81700 WORLD BANK GROUP – AFGHANISTAN PARTNERSHIP: COUNTRY PROGRAM SNAPSHOT AUGUST 29, 2013 Recent Economic and Sector Developments oil fields are currently producing around 1,950 barrels of oil per day and are expected to reach Growth Performance more than 4,000 barrels per day by end-2013. The expected contribution to the government The economy appears to be slowing this year budget through royalties and taxes is around from a very high trajectory. Growth in gross US$250 million annually for the next 25 years. domestic product (GDP) increased from 7.3 In addition, the rehabilitation and reconstruction percent in 2011 to an estimated 11.8 percent in of eight gas wells in Sheberghan, operated by a 2012 due to an extraordinary harvest. state-owned enterprise, will be completed within However, for this year the IMF projects that 18 months, and is expected to significantly growth will slow to 1.5 percent, mainly as a increase the supply of gas to the fertilizing and result of a contraction in agricultural production power plant at Mazar-e-Sharif. and increasing uncertainty in the economy. In its “Transition Economics” analysis, the World Positive developments in the services sector Bank previously indicated that a decline in aid contributed to growth in 2012. The could slow growth to an average of 4-6 percent telecommunications sector continued to record in the medium-term across different scenarios strong growth in 2012. The government awarded (with slower growth during the transition years). three 3G licenses during the year and this has been estimated to have more than doubled the Growth rates in Afghanistan have historically number of Internet users in the country, from 1 been highly correlated to weather conditions. million in 2011 to 2.4 million in 2013. Typically, agriculture accounts for one-fourth to Moreover, Afghan Telecom—the corporatized one-third of GDP, depending on annual output. public telecommunications company— Wheat accounts for approximately 60 percent of drastically reduced its wholesale prices for agricultural output and is the most important licit Internet bandwidth. As a result, average prices crop in the country. However, around one-third for Internet services dropped from US$900 per of the wheat production is rain-fed, which makes megabyte in 2011 to US$97 per megabyte in agricultural output highly volatile and dependent 2013. Other services also appear to do well, on rainfall. Given agriculture’s weight in GDP, even though data are hard to come by; anecdotal economic growth tends to follow the same evidence suggests that the transportation cyclical patterns as agricultural output (Figure industry is currently benefiting from higher 1). contract volume for out-of-country shipments The mining sector showed dynamic due to the drawdown of international forces. developments in 2012. Historically small, the Figure 2: GDP sector shares share of mining in aggregate output increased from 0.6 percent of GDP in 2010 to an estimated 100.0 1.8 percent in 2012 (Figure 2), owing to the start Services 90.0 of oil production in the Amu Darya fields. The 80.0 Electricity, gas Figure 1: Real GDP and agricultural output 70.0 Percent of GDP and water growth (in percent) 60.0 50.0 Construction 20.0 50.0 40.0 15.0 30.0 40.0 10.0 20.0 Mining and 10.0 30.0 quarrying 5.0 0.0 20.0 0.0 -10.0 Manufacturing -5.0 -20.0 10.0 -10.0 -30.0 0.0 Agriculture 2005 2012* Real GDP growth (left axis) Agriculture growth (right axis) 1 Opium production is not included in official Inflation GDP figures although it figures large in the economy. By farm-gate price measurement, the CPI inflation slowed from 10.2 percent in opium economy in 2012 is estimated at around 2011 to 6.4 percent in 2012. Declines in both 3.3 percent of GDP, or as much as 7-8 percent of food and non-food prices contributed to the GDP if export earnings are reckoned in. While decline in headline inflation. Core inflation (CPI production had been declining over the past few excluding fuel and cereals) eased from 14.6 years, the United Nations Office of Drug and percent in 2011 to 6.4 percent in 2012. Higher Crime Control winter risk assessment survey in core inflation in 2011 compared to the headline 2013 indicates that opium production is likely to was mainly due to a sharper decline in prices for increase across most provinces in 2013. Figure 5: Headline and core CPI inflation (annual percent change) 20.0 15.0 10.0 5.0 0.0 Jun-11 Oct-11 Apr-11 Dec-11 Apr-12 Dec-12 Oct-12 Apr-13 Aug-11 Jun-12 Aug-12 Feb-12 Feb-13 Headline Inflation Core inflation (excl. fuel & cereals) fuels and cereals in that year. Investments are declining, in light of External Position heightened uncertainty. The number of newly registered firms declined by 8 percent in 2012 Exports, estimated at US$2.6 billion, declined (Jan-Dec). In particular the construction sector by 5 percent in 2012. In contrast, total imports experienced slower company growth: only 1,760 increased by approximately 5 percent, to new firms were registered in 2012 compared to US$11.2 billion in 2012, leading to a higher 2,630 in 2011. There are no reliable data on nominal trade deficit of US$8.5 billion in 2012. investment volume but the Afghanistan The Afghan export base has relatively few Investment Support Agency estimates that tradable products and these are heavily around US$8.9 billion has been invested since concentrated in a few markets. Dry fruits, which 2004, of which 47 percent was invested in account for around one-third of official exports, services and 37 percent in manufacturing declined by 21 percent. Carpets, another major activities. Construction and agriculture sectors export item, declined as well. received 14 percent and 2 percent of total private investment respectively.1 This dampens the Figure 6: Current Account and Overall Balance outlooks for growth in 2013, which is currently 20.0 10.0 projected at below 3.1 percent. 0.0 -10.0 Percent of GDP -20.0 -30.0 -40.0 -50.0 -60.0 -70.0 -80.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1 “Estimating Business Fixed Investment in CAB (excl. foreign aid) Overall balance CAB (incl. foreign aid) Afghanistan”, Afghanistan Investment Support Agency, May 2012 2 The large trade deficit of 43 percent of GDP 2013, public spending is expected to further was offset by large transfers—mainly foreign increase by 40 percent over last year’s budget. aid inflows—in the current-account. Remittance inflows, believed to be large, are mostly informal and are not captured by balance of payments statistics. Foreign direct investment remained stagnant at around 2 percent of GDP. As result, the overall balance of payments in 2012 remained in surplus, which contributed to a further accumulation of international reserves reaching an all-time high of US$7.1 billion in December 2012. However, reserves declined to US$6.5 billion in June 2013, probably due to decreasing capital inflows to the country following the reduction in military spending by international forces. The exchange rate depreciated by 8 percent in 2012 and the trend continued in the first The increase in public spending has been half of 2013. The afghani (Afs), which averaged driven primarily by a larger security bill. Afs 47.9 to the US dollar in 2011, depreciated to Security spending increased to roughly US$1.6 Afs 51.8/US$1.00 in 2012 and continued to billion in fiscal year 2012, showing a 48 percent weaken in the first six months of 2013. The increase over the nine months of the previous depreciation was likely driven by increased year. Security expenditures make up 60 percent uncertainty over security and the business of the operating budget. Nonetheless, non- environment, as reflected in increased demand security expenditures have also increased from for foreign exchange at central bank auctions. US$1.5 billion to US$2 billion over the same However, the afghani remained stable against period. Sectors such as infrastructure and natural the euro and the Pakistani rupee. resources, private sector development, health, and education have had higher increases in both Fiscal Developments operating and development spending. Public spending increased in fiscal year 2012 and is expected to further increase in 2013. 30 The Ministry of Finance shifted the budget cycle Pipeline to a new calendar in 2012 covering only nine months, so naturally 2012 spending was lower 25 Social than in previous years. However, compared to Contributions the first nine months of the previous fiscal year 20 Billions Afg (April-December), public spending increased by Sales of non 45 percent in 2012. Total spending amounted to current Assets 15 US$3.7 billion in fiscal year 2012, of which 28 Other sources percent, or US$1 billion, represented development expenditures. Operating 10 Non Tax expenditures reached US$2.6 billion (72 percent Revenues of total budget) – an increase of 40 percent over 5 Customs the same period in the 2011/12 budget. Wages Revenues and salaries and the supply of goods and 0 Tax Revenues services are the two largest components of the Q12012 Q12013 operating budget (Figure 11). In the fiscal year 3 Domestic revenues declined in the early budget and the development expenditures; the months of 2013. Revenues declined by 13.7 rest was covered by donor grants. percent in the first 5 months of the year compared to the same period in the previous Financial Sector year. The shortfall was across the different sources of revenues, including the customs and The banking sector had been small and tax revenues that form the two largest sources of growing through 2010, but since then has revenue for the country. While tax revenues had significantly suffered from the Kabul Bank positive growth last year, customs revenues crisis. Prior to the crisis, the banking sector declined by 9.6 percent in spite of higher import experienced strong growth (from a very low volumes. Overall, domestic revenues in 2012 base), reaching US$5.5 billion in total assets and were short of the annual targets. This year, a US$3.5 billion in total deposits in 2010. In 2012, decline in tax revenues further exacerbated the two years after the Kabul Bank crisis, total revenue shortfall. While several factors could assets of the banking sector had declined to explain this, it is likely that a deteriorating US$4.4 billion. governance environment at customs have The Kabul Bank crisis continues to impact contributed to poor performance in revenue the banking sector. Kabul Bank has been split collection this year. Subsequent to these up into a “good bank” and a “bad bank”. The developments, the Ministry of Finance has bank’s deposits and “good” assets were undertaken administrative reforms to strengthen transferred to a bridge bank, New Kabul Bank revenue collection, including changing (NKB), owned by the Government of leadership and senior staff of the revenue and Afghanistan. A proposed attempt to privatize customs department. NKB was fruitless; the only bid received following a competitive process was rejected. The authorities and the International Monetary Fund (IMF) had agreed that, if the privatization process failed, NKB would need to be liquidated. However, as NKB is responsible for the payment of most civil servants salaries (including army and police), the timing of the liquidation of NKB might need to be reviewed. About US$935 million (principal and interest) in the asset portfolio (held by the “bad bank”) are sought for recovery. However progress on asset recovery has been slow, with cash recoveries amounting to US$173 million out of US$935 million total receivables. In the absence of recoveries, the government had to shoulder Due to the shortfall on revenue, fiscal US$825 million for the cost of the lender-of- sustainability deteriorated in 2012. The fiscal last-resort facility that covered the deposit sustainability ratio, defined as domestic guarantee (about 5 percent of GDP). revenues over operating expenditures, declined from 65 percent in 2011/12 to 60 percent in These developments have reduced consumer 2012 (see Figure 13). However, the smaller confidence and slowed the growth of budget and the shorter budget period narrowed Afghanistan’s banking system. Total banking the financing gap from 6.1 percent of GDP in sector loans amount to US$820 million in April 2011/12 to 5.3 percent in 2012, and as in 2013 (total loans amounted to US$804 million previous years this was financed entirely by in March 2012 and US$1.18 billion March 2011 donor grants. Domestic revenues financed when Kabul Bank loans were included). approximately 40 percent of the operating Deposits growth also slowed following the Kabul Bank crisis. Total deposits amount to 4 US$3.7 billion in April 2013 (total deposits additional microfinance institutions (including amounted to US$3.6 billion in March 2012 and the largest institution in terms of the number of US$3.4 billion in March 2011). The regulatory borrowers) exited the sector. Microfinance capital ratios of all commercial banks (with the institutions are currently piloting a number of exception of NKB) are above the minimum new financial products to better address the regulatory threshold (12 percent). Da needs of the Afghan population, including loans Afghanistan Bank recently raised the minimum for small- and medium-sized enterprises (SMEs) capital requirement to AFN 1 billion (equivalent or sharia-compliant financial products. The to US$20 million). sector remains dominated by First Microfinance Bank (FMFB), a commercial bank with a healthy standing, targeting small and medium enterprises. FMFB reports 62,000 borrowers (16 percent of them women), and a loan portfolio of US$79 million. 500,000 140 120 In US Million $ 400,000 Active clients 100 300,000 80 200,000 60 40 100,000 20 The aftermath of the Kabul Bank crisis is still 0 0 affecting money growth. Broad money (M2) 2004 2005 2006 2007 2008 2009 2010 2011 2012 declined from 38.2 percent of GDP to around 33 percent in 2012 after the Kabul Bank crisis had Portfolio outstanding Number of active clients shaken Afghanistan’s nascent financial sector. Transferable/demand deposits, which grew at an average 80 percent between 2005 and 2009, Poverty and Unemployment slowed to an average 12.5 percent over the past Afghanistan’s development progress has been three years. substantial over the past decade but large challenges remain. Strong growth over the past decade has been accompanied by marked improvements in socioeconomic conditions for the Afghan population. Millions of people in rural Afghanistan now have access to primary health care for the first time, and school enrollment has increased from one million in 2002 to 7.2 million children in 2011, of which 2.7 million (37 percent) are girls (who were entirely excluded from education under the Taliban regime). In spite of these achievements, Afghanistan’s development challenge remains Trends in the microfinance sector remain a pressing. With around 36 percent of the Afghan concern. The microfinance sector has been population living below the poverty line, and going through a deep consolidation phase since more than 50 percent vulnerable to becoming 2008, resulting in slower growth of the loan poor, a sustainable pathway to socioeconomic portfolio, a decline in the number of active inclusion is a top priority. Unemployment is borrowers, and the exit of several institutions relatively low at 7.8 percent but over 48 percent from the sector. Just after the first signs of of the population is underemployed. recovery emerged toward the end of 2012, two 5 The Afghan labor market is characterized by Industry Trade and Repair a young and fast growing workforce. Decades of conflict, international migration and relatively high fertility rates make Afghanistan – together Manufacturing with Pakistan and Nepal – one of the youngest Accommodation countries in South Asia. The share of population and Food Services aged 15 or below is 51.3 percent, meaning that 28% 29% Health and Social more than one in every two Afghans is Work economically dependent. Afghanistan’s Electricity, Gas population is characterized by a wide base with 3% and Water Supply a high number of new labor market entrants for 3% Mining and 22% Quarrying the decade to come, especially in rural areas. It 10% is estimated that the labor market will need to 5% Others accommodate an annual influx of 400,000 to 500,000 new entrants over the next 5 to 10 years. Foreign Direct Investment (FDI) has been Business Environment declining, from an already low base. Inflows steadily increased between 2001 and 2005 Afghan firms are young and small: half of the (reaching US$270 million). With the firms have been operating for 4 years or less, deterioration in national security, FDI inflows and 91 percent of firms have five workers or less have been more erratic since 2006. Gross (0.2 percent of firms have more than 50 domestic private investment has remained at a workers). Firms are concentrated in (i) trade and low level of 8 to 9 percent of GDP. retail (29 percent), (ii) manufacturing, including 300 food processing (22 percent), and (iii) 250 accommodation and food services (10 percent). 200 Number of Workers 150 100 0.2% 50 1.1% 0.2% 0 7.8% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1 2-5 FDI inflows ($ mil.) 39.6% 6-10 11-20 The 2008 Enterprise Survey identified crime, 51.1% theft and disorder, and electricity and access 21-50 to finance as major constraints. Afghanistan >50 ranks at the 168th position (out of 185 economies) in the 2013 Doing Business report. It ranks particularly low on protecting investors (185); trading across borders (178); registering property (174); enforcing contracts; and dealing with construction permits (164). Only 3.4 percent of firms have a bank loan or line of credit and only 1.4 percent of firms use banks to finance investments. 6 Public Sector Governance Structures The provincial department of the Ministry of Economy coordinates the preparation of the Afghanistan’s public sector is highly Provincial Development Plan. centralized. Only central ministries and similar administration units receive funds from the Provincial offices have very limited capacity national budget. Line ministries or agencies and staff. They wield influence primarily then operate at the provincial/local level and through their ability to shape the national budget provincial administrations are essentially a and its execution through the provincial collection of line ministries with the departments of line ministries. They have responsibility for delivering service at the signatory power over most procurement at the provincial level. provincial level and certain powers of appointment. Furthermore, the governor has The central administration level consists of significant authority over the police in the about 50 government units. These comprise province, and direct authority over the district ministries, departments, agencies, offices, governors. independent directorates, and other budgetary units. These central government ministries and There are 398 districts in Afghanistan, with institutions are considered primary budgetary an average population of about 67,000. The units, and the respective budgets of these entities Constitution is vague on the legal nature of are determined by the annual budget law. The district entities. District governors report to the Finance Ministry is currently conducting a provincial governor, and represent IDLG at the provincial-based budgeting pilot project, as well district level. The district governor is part of the as efforts to strengthening the role of the Office of the Provincial Governor in provincial financial management system. organizational and budgetary terms. In addition to the Finance Ministry, two There are currently no formal governance central institutions that help manage institutions at the village level. The subnational relations are the Independent constitution does call for the election of village Directorate for Local Government (IDLG) councils, but these have not yet been constituted. and the Ministry of Reconstruction and Rural There are, however, other governance structures Development (MRRD). IDLG is responsible such as the community development councils for the overall system of intergovernmental that help to administer the National Solidarity relations, including provincial, district, village Programme and other development programs, and municipal affairs. Among line ministries, and other formal or informal local groups. the MRRD plays an important role in rural development in the provinces. This includes Municipalities are constitutionally recognized managing the National Solidarity Programme, as local government entities, created to which promotes local development and manage urban affairs. As such, municipalities governance through the establishment and have their own, separate budgets. Urban affairs funding of community development councils. are mostly managed in a rather top-down manner by IDLG’s General Directorate for Afghanistan is divided into 34 provinces, each Municipal Affairs; mayors are centrally with an average population of about 800,000 appointed, and budgets are centrally approved. residents. Provinces do not have any formal Municipalities are largely self-sustaining entities designated space within the budget structure and that fund the provision of urban services with the functioning of provinces is not always clear, local revenue collections. including the role of provincial governors (appointed by the President) and provincial councils. Provincial councils are elected, and exercise limited oversight of the provincial governor and the provincial line departments. 7 Public Financial Management within these, calculation of budget ceilings for the primary budgetary units. Afghanistan has a well-developed Afghanistan’s scores on PEFA are relatively infrastructure for public financial strong. Performance indicators are superior to management (PFM). The foundation of PFM in fragile state and other low-income countries’ Afghanistan is the comprehensive budget that is results on all dimensions except budget prepared in an orderly, transparent fashion. credibility and they equal middle-income Given the centralized nature of the budget, the country results in control, reporting, and external budget practically gives the entire general scrutiny. Similarly, Afghanistan’s rating by the government sector financial position. The Open Budget Survey improved in 2012 to 59 Ministry of Finance plays a pivotal role in (compared to 58 in Pakistan) from a rating of 21 budget preparation and expenditure control. Line in 2010 ministries, departments and agencies have well- defined roles in implementing budgets but no Energy role in accounting or reporting. The Ministry of Finance’s Treasury Department makes all Afghanistan has one of the lowest rates of payments (both for central units and in all 34 energy usage in the world. It is at the bottom provinces) and maintains an integrated financial 10 percent globally (around 100 kilowatt hours management system. This system lies at the per year per capita consumption) and only 28 heart of the control and reporting functions, percent of its population is connected to the grid. which are highly rated under the studies on Three decades of conflict destroyed 65 percent Afghanistan by Public Expenditure and of power lines. Extensive load shedding and Financial Accountability (PEFA), a multi-donor outages has resulted in unreliable, poor quality, partnership. and limited supply to those connected to the grid, leaving no other alternative aside medium- The Control and Audit Office, the supreme sized diesel or gasoline generators for reliable audit organization, conducts financial and supply. compliance audits. The promulgation in 2012 of a new audit law provides the legal framework Low connectivity to the grid conceals a vast of a modern, external review. The role of the difference between rural and urban access. supreme audit organization and its Only 9 percent of the rural population has responsibilities are clearly established and has a coverage against 77 percent in urban areas. wide mandate with guarantees for access. Some Access to electricity has improved in the major concern remains over the independence and hubs of the country; parts of Kabul, Mazar-e- there are capacity limitations preventing the Sharif and Pul-e-Khumri have a 24-hour power Organization from conducting audits to a high supply. These cities are part of the North East standard without extensive technical assistance. Power System, which imports power throughout the year from the interconnection with Medium-term budgetary framework. The Uzbekistan (300 megawatts) and Tajikistan’s Fiscal Policy Department of the Ministry of (300 MW). Finance has developed a medium-term fiscal framework tool that is regularly updated and Energy demand, usage and capacity are used in preparing the annual pre-budget increasing from a very low base. Growth in statement. The document provides a preliminary demand for electricity was 17 percent in the last draft budget that assesses the government’s four years and there has been a four-fold existing budget policies and new funding increase in the customer base. Installed energy priorities for the next fiscal year and the capacity has more than doubled from 430 MW medium-term. The document also includes in 2001 to 1,029 MW in 2009. Supply has also revenue and expenditure analyses that provide increased through greater use of imported the basis for sector expenditure reviews and, energy. These imports consist of power purchase agreements with Uzbekistan (55 percent of total 8 imports), Turkmenistan (16 percent) and Iran articulation of responsibilities and better (22 percent) on gas fired and Tajikistan (7 collaboration across inter-ministerial agencies percent) on hydropower. The government plans on the government side. The legal framework to further increase import capacity (by around governing the sector is weak; in particular there 900 MW) through strengthening the National is an absence of sector-specific legislation and Electricity Supply Program. regulatory regime resulting in poor governance. These need to be addressed if the sector is to Progress on increasing the energy mix has eventually establish market-based pricing been limited in the midst of decreasing systems that allow for cost recovery. domestic production. Domestic generation mix has been dominated by hydropower, which Regional energy projects can also provide accounts for around 49 percent of the total opportunity. The CASA-1000 (a regional IDA- installed capacity followed by diesel (32 backed project) allows utilizing available surplus percent). The share of hydropower has struggled hydro generation in Central Asia for both to remain stable but diesel-based generation has Afghanistan and Pakistan without the need for exponentially increased since 2003. new investments in power generation. As a transit country, Afghanistan would also gain a Losses and the performance of the national new source of revenue. CASA-1000 would utility remain challenges. Distribution losses enable a transfer of up to 1,300 MW of are high (in 2010 aggregate losses ranged 30- electricity between the two regions. 40% percent), making sector planning challenging. Donors have been helping the state Agriculture Development utility to improve its performance and provide capacity building, and cash collections, the Agriculture is the main source of employment commercial efficiency ratio, and system and subsistence for the Afghan population. collection efficiency have all improved. Agriculture contributes to the economy from a relatively small resource base. Only 12 percent Northern Afghanistan contains large oil and of Afghanistan’s 65 million hectares of land area dry gas prospects. One of the most important is arable, and the actual cultivated area is green field projects is the Sheberghan Gas-fired substantially less due lack of irrigation water. It project supported by the U.S. Agency for is also a sector of small operators. The average International Development (USAID). Gas farm size ranges from 0.4–1.0 hectare for small- reserves in the north have the potential to be scale producers and 1–2 hectares for large-scale cost-competitive over time with imports. producers. However, gas is a difficult commodity, and guarantee and financing agencies have been Three decades of conflict have destroyed reluctant to proceed without further seismic much of the agriculture sector’s capacity. work to confirm predictability and a clear Before the conflicts, Afghanistan was a world- contractual framework. class exporter of horticultural products. It was self-sufficient in meat and milk and was a Domestic coal resources exist in the North- significant exporter of wool, carpets, and leather West Bamyan province. Coal development, goods. The country was also self-sufficient in including for the Aynak copper mining project, cereals and, at times, a small exporter. could provide a significant source of power. However, the conflicts have destroyed much of However, a significant delay in project Afghanistan’s irrigation systems, storage development is expected, compounded by facilities, and rural roads network. uncertainties stemming from political instability in the area, poor infrastructure, and unknown Today, most agriculture is subsistence. Food estimates on the financial viability. crops account for over two-thirds of the cultivated area and are typically grown for More needs to be done to strengthen capacity subsistence, mixed with a variety of other crops, and accountability, to ensure clearer such as perennial horticultural crops and 9 vegetables. The country lost its horticulture to now, about 13,000 km out of total 123,000 market to China, India, and Turkey. Now, the km road network have been rehabilitated or major farming system of the poor is cereal improved over the past 10 years. Regional production for household food security, but most integration, national connectivity, as well as families are only food sufficient for a few access to local markets and services still remain months each year. Afghanistan relies on varying challenges. Around 85 percent of the road levels of cereals imports, particularly from network is degraded and a majority of roads are Pakistan, to meet its growing domestic demand. not passable by motor vehicles. A sustainable The country also depends on imports of frozen operation and maintenance system is urgently chicken, eggs, and dairy products. needed. Afghanistan is establishing an independent road authority for road management The most important crop is wheat. Afghans and maintenance, and a road fund mechanism to consume wheat with every meal, resulting in support network improvement and maintenance. having the world’s highest annual per capita wheat consumption (at 160 kilograms per Accessibility to urban transport services is person). Wheat flour contributes 57 percent to another challenge. Rapid urbanization presents the total caloric content of the average bundle of a challenge to provide affordable, safe, and clean food items of the poor. Despite the large area transport in urban areas. Rehabilitation of urban devoted to wheat cultivation, Afghanistan road networks and restructuring and remains a highly food-insecure country. The improvement of urban transport remains a quality of local wheat flour is inferior, and priority of major cities. Traffic management and production costs are 30 percent above traffic safety are emerging challenges neighboring countries. Boosting productivity of particularly impacting the urban poor. horticulture and livestock in addition to wheat The railway system is underdeveloped. will generate income and diverse nutritious Afghanistan has no internal railway link, dietary choices for Afghans. hampering the development of mining and agriculture. The government has established a Transport railway authority but the country still needs a Afghanistan heavily relies on road transport railway strategy and significant improvements in for the movement of people and freight. The operations and maintenance capacity. country has a road network of about 123,000 Airports have been rehabilitated and km, of which 7 percent are regional and national expanded in the past 10 years, but civil air highways (see figure below for more service is behind international standards and information). The country has a scant 75 km of practices. A regulatory framework that railway line and just two international airports, encourages free entry of civil aviation Kabul and Mazar-e-Sharif. transporters and maintains international standards for safety is urgently needed. Both technical and organizational capacity in transport ministries and institutions are limited. The past 10 years have seen a significant improvement in the basic technical skills of private design and consulting firms. However, public sector capacity, in terms of budgeting, procurement and contract management and transport related asset management, is lagging. Moreover, the lack of regulatory and enforcement frameworks of the transport sector, overlapping ministerial Rehabilitation and extension of road network responsibilities, and lack of coordination among projects have been given a high priority. Up 10 the ministries have been resulting in low sector (Soviet occupation) and 1990s (civil war and the productivity. emergence of the Taliban). Since 2002, however, Afghanistan has been on a course of recovery, and the education sector has been one Urban Development of the success stories. In 2001 no girls attended formal schools, and boys’ enrollment was 1 Afghanistan’s urban population is growing rapidly. The urban population (about 7 million) million. By 2012, over 2.9 million girls were has been growing at 4.6 percent annually, higher enrolled among a total of 7.8 million active than the national population growth. Urban pupils. In the same period, the number of dwellers represent 23 percent of Afghanistan’s teachers grew from 20,000 to more than population and are expected to constitute 47 180,000. percent by 2050. Kabul alone is home to 56 percent of the urban population or 13 percent of Afghanistan is ranked 175th in the human Afghanistan’s total population, and is among the development index and education attainment fastest growing cities in the world. Five other overall is low. Given insecurity and unrest in the cities (Herat, Jalalabad, Kandahar, Kunduz and country, it is unlikely that the Millennium Mazar-e-Sharif) account for most of the other 44 Development Goal (MDG) on universal primary percent. education will be met by 2020; Afghanistan’s timeline for MDGs since it signed up in 2004. Much of the urban areas are unplanned. The education sector, while growing steadily, Seventy percent of Kabul’s population is faces a number of supply and demand estimated to live in informal settlements and challenges. Of the total registered schools, about some 2.3 million people live in informal 5,000 have proper buildings while the rest settlements in the other five major cities. The operate in tents, houses and under trees. Of the informal sector dominates most of the urban 180,000 teachers, only 52 percent meet the economy. With better planning, basic public minimum requirements of becoming a teacher; services could be provided to these areas more the rest receive in-service training to upgrade cost effectively. skills. National student learning assessments have yet to take place and the quality of Municipality effectiveness is hampered by the lack of delineation of financial and management functions. Constitutionally, municipalities have the responsibility to administer city affairs and are fiscally autonomous, but in reality authority, functions, and resources are often not decentralized. A strengthening of municipalities’ ability to regulate local space, administer local services, and manage and raise resources at local levels is critical for effective, equitable, and affordable services. The General Directorate for Municipal Affairs is developing education and administration remains relatively policies to create more effective municipal weak. structures On the demand side, an estimated 4 million Education children of primary school age are out of schools. Furthermore, girls’ dropout rates are The public education system in Afghanistan has very high in secondary grades. In higher suffered decades of upheaval in the 1980s education, quality remains weak and of minimal relevance to market needs. In addition, the adult 11 literacy rate is one of the lowest in the world. environment, and sufficient resources is a key The higher education gross enrollment rate is priority for the government. three percent; one of the lowest in the region. And as a new generation of primary and secondary school students is coming of age, demand and enrolment is increasing sharply, Health putting pressure on the labor market. The Afghan health system has made considerable progress during the past decade thanks to strong government leadership, sound public health policies, innovative service delivery, careful program monitoring and evaluation, and development assistance. Data from household surveys (between 2003 and 2011) show significant declines in maternal and child mortality. The under-five mortality rate and infant mortality rate dropped from 257 and 165 per 1000 live births to 97 and 77 respectively. The maternal mortality ratio is 327 per 100,000 live births, compared with 1,600 in The education sector faces significant challenges 2002. The number of functioning health compounded by a worsening security situation facilities increased from 496 in 2002 to more (school closures and violence against than 2,000 in 2012, while at the same time the educational staff and students), insufficient proportion of facilities with female staff resources, low implementation capacity of the increased. government, and low sub-national capacity, planning and management. Meeting further Since the establishment of a new administration education goals and targets will require in 2002, the government has given the utmost sustained commitment of the government and importance to addressing the high maternal and donor partners. The government, on its part, child mortality, especially in rural areas. The having focused over the past decade on Ministry of Public Health undertook a series of expanding access, has turned its attention to critical and strategic steps: it defined a Basic strengthening systems and ensuring quality of Package of Health Services and later an education. A number of reforms and assessments Essential Package of Hospital Services, and it have been initiated in the past 2 years. For established a system for contracting on a large instance, the Global Partnership for Education scale with international and national non- was launched in 2012 to expand education to governmental organizations (NGOs) for delivery insecure areas and get children back to schools. of these services. Services under the Basic A first learning assessment of students is Package have recently been expanded to include underway this year to inform policy decisions mental health, disability, and nutrition services. and show how much learning actually happens The Ministry also prioritized the monitoring and in classrooms. Technical vocation and education evaluation of health sector performance. training (TVET) reforms and a new higher Through the deployment of predominantly local education strategy for the next five years are consultants, the Ministry addressed human being formulated to address the gap between resource capacity constraints in terms of market needs and education. managing NGO contracts, tracking health sector progress through rigorous impact level Female education remains a key priority. monitoring, and performing its stewardship Strategically investing in girls’ education functions effectively. through expanded access, an enabling 12 Despite significant improvements in the interventions led and implemented by coverage and quality of health services, as well development partners and NGOs. as a drop in maternal, infant and under-5 mortality, Afghanistan health indicators are still The sector faces a number of challenges related worse than the average for low income to program coordination, effectiveness countries, indicating a need to further decrease (including coverage and targeting), and barriers for women in accessing services. financing. Human resource capacity constraints Afghanistan also has one of the highest levels of and organizational complexities hamper the child malnutrition in the world. About 55 Ministry of Labor, Social Affairs, Martyrs and percent of children under-five suffer from Disabled in performing its coordination function chronic malnutrition and both women and as the lead agency for social protection. The children suffer from high levels of vitamin and country’s safety net has low coverage and weak mineral deficiencies. targeting. While about 36 percent (9 million) of the Afghan population is poor and another 15 Social Protection percent are vulnerable to shocks, the safety nets are covering less than 25 percent of the poor. The Social Protection sector in Afghanistan is Those safety nets that are providing some still fragmented. While the Afghanistan National sizeable coverage of the poor consist mainly of Development Strategy provides a framework for cash-for-work or food-for-work programs, developing social protection, the transition from mainly targeting rural areas, which are financed primarily humanitarian relief-based and implemented by donors and NGOs. interventions to social protection systems is still in its infancy. The Afghan social protection system includes a public sector pension scheme The World Bank Program in Afghanistan and a number of rather small social assistance The World Bank Group’s program to assist schemes that transfer unconditional and Afghanistan is built around the three conditional cash and in-kind benefits to various interlocking themes: (i) Building the legitimacy population groups, and provide social care and capacity of institutions, (2) Equitable service services. The government is also administering a delivery, and (iii) Inclusive growth and jobs. number of labor market interventions, including Afghanistan’s overall performance toward 300 development outcomes has been good, with 257 considerable achievements in education and 250 health, and more challenging results in urban issues and infrastructure and energy. All Bank 200 operations are on-budget and support national 161 165 programs. 150 111 The Bank is providing support policy reforms 97 in selected areas critical to strengthening 100 77 revenue mobilization and improving the 50 enabling environment for investment in sectors with a high growth potential. A recently 0 approved programmatic Development Policy U5MR IMR Grant is instrumental in this regard. In advance 2000 2007/08 2010 of the 2014 elections, the Bank will invest public employment services and skills considerable effort in preparing policy notes in development programs, with support from key areas to facilitate the new government in development partners. In addition there are moving forward with key policy reforms. several social assistance and safety net 13 The Bank has a strong focus on governance international community and Afghan and gender throughout its portfolio. The government during the Tokyo Conference in Bank has a governance advisor in Kabul who 2012 and at the 2013 Senior Officials Meeting in advises task teams, particularly on issues related Kabul. Highlights included an agriculture sector to public sector reform, institution-building and review to inform strategic investment and job sub-national governance. Gender disparities creation, and continuing work on resource remain pronounced in Afghanistan and gender corridors that looks at strategic supply chains issues continue to be integrated across the investment to produce economic spillovers from Bank’s portfolio. mining operations. The World Bank Group’s program in International Finance Corporation Afghanistan is governed by its joint Interim IFC’s portfolio in Afghanistan has more than Strategy Note for FY12-14. The Bank also doubled since FY08 from around US$58 administers the Afghanistan Reconstruction million to about US$131 million, as of end- Trust Fund (ARTF), the World Bank Group’s June 2013. IFC is following an integrated largest single-country multi-donor trust fund. strategy focused on improving the investment The ARTF provides grant support to climate, building capacity, and supporting Afghanistan based on a 3-year rolling financing selective investments in sectors with high strategy. Together, IDA and ARTF provide development impact and job creation. The close to US$1 billion per year in grants investment program is currently focused on (US$150m from the International Development microfinance, services (hotel), and telecoms, and Association [IDA] and about US$800-US$900 has been supported by a strong advisory services million from the ARTF). Additionally, the program with a budget of US$5.7 million in the International Finance Corporation (IFC) has a areas of access to finance, investment climate, committed exposure to Afghanistan totaling SME capacity development and public-private US$131 million. partnerships. Portfolio management is quite strong: The IFC’s investments have had a Bank’s portfolio (including ARTF projects) transformational impact (in terms of access to comprises 25 ongoing operations across a wide finance and reach) in the microfinance sector range of sectors. The disbursement ratio for IDA through the First Microfinance Bank (FMBA). was 26 percent in FY13. The ARTF FMBA is the first licensed private sector disbursement ratio (slightly different microfinance bank, which has reached out to methodology) was over 50 percent in FY13. The about 45,000 borrowers (25 percent of the Bank has taken steps to improve portfolio current market) of whom 16 percent are women. performance by restructuring a handful of Similarly, IFC has had significant impact in the projects, adjusting procurement plans based on telecoms sector of Afghanistan (improved risk analysis and an appraisal of government mobile phone access and services to the poor) fiduciary responsibilities, and improving project through IFC’s investment in Mobile Telephone readiness, to name just a few initiatives. Networks (MTN), and more recently Roshan Supervision is also being enhanced through use Telecom. of partner organizations in many projects, third party monitoring, and innovative information Engaged in active projects in the country technology. since 2003, IFC has had a country presence in Afghanistan since 2009 and is co-located within Extensive and well-received analytical work the World Bank office in Kabul, with two full- has been at the forefront of the Bank’s time staff. IFC is looking to expand its staff engagement. Two pieces of analytical work in based in Kabul and working on Afghanistan particular, Transition Economics and Resource from other countries, utilizing an increased Corridors, have played a crucial role in budget allocation for Fragile and Conflict States informing and advancing dialogue between the approved recently by the Board. 14 WBG collaboration is growing. IFC is working closely with the World Bank and the Multilateral Investment Guarantee Agency (MIGA) on joint programs to maximize its impact. Recently IFC supported the establishment of the first collateral registry under the Bank’s Financial Strengthening Program. IFC and MIGA have also collaborated on one of the telecoms projects (MTN). A workshop held in Dubai in January 2013 helped to increase the effort to work together with the Bank on joint transformational impact projects. Two projects under preparation with the Bank are in the areas of expanding mobile banking services and rural solar lighting. Other projects that are exploring potential collaboration opportunities with the World Bank include the Horticulture and Livestock Project and the Business Edge project. Multilateral Investment Guarantee Agency MIGA has US$153 million of gross exposure in Afghanistan, supporting telecoms and agri- business projects. MIGA recently launched its "Conflict Affected and Fragile Economies Facility", which will boost the agency’s exposure in Afghanistan. MIGA is currently supporting two projects in Afghanistan, of which one is a joint effort with the IFC in the telecoms sector (MTN) and the other is MIGA-only (cashmere exporter, Traitex Industry). 15 AFGHANISTAN: AGRICULTURAL INPUTS PROJECT Key Dates: Approved: June 30, 2013 Effective: June 30, 2013 Closing: June 30, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA ARTF 74.75 0.0 74.75 Total Project Cost 74.75 0.0 74.75 *As of June 30, 2013 Project Background: Limited access to quality inputs at affordable prices is a key constraint to higher agricultural productivity. The agricultural inputs delivery network in Afghanistan remains underdeveloped, weakly regulated, and distorted. These are all challenges of a rather long-term nature that require investments and policy action at the institutional, policy, and farm levels. The project will primarily address the institutional and policy levels without which investments at the farm level will not have the expected impact, along with support for the infrastructure and human resources to exercise and enforce quality control for fertilizers and other agro-chemicals, and improved functioning and transition of the seed sector towards a market for certified wheat seed with minimal external support. Project Development Objective: The objective is strengthened institutional capacity for safety and reliability of agricultural inputs and sustainable production of certified wheat seed. Component A: Improved Wheat Seed Production: this component supports (a) Varietal selection and production of breeder seed through a program of activities to increase the number of wheat seed varieties and improve the production efficiency of breeder seed; (b) Production of foundation and registered seed through a program of activities to improve the efficiency of multiplication of breeder seed into foundation and registered seed at the Improved Seed Enterprise; and (c) Coordination of the seed sector through a program of activities to enhance the capacity of the National Seed Board to coordinate the seed industry and the Afghanistan National Seed Organization in its facilitation and coordination role of private seed enterprises. Component B: Plant Quarantine Networks and Quality Control of Agro-chemicals: will support the enhancement the capacity of the Ministry of Agriculture and Livestock to implement the quality control of agro-chemicals, including: (i) establishment of an office for pesticides registration; (ii) construction of various laboratories; (iii) provision of pesticide bio-efficacy trial equipment; and (iv) strengthening of the fertilizer quality control inspection system. This component will also enhance the Ministry’s capacity for implementation of the Pest Management Plan and of the plant quarantine network, which includes the construction of 13 quarantine stations and the carrying out of a nationwide insect pests and diseases survey analysis. Component C: Input Delivery Systems: will support the analysis of the recipient’s current agricultural input delivery systems, including data from surveys on farm level production activities for wheat and other major crops and input distribution networks. It will also assist in the development of an action plan for investment activities in inputs delivery systems, the testing of alternative forms of input delivery systems, and the piloting of information and communications technology applications in agricultural input delivery systems. Component D: Project Management and Monitoring: will support management and monitoring of the project, including strengthening the Ministry’s capacity in project management and implementation, coordination, financial management, procurement, monitoring and evaluation, and management of information systems. Results: Not applicable. Key Partners: This project is implemented by the Ministry of Agriculture, Irrigation, and Livestock. 16 AFGHANISTAN: RURAL ACCESS PROJECT Key Dates: Approved: June 26, 2012 Effective: August 12, 2012 Closing: March 13, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 125 11.00 115.40 ARTF 107 Total Project Cost 332 11.00 115.40 *As of June 30, 2013 Project Background: Two decades of civil war caused severe damage to the Afghan road network at all levels: regional and national highways, provincial roads and local access roads. Prolonged conflict had 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 10,000 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. Improving rural access will also enhance the livelihoods of people in a great many communities through better access to markets and public service providers. Project Development Objective: The objective of Afghanistan Rural Access Project is to enable rural communities to benefit from all-season road access to basic services and facilities. Component 1: Improvement and maintenance of secondary roads: the objective of this component is to support about 1,000 km of rehabilitation; 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 m of bridges. Component 2: Improvement and maintenance of tertiary roads: this 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 m of bridges. Component 3: Program Planning and Development, Institutional Strengthening, and Program Coordination Support: this component supports human resource and institutional capacity building, program monitoring and evaluation, and program development activities. Results: The outcomes to be achieved upon completion of the project will include: • Reduction in travel time to essential services. • Increased frequency of such trips. • Increased percentage of rural population living within 2 km of all season roads Key Partners: The World Bank partners with Afghanistan Ministry of Finance and Ministry of Public Works. 17 AFGHANISTAN: STRENGTHENING THE NATIONAL STATISTICAL SYSTEM (SNSS) Key Dates: Approved: October 7, 2010 Effective: March 24, 2011 Closing: February 29, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA ARTF 14.00 3.462 10.538 Total Project Cost 14.00 3.462 10.538 *As of June 30, 2013 Project Background: The Strengthening the National Statistical System project is funded under the Statistics for Results Facility Catalytic Fund, a multi-donor trust fund administered by the World Bank to provide assistance and catalytic financing in response to country proposals emerging from national partnerships of local governments, donors, and other stakeholders. The overall objective of the trust fund is to promote a system-wide approach to statistics at the country level; increase resources for the implementation of a National Statistical Plan; explicitly link improvements in statistical systems to the needs of national and sector policy and monitoring frameworks; promote improved national dialogue and partnership between data users and producers; and aim at delivering more efficient and effective aid and technical assistance for strengthening statistical systems and results measurement. Project Development Objective: The main objective of this project is to: (i) enable Afghanistan to address the data needs of the country for planning, decision-making and monitoring purposes through various surveys and by developing administrative statistical systems to support the Afghanistan National Development Strategy; (ii) build sustainable statistical capacity in the country, and particularly at the Central Statistics Organization; (iii) enable Afghanistan to use international standards for concepts, classifications, and definitions; and (iv) enable Afghanistan to meet its data obligations. The project components are the following: Component 1: Improve the framework for institutional and capacity development Component 2: Improve data collection and analysis Component 3: Improve administrative data systems and other data from line ministries Component 4: Develop information and communication technology infrastructure Component 5: Project management Results:  The World Bank Statistical Capacity Building Score for Afghanistan improved to 45 points, up from the baseline level of 33 points;  Number of the Afghanistan National Development Strategy and MDG indicators supported by the Central Statistics Organization increased from 17 indicators to 26 indicators;  Increased percentage of users who say they are “satisfied” or “very satisfied” with statistical products and services. Key Partners: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) entered into a twinning arrangement with the Central Statistics Organization for 4 years, and will provide it with capacity building and advisory services for the implementation of the project. Furthermore, a statistician from the U.K. Department for International Development (DFID) provides technical advice to the national authorities on statistical development issues. 18 AFGHANISTAN: RURAL ENTERPRISE DEVELOPMENT PROJECT Key Dates: Approved: March 9, 2010 Effective: June 14, 2010 Closing: January 1, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 30 12.3 16.8 ARTF 16 4.1 15.9 Total Project Cost 46 16.4 32.7 *As of June 30, 2013 Project Background: Over 75 percent of the people of Afghanistan live in rural areas where agriculture is the primary activity and contributes about one-third of the GDP. However, poor governance, weak factor markets, inadequate marketing infrastructure, ineffective business development services, and poor post-harvest practices limit the economic development potential of this sector constraining on-farm and non-farm employment opportunities, prolonging poverty in the rural areas. 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. It strives to improve access to credit and business training, strengthen marketing systems, and increase jobs and incomes. Project Development Objective: The overall development objective of the project is to improve employment opportunities and income of rural men and women, and the sustainability of targeted local enterprises. Component A: 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 trading, ensuring production is oriented towards identified market opportunities, and creating access to credit through internal lending. Component B: Small and medium-sized enterprise (SME) development: supports the emergence of a stronger SME sector with improved trading linkages with the rural economy 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. It supports SMEs in building necessary skills, promoting market development, and particularly in encouraging business linkages with the rural economy. Action plans are developed to enable the SMEs to access the services they need in market development, generic training, and specific technical support. Component C: Project implementation support: Project management and monitoring and evaluation. Results: The Afghanistan Rural Enterprise Development Project stimulates the integration of rural communities within the economy. It improves rural livelihoods and incomes. Targets and design are in the process of being revised as a result of restructuring, including greater reliance on private sector service providers and cancelation of US$9.5 million to bring the financial outlay to US$35 million. Key Partners: The Ministry for Rural Rehabilitation and Development in the implementing ministry, while DFID and the Swedish International Development Cooperation Agency (SIDA) are the major contributors through the ARTF. 19 AFGHANISTAN: CAPACITY BUILDING FOR RESULTS PROJECT Key Dates: Approved: January 15, 2012 Effective: January 20, 2012 Closing: December 31, 2017 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA ARTF 100 26 74 Total Project Cost 100 26 74 *As of June 30, 2013 Project Background: The Capacity Building for Results (CBR) Project is a key ARTF investment that supports government in developing its internal human capacity over the medium term to improve service delivery to the population. It is demand driven with ministries required to meet various criterion to participate. A CBR ministry 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 to hire skilled Afghans into civil service positions at more competitive rates. Currently, donors pay national consultants much higher rates than the government, which has resulted in a parallel second civil service. Much of these skills need to be brought into government to create institutional sustainability. Project Development Objective: The project's development objective is to assist the government in improving the capacity and performance of select line ministries in carrying out their mandates and delivering services to the Afghan people. Component 1: Technical Assistance Facility for Preparation and Implementation of Capacity Building Programs: under this component technical assistance is being provided to the participating ministries both for preparation and implementation of Capacity Building for Results Programs, with quality assurance at both stages on relevance, results focus, cost–effectiveness, realism, implementation accountability, and monitoring. Component 2: Developing human resources: this component supports the continued implementation of broad civil service reform efforts and placement of critical managerial and professional staff resources in participating line ministries. Specifically, it will foster an enabling environment for a ministry’s Capacity Building for Results Program. Component 3: Civil service training: this component intends to create partnerships between the Afghanistan Civil Service Institute and reputable international institutions to (i) develop custom-made public administration management training programs for civil servants in managerial positions and management interns; (ii) deliver the training programs; and (iii) develop faculty capacity at the Afghanistan Civil Service Institute. Component 4: Project management, monitoring and evaluation: this 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. Results: The project has made notable progress in a number of areas. The government has approved most core operational policies, and an independent expert group has already reviewed an ambitious CBR proposal from the Ministry of Agriculture. Additional CBR proposals from the Ministry of Communication and the Ministry of Health are expected this summer. Smaller scale reform proposals are also under development, including by the Ministry of Mines. Recruitment of senior level civil servants funded through CBR is progressing; a total of 90 new senior common function group positions have been advertised under CBR of which 49 have been selected by the government. Key Partners: The Ministry of Finance is the official implementing agency, while the Independent Administrative Reform and Civil Service Commission is an implementing partner, and key line ministries are involved in implementing CBR reform programs. 20 AFGHANISTAN: SECOND EDUCATION QUALITY IMPROVEMENT PROJECT Key Dates: Approved: January 31, 2008 Effective: March 20, 2008 Closing: August 15, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 30 30 0 ARTF 283 182 226 USAID 22 22 0 Total Project Cost 460 234 226 *As of June 30, 2013 Project Background: 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. Project Development Objective: Increase equitable access to quality basic education – especially for girls – through school grants, teacher training, and strengthened institutional capacity with support from communities and private providers. Project Components: Component 1: School Grants: Sub-Component 1.1: School Grants for Quality Enhancement Sub-Component 1.2: School Grant for Infrastructure Sub-Component 1.3: Social Awareness and Mobilization Component 2: Teacher and Principal Training and Education: Sub-Component 2.1: Teacher Training Sub-Component 2.2: Principal Training Sub-Component 2.3: Increasing Female Teachers Component 3: Project Management, Monitoring and Evaluation Results: As of June 2013, EQUIP II has supported the construction or rehabilitation of 356 schools, with a further 521 schools under construction; trained more than 187,000 teachers; provided school management training to 14,115 principals, headmasters or headmistresses, and school managers; and awarded 3,328 scholarships to female recipients enrolled in teacher training colleges. It is estimated that almost 1.2 million students are currently studying in EQUIP II-supported schools, of which 469,130 are girls. Under both phases of the Education Quality Improvement Program, social mobilization activities have been conducted in 11,087 communities, resulting in the establishment of 11,087 school shuras (community-based consultative bodies) along with the preparation of 10,939 school improvement plans nationwide. So far, 10,800 schools have received Quality Enhancement Grants for purchase of school supplies, laboratory equipment, and other purposes. Key Partners: Ministry of Education, and ARTF donors (the U.S., U.K., Denmark, Canada, Sweden, Australia, Germany, and Norway. 21 AFGHANISTAN: FEMALE YOUTH EMPLOYMENT INITIATIVE (FYEI) Key Dates: Approved: August 17, 2011 Effective: August 17, 2011 Closing: December 31, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA MDTF – Adolescent 2.05 0.37 1.68 Girls Initiative - AGI Total Project Cost 2.05 0.37 1.68 *As of June 30, 2013 Project Background: The Female Youth Employment Initiative (FYEI) is a pilot project implemented by the Ministry of Education, with support from the Bank-financed Education Quality Improvement Program. It is a pilot effort to promote the economic empowerment of young women by supporting their transition from school to productive employment. At a total cost of US$2 million, the FYEI in Afghanistan aims to train and employ 1,300 female high school graduates aged between 18 and 30 years in Mazar City and four selected districts in Balkh province. Project Development Objective: The objective of the project is to provide job skills training to young women ages 18 to 30 to improve their access to income-earning opportunities. There are three components: Component 1: Social mobilization: through social mobilization, FYEI raised awareness and support for the project by reaching out to female high school graduates, their families, and communities through School Management Shuras, formed with the help of the Education Quality Improvement Program. Component 2: Training and employment: this component provides the beneficiaries with demand-driven job skills training, coupled with life skills training that helps them build confidence and self-esteem in job searches or on the job at the office environment or in their communities. It also provides for job placement, including internship, employment in public and private sectors or aid agencies, and self-employment. The project contracted an NGO service provider to design, develop, and implement a training and employment program. Component 3: Project management: this component supports the overall project implementation and staff capacity building. Results: FYEI reached out to all 61 selected high schools and welcomed 2,822 female high school graduates into the program, exceeding the goal of 2,400 graduates by almost 20 percent. Half of those selected are youth, surpassing the original goal of 25 percent. The project developed a nutrition education curriculum to be delivered as a part of the life skills training and created a comprehensive knowledge exchange program between FYEI and an Adolescent Girls Initiative in Nepal, financed by the South-South Knowledge Exchange trust fund. A study tour to Nepal was planned in early-September, and a dissemination workshop in Kabul will take place at the end of October. Key Partners: The Ministry of Education is the implementing agency, while the Bank’s Education Quality Improvement Program is providing finance and procurement support, and Coordination of Humanitarian Assistance is the NGO service provider. 22 AFGHANISTAN: FINANCIAL SECTOR RAPID RESPONSE PROJECT Key Dates: Approved: August 25, 2011 Effective: September 6, 2011 Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 19 5.04 13.96 Other Total Project Cost 19 5.04 13.96 *As of June 30, 2013 Project Background: The Financial Sector Strengthening Project aims to finance costs associated with the following activities: (i) Audits (financial, portfolio and institutional) of 10 commercial banks operating in Afghanistan; (ii) Modernization of the national payment system to facilitate payments within the country; (iii) Support to the development of the Afghanistan Institute of Banking and Finance; and (iv) Technical assistance and training for project implementation. Project Development Objective: The project’s aim is to assist Da Afghanistan Bank (the central bank), which is implementing the project, to develop actions plans for improved banking supervision and to implement a modern national payment system for efficient and transparent payment transactions. Project Components: Component 1: Audits: Financial, portfolio and institutional audit of 10 commercial banks operating in Afghanistan. Component 2: Modernization of the national payment system: to facilitate payments within the country which involves the establishment of a Real Time Gross Settlement, Automated Clearing House, and Central Security Depository, all as one system at Da Afghanistan Bank; and a national card payment switch. Component 3: Support to the development of the Afghanistan Institute of Banking and Finance. Component 4: Technical Assistance and training for project implementation. Results: The audits of the 10 commercial banks started in November 2011 were completed in June 2012. Presentations on the findings of the audits were given in June and July 2012 to development partners. The procurement processes for modernization of the payment system (national card and mobile payment switch) is complete and the contract will be awarded soon. The procurement process for the Automated Transfer System (Automated Clearing House, Real Time Gross Settlement, and Central Securities Depository) is in progress. Key Partners: Da Afghanistan Bank is the implementing partner in this project. 23 AFGHANISTAN: FINANICAL SECTOR STRENGTHENING PROJECT Key Dates: Approved: April 30, 2009 Effective: June 18, 2009 Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 8 1.63 6.37 ARTF Total Project Cost 8 1.63 6.37 *As of June 30, 2013 Project Background: The Financial Sector Strengthening Project aims to finance the costs associated with provision of support for strengthening the capacity of Da Afghanistan Bank (DAB; the central bank of Afghanistan), and developing the necessary financial infrastructure such as a public credit registry, a collateral registry, and an Afghanistan Institute of Banking and Finance. The International Finance Corporation (IFC) is the key partner and has been providing necessary technical support on establishment of the public credit registry and the collateral registry. The Financial Sector Strengthening Project is undergoing a restructuring and will be merged with Financial Sector Rapid Response Project by the end of September 2013. Project Development Objective: The objective of the project is to assist the central bank in improving its core function of banking supervision and regulation, and to help improve access to formal banking services by establishing key initial building blocks for further financial sector reform. Component 1: Strengthening the capacity of Da Afghanistan Bank: this component supports strengthening central bank capacity through provision of consultancy services and financing for information technology (IT) systems development in three critical areas: (i) developing the off-site supervision systems and supervision competencies in DAB; (ii) creating an effective accounting and internal auditing system functioning to generally acceptable international standards, which is operationally critical and establishes DAB’S credibility; and (iii) establishing an effective human resource management system so it can move from relying on expatriate advisors to well-trained and empowered Afghan national staff. Component 2: Development of basic infrastructure in the financial sector: In close collaboration with IFC, this component assists in establishing the following basic financial sector infrastructure in Afghanistan: (i) a public credit registry that will provide lenders information for efficient risk assessment on borrowers; (ii) a collateral registry for movable property that will provide lenders the ability to effectively use borrowers’ property as collateral; and (iii) an Afghanistan Institute of Banking and Finance to support development of professional resources. Results: The first component has proved disappointing. Efforts at strengthening the capacity of human resource management, auditing, and accounting have not yielded the expected results. It appears that the approach to capacity building chosen by the project is not effective (i.e. a reliance on individual consultants drafting manuals). In addition, the outputs of the IT consultant have also been disappointing, particularly when it comes to automation of off-site supervision. It has therefore been decided to restructure the project following the recently-completed mid-term review (February 24-March 6, 2013) to focus on a limited number of activities, with significant resources, to achieve tangible results. The second component has resulted in: (i) the Afghanistan Institute of Banking and Finance being established in November 2010, (ii) the collateral registry established and officially launched in February 2013, and (ii) the contract for establishment of the public credit registry, signed in February 2013, which paves the way for the registry to begin operations by the end of 2013. Key Partners: IFC, Da Afghanistan Bank. 24 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*: Financier Financing Disbursed Undisbursed IDA 97.8 28.6 65.1 Govt. of Afghanistan 2.5 ARTF 48.4 4.6 43.8 Total Project Cost 148.7 *As of June 30, 2013 Project Background: The Irrigation and Restoration and Development Project 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. Project Development Objective: The objective of the EIRP was to increase agriculture productivity and production in the project areas. The project had four key components: Component 1: Rehabilitation of irrigation systems. This component supports the rehabilitation of irrigation schemes covering total irrigated area of about 300,000 ha that would benefit approximately 230,000 households and increase irrigated area by about 15 percent. Component 2: Small dam development. This component supports the design and construction of about three multi- purpose small dams and appurtenances, and associated irrigation conveyance and distribution systems. The selected dams would be located in closed river basins that are free of trans-boundary riparian issues. Component 3: Establishment of hydro-meteorological facilities and services. This component sets out to build upon the work done under EIRP and establish an efficient and effective hydro-meteorological service. Component 4: Project management and capacity building. This component included the following sub-components: (i) Project management and construction supervision; (ii) Support for capacity building; (iii) Incremental contract staff. Results: As of end July 2013, the following achievements had been made: In the irrigation component, approximately 4,200 ha (9 percent of the target 45,000 ha) of incremental irrigated area had been achieved. In the small dam component, the completed pre-feasibility study had selected seven dam sites in the northern provinces and a feasibility study for these sites is now on-going. In the hydro-met component, installation of hydro-meteorological equipment had been completed and data collection performance of the installed stations also improved considerably in all river basins. Key Partners: This project is implemented by the Ministry of Energy and Water. UN Food and Agriculture Organization is providing technical support. 25 AFGHANISTAN: NATIONAL EMERGENCY RURAL ACCESS PROJECT Key Dates: Approved: December 13, 2007 Effective: November 17, 2008 Closing: December 31, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 152 146.0 2.7 ARTF 80 75.4 4.6 Total Project Cost 232 221.4 7.3 *As of June 30, 2013 Project Background: The World Bank has supported the provision of rural roads to improve rural accessibility through the government’s National Rural Access Program, which aims to address a key cause of rural poverty, which is a lack of rural access. This is a key constraint in the transition from opium poppy cultivation to legal rural non-farm activities. The project is helping to improve accessibility as well as integration of village economies with regional and national markets, leading to better allocation of resources, technology transfer, and higher productivity and outputs. Project Development Objective: The objective of the project is to help Afghanistan provide year-round access to basic services and facilities for rural populations through the rehabilitation and maintenance of rural access infrastructures. The project aims to achieve this through three components: Component 1: Improvement of secondary roads: Rehabilitation and reconstruction of 1,075 kilometers of secondary rural roads; (ii) emergency repair work to roads and bridges following natural disasters; (iii) environmental and social management; and (iv) project implementation assistance to the Ministry of Public Works. Component 2: Improvement of tertiary roads: (i) rehabilitation and reconstruction of 925 kilometers of tertiary rural roads; (ii) emergency repair work to roads and bridges; (iii) maintenance of the roads already rehabilitated under earlier initiatives; (iv) environmental and social sector management; and (v) project implementation assistance to the Ministry if Rural Rehabilitation and Development. Component 3: Institutional strengthening, project management and program development: (i) development of a rural roads management system; (ii) capacity building activities for staff; and (iii) project management, monitoring and evaluation. Results: Over 1,000 km of secondary road and 1,100 tertiary road rehabilitated; more than 1,150 running meters of secondary road bridges and 1,400 running meters of tertiary road bridges constructed; a community based routine maintenance mechanism was piloted and over 2,400 km of rural roads are now under routine maintenance; contracts mobilizing nearly 300 community development councils and providing employment to over 2,000 rural laborers; new system developed and established that helps reporting and improves monitoring and evaluation; first stage of network planning system has been developed and established to help road rehabilitation and maintenance prioritization and selection; more than 500 engineering students trained; capacity development programs conducted and more 1,000 program and government staff trained; draft rural road strategy prepared; new cost estimation system for rural road established; In FY13, the project has been recognized for its innovative approach to third party monitoring initiated to overcome the security challenges in site monitoring in remote and rural areas. Key Partners: Ministry of Public Works and Ministry of Rural Rehabilitation and Development, Ministry of Finance and the coordinator of the government’s National Rural Access Program. 26 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*: Financier Financing Disbursed Undisbursed ARTF 100.0 5.8 94.2 Other – Beneficiaries 14.6 Total Project Cost 114.6 5.8 94.2 *As of June 30, 2013 Project Background: 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. However the main thrust of the approach will be centered on effectively moving out of an emergency phase and into a development approach. The aim is to put in place a more robust, better-performing and sustainable development platform worthy of expansion and sustained support focused on: (i) more effective and sustainable service delivery systems; (ii) improved internal and external coordination and complementarity of activities. Project Development Objective: The objective is to promote adoption of improved production practices by target farmers, with gradual rollout of farmer- oriented agricultural services delivery systems and investment support. The National Horticulture and Livestock Project has three components, comprising activities that are being implemented in 100 focus districts: Component 1. Horticultural production: Provides target beneficiaries with demand-driven extension and productive investment support, based on their expressed interests and needs, through two subcomponents. One provides farmers with organizational support and extension focused on three main thematic areas: orchard management, value addition and marketing. The second subcomponent complements extension by providing support to productive investments required for actual adoption of improved technology packages. Component 2. Animal production and health: provides beneficiaries with extension and investment support based on their needs through two subcomponents. The first provides farmers with organizational support, and delivers extension focused on two main thematic areas, animal production and animal health. The other subcomponent has a two-pronged approach. At private sector level it complements extension by providing farmers with productive investment support required for actual adoption of improved technology packages. It also supports public investments for the establishment of an animal health surveillance and control system, and in the development of improved models of intervention through trials and studies to inform policy on possible future private investment. Component 3. Implementation Management and Technical Assistance Support: this covers 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 to develop long-term adequate staffing and ability at all levels of the service delivery systems being deployed. Results: The project has financed the planting of 1,204 hectares of new orchards, of which 60 percent are in new provinces. The collection of farmers’ contributions has been very successful and currently 98 percent are complying with the required contributions. Similar substantial achievements have been recorded for rehabilitation of orchards (1,000 ha actual against a target of 140 ha), grape trellising (200 ha surveyed actual versus a goal of 140 ha planted annually), strawberry cultivation (10 ha actual vs. 5 ha annual target) and high- and medium-density orchards with trellising (15.8 ha actual vs. 10 ha annual target). In addition, demand from target beneficiaries for kitchen gardening support has proved very high, and the entire annual program has already been exceeded (8,075 schemes vs. 8,000 schemes annual target.) Key Partners: The project is implemented by the Ministry of Agriculture, Irrigation and Livestock. 27 AFGHANISTAN: NATIONAL SOLIDARITY PROJECT Key Dates: Approved: June 29, 2010 Effective: October 6, 2010 Closing: September 30, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 40.0 40.0 0 ARTF 750.0 449.67 278.34 Other – JSDF Grant 15.0 12.50 2.50 Total Project Cost 805.0 *As of June 30, 2013 Project Background: The National Solidarity Program (NSP) is a flagship program of the Government of Afghanistan, and it is currently operating in all 34 provinces. The Afghan government launched NSP to lay the foundation for a sustainable form of inclusive local governance, rural reconstruction, and poverty alleviation. It is identified in Afghanistan’s National Development Strategy as the government’s principal community development program. This multi -billion dollar community development and local governance program is managed by the Afghan Ministry of Rural Rehabilitation and Development. Project Development Objective: The objective of the project is to build, strengthen, and maintain community development councils (CDCs) as effective institutions for local governance and socioeconomic development. Component 1: Capacity building of CDCs: Designed to establish CDCs and build their capacity to: (a) function as a village level governance body for continued empowerment of village communities, bringing their voices into the government decision-making process for sub-national development planning, resource allocations and delivery of rural development programs; and (b) facilitate communities’ participation in the various sector programs operating in rural areas, harvesting benefits of synergy and complementarity among various programs, maximizing development outcomes and reducing delivery costs. Component 2: Community grants for economic and social development. Designed to provide block grants to communities to fund priority investment schemes (sub-projects) for rural and social development. The component was to finance block grants to a total of 27,720 CDCs in the following manner: (i) a first block grant will be given to the 10,320 newly-mobilized CDCs; and (ii) A second block grant will be given to 17,400 existing CDCs that were operating under previous initiatives, which have successfully utilized their first block grant and are maintaining completed sub-projects. Component 3: Project implementation support. Designed to cover expenditures associated with the Ministry of Rural Rehabilitation and Development’s overall management and oversight of NSP, including the salaries of all contractual staff, the technical assistance needed to support the Ministry’s Program Management Office for NSP, and its incremental operating costs pertaining to NSP and those associated with monitoring and evaluation of the program. Results: Since its inception in 2003, NSP has disbursed over US$1.6 billion. Out of this, about US$1.2 billion has gone to communities through block grants to finance over 72,000 sub-projects, having an average economic rate of return of about 30 percent. To date, some 33,000 villages have elected CDCs, and about 30,000 communities in 396 districts have received at least their first block grants. Those sub-projects financed to date included water supply and sanitation (24 percent), rural roads (26 percent), irrigation (19 percent), power (12 percent) and education (10 percent). Over 20 million people have benefited from NSP sub-projects out of Afghanistan’s total population of 36 million. NSP has created temporary rural employment by generated over 23 million labor days over the past nine years. Key Partners: The Afghanistan Reconstruction Trust Fund, and the Ministry of Rural Rehabilitation and Development. 28 AFGHANISTAN: ON-FARM WATER MANAGEMENT PROJECT Key Dates: Approved: March 16, 2011 Effective: March 16, 2011 Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA ARTF 25.0 8.7 16.0 Total Project Cost 25.0 8.7 16.0 *As of June 30, 2013 Project Background: 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. Project Development Objective: The development objective of the project is to improve agricultural productivity in project areas by enhancing the efficiency of water used. Component A: On-farm water management: Carry out social mobilization for the establishment of irrigation associations (IAs) in the project areas, including, the provision of: (a) training to communities in organization and management of IAs; (b) facilitation services for communities to develop the IAs’ internal legal rules and regulations; (c) assistance to IAs to be registered under the Water Law; (d) technical training to IAs on water distribution, maintenance of irrigation infrastructure, irrigation methods, water-saving techniques, crop-water requirements, and good agronomic practices; (e) carrying out engineering surveys and infrastructure improvements to small irrigation schemes or tertiary canals covering approximately 10,000 ha in the project areas. The establishment of approximately five easily-accessible pilot irrigation demonstration sites in each project area showcases improved water management practices and agronomic water saving techniques, as well as proper farm planning and layout for an efficient use of irrigation water. Component B: Institutional strengthening and capacity building at the Ministry of Agriculture, Irrigation and Livestock: Developing the institutional capacity at the Ministry to plan, design, implement, and monitor on-farm water management programs, including the strengthening of its General Directorate of Irrigation at national, provincial and district levels, liaising with foreign states to train Ministry staff, and developing a database covering irrigation systems throughout the country. This component also supports the construction of five office buildings to accommodate the Ministry’s Irrigation Directorate and staff at the five regional centers of Kabul, Herat, Mazar-e-Sharif, Baghlan and Jalalabad. Component C: Project management, coordination, monitoring and evaluation: Strengthening the institutional capacity at the Ministry for project implementation, monitoring and evaluation, by establishing and maintaining a project implementation unit comprised of a Kabul-based core team, five project area teams, and internationally recruited experts. Results: Land productivity of wheat and other crops has increased by 15 percent. Water productivity of wheat and other corps increased 15 percent, and the irrigated area increased by 10 percent. Key Partners: This project is implemented by the Ministry of Agriculture, Irrigation and Livestock. 29 AFGHANISTAN: PUBLIC FINANCIAL MANAGEMENT REFORM PROJECT II Key Dates: Approved: August 9, 2011 Effective: August 9, 2011 Closing: December 31, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA ARTF 73.0 28.0 45.0 Total Project Cost 73.0 *As of June 30, 2013 Project Background: 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 both 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”. The PFM roadmap 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’ trus t in government. As such, the proposed project responds to the desire of major donor agencies and the government to channel more official development assistance through the budget, as donors transition out of direct implementation. It aims to ensure continued high-level PFM performance through direct operational support in the form of expert advisors for the core public financial management systems, such as treasury and budget operations, public sector procurement, and audits. Project Development Objective: To strengthen public financial management through effective procurement, treasury and audit structures and systems in line with sound financial management standards of monitoring, reporting, and control to ensure efficient, transparent and accountable use of public resources and to increase aid utilization and improve development outcomes. Component 1: Procurement reform: which aims to enhance procurement facilitation, capacity building in line ministries and provinces, and institutional development. Component 2: Financial management reform: in treasury operations and system development, human resources capacity development, professional accountants organization development, and line ministry public financial management assessments. Component 3: Audit reform and performance: in internal and external audit. Component 4: Reform management. Results: Project support to Afghanistan’s centralized procurement oversight has been mobilized and the Procurement Policy Unit in the Ministry of Finance continues to assist with the reorganization, development and assessment of procurement units in the line ministries. The project has established alternative training facilities in Kabul after split from the Civil Service Institute. Grants audits have been completed 100 percent during the last fiscal year. The Financial Management Reform has progressed and major contracts have been sourced and executed. Key Partners: Ministry of Finance, Ministry of Economy, and the Supreme Audit Office of Afghanistan. 30 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*: Financier Financing Disbursed Undisbursed IDA ARTF 2954.32 2883.62 70.7 Total Project Cost 2954.32 2883.62 70.7 *As of June 30, 2013 Project Background: A coordinated funding mechanism in support of Afghanistan’s reconstruction is essential for helping 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. Project Development Objective: The objective of the recurrent cost component of the ARTF is to provide a coordinated financing mechanism enabling the Government of Afghanistan to make predictable, 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. Component 1: The reimbursements of civil servant salaries. Component 2: Reimbursement of operating and maintenance costs. Component 3: The incentive program. The first two components 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. The third component was introduced in 2009 and it refers to a series of policy actions and revenue benchmarks agreed to between the World Bank and the government that align with development priorities and which, if attained, entitle the government to an agreed amount of additional funding for the first two components. Results: Over 11 years, the project disbursed nearly US$3 billion against legitimate recurrent costs in a timely fashion. This represents 20 percent of civilian costs in the period and 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: All the ARTF donors (33 countries) are considered partners. 31 AFGHANISTAN: ARTF INCENTIVE PROGRAM Key Dates: Approved: July 12, 2012 Effective: July 12, 2012 Closing: December 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed ARTF 507 29.3 477.7 Total Project Cost 507 29.3 477.7 *As of June 30, 2013 Project Background: The Afghanistan Reconstruction Trust Fund (ARTF) Incentive Program is a policy-based budget support instrument within the Recurrent Cost Window of the ARTF. It was established in 2009 in order to support a gradual phasing out of the baseline ARTF recurrent cost support and facilitate policy dialogue on economic and fiscal issues between the Government of Afghanistan and ARTF Donors. Project Development Objective: The overall objective of the Incentive Program is to support a reform effort that aims to improve fiscal sustainability by increasing domestic revenue mobilization and strengthening expenditure management. The Incentive Program funding pledged by the donors is allocated across three components:  The Revenue Matching Grant Scheme incentivizes improved revenue performance and is anchored in the annual revenue targeting negotiations between the Ministry of Finance and the International Monetary Fund. The incentive funds are calculated based on sliding scale, starting at 90 percent of target access threshold for incentive funds under this scheme.  The Structural Reform Scheme includes 10 reform-oriented actions per year related to public financial management, governance and civil service reform, investment climate and trade facilitation and sub-national finance. Each action has its own funding allocation and needs to be implemented within one year in order to be eligible for full funding. Non-completed actions roll over into the following year and will be discounted depending on delay.  The Operation and Maintenance Facility aims at improving the operation and maintenance of public assets in key areas such as education, health, and rural/urban infrastructure, enhancing their sustainability. Participating ministries need to establish an asset registry and relevant policies and procedures. The facility offers resources for operation and maintenance and incentivizes their management. Technical assistance for operation and maintenance management in line ministries is being extended through existing ARTF projects. Results  Budget execution of the development budget improved from 50 percent to 65 percent in four years  Open Budget indicators show improved budget transparency  The gap between the salaries of donor-financed support and civil servants across ranks is at least reduced by one-third in 2015 (the first monitoring report will provide a baseline)  The number of ministries that complete pay and grading increases from eight to 19 by end-2014 and number of professional cadres increases from none in 2012 to at least six in 2014  Ninety percent of all companies renew their licenses within 10 days (from day of first renewal request)  Time and steps to trade across borders are reduced by 50 percent from the level of 2011.  Customs revenue increases by 25 times over the lifetime of the Incentive Program (from Afs 30 billion)  The operating budget designated to provinces is being allocated according to the established norms Key Partners: All the ARTF donors (33 countries) are considered partners. 32 AFGHANISTAN: CUSTOMS REFORM & TRADE FACILITATION Key Dates: Approved: May 25, 2010 Effective: December 28, 2010 Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 50.48 36.61 14.38 ARTF Total Project Cost 50.48 36.61 14.38 *As of June 30, 2013 Project Background: The Second Customs Reform and Trade Facilitation Project will continue the Bank’s support as part of the overall donor effort to reform and modernize Afghan customs. It aims to assist the Afghanistan Customs Department in consolidating the customs modernization process, improving governance, and improving the release of legitimate goods in a fair and efficient manner. Project Development Objective: The goal is to improve the performance of the Afghanistan Customs Department through the following components. Component 1: Countrywide computerization of Customs clearance operation. To sustain and build upon the accomplishments of the computerization effort undertaken under the first Customs Modernization project through implementation of Automated System for Customs Data. Component 2: Installation of executive information systems for Customs allowing real time monitoring of operations: Targeted at introducing a new functionality (management summary and statistical reporting and alerts) in order to improve governance and mitigate chances of corruption. Component 3: Development of possible options for cross border Customs-to-Customs Cooperation: Reviews the current available options to improve Customs to Customs cooperation, including data sharing between Afghanistan and its bordering countries. It will also help pilot the implementation of those options that are supported by Afghanistan and its neighbors. Component 4: Provision of selected Customs infrastructure to enable modernized operations. Includes support improvements to the Customs Department’s infrastructure, specifically Inland Clearance Depots in Jalalabad, Kabul, Khost, Nimroz, Farah, and Andkhoi, as well as the Aqina Border Post. This will be supported by a feasibility study for a multimodal container freight station for the infrastructure efficiency. Component 5: Technical assistance to support the development of an adequate regulatory, administrative and institutional framework for Customs: This component will provide technical assistance to the Customs Department to addresses the major cross-cutting issues related to Generally Accepted Accounting Principles such as improvement of laws and procedures; review of Customs clearance procedures; improvements to risk management and control requirements in the computerized framework; and informing the Customs role in collaborative border management to list just a few. Results: The Declaration Processing System is now functional at 10 locations. Implementing the International Transit under Automated System for Customs Data platform at Sherkhan Bandar is complete, and roll out of the risk management module is expected by end-2013. A plan for post clearance audit has been drafted and is expected to be rolled out by end-2013. The team organized the first customs modernization workshop, attended by nearly all concerned government ministries and donors, which developed a consensus policy blueprint and action plan for the Customs Department. The action plan has been adopted by the ARTF as part of the Customs-related Incentive Program. Key Partners: The Afghan Customs Department, Ministry of Finance, UN Office for Project Services, UN Conference on Trade and Development as implementing partners, US Border Management Task Force, USAID, EC, DFID, Government of Canada, UN Assistance Mission in Afghanistan, the Government of Japan, UN Office on Drugs and Crime, IMF, ADB. 33 AFGHANISTAN: ICT SECTOR DEVELOPMENT PROJECT Key Dates: Approved: April 26, 2011 Effective: June 14, 2011 Closing: June 30, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 50.0 12.0 38.0 Total Project Cost 50.0 12.0 38.0 *As of June 30, 2013 Project Background: 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 employment generation. Yet, challenges remain. Internet use is limited, entrepreneurship in the sector is nascent, and ICT is not yet fully supporting public services delivery or job creation. 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 aims to expand broadband connectivity and accelerate the development of the local private sector IT industry. Project Development Objective and brief component description: 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 (IT) industry. The Project has three substantive components: Component 1: Expanding connectivity: The Project is financing the expansion of the national backbone network by 1,000 km, and is supporting the creation of an enabling policy and regulatory environment to increase the reach of high quality mobile telephone and Internet services to more users. Component 2: Mainstreaming mobile applications: This component 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, i.e. supporting “mGovernment”. The Project is supporting the development of an mGovernment strategy, the creation of an ICT platform to deploy mGovernment services, and an innovation support program that funds ideas and technology that address specific development challenges. Component 3: IT industry development: This component supports the definition of an IT sector development policy; an IT skills development program to expand the pool of skilled IT professionals as a key building block for sector development in Afghanistan; and the setting up of an incubator for ICT firms in the ICT Village. Results:  Optical fiber cable construction is progressing; about 50 km of ducting has been completed.  The Ministry of Communications and Information Technology adopted an open access policy for the national backbone network, ensuring non-discriminatory access to wholesale Internet bandwidth for all firms.  450 Afghans have been trained under the IT skills development program.  Submissions for the first round of the Innovation Support Program are being evaluated to select award winners. Key Partners: This project is implemented by the Ministry of Communications and Information Technology. The World Bank task team and Ministry also coordinate closely with the U.S. Government, International Security Assistance, and Afghan ICT firms. 34 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*: Financier Financing Disbursed Undisbursed IDA 100.0 0 97.58 Govt. of Afghanistan 30.0 0 30.0 ARTF 270.0 0 270.0 Norwegian Health 7.0 0 7.08 Results Innovation Trust Fund Total Project Cost 407.0 *As of June 30, 2013 Project Background: 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 both in rural and urban areas covering 22 provinces, including Kabul (out of 34 provinces). Project Development Objective: The objective of the project 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. Component 1: Sustaining and improving BPHS and EPHS services: Supports the implementation of the BPHS and EPHS through performance-based partnership agreements between the Ministry of Public Health and NGOs that deliver health services as defined in these packages. It also supports the government’s efforts in BPHS and EPHS through contracting in management services in three designated provinces, and the implementation of an urban version of the BPHS in Kabul city. The project improves access to and quality of BPHS and EPHS services and the training of additional community midwives and community nurses. In addition, financing will be available for marginalized and at- risk populations. Component 2: Building the stewardship capacity of the Ministry of Public Health and system development: This involves: Strengthening sub-national governments; Strengthening the Healthcare Financing Directorate; Developing Regulatory Systems and Capacities for Ensuring Quality Pharmaceuticals; Working with the Private Sector; Enhancing Capacity for Improved Hospital Performance; Strengthening Human Resources for Health; Governance and Social Accountability; Strengthening Health Information System and Use of Information Technology; Strengthening Health Promotion and Behavioral Change; and Improving Fiduciary Systems. Component 3: Strengthening program management: Supports costs associated with system development and stewardship functions of the Ministry of Public Health including those at central and provincial levels and technical assistance. The Ministry will engage with the Capacity Building for Results Facility to improve its capacity and performance in delivering services through the implementation of specific capacity and institution building programs. Results: There have been increases in: births attended by skilled health personnel among lowest income quintile from 15.6 percent to 35 percent; PENTA3 immunization coverage (a combination of five vaccines in one covering polio, diphtheria, Pertusis, tetanus and hepatitis B) among children aged between 12 and 23 months in lowest income quintile from 28.9 percent to 60 percent, contraceptive prevalence rate (using any modern method) from 19.5 percent to 30 percent, proportion of children under 5 years of age with severe acute malnutrition receiving treatment. Improved the score on the examining quality of care in SCs, BHCs, and CHC on the balanced scorecard from 61 percent to 70 percent Key Partners: The Ministry of Public Health; USAID European Union and UN agencies on technical matters. 35 AFGHANISTAN: STRENGTHENING HEALTH ACTIVITY FOR THE RURAL POOR PROJECT Key Dates: Approved: March 24, 2009 (AF – June 2, 2010) Effective: April 22, 2009 (AF – Aug. 5, 2010) Closing: September 30, 2013 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 30.00 29.82 0.01 IDA – Add’l Financing 49.00 34.19 13.77 ARTF 46.00 44.36 1.64 Health Results 12.00 4.92 0.0 Innovation Trust Fund JSDF 17.65 17.00 0.65 Total Project Cost 154.65 130.29 16.07 *As of June 30, 2013 Project Background: The Strengthening Health Activity for the Rural Poor (SHARP) project provides strategic support to the overall implementation of the health sector program for 2009-2013. Project Development Objective: To support the government in achieving the goal of improving the health and nutritional status of the people of Afghanistan, with a greater focus on women and children and under-served areas. Component 1: Sustaining and strengthening the Basic Package of Health Services (BPHS): Supports the BPHS through performance-based partnership agreements between the Ministry of Public Health and implementing NGOs in eight provinces. It also supports the Ministry’s delivery of the BPHS through contracting management services in three provinces and urban Kabul. It also supports improving access for 60 percent of people who live over an hour away from a health facility through sub-health centers and training of community mid-wives and nurses. Component 2: Strengthening the delivery of the Essential Package of Hospital Services (EPHS): EPHS is the Ministry’s strategy for the delivery of hospital services supported by several development partners based on a geographic division of labor. It supports policy dialogue to develop a coherent package of hospital policies that will ensure efficient use of resources and provision of priority services. Through third party assessment, SHARP also contributes to monitoring hospital performance in the country while supporting hospital functions critical to reduce maternal and child mortality in some locations, with special emphasis on services for the poor. SHARP will finance an evaluation of the impact and lessons learned from different approaches. Component 3: Strengthening Ministry stewardship functions: This component strengthens both the central Ministry and the Provincial Health Offices, while maintaining coordination and promoting decentralization. At the central level, this component finances contractual staff in critical areas within the Ministry, while Provincial Health Offices are strengthened through computerization and reactivation of provincial health coordination meetings. SHARP contributes to the organization of semi-annual national health coordination workshops. Renovation of Grant and Contracts Management Unit offices will also be financed. Component 4: Piloting innovations: This component supports the piloting of supply-side interventions as part of a results-based financing study. It aims to test innovative approaches to increase utilization of health services using performance-based incentives. The component is implemented within the framework of the existing health system through contracted NGOs and the Ministry of Public Health’s service delivery arm. Results: Increased tuberculosis treatment success rate, proportion of newborns breastfed within one hour of birth, DPT3 combo vaccine coverage among children 12-23 months, proportion of births attended by skilled birth attendant (doubled baseline percentage), proportion of parents knowing appropriate care with ARI, coverage of antenatal care (surpassing project target), contraceptive prevalence rate. Key Partners: The Bank team partners with the Ministry of Public Health, and works with key donors including USAID, EU, Government of Japan, CIDA and technical agencies of WHO and UNICEF. 36 AFGHANISTAN: SKILLS DEVELOPMENT Key Dates: Approved: January 31, 2008 (IDA); April 14, 2009 (ARTF) Effective: March 20, 2008 (IDA); April 14, 2009 (ARTF) Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 20.00 17.10 2.90 ARTF 18.00 12.61 4.68 Total Project Cost 38.00 *As of June 30, 2013 Project Background: Despite impressive strides, Afghanistan remains at a critical stage in its transition, facing numerous challenges in the social sector including persistent poverty, a poorly skilled labor force, and non-responsiveness of the skill and capacity- building infrastructure to market demands. As a key step in responding to these challenges, especially in the area of low capacity of the labor force, the Government of Afghanistan had requested the World Bank’s assistance in the area of Technical Vocational Education and Training (TVET). The Bank developed a policy note in 2006 entitled “Skills Development in Afghanistan’ in response to the government’s request and the resulting Afghanistan Skills Development Project was built around its findings. Project Development Objective: The goal is to increase the number of immediately-employable graduates produced by building, in stages, a high quality TVET system that is equitable, market responsive, and cost-effective. Component 1: Develop regulatory and quality assurance framework for TVET: This component aims at establishing a Committee on Education Skills and Policy under the chairmanship of the First Vice President, and developing a national qualifications framework for TVET and the related legalities, which the Committee was to guide through the legislature. Component 2: Improve relevance, quality and efficiency of TVET: Sub-component 2.1: Establish National Institute of Management and Administration. Sub-component 2.2: Institution-based reform package: Under this sub-component, the project is providing support for reforms as mandated at the Afghan Institute of Technology, the Auto-Mechanical School in Kabul, the Blind School in Kabul, the Computer Training Institute in Kabul, and the Afghan National Institute of Music. Sub-component 2.3: Management reforms in the Deputy Ministry of Technical and Vocational Education and Training. Component 3: Skills development program and market linkages with a rural focus: Under this component, contracted trainers are to provide skills training for chronically poor women, marginalized farmers, unskilled and semi- skilled youth, disabled persons, and injecting drug users. Component 4: Research, Monitoring and Evaluation. Results The regulatory environment has been greatly enhanced, the music school students are graduating and finding work (70 percent had found work six months after graduating), and wages paid to graduates are improving as a result of the project. Considerable administrative autonomy has been provided, and a total of 9,100 persons trained (30 percent women). Key Partners: Deputy Ministry of Technical Vocational Education and Training, Ministry of Education, National Skills Development Program under Ministry of Labor, Social Affairs, Martyrs and Disabled, and the Government of Norway. USAID also provided financing. 37 AFGHANISTAN: SECOND SKILLS DEVELOPMENT PROJECT Key Dates: Approved: March 19, 2013 Effective: June 12, 2013 Closing: June 30, 2018 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 55.00 Advance of 55.0 3.5 processed Govt. of Afghanistan 5.00 0.0 5.00 Other 60.0 *As of June 30, 2013 Project Background: The level of skills in Afghanistan is low and formal training for mid-level skill competence, though available, is not standardized and/or benchmarked to acceptable sub-regional or regional standards. The project helps finance the costs associated with reforms in, and improvement of, the Technical and Vocational Education and Training (TVET) sector in Afghanistan, with particular attention to deepening of the institutional systems. Project Development Objective: To increase the potential for employment and higher earnings of graduates from (TVET) institutions through improvements in the skills delivery system. The project includes four components, as follows: Component 1: Strengthening of the TVET system. Provides for technical assistance for the development of TVET strategy, and the development of quality assurance standards for institutional accreditation and training delivery. Component 2: Improving performance of TVET schools and institutes Focuses on reforms in TVET schools and institutes through the mechanism of a challenge fund, a voucher program for students, training for school principals and administrators and improvement of systems in schools and institutes, and continuing support to institutions aided under the project, provided they fulfill certain conditions. Component 3 – Improvement of teacher competencies Establishment of a Technical Teachers’ Training Institute for in-service training. The plan is to train 750 teachers and at least 60 master trainers. Component 4 – Project management, monitoring and evaluation, and public awareness Focuses on project management, impact evaluation, and a public awareness campaign for TVET. Results: A two-day workshop was held in Kabul for 120 principals of Deputy Ministry of Technical and Vocational Education and Training schools and institutes to familiarize potential beneficiaries with the administrative procedures for the challenge fund. Firms to assist the schools and institutes to frame their business plans have been short listed; Business Plans of the aided institutions under the Afghanistan Second Skills Development Project have been received and will be placed before the technical evaluation committee of the client for evaluation during current month; and Second round of the voucher program has been launched. The Technical Teacher Training Institute building has been inaugurated by the Minister of Education; 120 applicants for master trainers have been received, of which 60 will be selected for master trainer program and the rest will undergo the regular technical teacher training program. Key Partners: Deputy Ministry of Technical and Vocational Education and Training, Ministry of Education, Germany’s GIZ, and the Dutch government. 38 AFGHANISTAN: SAFETY NETS AND PENSIONS SUPPORT PROJECT Key Dates: Approved: October 15, 2009 (Additional Financing June, 2013) Effective: February 10, 2009 (Additional Financing July, 2013) Closing: June 30, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 7.5 6.3 1.2 ARTF Total Project Cost 7.5 *As of June 30, 2013 Project Background: The Afghan formal social protection system consists largely of a pension scheme for public sector employees, military and police, as well as social safety nets encompassing a number of government and donor schemes that transfer cash and in-kind benefits to various groups. Existing government interventions, however, remain small, both in terms of beneficiaries and spending. In pensions, the government’s objective is to ensure fiscal sustainability and mitigate fiscal impact of the civil service reform on the pension program, making it consistent with the broader public sector reform agenda. Among the immediate and important priorities is the enhancement of administrative capacity of the Pension Department. The strategy also recognizes that it is critical to develop fiscally sound and well-targeted social protection interventions, including safety nets. The main issues with social protection program implementation include lack of well-designed targeting instruments, poor coordination across programs, and weak administrative capacity. The World Bank support aims to help Afghanistan build a fiscally sustainable public pension system and an affordable social protection system, as well as strengthen the capacity and institutional framework of the Ministry of Labor, Social Affairs, Martyrs and Disabled. Project Development Objective: The project’s goals are to improve the administration of the public pension schemes, and develop administrative systems for safety nets interventions, with a focus on targeting and benefit payment delivery systems, while delivering cash benefits to the poorest families in targeted pilot districts. Component 1: Pensions: Supports initial steps toward public pension reform. It supports the design of new administrative arrangements for the public pension system, and modernization of the existing pension system. Component 2: Safety nets: Supports the design and piloting of targeting and delivery systems to establish a poverty-targeted cash transfer system; this includes capacity development at the Ministry to deliver and coordinate social protection programs. Results: The project has so far achieved the following results: Component 1: Pensions: The project has financed 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 comprehensive new Management Information System, a set of business processes, fiscal forecasting models for revenues and expenditures, and a new chart of accounts of the pension system. The renovation of the Pension Department has resulted in improved client services. Component 2: Safety Nets: A multi-phased safety nets cash transfer pilot has been designed, implemented, and evaluated. A targeting and benefit delivery mechanism has been tested and put place as well as a computerized registration and financial tracking system. The pilot program over the past two years has provided support in cash transfers to over 16,000 poor and vulnerable families (around 80,000 individuals) in eight selected districts of five provinces. Key Partners: The project is coordinated with development partners UNICEF, World Food Programme (WFP), DFID, USAID, and International Labor Organization (ILO) through coordination mechanisms led by the Ministry of Labor, Social Affairs, Martyrs and Disabled, and the Social Protection Working Group. 39 AFGHANISTAN: URBAN WATER SECTOR PROJECT Key Dates: Approved: May 25, 2006 Effective: December 27, 2006 Closing: June 30, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 40.0 5.8 12.8 German Development 24.50 Bank Total Project Cost 64.50 *As of June 30, 2013 Project Background: Water supply services in Afghan cities are of poor quality due to conflict and drought, a lack of investment, and rapid urban growth in recent years. Only Kabul (with a population of over 3 million people) and 13 towns have piped water supply systems serving a total of only an estimated 60,000 connections, of which 35,000 in Kabul. Access to piped water infrastructure is among the lowest in the world at around 18 percent. The water service reaches an even lower share of the population because of poor operation and maintenance. A vast majority of urban dwellers draw small quantities of water from generally unsafe boreholes and open wells, springs, or streams. Facing these challenges, the government set the urban water supply and sewerage (WSS) as a top priority and took major steps on the policy and institutional fronts with the announcement of its Urban Water Supply and Sanitation Sector Policy, the formulation of an Urban Water Supply and Sanitation Sector Institutional Development Plan, and the signing of a Presidential Decree to “corporatize” the Central Authority for Water Supply and Sewerage. As a centralized authority, the Central Authority for Water Supply and Sewerage is responsible for the piped water supply and sewerage across the country. However, its regional operations have acquired a certain degree of autonomy due to communication difficulties with provincial towns during the period of conflict. There is no clear jurisdiction over point water supplies nor on-site sanitation and several functional overlaps exist between the Central Authority for Water Supply and Sewerage and municipalities. The institutional arrangements do not allow for a clear separation of policy, supervisory, and operational roles. The project was thus initiated in 2006 to assist capacity development of the new corporate entity ( Afghanistan Urban Water Supply and Sewerage Corporation) and to support the expansion of the Kabul water supply system. Project Development Objective: The Urban Water Sector Project for Afghanistan aims to assist the government in developing the capacity of the Afghanistan Urban Water Supply and Sewerage Corporation for operational management and investment planning and implementation. Component 1: institutional development of Afghanistan Urban Water Supply and Sewerage Corporation. Component 2: financial support to Afghanistan Urban Water Supply and Sewerage Corporation operations. Component 3: extension of the Kabul water supply system. Results: The Central Authority for Water Supply and Sewerage was liquidated and the new corporate entity, the Afghanistan Urban Water Supply and Sewerage Corporation, took over urban water supply and sewerage operations in the country. The operational and financial performance of the Afghanistan Urban Water Supply and Sewerage Corporation has been steadily improving since its establishment in October 2010. The senior management team at headquarters is in place, heads of its six strategic business units have come on board and its organizational structure and staff job descriptions have been prepared and approved by board of directors. Furthermore, consultants to provide management support and technical assistance were appointed in June 2011. Support to strengthen Afghanistan Urban Water Supply and Sewerage Corporation to perform corporate activities and a calendar of activities for capacity building has commenced and a revision of water tariffs has been approved with effect from April 24, 2012, which will help transform the new entity into a financially viable institution. Key Partners: 40 Afghan Urban Water Supply and Sewerage Company, German Development Bank. AFGHANISTAN: JUSTICE SERVICE DELIVERY PROJECT Key Dates: Approved: June 1, 2012 Effective: June 1, 2012 Closing: May 31, 2017 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 0 0 0 ARTF 40.00 6.344 33.66 Total Project Cost *As of June 30, 2013 Project Background: The Justice Service Delivery Project is an US$85.5-million, 5-year investment operation funded by the Afghanistan Reconstruction Trust Fund (ARTF). The project beneficiaries include: the Supreme Court, the Ministry of Justice, and the Attorney General’s Office and – through support to these institutions – the poor will benefit from better and more efficient legal services. The current project seeks to: mitigate the impact of the political and security transition, put the justice system on a sustainable path for long-term results, and improve service delivery. Project Development Objective: The project’s goals are to increase access to and use of legal services. Three key project outcome indicators will be used to track progress toward achieving these, being an increase in the scope and quality of legal services, improved productivity of legal service providers, and enhanced accountability of legal service providers. The project development objectives will be achieved by balancing demand for and supply of core legal services and increasing the productivity of legal service providers through: (a) encouraging specialization and close collaboration among various service providers; (b) aligning the structure, organization, processes and capacities of judicial institutions to contemporary needs of users; and (c) easing access to legal information for legal professionals, judicial institutions and the broader public. The project intends to benefit Afghan citizens and users of the legal system, with particular emphasis on providing additional support to the indigent population, women, and the private sector (particularly in resource corridors). The project consists of four interrelated components: (a) Partnership for Justice; (b) Legal Empowerment; (c) Organization and Capacity of Justice Institutions; and (d) Implementation Capacity. Results: There has been progress in several of the components and sub-components: the implementation infrastructure is almost in place; annual work plans have been prepared; Capital Investment Plans (which will govern all capital investment projects and maintenance and operations expenditures) are under implementation; the development of the Legal Aid Road Map (overall policy for the state legal aid) is about to be contracted; Civil service reform in the Attorney Generals Office has been advancing according to plan (a number of critical positions in the Attorney Generals Office have been advertised and new staff have been hired through a competitive process); a plan for the three-phase reform of the regulatory framework is under discussion with stakeholders; and training assessments for all judicial institutions are under preparation. The Project has ambitious objectives for structural reforms; development of an improved legal services regulatory framework rightsizing of the sector according to the demand for legal services will require strong policy dialogues between the Bank and judicial institutions. Key Partners: Key Partners are Supreme Court, Ministry of Justice and Attorney General’s Office, as well as the Ministry of Finance. Donors such as the EU, Italy, Norway, Sweden, and Belgium have contributed to the Project. 41 AFGHANISTAN: NEW MARKET DEVELOPMENT PROJECT Key Dates: Approved: May 30, 2011 Effective: July 12, 2011 Closing: February 29, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD IDA 22 3.8 18.2 Other Total Project Cost 22.0 3.8 18.2 *As of July 23, 2013 Project Background: The New Market Development Project is the first World Bank funded project that to be implemented by Ministry of Commerce and Industries since the World Bank’s re-engagement in Afghanistan. Project Development Objective: The objective of the project is to help in the revitalization of private sector activities in the four major urban cities of Kabul, Mazar-e-Sharif, Jalalabad, and Herat through provision of business development technical assistance to support private firms‘ initiatives to gain market knowledge, improve product quality and processing. Component 1: Facility for New Market Development: This component is a cost-sharing program to support small- and medium-sized enterprises (SMEs) and business associations to access business development services in order to enhance their productive capacity and encourage innovation through product or market diversification. Component 2: Project implementation support and technical assistance to Ministry of Commerce and Industry: This component will support the Ministry with: (a) The establishment and operation of a project management unit for the New Market Development Project; and (b) Technical assistance to develop a strategic plan to access support from the recently approved Afghanistan Capacity Building for Results Facility. Results  The Project Management Unit is fully staffed.  GIZ IS (a German firm) was hired through an international competitive bidding process to manage the Facility. The contract between the Ministry of Commerce and Industry and GIZ IS was signed on September 15, 2012, and the Facility for New Market Development was officially launched on March 12, 2013.  The Facility has received applications from over 200 SMEs.  The Facility has signed cost-sharing grant contracts with over 100 SMEs. Key Partners: Ministry of Commerce and Industries 42 AFGHANISTAN: SUSTAINABLE DEVELOPMENT OF NATURAL RESOURCES PROJECT II Key Dates: Approved: 31 May 2011 Effective: 01 Sept 2011 Closing: 30 June 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 52.0 3.7 48.3 Total Project Cost 52.0 3.7 48.3 *As of June 30, 2013 Project Background: The Sustainable Development of Natural Resources Project II aims to assist Afghanistan’s Ministry of Mines and the National Environmental Protection Agency (NEPA) in further improving their capacities to effectively regulate the country’s mineral resource development in a transparent and efficient manner, and foster private sector development. Project Development Objective: The activities supported under the Project include: (i) capacity building support to the Ministry of Mines in relation to the development of sector policy frameworks and the tendering process of the Hajigak iron ore deposit; (ii) strengthening the capacity at the Ministry and NEPA for regulation and monitoring of operations, including implementation of a licensing system, inspection and contract compliance monitoring functions; and (iii) support towards the preservation of Mes Aynak antiquities and support for alternative livelihoods through sustainable artisanal and small-scale mining. Results:  Increased capacity at the Ministry of Mines to administer and monitor ongoing sector activities for both the small- scale and the large-scale mining sub-sectors, to license operations and ensure regulatory and contract compliance, and to manage future resource auctions based on improved quality and availability of geodata and better linkages to transportation infrastructure and resource transport corridors;  Increased capacity at NEPA and strengthened monitoring and enforcement mechanisms to ensure appropriate environmental, social, and cultural protection and mitigation standards at mining sites;  Contribution to the prompt recovery and restoration of archeological artifacts from the Mes Aynak site, which is of great importance to the government and people of Afghanistan;  The strengthening of sustainability of artisanal and small-scale mining operations, including establishment of a gemstone center and provision of training for downstream operations for gemstone-based entrepreneurial activities for women. Key Partners: Principally DFID and a combination of USAID and the Task Force for Business Stabilization and Operations within the US Department of Defense. Additionally Germany’s GIZ, AusAid of Australia, Finland, and the Indian School of Mines. 43 AFGHANISTAN: POWER SYSTEM DEVELOPMENT PROJECT Key Dates: Approved: October 22, 2008 Effective: March 19, 2009 Closing: January 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA - - - ARTF 60 33.7 26.3 Total Project Cost 60 33.7 26.3 *As of June 30, 2013 Project Background: The project supports the continued rehabilitation and expansion of Afghanistan’s electricity infrastructure, with a focus on increasing supply to the secondary cities of Charikar, Gulbahar and Jabul-es-Seraj located 60-70km north of Kabul, and Pul-e-Khumri which is approximately 200km north of Kabul. It follows two recently-closed projects that addressed transmission and distribution rehabilitation in Kabul and Mazar-e-Sharif. The project has recently been restructured to revise its objective and extend the closing date by 18 months. Project Development Objective: The revised project development objective is to increase the number of electricity connections for the urban centers of Charikar, Gulbahar and Jabul-es-Seraj and Pul-e-Khumri in an institutionally efficient way. Component 1: Distribution system rehabilitation: this component finances the distribution system rehabilitation at Charikar, Gulbahar and Jabul-es-Seraj, and Pul-e-Khumri. Component 2: Institutional capacity building, energy efficiency and project management support: This component finances a project management firm to support Ministry of Energy and Water in implementation, and to undertake a pilot energy efficiency program. Component 3: Rehabilitation of transmission switchyards associated with Naghlu and Mahipar hydropower stations: This component does not directly contribute to the original or revised project goals and is to be transferred to the proposed Naghlu Hydropower Rehabilitation Project, under preparation. Results: The key results expected are:  An increase in the number of households with metered connections to the grid in the target areas, from a March 2009 baseline of zero to an end-of-project target of 12,500 households in Charikar, Gulbahar and Jabul-es-Seraj and 5,500 households in Pul-e-Khumri. Key Partners: The project is implemented by the Ministry of Energy and Water, which has been a key partner in all past investments in the power sector (as well as many in the water sector), though Da Afghanistan Breshna Sherkat, the national electricity utility is expected to be the partner of choice in the future. The other main donors active in the power sector include ADB, the Government of India, Germany’s KfW and USAID. 44 AFGHANISTAN: PROMOTING ECONOMIC GROWTH AND FISCAL SUSTAINABILITY Key Dates: Approved: August 8, 2013 Effective: Pending Closing: June 15, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA 50.00 50.00 ARTF Total Project Cost 50.00 *As of June 30, 2013 Project Background: The ongoing transition process in Afghanistan carries major economic implications. Reconstruction efforts and the provision of public services was supported not only by the operations of international troops but also civilian aid, which is set to decline as the international forces leave, presenting Afghanistan – which is highly aid dependent – with a new economic reality to which it must adapt. Specifically, the decline in aid will increase risks to fiscal sustainability, economic growth, and macroeconomic stability. The government recognizes its donor dependence and the implications of the anticipated decline in aid. In order to prepare itself for the challenges ahead, it has embarked on an ambitious reform program that aims at fostering domestic sources of economic growth and enhancing revenue mobilization. In addition, the government has put in place a series of measures to mitigate the currently deteriorating fiscal trends, including stronger expenditure controls and increase in selected custom duties and fees. This development policy grant supports the government’s economic and fiscal reform program in selected areas. This operation is a first in a series of two programmatic grants to Afghanistan. The proposed first operation is for US$50 million, out of US$100 million for the programmatic series. Project Development Objective: The objective of this operation is to support policy reforms in selected areas critical for strengthening revenue mobilization and improving the enabling environment for investment in sectors with a high growth potential. As such, the operation expects to contribute to the government’s strategy towards developing greater economic and fiscal self -reliance. The operation supports legal, regulatory, and institutional reforms in customs, land administration and management, mining, and information and communication technologies (ICT). Results: In the long-term, the operation is expected to (i) boost investment in mining, agriculture, and ICT, and (ii) increase fiscal revenue through enlargement of the tax base in these key sectors and improved collection of customs duties. Intermediate outcomes include an increase in customs revenues, improved controls at customs, more affordable ICT services and an increase in ICT usage, a stronger legal, regulatory and institutional environment for mining and land management as well as better coordination in the deployment of public network infrastructure. Key Partners: The Ministry of Finance is the key implementation partner, in cooperation with the Ministry of Mines and Petroleum, the Ministry of ICT, and the Afghan land authority, ARAZI. 45 AFGHANISTAN: MTN GROUP MIGA Key Dates: Approved: June 22, 2012, Signed: June 29, 2007, July 5, 2011 MIGA Guarantee (million US Dollars): Amount Fiscal Year Equity $74.5 2006 Shareholder loan $84.1 2010 Equity IFC Key Dates: Approved: June 23, 2006 Signed: June 30, 2006/June 19, 2009 IFC Investment (million US Dollars): Amount Fiscal Year Equity 13.5 2009/10 Senior Debt 65.0 2011 Project Background: 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 third and most recent 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 US$13.5 million and senior debt of US$65 million in order to finance the expansion of MTN’s operations. MIGA issued a guarantee of US$74.5 million to cover its direct equity investment of US$85 million in Afghanistan. The coverage was for 15 years against two risks: transfer and convertibility restriction, and expropriation. The Afghanistan Investment Guarantee Facility, managed by MIGA, provided US$2.0 million of first loss. In 2011 when MTN Group expanded its network, MIGA issued a second guarantee of US$84.1m. These guarantees bring MIGA’s total gross coverage to US$158.6 million and total net coverage up to US$108.6 million. Project Development Objective: From both the country and sector perspectives, MIGA and IFC are playing an important role in increasing the availability and affordability of communication services in Afghanistan. Furthermore, IFC’s investment has been supporting the expansion of telecom services in to semi-urban and rural areas of Afghanistan. MIGA can mobilize additional capacity in the private insurance market through its reinsurance arrangements. MIGA’s establishment of the Afghanistan Investment Guarantee Facility, 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. Results: With MIGA guarantee coverage and IFC’s investment and advisory support, MTN has been able to exceed expectations and reach over 5 million subscribers, and close to a one-third market share. Key Partners: Afghanistan Investment Guarantee Facility 46 AFGHANISTAN: ROSHAN Key Dates: Mandate: July 17th 2012 Board: January 17th 2013 (streamlined) Commitment: February 14th 2013 IFC financing (million US Dollars): Financier Status Amount Date Committed 65.0 February 14th 2013 Straight Senior Loan 46.0 February 21st 2013 Disbursed (6-year maturity) 9.0 May 6th 2013 Note: US$10 million remain undisbursed as of July 18th 2013 Project Background: 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 the acquisition of its 3G license, the capital expenditures necessary to rollout the 3G network and improve the 2G network, and back the consolidation of its existing loans into a single loan, while extending the maturity. Project Development Objective: IFC provided Roshan with long-term financing not available from local commercial banks or capital markets to finance its 3G expansion plan. Given an Internet penetration rate of only 4 percent and a fixed line penetration of 1 percent in the country, IFC’s investment is expected to create a competitive environment that motivates all operators to provide the best quality mobile data services at competitive prices to the Afghan population. In accordance with the 3G license obligations, Roshan will extend its mobile broadband services coverage to achieve a target of 80 percent population coverage in key cities within five years. Other development impacts include: (i) broadening economic opportunity to reach the unbanked population in Afghanistan through Roshan’s mobile banking services; (ii) financially supporting community social programs such as building schools and playgrounds and providing clean water wells; and (iii) reducing the gender gap by financially supporting the inclusion of women in society. Key Results Expected: With IFC’s investment, Roshan is expected to achieve the following results by 2015:  Increase mobile banking customers to 900,000 (against less than 100,000 today)  Increase mobile customers to 8.1 million (against 5.6 million today)  Increase direct employment to 1,417 (against approximately 1,200 today)  Support local companies and SMEs by partnering with over 4,600 dealers and distributors (against 4,300 today)  Increase the amount of regulatory fees and taxes paid to the government to US$59 million (from US$41 million in 2012) Key Partners: AKFED, Monaco Telecom, and TeliaSonera. 47 AFGHANISTAN: FIRST MICROFINANCE BANK Key Dates: Approved: October 31, 2002 Signed: January 16, 2004 Invested: February 17, 2004 IFC financing (million US Dollars): Financier Committed Outstanding Loan - - Equity 1.96 1.96 Guarantee - - Data as of June 30, 2013 Project Background: First Microfinance Bank Afghanistan (FMBA) was founded in 2003 by the Aga Khan Fund for Economic Development, and subsequently both IFC and Germany’s KfW became shareholders. FMBA offers micro loans and 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. Project Development Objective and brief component description: (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, namely 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 Achieved: FMBA has shown a continued and improving financial performance characterized by improving profitability backed by a growing loan book and sound asset quality, despite operating in an insecure and economically fraught environment. It persistently strives to develop the private sector by introducing new products and market segments (such as housing finance and SME loans) to help improve access to finance across the country. Moreover, it has also developed and implemented a system that allows it to screen its portfolio and provide lending on a socially and environmentally responsible basis. As of March 31, 2013, FMBA reported:  A net loan portfolio of US$76.7 million;  Borrowers totaling 61,784;  Total Deposits of US$93.5 million, from 65,959 individuals with accounts;  An employee base of 986 spread among 46 main branches and 11 outlets. Key Partners: Aga Khan Foundation for Microfinance, Kreditanstalt fuer Wiederaufbau, and Aga Khan Foundation-US 48 AFGHANISTAN: TRAITEX INDUSTRY MIGA Key Dates: Approved: June 26th, 2013 Signed: June 28th, 2013 MIGA Guarantee (million US Dollars): Amount Fiscal Year Equity $1.33 2013 Shareholder loan $0.825 2013 Project Background: Afghanistan is the third largest producer of raw (greasy) cashmere in the world, after China and Mongolia. Cashmere is harvested only in limited areas of Afghanistan, mostly in the western provinces of Herat, Farah, Ghor, and Badghis. 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 and Cashmere Fibres International (“CFI”), the largest de-hairer 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 Belgium is an independent processing company that scours and carbonizes wool and cashmere. It is based in Verviers, Belgium. In June 2013 MIGA issued a guarantee of US$1.3 million to Traitex to cover direct equity against the risks of transfer restriction, expropriation, and war and civil disturbance. Project Development Objective and brief component description: From both the country and sector perspectives, MIGA is playing an important role in facilitating private investment to promote the technical know-how and investment needed to develop this sector in a conflict-affected country. Key Expected and Achieved Results: With MIGA guarantee coverage, Traitex is expected to achieve: (i) The generation of 35 permanent jobs directly, as well as supporting many hundreds of cashmere farmers indirectly; (ii) US$35,000 in taxes and fees annually; (iii) 20.6% Economic Rate of Return. Key Partners: Traitex Industry 49 THE WORLD BANK GROUP IN AFGHANISTAN www.worldbank.org.af Abdul Raouf Zia 50 PHONE +93 700 280 800 infoafghanistan@worldbank.org PHOTOS ©Graham Crouch/World Bank House 19, Street 15, Wazir Akbar Khan, Kabul, AFGHANISTAN ©WORLD BANK, AUGUST 2013