodies for continued empowerment of village communities; and (ii) facilitate com- munities’ participation in the various sector programs operating in rural areas. ■■ Community grants for economic and social development: Provide block grants to communities to fund priority investment schemes (sub-projects) for rural and social development. ■■ Project implementation: Support the Ministry of Rural Rehabilitation and Development’s overall management and oversight of NSP. KEY ACHIEVEMENTS: ■■ Since 2003, NSP has successfully established CDCs in over 35,000 communities, and supported subsequent rounds of CDC elections in over 11,500 of these communities. Over 450,000 CDC members have been elected, registered and trained in a variety of areas. Over 1.23 million community members have also been trained to support the CDCs with project management and/or operations and maintenance. ■■ NSP has completed over 84,000 community level infrastructure schemes in all three phases which has resulted in greater access to services. Over 53,300 kilo- meters of road was constructed and 310 km rehabilitated; over 11.7 million people were provided with access to improved water sources and a further 86,300 improved community water points were constructed; 32 MW of power was generated; over 524,000 hectares of land was brought under irrigation or provided with irrigation and drainage services, and 1,974 classrooms were built. All these sub-projects have generated over 52 million days of paid short term employment for skilled and unskilled workers. ■■ Since December 2015, the MCG has rolled out equitably across the country to 45 districts in 12 provinces (Baghlan, Balkh, Farah, Faryab, Herat, Jawzjan, Kanda- har, Khost, Kunarha, Kunduz, Laghman, and Nangarhar) that had high underemployment rates. As of August 2016, US$35 million has been disbursed as small US$10,000 grants directly to 3,900 CDCs, who administer the funds and select skilled and unskilled workers from the poorest households. ■■ As of July 2016 a total of 1.9 million labor days have been generated, and with an additional financing of US$57 million the MCG is expected to roll out to all Provinces and will have created over 11 million paid-for-labor-days that will directly benefit over 440,000 households. Efforts are being made to target the poorest households and provide food security through 2-3 months of income generation during the lean periods in the year. KEY PARTNERS: Afghan Ministry of Rural Rehabilitation and Development (MRRD), Afghanistan Reconstruction Trust Fund Donors 34 AFGHANISTAN: ON-FARM WATER MANAGEMENT PROJECT KEY DATES: Approved:March 16, 2011 Effective: March 16, 2011 Closing: December 31, 2019 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 25 23.8 1.2 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund (ARTF) 25 23.8 1.2 BACKGROUND AND OBJECTIVES: Most irrigation schemes in Afghanistan are operating at 25 percent efficiency, as compared to the norm of 40-60 percent elsewhere in South Asia. Water loss occurs at farm level because the absence of proper farm-level irrigation systems (basins, furrows) leads to wastage of water supplied from the watercourses. Under the Agriculture Production and Productivity Program, the first step is to improve agricultural productivity by reducing water loss in tertiary canals and proper on-farm water management practices. An Additional Financing of about $45 million from ARFT has been granted. The objective is to improve agricultural productivity in project areas by enhancing the efficiency of water used. Components are: The objective is to improve agricultural productivity in project areas by enhancing the efficiency of water used. Components are: ■■ On-farm water management: Carries out social mobilization for the establishment of irrigation associations (IAs) in the project areas, including the provision of: (i) training to communities in organization and management of IAs; (ii) facilitation services for communities to develop the IAs’ internal legal rules and regulations; (iii) assistance to IAs to be registered under the Water Law; (iv) technical training to IAs; and (v) carrying out engineering surveys and infrastruc-ture improvements to small irrigation schemes, or tertiary canals, covering approximately 10,000 hectares in the project areas. ■■ Support for Agricultural and Water Productivity Enhancement, aiming at exploiting irrigation potentials through demonstration and technical training at the on-farm level. ■■ Institutional strengthening and capacity building: Develops institutional capacity at the Ministry of Agriculture, Irrigation and Livestock (MAIL) to plan, de-sign, implement and monitor on-farm water management programs. Supports the construction of five office buildings to accommodate the ministry’s irriga-tion direc- torate and staff at five regional centers in Kabul, Herat, Mazar-e-Sharif, Baghlan and Jalalabad. ■■ Project management, coordination, monitoring and evaluation: Strengthens institutional capacity at the ministry for project implementation, monitoring and evaluation by establishing and maintaining a project implementation unit comprising a Kabul-based core team, five project area teams, and internationally recruited experts. KEY ACHIEVEMENTS: ■■ Land productivity of wheat and other crops has increased by 15 percent, while water productivity of wheat and other crops also increased by 10 percent and ir- rigated area by 10 percent. ■■ Physical rehabilitation of irrigation schemes exceeded its target with good quality and within the project budget allocation and timeline: as of now, 100 irrigation schemes (mostly informal) have been rehabilitated covering a total of 19,000 hectares of irrigation command area. ■■ Establishment of 175 irrigation associations (IAs) has been completed. The IAs are based on the traditional Mirab system and have taken up the responsibilities for operation and maintenance. ■■ A robust impact has been observed on increasing agriculture production with relatively modest investment costs (on average less than $500 per hectare). KEY PARTNERS: Afghan Ministry of Agriculture, Irrigation of Livestock (MAIL). Afghanistan Country Snapshot 35 AFGHANISTAN: SECOND PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT KEY DATES: Approved:August, 2011 Effective: June 23, 2011 Closing: June 30, ,2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 114.13 75.40 38.73 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund 114.13 75.40 38.73 BACKGROUND AND OBJECTIVES: Building core public financial management (PFM) capacity in government has been one of the fundamental thrusts of the Bank’s interim support strategy for Afghanistan. The Bank has gained valuable insight on PFM issues in Afghanistan through IDA-funded technical assistance projects and extensive analytical work. In the wake of discussions between the government and the donor community on a planned transition for Afghanistan to take greater responsibility in managing the reconstruction agenda, the government prepared and shared with donors at the Kabul Donor Conference in June, 2010 a PFM “roadmap”. It is guided by the vision that (i) policies that reflect the aspirations and needs of the Afghan people drive the government budget; (ii) a government budget assigns responsibility for development outcomes; (iii) efficient public finance and equitable allocation of resources sustain economic development; and (iv) accountable civil servants and equitable delivery of services build citizens’ trust in government. On February 10, 2016, Additional Financing of $41.125million was approved to help finance the costs associated with scaling up successful activities and sustain some achieved results in the project. PFMR II’s original development objective is to strengthen the efficiency and effectiveness of Afghanistan’s procurement, treasury, and audit systems”. The project components are: ■■ Procurement reform: Introduces procurement reform aimed at enhancing procurement facilitation, capacity building in line ministries and provinces, and insti- tutional development. ■■ Financial Management Reform: Financial management reform: Supports financial management reform in treasury operations and system development, human resources capacity development, professional accountant organization, and line ministry public financial management assessments. ■■ Audit reform and performance: Supports reforms and performance improvement through training for internal and external Audit. Reform management: Sup- ports monitoring technical assistance and reporting on benchmarks of the PFM roadmap. ■■ Revenue Mobilization: Support to the Afghanistan Revenue Department for maintenance of computerized tax system, implementation of tax related initia-tives and design & implementation of its new organizational structure. KEY ACHIEVEMENTS: ■■ The legal framework underpinning public financial management in Afghanistan has been established. The government now prepares and passes a compre- hensive budget in an orderly and transparent manner. ■■ A government–wide integrated financial management information system is in place and is being upgraded. ■■ Project support to Afghanistan’s centralized procurement oversight has been mobilized and National Procurement Authority, as the successor to the Procure-ment Policy Unit, continues to assist with the reorganization, development and assessment of procurement units in the line ministries. External audit is now engaged in performance audit and is committed to developing a mechanism for citizens’ participation in the audit. KEY PARTNERS: Ministry of Finance, Supreme Audit Office of Afghanistan, National Procurement Authority 36 AFGHANISTAN: SECOND CUSTOMS REFORM AND TRADE FACILITATION PROJECT KEY DATES: Approved:May 25, 2010 Effective: December 28, 2010 Closing: June 30, 2014 Revised Closing: December 31, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 71.98 56.63 16.06 Borrower Co-financing Total Bank Financing 71.98 56.63 16.06 IDA 71.98 56.63 16.06 IBRD Trust Fund BACKGROUND AND OBJECTIVES: The Second Customs Reform and Trade Facilitation Project and Additional Financing continues the Bank’s support as part of the overall donor effort to reform and modernize Afghan customs. It assists the Afghanistan Customs Department in consolidating the customs modernization process, improving governance, and im- proving the release of legitimate goods in a fair and efficient manner. The objective is to “Improve the release of legitimate goods in a fair and efficient manner”. The project components are: ■■ Countrywide computerization of Customs clearance operations through implementation of Automated System for Customs Data (ASYCUDA). ■■ Installation of executive information systems for Customs to allow real-time monitoring of operations through a new functionality (management summary and statistical reporting and alerts) to improve governance and mitigate chances of corruption. ■■ Development of possible options for cross-border Customs cooperation. Reviews the current available options to improve Customs-to-Customs cooperation, including data sharing between Afghanistan and its bordering countries. ■■ Provision of selected Customs infrastructure: Builds selected Customs infrastructure to enable modernized operations such as Inland Clearance Depots in Jalala- bad, Kabul, Khost, Nimroz, Farah, Andkhoi, Ghazni, Paktika as well as the Aqina Border Post. ■■ Technical assistance: Support the development of adequate regulatory, administrative and institutional framework for Customs. KEY ACHIEVEMENTS: ■■ The ASYCUDA World Declaration Processing System (DPS) is now operational in 13 Customs sites. ASYCUDA World International Transit is operational on 7 main corridors, ASYCUDA Risk-management module in 10 ICDs; ASYCUDA Valuation Control in 7 ICDs and the Entry-Exit control module operational in 4 Customs sites. ■■ Customs-to-Customs Cooperation Agreements between Tajikistan and Afghanistan, and Iran and Afghanistan have been signed. Real time data exchange be- tween Afghan and Tajik Customs already was set up and tested, and finally went live in Tajikistan in February 2016. ACD has also started negotiations with UAE and Turkish Customs, for signing similar cooperation agreements. ■■ Infrastructure development was completed successfully, with 10 large and 21 smaller civil works-related contracts completed, including a new Customs House at Khost, and improvements to Kabul, Jalalabad, Kandahar and Nimroz Customs Houses. KEY PARTNERS: The Afghan Customs Department, Ministry of Finance, , U.N. Conference on Trade and Development, , USAID, European Commission, U.K. Department for Interna-tional Development, Government of Canada, U.N. Assistance Mission in Afghanistan, the Government of Japan, U.N. Office on Drugs and Crime, International Monetary Fund, Asian Development Bank. Afghanistan Country Snapshot 37 AFGHANISTAN: SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES PROJECT II KEY DATES: Approved:May 31, 2011 Effective: September 21, 2011 Closing: March 30, 2017 FINANCING (IN MILLION US DOLLARS): *As of August 2016 Financing source Total amount Disbursed Undisbursed Total Project Cost - 32.28 3.618 Borrower Co-financing Total Bank Financing - 32.28 3.618 IDA - 32.28 3.618 IBRD Trust Fund BACKGROUND AND OBJECTIVES: As part of a program approach to oil, gas and mining sector development in Afghanistan, the Executive Directors approved the following technical assistance operations: (i) Sustainable Development of Natural Resources Project (SDNRP) in 2006 ($30 million); (ii) SDNRP-Additional Financing (SDNRP-AF) in 2009 ($10 million); and (iii) Second SDNRP (SDNRP-2) in 2011 ($52 million). The first two have closed. SDNRP-2 aims to assist the MoMP and the National Environmental Protection Agency (NEPA) in further improving their capacities to effectively regulate the GoA’s mineral resource development in a transparent and efficient man-ner, and foster private sector development. To assist the Ministry of Mines & Petroleum (MoMP) and the National Environmental Protection Agency (NEPA) in further improving their capacities to effectively regulate Afghanistan‘s mineral resource development in a transparent and efficient manner, and foster private sector development. The project components are: 1) Award of contracts and licenses, 2) Regulation and monitoring of operations, 3) Preservation of antiquities, and 4) project implementation support. KEY ACHIEVEMENTS: The project provided technical support in the following areas: ■■ The establishment of an International Advisory Panel (IAP) to ensure the transparency of the negotiations process; and the preparation and publication of 18 sub- sector development policies by commodity to guide sustainable development. ■■ 3D imaging scanning of the exposed Buddhist complexes at Mes Aynak, the resulting modeling would facilitate the virtual reconstruction of the site for future generations to admire. ■■ Capacity building activities provided to Civil Social Natural Resource Monitoring Network (CSNRMN), MoMP officials and policy makers, Afghan Geological Survey, and National Environmental Protection Agency (NEPA). ■■ Development of the computerized mining Cadastre system (AMCS+) for MoMP and training Afghan personnel on the system. ■■ Advice and support to the MoMP in the management of Aynak Copper Project, development of Financial Management Information System (FMIS) for MoMP, KEY PARTNERS: Project is implemented by Ministry of Mines and Petroleum Afghanistan. 38 AFGHANISTAN: JUSTICE SERVICE DELIVERY PROJECT KEY DATES: Approved:June 01, 2012 Effective: June 01, 2012 Closing:June 01, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 25 16.12 8.88 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund 25 16.12 8.88 BACKGROUND AND OBJECTIVES: The project seeks to help the Government to put the justice system on a sustainable path for long-term results, and where possible improve service delivery through discrete inputs designed to inform and incentivize eventual reform of the justice sector. The Justice Service Delivery Project beneficiaries include the Supreme Court, the Ministry of Justice, and the Attorney General’s Office and – through support to these institutions – the people of Afghanistan, who will benefit from increased access to legal services. A project restructuring was completed in June, 2016 which resulted in partial cancellation of S$60.5 million out of the US$85.5m originally approved for the project thereby, reducing the project’s commitment amount to US$25 million. The PDO and project components, however remain the same. The objective is to increase access to and use of legal services through balancing demand and supply of core services and increasing the productivity of providers through: (i) aligning the structure, organization, processes and capacities of judicial institutions to contemporary needs of users; and (iii) easing access to legal information for legal professionals, judicial institutions and the broader public. The components are: ■■ Legal Empowerment ■■ Organization and Capacity of Justice Institutions ■■ Implementation Capacity. KEY ACHIEVEMENTS: ■■ The level of legal aid provision has been increased with the project facilitating 65 legal aid providers across the country each expected to handle 10 cases per month. Legal Aid Offices were established in the four pilot provinces (Kabul, Herat, Logar, and Bamyan) targeted by the project. ■■ Complementary to this, libraries have been established by the project in each of these provinces, and a legal information center is close to completion with the necessary IT equipment procured and installed, and staffing needs for the center are in process of being recruited. The project has also supported training for 125 judges, with training of a further 40 judges scheduled. ■■ The project has completed a limited number of renovation and construction activities to create an appropriate working environment for justice institutions. These include courts and prosecutor’s offices in the four pilot provinces, and a Ministry of Justice (MOJ) Sub-office in the Dehsabz District of Kabul. Construc-tion of new MOJ headquarters and renovation of its old headquarters (within the same compound) are ongoing, while procurement process for an urban court in Kandahar and one in Parwan has concluded with construction soon to commence. ■■ Several activities expected to help lay the foundation for eventual reform of the justice sector, such as Justice Institutions Mapping, HRM Strategy Develop-ment and Training Needs Assessment, are in process. KEY PARTNERS: Supreme Court, Ministry of Justice, Attorney General’s Office, Ministry of Finance, UNDP (legal aid) ,USAID (court case management), Italian Development Corpo-ration (partnership for justice), European Union. Afghanistan Country Snapshot 39 AFGHANISTAN: SYSTEM ENHANCEMENT FOR HEALTH ACTION IN TRANSITION PROJECT KEY DATES: Approved:February 28, 2013 Effective: June 20, 2013 Closing: June 30, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 654 130.07 306.93 Borrower 7 4.3 2.7 Co-financing 30 0 30 Total Bank Financing IDA 100 55.99 44.01 IBRD Trust Fund 517 69.78 230.22 BACKGROUND AND OBJECTIVES: The System Enhancement for Health Action in Transition (SEHAT) Project augments the progress achieved through the Strengthening Health Activities for Rural Poor project, and will support the implementation of the Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS) through contracting arrangements in rural and urban areas covering all 34 provinces, including. The objective is to expand the scope, quality and coverage of health services provided to the Afghan population, particularly to the poor in the project areas, and to enhance the stewardship functions of the Ministry of Public Health. The project components are: ■■ Component 1: Sustaining and improving the Basic Package of Health Services (BPHS) and Essential Package of Hospital Services (EPHS): Supports the implemen- tation of the BPHS and EPHS through contracting arrangements between MOPH and NGOs in 31 provinces and MOPH Strengthening Mecha-nism (MOPH-SM) approach in three provinces and urban areas of Kabul city. This component also finances the contracting of NGOs for the implementation of HIV/AIDS prevention services for targeted population sub-groups in four cities. ■■ Component 2: Building the stewardship capacity of MOPH and system development: Finances development of the regular systems of MOPH at central and provincial level with focus on ten thematic areas: Sub-national governments, Healthcare Financing Directorate; developing regulatory systems and capaci-ties to ensure quality pharmaceuticals; working with the private sector; Gender, enhancing capacity for improved hospital performance; human resources for health, governance and social accountability; health information systems and the use of information technology; health promotion and behavioral change; and fiduciary systems. ■■ Component 3: Strengthening program management Supports costs associated with support strengthening program management at central and provincial levels and technical assistance. KEY ACHIEVEMENTS: Overall, the project is on track to achieve its project development objectives. Most of the Project Development Objective Indicators have achieved their target for 2016 or are on track to meet end of project targets. Some of the results achieved include: ■■ Increase in births attended by skilled health personnel among lowest income quintile from 15.6 percent to 35 percent; ■■ PENTA3 immunization coverage among children aged 12 to 23 months in lowest income quintile more than doubled, from 28.9 percent to 60 percent. ■■ Contraceptive prevalence rate (using any modern method) has increased from 19.5 percent to 30 percent. ■■ Score on the examining quality of care in SCs, BHCs and CHC on the balanced scorecard rose from 61 percent to 70 percent. KEY PARTNERS: Ministry of Public Health, USAID and European Union. 40 AFGHANISTAN: SAFETY NETS AND PENSIONS SUPPORT PROJECT KEY DATES: Approved: October 15, 2009 Effective: February 10, 2010 Additional Financing: October 6, 2013 Closing: June 30, 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 20 12.2 7.8 Borrower Co-financing Total Bank Financing 20 12.2 7.8 IDA 20 12.2 7.8 IBRD Trust Fund BACKGROUND AND OBJECTIVES: The Afghan formal social protection system consists largely of a pension scheme for public sector employees, military, police and a Martyrs and Disabled Pension Program. In addition, a social safety net encompasses a number of government and donor schemes that transfer cash and in-kind benefits to various groups. In pensions (including the Public Pension and the Martyrs and Disabled programs), the Government’s objectives are to ensure fiscal sustainability of the public pension program, to provide improved and streamlined services to the beneficiaries, modernize programs’ administration, increase transparency , and reduce error, fraud, and corruption. In safety nets, the government aims to build systems for a poverty targeted national safety net program. The project’s goals are to improve the administration of the public pension schemes, and develop administrative systems for safety net interventions, with a focus on targeting and benefit payment delivery systems, while delivering cash benefits to the poorest families in specific pilot districts. Project Components are: Pensions: Supports the design of new administrative arrangements for the public pension system and modernization of the existing pension systems, including the Martyrs and Disabled Pension. Safety Nets: Supports designing and piloting of targeting and delivery systems to establish a poverty-targeted cash transfer; KEY ACHIEVEMENTS: ■■ Key elements of a reformed and modernized Public Sector Pension System, which includes a revised institutional and human resources structure of the Pension Department, a set of simplified business processes, a comprehensive new Management Information System, fiscal forecasting models for revenues and expen- ditures, and a new chart of accounts of the pension system, are in place. Recently, a bio-metric identification and verification system with one win-dow operation facility started working at the Central Pension Department in Kabul. Around seventy five thousand pensioners are registered at the new Man-agement Informa- tion System (MIS) at the center and are paid through bank accounts. The MIS is rolled out to two provincial pension departments namely Balkh and Nangarhar. ■■ A multi-phased safety net cash transfer pilot has been designed, implemented and evaluated. In the new phase, a new targeting methodology of computer-ized registration of poor households in five districts and benefit payments through mobile money operators and commercial banks was successfully imple-mented. Around twelve thousand selected poor families (68,000 individuals) benefited from the cash benefits. The pilot project will deliver two more rounds of benefits to these families until June 2017. ■■ The pilot program over the past five years has provided support in cash transfers to over 28,000 poor and vulnerable families (around 148,000 individuals) in thirteen selected districts in ten provinces. KEY PARTNERS: Afghan Ministry of Labor, Social Affairs, Martyrs and Disabled, UNICEF, World Food Program (WFP), UK’s Department for International Development (DFID), Afghanistan Country Snapshot 41 AFGHANISTAN: POWER SYSTEM DEVELOPMENT PROJECT KEY DATES: Approved: December 17, 2010 Effective: December 17, 2010 Closing: May 31, 2017 FINANCING (IN MILLION US DOLLARS): Financier Financing* Disbursed Undisbursed IBRD IDA Government of ARTF 75 58 16 Total Project Cost 75 58 16 *$ millions; as of August 2016; revised amount after partial cancellation; For more information see the latest Implementation Status and Results Report (Cambria 9, italics; remember to hyperlink to project page) BACKGROUND AND OBJECTIVES: The original project had three components: (i) distribution system rehabilitation - rehabilitation of the distribution system in Charikar, Gulbahar, and Jabul-es-Seraj (in Parwan province); and Pul-e-Khumri (in Baghlan province); (ii) rehabilitation of transmission switchyards at the Mahipar and Naghlu hydropower stations on the Kabul River; and (iii) institutional capacity building and project management – project implementation support to the Ministry of Energy and Water (MEW) and the recruitment/retention of a Project Management Firm (PMF). Under the additional financing the implementation of components under the original project will be completed by covering the cost overrun, and by restructuring project implementation by components. KEY ACHIEVEMENTS: ■■ Since the additional financing became effective on 31 July 2015, the responsibility for the implementation of the Project was passed from the Ministry of Energy and Water (MEW) to Afghanistan’s power utility Da Afghanistan Breshna Sherkat (DABS). The hand-over of management responsibilities between MEW and DABS is complete, but there are now delays in the ongoing distribution and switchyard contracts. The World Bank team and teams from MEW and DABS are collaborating to address the situation. ■■ 700 kilometers of Distribution lines have been constructed or rehabilitated under the project. An assessment of km installed under the two contracts of this com- ponent shows that about 12 percent more distribution lines were built than originally envisaged under the contract. Also, under institutional capacity building, energy efficiency and project management support are mostly complete. KEY PARTNERS: Da Afghanistan Breshna Sherkat (DABS ) 42 AFGHANISTAN: KABUL MUNICIPAL DEVELOPMENT PROJECT KEY DATES: Approved: March 26, 2014 Effective: April 11, 2014 Closing: December 31, 2019 FINANCING (IN MILLION US DOLLARS) Financier Financing* Disbursed Undisbursed IBRD IDA Government of ARTF 110 28.29 81.71 Total Project Cost 110 28.29 81.71 *$ millions; as of August 2016; revised amount after partial cancellation; For more information see the latest Implementation Status and Results Report (Cambria 9, italics; remember to hyperlink to project page) BACKGROUND AND OBJECTIVES: The KMDP Grant for US$110 million was approved on April, 2014 and became effective on April 15, 2014. As of April 9, 2015, within one year of effectiveness, disbursements stand at US$28.29million (25.45%). The PDOs remain highly relevant for Kabul, a city with over 70% of its population in unplanned settlements. KMDP’s cost effective methodology enables equitable service delivery, strengthens the social capital of the beneficiary communities and continues to entrench a culture of community participation in decision making over public expenditures that directly impacts the community. The likelihood of achieving end-of-project as well as intermediate PDOs indicator targets is high. The PDO is rated “satisfactory”. The Project Development Objectives are to: (i) Increase access to basic municipal services in selected residential areas of Kabul city; (ii) Redesign KM’s Financial Management system to support better service delivery; and (iii) Enable early response in the event of an eligible emergency. KEY ACHIEVEMENTS: ■■ Effective for just over a year, implementation of the KMDP Grant is progressing well, and it is expected to achieve the indicator targets at the project outcome level and at the intermediate level by the closing date. ■■ Grant disbursements stand at US$28.29 million (25.45%) and KMDP commitments at US$38.4 million (34.9%). By December 31, 2016, cumulative expendi- tures by KMDP within twenty months of effectiveness of the Grant are expected to be about US$38.4million (about 34%). ■■ There are about 445,000 direct beneficiaries, 40 % of the target number, about half from upgrading and half from trunk roads. There are 156,111 indirect benefi- ciaries, including students, teachers and staff of several schools and institutions of higher education that are located within the upgraded areas. About 73 percent of the beneficiaries are women and children. 14,850 tree saplings have been planted in 29 gozars, used for urban communities, with community contributions; and community solid waste collection mechanisms are functioning in most of the gozars. The works executed have generated 1,119,190 man-days of temporary employment. KEY PARTNERS: Kabul Municipality Afghanistan Country Snapshot 43 AFGHANISTAN: KABUL URBAN EFFICIENCY DEVELOPMENT PROJECT KEY DATES: Approved: April 03, 2014 Effective: April 11, 2014 Closing: December 31, 2019 FINANCING (IN MILLION US DOLLARS): Financier Financing* Disbursed Undisbursed IBRD IDA Government of ARTF 90.5 24.52 65.98 Total Project Cost 90.5 24.52 65.98 *$ millions; as of August 16, 2016; revised amount after partial cancellation; For more information see the latest Implementation Status and Results Report (Cam-bria 9, italics; remember to hyperlink to project page) BACKGROUND AND OBJECTIVES: Unprecedented population growth in Kabul, large-scale destruction of the city’s infrastructure during the war, followed by a growing concentration of security related activity has exacerbated the backlog of infrastructure deficiency in a city that harbors the capital functions of the country: A city originally planned for less than one million people, is now ranked 86th among the world’s largest agglomerations. The capacity of the existing road network is diminished further by an astronomical growth in the number of motor vehicles that is today double the 300,000 vehicles the network was designed for. The result is extreme congestion which is further exacerbated by security related encroachments and road closures.Urban productivity of Kabul is deeply impacted by inadequate transport services: Although Kabul’s existing urban road network, initially planned and developed in 1960s with technical support from the Former Soviet Union, provides generous widths, road surfac-es have deteriorated due to age, poor maintenance, severe weather conditions, and the lack of proper drainage. 55 percent of the network is in need for rehabilita-tion. More than 61 percent of the urban population accesses their homes through unpaved roads. The result is poor access to jobs and services, low mobility of passenger and freight movement, congestion, increased road accident rates, and productivity losses. The Project Development Objective (PDO) is to improve road conditions and traffic flows in selected corridors of Kabul City. KEY ACHIEVEMENTS: ■■ - Initial activities including survey, design review and procurement of civil works started during the preparation of the project. As of August 15th, 2016, the imple- mentation of the four NCB civil works contracts (Lot 1, 2, 3, & 4) is completed and the roads are opened to the traffic. The implementation progress for the ICB Lot 5 & 6 stands at 55%. The procurement process for Lot-7 is in the final stages of the bids evaluation. The procurement of Lot-8 (final lot) is planned to be started in the next 3 months. The design work for Wazir Abad canal is expected to be completed by December 2016. ■■ Under Component B, the consultancy for area accessibility and streets function optimization of Kabul city is under the final stages of the procurement review. The Terms of Reference (TOR) for the design and review of the 40 KM of new roads network is finalized and the roads are identified. The TOR for the Public Transport Demand study is prepared and ready for stakeholders’ consultation. IMPLEMENTING AGENCY: Kabul Municipality KEY PARTNERS: Afghan Ministry of Finance 44 AFGHANISTAN: DABS PLANNING AND CAPACITY SUPPORT PROJECT KEY DATES: Approved: : 10 Feb 2016 Effective: March 1, 2016 Closing: June 30, 2020 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: The Afghan power system is small, fragmented and underdeveloped but demand is growing rapidly. Despite considerable progress in building power infrastruc-ture over the last decade, the estimated grid-based electricity covers only about 20 - 25 percent of the population, mainly in the urban areas and along a few transmission corridors. Da Afghanistan Breshna Sherkat (DABS), the state-owned power utility, lacks solid management, which led to overstaffing and under-qualification of staff; poor customer service; lacking billing and collection; and below cost-recovery tariffs The project’s development objective is to improve the capacity of DABS to plan and implement new investments, and to enhance operation and maintenance of the Afghan electricity distribution system. The Project has two components: ■■ DABS staff capacity building. The objective of this component is to support DABS’ capacity to plan and implement new investments in distribution systems and tor operate and maintain the investments properly. ■■ Training Center development. This component supports development of a training center in Kabul. Currently DABS does not have any training facility for its staff, and this has been identified as a critical gap in its overall capacity building efforts. KEY EXPECTED RESULTS: ■■ Distribution investment project(s) of a USD 50 million planned and prepared using new standards and designs based on good international practice ad-justed for local conditions. ■■ Annual O&M plans for six major load centers prepared and implemented using new procedures based on good international practice adjusted for local conditions. ■■ 80 percent of DABS planning and O&M staff with improved skills through the project supported training and use of new training center. KEY PARTNERS: DABS Afghanistan Country Snapshot 45 AFGHANISTAN: NAGHLU HYDROPOWER REHABILITATION PROJECT KEY DATES: Approved: 14 Dec 2015 Effective: 24 January 2016 Closing: 30 Sep 2022 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 83 5 78 Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund 83 5 78 BACKGROUND AND OBJECTIVES: Hydropower provides 94.6 percent of domestically generated electricity with an installed capacity of 254 MW. In mid-2015 there were 12 hydropower plants in Afghanistan, not counting the over 5,000 off-grid micro hydropower plants constructed under the National Solidarity Program (NSP). The two largest among those are Naghlu Hydropower Plant (NHPP) at 94 MW installed capacity and Mahipar Hydropower Plant at 66 MW installed capacity. The NHPP was first commis-sioned in 1967 and is located on the confluence of the Panjshir and Kabul Rivers in the Surobi District, Kabul Province, about 80 km east of Kabul. This project addresses critical rehabilitation needs at the Naghlu Plant The project development objective (PDO) is to improve dam safety and to increase the supply of electricity at the Naghlu Hydropower Plant. ■■ Mechanical, Electrical, and Electromechanical Works. This component complements the rehabilitation of the electrical and electromechanical parts of the plant previously undertaken and ensures their sustainable operation. ■■ Dam Safety and Power Generation Improvement. This component aims to ensure the safe operation of the dam through dam safety audit and safety im-prove- ment measures as well as optimization of power generation. ■■ Environmental and Social Sustainability, Project Management Support, and Future Project Preparation. This component includes local development assis-tance in support of benefit sharing with local communities and support toward environmental and social management ensuring that the DABS receives ad-vice on good international practices. KEY RESULTS EXPECTED: ■■ Improvement in the generation capacity (in MW) of Unit 1 in the NHPP ■■ Reduction in the total number of forced power outages in the NHPP ■■ Establishment of dam safety plans and periodic audits in accordance with international best practices ■■ Implementation of dam safety measures as recommended in dam safety audit reports ■■ Development of O&M procedures and guidelines that are in line with international best practices KEY PARTNERS: DABS power utility 46 AFGHANISTAN: TECHNICAL ASSISTANCE FACILITY KEY DATES: Approved: June 29, 2016 Effective: 01 July, 2016 Closing: 30 June 2020 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower Co-financing Total Bank Financing IDA IBRD Trust Fund 5 0 5 DAB 0.03 PROJECT BACKGROUND: As the Ministry of Finance (MoF) advances this structural reform agenda, its need for specialized knowledge support will grow. This is especially the case in the interim as MOF formulates specific reform plans, policies and strategies for which technical assistance needs become more acute and require the production of specific independent analysis. The purpose of the proposed Technical Assistance Facility is therefore to support MOF’s reform planning. Specifically the TAF is required to support the implementation of the Five Year Plan for two Directorates General. The TAF is proposed to provide a flexible facility that allows MOF to quickly procure the necessary inputs including (but not limited to) skills, to support strengthened processes and substantive pieces of work contributing specifical-ly to strengthening: (i) Macro Fiscal Policy Management; and (ii) Budget Planning. The development objective is to strengthen the fiscal management and the budget planning performance of Government of Afghanistan. ■■ Supporting the Continuous Improvement of the Performance of the Macro Fiscal Performance Directorate General. This component is focused on strength-ening MFPD’s institutional capacity to effectively carry out its mandated activities. ■■ Supporting the Continuous Improvement of the Programs Implementation and Coordination General Directorate. This component is focused on strengthen-ing the institutional capacity of PICGD to effectively carry out its mandated activities set out in detail in its Five Year Rolling Plan. KEY RESULTS EXPECTED: ■■ Development and implementation of medium term fiscal framework ■■ Development and implementation of forward estimates framework ■■ National budget allocation determined by National Development Strategy KEY PARTNERS: Ministry of Finance Afghanistan Country Snapshot 47 IFC/F&M GP: ADVISORY —FINANCIAL INFRASTRUCTURE SECURED LENDING PROJECT (ACCESS TO FINANCE) KEY DATES: Approved: Effective: November 30, 2008 Closing: June 30, 2016 FINANCING (IN MILLION US DOLLARS): Financier Financing* Disbursed Undisbursed IBRD IDA Government of ARTF 15 2.5 12.5 Total Project Cost 15 2.5 12.5 *$ millions; as of August 2016; revised amount after partial cancellation; For more information see the latest Implementation Status and Results Report (Cambria 9, italics; remember to hyperlink to project page) BACKGROUND AND OBJECTIVES: It is widely acknowledged that Afghanistan’s growth is constrained by the incidence of poverty, high illiteracy, and the lack of a skilled labor force. This proposed project directly links literacy and skills development by designing interventions that improve access to skills for illiterate and unskilled young Afghan men and women. The project will incentivize non-formal training providers to provide quality training to Afghan men and women and increase their job placement rates. Subsequently, the project shall promote entrepreneurship among youth to help improve their welfare status. To increase the potential for employment and higher earnings of targeted young Afghan women and men in rural and semi-urban areas through non-formal skills training” ■■ Improving the Quality of Non-formal Training and the Labor Market Outcomes of Trainees ■■ Project Management, Capacity Building of MOLSAMD and M&E. Strengthening the capacity of NSDP/MOLSAMD for project implementation and monitoring Piloting unskilled Entrepreneurship among Unskilled and Illiterate young Afghans. Many young Afghans, and illiterate are unprepared to compete in the labor market KEY ACHIEVEMENTS: ■■ 250 Training Providers’ (TPs) applications have been received and reviewed. Request for Proposals were sent to 140 TPs who passed the initial step and 80 propos- als were received. The selection process and timeline were presented and approved by the Deputy Minister. To date 70 TPs have passed and are due to sign MoUs with MoLSAMD. A study will be conducted to trace graduates and their employment status. 673 Vocational Trainers received ToT training on NOSS utilization, learning materials development and training delivery. 57,459 trainees have been selected, of which 35,031 are male and 22,428 (39%) are fe-male. ■■ Data collection tools and methodology have been developed and 34 Labor Market Information data collection supervisors have been dispatched to various prov- inces. LMIA Database Development is underway and 4 Web-based applications for Employment Service Centers have been completed (job seekers regis-tration database, employers registration database, job seekers training & capacity building database, and job-placement database). KEY PARTNERS: Ministry of Labor, Social Affairs, Martyrs and Disabled (MoLSMAD) 48 AFGHANISTAN: IFC/F&M GP: FINANCIAL INFRASTRUCTURE SECURED LENDING PROJECT (ACCESS TO FINANCE) KEY DATES: Approved: Effective: November 30, 2008 Closing: June 30, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 0.97 Harakat Grant 0.29 Japan 0.07 The Netherlands (NIPP) 0.02 Total Bank Financing IFC Pool Funds 0.21 SME Facility 0.35 DAB 0.03 BACKGROUND AND OBJECTIVES: The Afghanistan Secured Lending Project is part of the Financial Infrastructure Program in the MENA region. IFC’s access to finance advisory services in the MENA region, through its Secured Transactions and Collateral Registries Team, assists government clients in developing the appropriate legal and institutional frame-works to allow and encourage the use of movable assets as collateral for loans. At inception of the project, the results from the Doing Business ranking on the Ease of Getting Credit, a measure of credit information sharing and legal rights of borrowers and lenders, showed that the financial sector in Afghanistan was not able to meet the needs of small firms or individuals – Afghanistan ranked 179th out of 181 countries in 2009. The overall objective of the project is to achieve sustained development of the financial sector by increasing private sector access to finance, particularly credit, in the MENA region, by strengthening lender rights in movable assets. In Afghanistan, the project operates under three components: a) legislative reform resulting in enactment or amendment of laws and regulations to enhance rights of creditors of movable assets; b) creation of a functioning movable asset registry to enable lenders to effectively file a notice related to their proprietary rights, and c) awareness raising and capacity building activities to increase knowledge among stakeholders about the benefits of well-functioning secured financing systems. The overall program targets are to benefit 250 micro, small and medium enterprises with expanded access to finance, facilitate $13 million in financing to small and medium enterprises (secured with movable property as collateral) and an overall $30 million in financing facilitated. KEY ACHIEVEMENTS: ■■ Two new pieces of legislation: an act on secured transactions in movable property and the regulation for operating the registry were adopted. ■■ Collateral Registry established in 2013 with 3869 new registrations as at May 2015. ■■ Improvements in the ranking of Afghanistan from ‘0’ to ’9 ’on the “Strength of Legal Rights Index” a subset of the “Ease of Getting Credit” ranking of Doing Busi- ness in 2015. Further in 2015, Afghanistan was ranked 89th out of 189 countries on the Doing Business “Ease of Getting Credit” ranking ■■ Establishment of the Afghanistan Institute of Banking and Finance in November 2010. KEY PARTNERS: Da Afghanistan Bank, Harakat Afghanistan Country Snapshot 49 AFGHANISTAN IFC: AFGHANISTAN INTERNATIONAL BANK KEY DATES: Approved: June,2009 Effective: Closing: FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower Co-finance Total Bank Financing IFC (Guarantee) 1.5 (Outstanding) 0.92 IBRD Trust Fund BACKGROUND AND OBJECTIVES: Afghanistan International Bank (“AIB” or the “Bank”) has Asian Development Bank (ADB) and two Afghan private sector business groups, namely Horizon Associ-ates LLC (HA) and Wilton Holdings Ltd. (WHL) as shareholders with ownership of 7.5 percent, 46.25 percent and 46.25 percent respectively. The bank was founded in March 2004 and is present in the major cities of Afghanistan through its network of 32 branches. It has roughly a 22 percent share in the total assets of the banking sector, and was the first bank to commence ATM services and introduce international debit card services in Afghanistan. AIB focuses its lending efforts on Corporate and the Small and Medium Sized Enterprises (SME) mostly in construction ( 31 percent) and fuel supply (31 percent) segments. In 2012, AIB acquired Standard Chartered Bank’s (SCB) retail business in Afghanistan comprising one branch, nine ATMs and gross assets of $229m. As of June 2015, the Bank has 33 branches, 2 cash outlets and employs about 680 staff members. To contribute to the reconstruction and economic development of Afghanistan by providing financing to small and medium sized businesses, which are at the forefront of job creation in the fledgling economy. To develop the financial sector by providing basic financial services currently not available in the market. The project was expected to contribute to overall financial sector reform by setting best-practice standards and supporting the authorities in developing the evolving legal and regulatory framework. KEY ACHIEVEMENTS: ■■ AIB has made a substantial development impact evident from its market-leader position in the banking sector of Afghanistan and ranks number 1 in terms of assets. ■■ The Bank is also regarded highly in the sector through its financial performance characterized by a relatively sound asset quality despite the tough operating and macroeconomic environment. ■■ Results as of August 2016: ■■ Net Loan Portfolio - $ 71 million ■■ No. of borrowers – 83 Corporate/SME loans, 179 Consumer/Pay-roll loans, 537 Credit Cards and 18 loans for small businesses. ■■ Total Deposits – $ 860 million, ■■ No. of depositors – 116,569 ■■ Employees – 680 , No. of branches – 33, Cash outlets – 2 KEY PARTNERS: Asian Development Bank (ADB), Wilton Holdings Ltd (WHL) and Horizon Associates LLC (HA). 50 AFGHANISTAN IFC: BUSINESS EDGE—FAST AFGHANISTAN PHASE-2 KEY DATES: Approved: Effective: April 01, 2013 Closing: June 30, 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 1,145,000 Borrower DFID Grant 544,750 529,957 14,793 Total Bank Financing IDA IBRD Client Cash fee 25,000 20,086 4,914 Trust Fund 86,000 77,530 8,470 BACKGROUND AND OBJECTIVES: The private sector in Afghanistan still lacks a sufficient level of capacity and understanding of good business skills and practices. This lack of knowledge affects the ability of the private sector to grow or to export which in turn affects economic growth. The business development services (BDS)/ management skills training market, while having improved its capacity to deliver high quality training using material customized to the local business environment, is still underdeveloped and requires further assistance to enable it to orient itself towards the private sector and its training needs. IFC has been contributing to the development of management capacity in both the public and private sector with its Business Edge (DFID funded) management training program for the past four years (September 2008 to March 2013). The overall goal of the project is to enhance the business performance and increase the revenue of micro, small and medium enterprises (MSMEs) by develop-ing their managerial capacities using IFC’s Business Edge (BE) product. The project will build the capacity of local training providers to deliver BE management training to 5,200 individuals (of which 1,820 are women) reaching 520 MSMEs. Approximately 77 percent of the targets (4,000 individuals trained) will be reached by project completion (June 30, 2016) and 23 percent of targets (1,200) will be reached within three years of post-project completion (by June 30, 2019). KEY ACHIEVEMENTS: ■■ From inception in September 2008 to June 30, 2015, the project has delivered training to 9,056 people including 3,935 (43 percent) women and reached 801 MSMEs. The impact assessment indicated that 91 percent of the private sector respondents expressed a positive impact of the BE training on company perfor- mance. ■■ Under the current project, since April 1, 2013 to June 2015, the project has delivered training to 5,604 people including 2,724 (48.6 percent) women and reached 547 MSMEs. In 2014, two impact assessment surveys were conducted to determine the impact of BE training on unemployed individuals and im-pact of Business Thematic Radio programs sponsored by IFC on businesses. ■■ Results show: ■■ 68 percent of the trained individuals stated that the training helped them in getting jobs; ■■ 8 percent individuals reported that the training helped them in setting up their own businesses. ■■ Of the 608 respondents surveyed, 76 percent individual employed the skills and ideas acquired from the radio programs and most of them reported positive impact of the programs on their businesses. KEY PARTNERS: Advanced Business Consulting (ABC), Kaweyan Business Development Services (KBDS), BRAC Afghanistan, Afghan Business Capacity Development (ABCD) Con- sultants, Afghanistan Institute of Banking and Finance (AIBF), Afghanistan Holding Group, Oriental Consultants, Women Star Consultancy, UK’s Department for International Development (DFID) Afghanistan Country Snapshot 51 AFGHANISTAN: IFC/T&C GP: CONSTRUCTION PERMIT REFORM PROJECT KEY DATES: Approved: Effective: May 2014 Closing: September 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower USAID 1.05 Total Bank Financing IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: The Afghanistan Construction Permits Reform Project, launched in May 2014, aims to support the Afghan government as it revamps the way construction permits are issued across the country. IFC will help officials simplify the often time-consuming permitting process and advise the government as it develops new permit-ting laws. The changes, planned for the provinces at the national and subnational levels, are designed to spur the growth of Afghanistan’s construction sector, a vital part of the country’s economy. That, in turn, is expected to increase the supply of affordable housing at a time when the demand for new homes is growing quickly. The project is part of a wider IFC effort to help diversify Afghanistan’s economy and spur growth across the nation. The objective of this project is to develop a simplified yet effective construction permit system and regulatory framework that will improve the government’s efficiency and capacity to issue construction permits. By doing so, the private sector will benefit from reduced costs through the easing of permitting bottlenecks, which hamper the ability of the growing housing sector in Afghanistan to meet demand. The new framework will also allow the government to retroactively formalize unpermitted buildings. The project aims to reduce the time it takes to obtain con-struction permits from the current 334 days to 180 days; reduce the number of procedures from 15 to nine; and improve the capacity of civil servants operating the process. Changes are expected to increase both the efficiency and capacity of the Kabul Municipality to issue construction permits and, hence, increase applications under the reformed permits system by 40 percent. KEY ACHIEVEMENTS: ■■ Implementation of the legal and regulatory recommended procedures has started which paves the way for the improved CP process as well as ensuring the health and safety of various structures built within the limits set by the Kabul City Master Plan. ■■ The time for obtaining Construction Permits in Kabul Municipality was reduced for residential permits from 52 to 6 steps and for commercial high rise buildings from 122 steps to 16. The Construction Permit processes have been streamlined. ■■ Kabul Municipality staff members at technical and managerial levels completed a tailor made training program. ■■ The project completed the CP software customization and launched it online on August 2016. The new web-based online system allows the private sector to obtain the permits online for the first time in Afghanistan. A wide-scale awareness raising campaign on improved Construction Permit process has been completed. KEY PARTNERS: Kabul Municipality, United States Agency for International Development (USAID) 52 AFGHANISTAN: IFC : INVESTMENT-ROSHAN KEY DATES: Approved: January 17, 2013 Effective: February 14, 2013 Closing: FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 65 65 Borrower Co-financing Total Bank Financing 65 65 IFC (Lending) 65 65 IBRD Trust Fund BACKGROUND AND OBJECTIVES: Founded in 2003, Roshan is the leading local mobile operator in Afghanistan with an estimated 27 percent mobile market share and 5.6 million subscribers as of March 2013. The company currently reaches 230 cities and towns in all of Afghanistan’s 34 provinces and covers approximately 62 percent of the population. In mid-2012, Roshan approached IFC to finance: (i) the acquisition of its 3G license; (ii) the capital expenditures to roll-out the 3G network and improve the 2G network; and (iii) consolidation of its existing loans into a single loan and extending its maturity. The overall objective of the project is to increase the supply of fresh and processed fruits, through improved compliance with market standards, and integration of farmers into the value chain of at least one lead agribusiness firms, giving them access to wider market opportunities. The project will initially start its activities in Kandahar building on the success of the previous project, while assessing the potential of expanding to other provinces in Afghanistan. Brief Component Description: ■■ Extension workers association. This component is aimed to set up and roll out a Sustainable business model for a lead firm to obtain sustainable supply of fruits from smallholder farmers by development of business relationship with extension workers. ■■ Farmer Technical Assistance aimed to improve the capacity of 1,000 farmers in fruit production, harvest and post-harvest handing and are integrated the farmers into the lead firm’s supply chain (through contract farming agreement between farmer producer groups and lead firm) ■■ Lead firm contract farming and trade facilitation. This component is aimed to support a Lead firm in implementation of the contract farming system with farmers in their supply chain as well as established an overseas Marketing Agent for export market expansion KEY EXPECTED RESULTS: ■■ Through the established network of extension workers in Kandahar, provide technical assistance to 1,000 farmers and integrate them into lead firms’ supply chain. By completion, at least 800 farmers are expected to adopt improved practices and comply with market standards. ■■ Through improved compliance with market standards at the farmer level, increase the volume and value of fruits sold to lead firms. By completion, benefitting farmers are expected to sell a cumulative volume of 9.6 million kg of fruit totaling a value of $5.06 million to lead firms. ■■ Through supporting lead firms to access new markets and obtaining at least four new contracts with new buyers, generate a total of $2.05 million additional net profit from the export of fresh and processed fruit by completion. KEY PARTNERS: ■■ AKFED: A for-profit international development agency which makes long-term investments in developing countries. ■■ Monaco Telecom: The main telecommunication company in Monaco, with operations in Maldives, Channel Islands, Isle of Man and islands in the Indian and Atlantic Oceans. ■■ TeliaSonera: A leading telecommunications operator in the Nordic and Baltic regions with 172 million subscribers. Afghanistan Country Snapshot 53 AFGHANISTAN: IFC - STRENGTHENING AFGHANISTAN HORTICULTURE EXPORTS PROJECT KEY DATES: Approved: Effective: October 1, 2014 Closing: April 30, 2018 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 1.1 Borrower 0.1 Co-financing Total Bank Financing IDA IBRD Trust Fund (Japan) 1.1 BACKGROUND AND OBJECTIVES: This project builds on the success of a previous successful IFC intervention in the horticulture sector, Afghanistan Horticulture Exports Development, which helped farmers to adopt best agriculture practices for two major export commodities (raisins and pomegranates). The project will focus on improving farmers’ skills and expanding market opportunities for Afghan agriculture commodities through improving access to export mar- kets, and strengthening the overall value chain, including processing opportunities for grade B fruits. The project will reach out to farmers located in remote locations, leveraging the skills of the extension workers association established and trained in the previous project. These farmers will be integrated into the supply chain of large fruit exporting and processing firms in Afghanistan. Meanwhile, these lead agribusinesses will be supported in becoming compliant with global standards required for access to high-end markets for food products. The overall objective of the project is to increase the supply of fresh and processed fruits, through improved compliance with market standards, and integration of farmers into the value chain of lead agribusiness firms, giving them access to wider market opportunities. The project will initially start its activities in Kandahar province, building on the success of the previous project, while assessing the potential of expanding to other provinces in Afghanistan. Components include: Extension workers association aimed to set up and roll out a Sustainable business model for a lead firm to obtain sustainable supply of fruits from smallholder farmers by development of business relationship with extension workers. Farmer Technical Assistance aimed to improve the capacity of 1,000 farmers in fruit production, harvest and post-harvest handing and are integrated the farmers into the lead firm’s supply chain (through contract farming agreement between farmer producer groups and lead firm) Lead firm contract farming and trade facilitation aimed to support a Lead firm in implementation of the contract farming system with farmers in their supply chain as well as established an overseas Marketing Agent for export market expansion. KEY EXPECTED RESULTS: ■■ Through the established network of extension workers in Kandahar, provide technical assistance to 1,000 farmers and integrate them into lead firms’ supply chain. By completion, at least 800 farmers are expected to adopt improved practices and comply with market standards. ■■ Through improved compliance with market standards at the farmer level, increase the volume and value of fruits sold to lead firms. By completion, benefitting farmers are expected to sell a cumulative volume of 9.6 million kg of fruit totaling a value of $5.06 million to lead firms. ■■ Through supporting lead firms to access new markets and obtaining at least four new contracts with new buyers, generate a total of $2.05 million additional net profit from the export of fresh and processed fruit by completion. KEY PARTNERS: Large fruit processing companies in Afghanistan, the Extension Workers Association, local NGOs, organizations engaged in supporting the agribusiness sector in Afghanistan, and potential global buyers (IFC and non-IFC investment clients). 54 AFGHANISTAN IFC: BUSINESS EDGE—FAST AFGHANISTAN PHASE-2 KEY DATES: Approved: Effective: April 01, 2013 Closing: September 2016 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 1,145,000 Borrower DFID Grant 544,750 529,957 14,793 Total Bank Financing IDA IBRD Client Cash fee 25,000 20,086 4,914 Trust Fund 86,000 77,530 8,470 BACKGROUND AND OBJECTIVES: The private sector in Afghanistan still lacks a sufficient level of capacity and understanding of good business skills and practices. This lack of knowledge affects the ability of the private sector to grow or to export which in turn affects economic growth. The business development services (BDS)/ management skills training market, while having improved its capacity to deliver high quality training using material customized to the local business environment, is still underdeveloped and requires further assistance to enable it to orient itself towards the private sector and its training needs. IFC has been contributing to the development of management capacity in both the public and private sector with its Business Edge (DFID funded) management training program for the past four years (September 2008 to March 2013). The overall goal of the project is to enhance the business performance and increase the revenue of micro, small and medium enterprises (MSMEs) by develop-ing their managerial capacities using IFC’s Business Edge (BE) product. The project will build the capacity of local training providers to deliver BE management training to 5,200 individuals (of which 1,820 are women) reaching 520 MSMEs. Approximately 77 percent of the targets (4,000 individuals trained) will be reached by project completion (June 30, 2016) and 23 percent of targets (1,200) will be reached within three years of post-project completion (by June 30, 2019). KEY ACHIEVEMENTS: ■■ From inception in September 2008 to June 30, 2015, the project has delivered training to 9,056 people including 3,935 (43 percent) women and reached 801 MSMEs. The impact assessment indicated that 91 percent of the private sector respondents expressed a positive impact of the BE training on company perfor- mance. ■■ Under the current project, since April 1, 2013 to June 2015, the project has delivered training to 5,604 people including 2,724 (48.6 percent) women and reached 547 MSMEs. In 2014, two impact assessment surveys were conducted to determine the impact of BE training on unemployed individuals and im-pact of Business Thematic Radio programs sponsored by IFC on businesses. Results show: ■■ 68 percent of the trained individuals stated that the training helped them in getting jobs; ■■ 8 percent individuals reported that the training helped them in setting up their own businesses. ■■ Of the 608 respondents surveyed, 76 percent individual employed the skills and ideas acquired from the radio programs and most of them reported positive impact of the programs on their businesses. KEY PARTNERS: Advanced Business Consulting (ABC), Kaweyan Business Development Services (KBDS), BRAC Afghanistan, Afghan Business Capacity Development (ABCD) Con- sultants, Afghanistan Institute of Banking and Finance (AIBF), Afghanistan Holding Group, Oriental Consultants, Women Star Consultancy, UK’s Department for International Development (DFID) Afghanistan Country Snapshot 55 AFGHANISTAN MIGA: MIDO DAIRY PRODUCTION COMPANY KEY DATES: Approved: Effective: October 29, 2013 Closing: FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower Co-financing Total Bank Financing MIGA (Equity) 1.82 IBRD Trust Fund BACKGROUND AND OBJECTIVES: Dairy products are a major source of protein in Afghanistan. However, the dairy sector was largely destroyed during the Afghan civil war and has yet to fully recover. Imported dairy products have gained the majority of the market share in large metropolitan areas including Kabul. Supporting the livestock and local dairy industries has been a priority for the Afghan government as well as international development organizations. However, domestic producers continue to find it difficult to compete with imported products in terms of both quality and quantity. The MIGA guarantee of €1.34 million to investors in Mido Dairy Production Co covers direct equity against the risks of Transfer Restriction, Expropriation and War and Civil Disturbance for up to 10 years. From both the country and sector perspectives, MIGA is playing an important role in facilitating private investment to promote the technical know-how and in-vestment needed to develop this sector in a conflict-affected country. The project entails the establishment of a joint venture company in Afghanistan, Mido Dairy Production Co (‘MIDO’ or ‘the Company) with a dairy processing plant, located in the suburbs of Kabul, which will produce and distribute high-quality dairy products such as milk and yogurt, primarily to Kabul. KEY EXPECTED RESULTS: ■■ The generation of 20-25 new permanent jobs. ■■ €1.2 million over the 7 years of operation in taxes and fees. ■■ 27.9 percent economic rate of return. KEY PARTNERS: Mido Dairy Production Co. 56 AFGHANISTAN MIGA: TRAITEX INDUSTRY KEY DATES: Approved: June 26, 2013 Effective: June 28, 2013 Closing: FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost 2.15 Borrower Shareholder loan 0.825 Total Bank Financing 1.325 IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: The aim is to boost the production of cashmere. Currently Afghanistan exports around 1,000 metric tons (MT) of cashmere on an annual basis. The main trade center is Herat, where a handful of exporters gather to purchase the cashmere from farmers. The project was initially supported by the Afghanistan Small and Medium Enterprise Development program, funded by USAID. In 2011, this program provided funding to Traitex Belgium (“Traitex”) and Cashmere Fibres International (“CFI”), the largest dehairer of Afghan cashmere, to set up operations in Afghanistan in order to increase the value-added within the country and to promote the development of the sector. Traitex, based in Verviers, Belgium, is an independent processing company that scours and carbonizes wool and cashmere. In June 2013, MIGA issued a guarantee of $1.7 million to Traitex to cover equity and shareholder loans provided to Traitex Afghanistan against the risks of Transfer Restriction, Expropriation, and War and Civil Disturbance for a period of up to 10 years. MIGA also provided a guarantee of $308,750 to Sodintec, a third party investor in Traitex Afghanistan, for the same tenor and against the same risks. From both the country and sector perspectives, MIGA is playing an important role in facilitating private investment to promote the technical know-how and invest-ment needed to develop this sector in a conflict-affected country. KEY ACHIEVEMENTS: ■■ Generation of 35 permanent jobs directly, as well as supporting many hundreds of cashmere farmers indirectly. ■■ Generating $35,000 in taxes and fees annually. ■■ Achieving a 20.6 percent economic rate of return. KEY PARTNERS: Traitex Industry Afghanistan Country Snapshot 57 AFGHANISTAN: IFC - INVESTMENT AND MIGA - MTN GROUP KEY DATES: Approved: JJune 2, 2011 Signed: July 7, 2011 FINANCE MIGA GUARANTEE (MILLION US DOLLARS): Amount Fiscal Year Equity $114 2011 Shareholder loan $42.6 2011 IFC KEY DATES: Approved: June 23, 2006 Signed: June 30, 2006/June 19, 2009 IFC INVESTMENT (MILLION US DOLLARS): Amount Fiscal Year Exited Investment/Loan Rapid Equity 13.5 2009/10 2013 Shareholder loan Equity 65.0 2011 Sept 2015 BACKGROUND AND OBJECTIVES: In 2002, following decades of armed conflict, Afghanistan had a barely functioning and severely limited communications network. In early 2007, IFC and MIGA made a commitment to provide support directly to the most recent (third) mobile operator, MTN Group (then Areeba Afghanistan). IFC initially made an investment commitment in Areeba Afghanistan in 2006, which was later replaced by a larger investment facility to MTN Afghanistan comprising an equity investment of $13.5 million and senior debt of $65 million in order to finance the expansion of MTN’s operations. MIGA initially issued a guarantee of $74.5 million to cover the direct equity investment of $85 million in Afghanistan. The coverage was for 15 years against two risks: i) transfer and convertibility re-striction, and ii) expropriation. The Afghanistan Investment Guarantee Facility (AIGF), managed by MIGA, provided $2 million of first loss. In 2011, when MTN Group expanded its network, MIGA increased its coverage by $82.1m. This brought MIGA’s total gross coverage to $156.6 million, in addition to the $2 million layer provided by AIGF. IFC exited its equity investment in July 2013 and the debt will be fully repaid in September 2015. In June 2016, the MIGA contracts guaranteeing the shareholder loans expired without renewal. From both a country and sector perspective, MIGA and IFC are playing an important role in facilitating south-south investment to promote the expansion of telecommunications infrastructure in a conflict-affected country, increasing the availability and affordability of communication services in Afghanistan. Fur-thermore, IFC’s investment has been supporting the expansion of telecom services into semi-urban and rural areas of Afghanistan. MIGA can mobilize addi-tional capacity in the private insurance market through its reinsurance arrangements. MIGA’s establishment of the AIGF, a first loss fund, with the help of other donor countries, has helped bring down the risk of the transaction, making it more attractive for the private reinsurance market. KEY ACHIEVEMENTS: ■■ With MIGA guarantee coverage and IFC’s investment and advisory support, MTN has been able to exceed expectations and reach over five million subscribers, close to a one-third market share. KEY PARTNERS: Afghanistan Investment Guarantee Facility (AIGF) – MIGA 58 AFGHANISTAN: IFC/T&C GP: INVESTMENT CLIMATE – SUB NATIONAL DOING BUSINESS STUDY KEY DATES: Approved: Effective: July 2015 Closing: June 2019 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower USAID 2.3 Million Total Bank Financing IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: The formal sector in Afghanistan is still in a formative stage, since the reopening of the economy to international business in 2002-2003. The economy is domi-nated by informal enterprises. Registered firms are young and small: half of them have been operating for 4 years or less, and 91 percent of them have a maxi-mum of 5 employees. Economic growth is estimated to have fallen to 2 percent in 2014, from 3.7 percent in 2013 and an average of 9 percent during 2003-12; the growth outlook for 2015 remains weak. Some of the major challenges that Afghanistan faces in the immediate and medium term are: restoring confidence and creating private-sector jobs; and strengthening cohesion and service delivery. This project will cover the measurement of 4 Doing Business indicators that are actionable at the local level and where subnational differences are likely to occur: starting a business, dealing with construction permits, registering property and getting electricity. Even in countries characterized by centralized public sector like Afghanistan, these areas show subnational differences at the regulatory level and/or in how the national regulations are implemented in practice. The benchmarking will include 4 of the largest cities in addition to Kabul that serve as regional economic centers: Herat, Mazar e-Sharif, Kandahar, Jalalabad, Kabul. The objective of the project is to support the Government of Afghanistan to advance regulatory reforms at the subnational level to foster a better business-enabling regulatory environment across the country. It will do so by producing a Subnational Doing Business (SNDB) report which benchmarks business regula-tions and their implementation on 4 key Doing Business indicators (Starting a business, Registering property, Dealing with construction permits and Getting electricity) across 4 municipalities (Herat, Mazar e-Sharif, Kandahar, Jalalabad) as well as Kabul. The report: (i) allows comparability among municipalities in Afghanistan and with 189 economies worldwide; (ii) identifies regulatory constraints in detail and highlights good practices; (iii) provides in-depth analysis and detailed policy recommendations on how to improve the areas measured; (iv) promotes peer to peer learning through the sharing of good practices; (v) and motivates governments to reform by repeating the measurement over time. A 2nd round of Subna-tional Doing Business benchmarking starting in 2018, will update the measurements and document the reforms undertaken, which were motivated by the first benchmarking round in each of the cities. It will also provide further reform recommendations. KEY ACHIEVEMENTS: ■■ Conducted a scoping mission in Kabul in May 2015, to present the project to the National Government authorities and to identify private sector profession-als and local consulting firms to organize the data collection process. ■■ Completed the selection and contractual arrangements with the coordinating firm in charge of supporting the data collection. ■■ Trained staff from the coordinating firm on the indicators methodology. ■■ Completed the first stage of the data collection, which included distribution of questionnaires (to the private and public sector), interviews and desk re-searches. ■■ Held the “Right of Reply” meetings in Kabul (April 2016) with local government officials and relevant agencies to discuss the preliminary findings of the project with the competent local authorities of the 4 cities measured on a confidential basis. KEY PARTNERS: Afghanistan Chamber of Commerce and Industry, Independent Directorate for Local Governance, Afghanistan Investment Support Agency, Da Afghanistan Bresh-nakat (DABS) and United States Agency for International Development (USAID) Afghanistan Country Snapshot 59 AFGHANISTAN: IFC/T&C GP: INVESTMENT CLIMATE – BUSINESS REGISTRATION AND LICENSING REFORM PHASE KEY DATES: Approved: Effective: July 2015 Closing: June 2017 FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower USAID 2 Million Total Bank Financing IDA IBRD Trust Fund BACKGROUND AND OBJECTIVES: The World Bank Group, fosters sustainable economic growth in developing countries by providing advisory services to businesses and governments aimed at specific aspects of private sector development, including supporting small and medium-sized enterprises, enhancing access to finance, improving the business enabling environment, supporting privatization and public-private partnerships and promoting environmental and social sustainable practices. Advisory services are delivered through the Trade and Competitiveness Global Practice in South Asia Region (SAR). An analysis conducted by IFC Advisory in December 2013 revealed that starting a business at the subnational level is a very complex, unwieldy and time-consuming process and is a severe impediment to investment at the subnational level. This analysis recommended a fundamental rethinking of the strict system of starting a business enforced by the Ministry of Commerce and Industry (MoCI) at the subnational level. Evidence collected from interviews with business man-agers at the subnational level, as well as with MoCI officials, indicated that the procedures for obtaining a business license and registration required a minimum of several weeks, and might extend to a few months. This is significantly slower than the 2 – 3 days currently required to complete the same process in Kabul. Building on the reforms achieved in phase I of Afghanistan Licensing Reform Project, the overall goal of Phase II is to support the Ministry of Commerce and Industry in promoting an investment climate conducive to private sector growth. The projects aims to achieve the following objectives by project completion: ■■ Business Registration and Licensing including establishing further streamlined processes and successfully rolling out the business registration and licensing reforms conducted in Kabul to MoCI offices at the provincial level in light of international best practices. ■■ Renewal of Business Licensing through increasing efficiency and sustainability for the renewal process of business licensing in the MoF, and increasing the number of firms that benefit from reformed licensing requirements as measured by the number of renewed licenses by 20% (3 years post project comple-tion). KEY ACHIEVEMENTS: ■■ Four-day study tour for the Senior Management of MoCI and ACBRIP in Tbilisi, Georgia to visit the key agencies in Georgia that have successfully imple-mented the key reforms and understand how Georgia was able to tackle similar political and social challenges. ■■ Signing Memorandum of Understanding with Ministry of Commerce and Industry to have the MOCI full commitment for the project deliverables and ensure the project sustainability. ■■ Completion of the Assessment Stage of the Project to have detailed Process Analysis of 16 provinces, based on which the next two stages of the Project will be executed. ■■ Completion of the ICT Infrastructure and Capacity Survey for the ACBRIP’s Central Office (Kabul) and provincial offices in cooperation between NETLINKS LTD, the staff of the MOCI, and other involved entities. ■■ Documented the history and evolution of the Afghan Central Business Registry since 2008 in line with international good practice as well as the future goals and potentials of the Registry. As result of the report the Government of Afghanistan assigned a high level commission that includes Ministry of Fi-nance, Ministry of Commerce and Afghanistan Investment Support Agency to come up with a strategic merger plan for the AISA and MOCI-ACBRIP business licenses that will be issued under One Stop Shop. KEY PARTNERS: Ministry of Commerce and Industry, United States Agency for International Development (USAID). 60 AFGHANISTAN: IFC – FIRST MICROFINANCE BANK (FMFB) KEY DATES: Approved: October 31, 2002 Effective: January 16, 2004 Closing: FINANCING (IN MILLION US DOLLARS): Financing source Total amount Disbursed Undisbursed Total Project Cost Borrower Co-financing Total Bank Financing IFC (Equity) 1.96 IBRD Trust Fund BACKGROUND AND OBJECTIVES: First Microfinance Bank Afghanistan (“FMFB-A” or the “Bank”) was founded in 2003, and it was the first bank to be licensed in Afghanistan under the new law. It was founded by the Aga Khan Fund for Economic Development (“AKFED”) and subsequently both IFC and KfW became shareholders, while the Aga Khan Agency for Micro- finance (“AKAM”) replaced AKFED as the principal shareholder & Sponsor of the Bank. FMFB-A commenced business in May 2004 in Kabul and it is regulated by the Central Bank (Da Afghanistan Bank, “DAB”). FMFB-A offers micro loans, SME loans and deposit taking solutions to micro entrepreneurs in Afghanistan’s urban and rural areas and stands as the largest regulated microfinance lender in the country. IFC’s involvement with FMFB-A commenced in 2002, with an original equity investment of $1.0 million for a stake of 16.7 percent. During 2012, IFC participated in the Bank’s rights issue subscription (amounting to $ 6.8 million) on a prorate basis to the tune of $ 1.1 million. During this rights issue subscription, AKAM has brought in its sister agency the Aga Khan Foundation-US (“AKF-US”) as shareholder in the Bank. As a result, the shareholding of the Bank is now changed, with AKAM holding a 39.2 percent stake, KfW at 32.3 percent, IFC at 16.7 percent & AKF-US holding a 11.8 percent share in the Bank. (i) To create the first commercially sustainable micro-finance institution in Afghanistan contributing to the development of micro-finance as a viable and attractive commercial activity, and providing financial services to the poor and underserved. (ii) To contribute to the reconstruction and economic development of Afghanistan by providing financing to the most dynamic sector of the fledgling economy - micro and small businesses. (iii) To develop the financial sector by providing basic financial services currently not available in the market. The project is expected to contribute to overall financial sector reform by giving an example of a best-practice institution and supporting the Interim Authority in developing the evolving legal and regulatory framework. KEY RESULTS EXPECTED: FMFB-A has had a big impact on development as the leading microfinance bank in Afghanistan. The Bank is known for its solid financial performance and improving profitability backed by a growing loan book & sound asset quality despite operating in a tough macroeconomic and fragile security environment. It has developed and implemented an E&S system which allows it to screen its portfolio and provide lending on a social and environmentally responsible basis. As of March 31, 2015: ■■ Net Loan Portfolio - $ 60.8 million ■■ No. of borrowers – 54,599 ■■ Total Deposits – $ 67.3 million, No. of saving accounts - 75,879 ■■ Employees 1,029, No. of main branches – 38, including 9 sub-branches. KEY PARTNERS: Aga Khan Agency for Microfinance, KfW and Aga Khan Foundation -US Afghanistan Country Snapshot 61 62