Afghanistan: Supporting State Building and Development

Challenges

Afghanistan faces a daunting set of challenges after almost three decades of conflict. By 2010, the Government of Afghanistan initiated the Kabul Process, which aims to support full Afghan leadership and responsibility for the development of Afghanistan over the coming years. The government has initiated 23 National Priority Programs (NPPs) covering such areas as governance, service delivery, and infrastructure. The government asked donors to align their programs with the NPPs to coordinate and target development efforts in support of principles of aid effectiveness.

Meeting the Challenges

The World Bank’s current engagement with Afghanistan is determined by the Interim Strategy Note (ISN), which is closely aligned with the government’s Afghanistan National Development Strategy. World Bank support to Afghanistan over 2012-2014 is based on supporting the delivery of some of the country's most important national priorities. It is also grounded in helping the government manage the critical transition from security and development dominated by the international community to one led by the government by the end of 2014. World Bank Group support is provided around three themes:

1. Building the legitimacy and capacity of institutions
2. Equitable service delivery
3. Inclusive growth and jobs

Bank Group Contribution

The Bank is delivering its program through International Development Association (IDA) grants, from which Afghanistan receives about $150 million per year, as well as the Afghanistan Reconstruction Trust Fund (ARTF), which could potentially provide up to $800 million per year in grants during the period of the Interim Strategy Note (2012-2014). The Bank’s private-sector arm—the International Finance Corporation (IFC)—is also strengthening its support to private sector companies and improving the business environment.

Since 2001, the International Development Association has provided $2.75 billion in financing to the Government of Afghanistan for a large number of development and emergency reconstruction projects. This support comprises $2.31 billion in grants and $436.4 million in no-interest loans also known as ‘credits’. As of January 2014, IDA has 20 active projects in Afghanistan with net commitments of almost $1 billion.

In recognition of the enormous challenges of a post-conflict setting, IDA has provided exceptional levels of financial support to Afghanistan. IDA support emphasizes national programs that are improving the lives of millions of Afghans across the country, including in the areas of health, education, rural development, and public finance management.

The International Financial Corporation has provided support through investments totaling some $90 million, as well as advisory assistance in seven interventions in the areas of Access to Finance, Investment Climate Reform, Agribusiness, Small and Medium Enterprise training and Public Private Partnerships.  IFC is working towards increasing its commitments to the private sector and assessing the possibility of increasing its advisory work in different areas. 

The Afghanistan Reconstruction Trust Fund has been the largest single source of external on-budget financing that supports Afghanistan’s National Priority Programs, government operating costs and salaries, as well as the policy reform agenda for the past 12 years. It includes support for development projects in health, education, rural development, and infrastructure. Since its inception, 33 donors have contributed a total of $6 billion to ARTF. It is administered by the World Bank in close cooperation with the Government of Afghanistan, represented by Ministry of Finance, as well as the many donors. 

The Multilateral Investment Guarantee Agency (MIGA), the World Bank’s political risk insurance and credit enhancement arm, promotes foreign direct investment into emerging economies to support economic growth, reduce poverty, and improve lives. MIGA has $153 million of gross exposure in Afghanistan, supporting telecommunications 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, one of which is a joint effort with IFC in the telecommunications sector (MTN) and the other is MIGA-only in the Traitex industry.

Partners

ARTF is a partnership between the international community and the Government of Afghanistan for the improved effectiveness of the reconstruction effort. Since early 2002, 33 donors have contributed over $6 billion, making ARTF the largest contributor to the Afghan budget – for both operating costs and development programs.

Results

Education: The International Development Association (IDA) is helping to rehabilitate primary schools and train teachers, while giving technical assistance to strengthen the Ministries of Education and Higher Education.  The Education Quality Improvement Program (EQUIP), supported by IDA and Afghanistan Reconstruction Trust Fund (ARTF), gives funds to communities to rehabilitate or construct school buildings, and access teaching and learning materials. Funds are directed through school shuras, or councils, now functioning in more than 13,500 schools. Since 2001, a total of 442 schools has been constructed and 416 are under construction and expected to be built by March 2015.

The Skills Development Program revived two key institutions in Kabul: the National Institute of Management and Administration that prepares young professionals to acquire junior level jobs in public and private sectors; and the National Institute of Music that trains gifted young musicians. By March 2015, some 9,000 students are expected to graduate from both institutions. 

Health: Over the past decade, Afghanistan has made steady progress in the health sector.  The number of functioning health facilities increased from 496 to more than 2,000. Around 20,000 community health workers—half of them women—were trained and deployed throughout the country, increasing access to family planning and boosting childhood vaccinations. The number of facilities with trained female health workers rose from 25 percent before the project to 74 percent today. These interventions have produced considerable improvement in the coverage of reproductive and child health services, as well as a significant drop in maternal and child mortality.

Bringing most of the efforts in public health service delivery under one umbrella, the System Enhancement for Health Action in Transition (SEHAT) Program is expanding the provision of basic health and essential hospital services in 22 provinces, and strengthening the capacity of the Ministry of Public Health at central and provincial levels to effectively carry out its stewardship functions. The program, financed in the amount of $407 million, will be jointly supported through a contribution of $30 million from the Government of Afghanistan, $100 million from an IDA Grant, $7 million from the Norwegian Health Results Innovation Trust Fund, and $270 million from ARTF.

Rural Development: The National Solidarity Program (NSP), the government’s flagship rural development program, is empowering rural communities by facilitating democratically elected Community Development Councils (CDCs). To date, over 32,000 CDCs in 390 districts representing almost all districts have received over $1.3 billion in block grants, and implemented over 77,000 rural infrastructure sub-projects in their respective villages. About 80 percent of the projects involve infrastructure such as irrigation, rural roads, electrification, and drinking water supply, all critical for the recovery of the rural economy. More than half the projects have been completed under this IDA and ARTF-funded program.

Improving access to basic services and facilities through secondary and tertiary roads, the IDA-funded Afghanistan Rural Access Project will increase the number of people living within two kilometers (km) of feeder roads and reduce travel time to essential services. The project is expected to build 500 km of secondary roads and 600 km of tertiary roads by March 2015.

Horticulture and Livestock: Building on the 5,000 hectares of fruit orchards established since 2009 through its predecessor, the National Horticulture and Livestock Project (NHLP) will rehabilitate 6,000 hectares of old orchards, and plant 1,500 new vineyards and orchards of apricots, pomegranates, almonds, and pistachios in 2014. This ARTF-funded project is also expected to reduce animal brucellosis by 15 percent throughout the country, granting a means of sustainable income to the rural poor by March 2015.

Irrigation: With over 85 percent of rural population relying on agriculture, irrigation remains a pressing need in rural Afghanistan. The Irrigation Restoration and Development Project (IRDP), supported by IDA, ARTF, and the government, is ensuring irrigation of some 300,000 hectares of land by rehabilitating irrigation systems and building a limited number of small multi-purpose dams. The rehabilitation of 43 medium and large irrigation schemes has been completed. It is expected that work on 60 irrigation schemes will be completed by March 2015.

Rural Enterprise: The Afghanistan Rural Enterprise Development Project (AREDP), funded by IDA and ARTF, has mobilized 41,800 rural poor—almost half of whom are women—in 3,500 village Savings Groups (SGs), which have collectively saved over $1.5 million. Federated in 35 Village Savings & Loans Associations, they have issued over 10,400 loans to SG members with a repayment rate of about 95 percent.

AREDP also works towards strengthening market linkages and value chains for rural enterprises by providing technical support to over 450 Enterprise Groups (58 percent women) and 150 Small and Medium Enterprises that have been selected for their potential as key drivers of rural employment and income generation. AREDP uses Community Development Councils as an entry point into communities and is currently working in 20 districts of five provinces.

Customs: The IDA-funded Customs Reform and Trade Facilitation Project assisted the Afghan Customs Department (ACD) to migrate to the web-based Automated System for Customs Data World (ASYCUDA World), an automated system for customs data. This system is in operation at Islamqala, Kabul and Kabul Airport Customs where it has further expedited the release of legitimate goods. By March 2015, ACD will also install systems for real time monitoring of customs operations, and cross-border custom-to-custom data exchange with neighboring countries.

Market Development: The Afghanistan New Market Development Project (ANMDP), funded by IDA, aims to pilot a business development program in the urban centers of Kabul, Mazar-e-Sharif, Jalalabad and Herat, which are the major hubs of economic activity. The project aims to help enterprises gain market knowledge, improve product quality, boost productive capacity, acquire new technologies, and develop and implement business plans to increase their presence in domestic and export markets. To date, the Facility for New Market Development has received applications from over 500 small and medium enterprises (SMEs), and signed cost-sharing grant contracts with over 200 SMEs.

Telecommunications:  The Afghanistan Information and Communication Technology Sector Development Project, funded by IDA, supports the government’s use of mobile technologies to improve public service delivery in strategic sectors in Afghanistan. The project will train 1,500 young Afghans to develop Information Technology (IT) skills and improve their employability by March 2015. Implementation of three contracts for the installation and commissioning of approximately 1,000 kilometers of fiber optic cables; and one contract for the establishment of a shared government mobile services delivery platform has taken off. Optical fiber cable construction is pro­gressing; about 50 kilometers of duct­ing has been completed. Some 450 Afghans have been trained under the IT skills development program.

Moving Forward

Afghanistan’s achievements in the last ten years have been impressive in many ways. The coming years will be critical to strengthening Afghan institutions’ ability to deliver basic services nationally and consolidate and expand the economic development gains made to date. IDA’s role during this period—beyond the provision of its own resources—must be to continue to make the case for these principles, and to help the government effectively prioritize and utilize its own resources.