Countries and Regions

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p. 3 of 10 BACK | NEXT Executive Summary I. Current Development Trends and Issues II. The Government's Development Strategy III. ADB's Development Experience IV. ADB's Strategy V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation

Afghanistan: Initial Country Strategy and Program 2002-2004

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II. The Government's Development Strategy

A. Development Goals and Strategy

22. The plan outlined by IAA Chairman, H.E. Hamid Karzai at the International Conference on Reconstruction Assistance to Afghanistan in Tokyo on 21-22 January 2002, espouses the vision of a prosperous, and secure Afghanistan. It also refers to an efficient and transparent government, small and flexible, accountable both internally and externally and only a regulator and promoter of the entrepreneurial energies of the people. Since the Tokyo Conference, the IAA has prepared a National Development Framework¹⁸ outlining the Government's priorities and plans, and incorporating findings of joint sector missions fielded for CNA. The strategy outlined consists of three pillars: building of human and social capital, building of physical infrastructure, and private sector development.

23. The Government's priority program under human and social capital development includes (i) return and reintegration of IDPs and refugees; (ii) provision of education with particular focus on training and recruitment of teachers and on vocational education aimed at absorbing ex-combatants and the lost generation; (iii) addressing the problem of chronic malnutrition and the provision of preventive health care, with investments directed toward the poor and rural areas; (iv) promoting sustainable livelihoods; (v) demining and demobilization; and (vi) creation of a sustainable social policy. With regard to infrastructure, the Government's priority programs include (i) transport and communications, (ii) water and sanitation, (iii) energy, (iv) urban management, and (v) environment and natural resource management. As for private sector development, the Government has laid out a number of steps in several related fields such as finance, investment, trade, and anticorruption. The Government's strategy for reviving the financial sector includes (i) development of an effective payments system with adequate transparency and regulation; (ii) facilitation of the establishment of private sector SMEs and a venture capital fund; (iii) providing support for microfinance including housing finance for the poor; (iv) re-establishment of the legal framework and the functioning of the central and the commercial banking sector, including offering compensation to the former depositors; and (v) removing obstacles to the development of finance companies and private leasing services. To promote private investment, the Government proposes to set up company registration procedures, establish land title registration schemes, establish a body to oversee the privatization program, compile a survey of state assets, privatize appropriate state assets, and establish a foreign investor facilitation center. The Government's strategies for trade include (i) establishment of a free trade regime, (ii) streamlining of customs procedures and trade legislation, (iii) extending support for the establishment of a chamber of commerce, (iv) establishing a standards and certification body, and (v) promoting the establishment of foreign trade missions in Kabul. In addition, the Government has drawn up a number of subprograms for improving governance and security, which deal with the physical infrastructure of the Government, management training, land registration, financial management and revenue service capacity building, information management and aid tracking, creation of a national army, creation of a national police force, revival of the justice system, mine clearance and awareness, and demobilization of excombatants.

B. Resource Mobilization and Investment

24. According to the PNA prepared jointly by ADB, the World Bank, and UNDP, the cost of Afghanistan's reconstruction is estimated at about $4.9 billion in the first two and a half years. The total investment requirement over the next decade is estimated at $14.6 billion. This assessment does not cover humanitarian needs, i.e., food, shelter, medicine, and provisions which may run up to $1 billion over this period, assuming there is no further natural or manmade calamity. Under normal circumstances, domestic resources would play an important role in financing total investment requirements. However, at this stage, the Government has very limited capacity to mobilize resources to meet its anticipated current expenditures, let alone have anything available for investment. According to IMF estimates government revenue will cover less than 18% of projected expenditure for the current fiscal year (22 March 2002-21 March 2003).

C. Role of External Assistance

25. External assistance will play a dominant role during the years of Afghanistan's rehabilitation, reconstruction, and development. To determining the magnitude of the external assistance requirement, the ADB/UNDP/World Bank jointly sponsored the Islamabad Conference held in November 2001 and set the stage for a multisector PNA in collaboration with Afghanistan's NGOs, people, communities, officials and professional community. Subsequently when the IAA was formed on 22 December 2001 following the Bonn Conference, it became the key partner in the PNA process. The Bonn Conference identified humanitarian assistance, gender development, education, health, water, and sanitation as priority areas for external assistance. ADB highlighted the importance of an appropriate policy and institutional framework, alongside the humanitarian effort to provide a foundation for reconstruction investments. Based on the PNA, international agencies pledged $4.5 billion over 2.5 years for reconstruction at the Tokyo Conference on 21-22 January 2002.

26. In February 2002, the IAA together with the UN and NGOs launched the Immediate and Transitional Assistance Program for the Afghan People (ITAP) calling for $1.8 billion in external assistance for 2002 to meet relief, recovery, and reintegration needs for IDPs and refugees. ITAP drew heavily from the PNA. Areas identified as requiring external funding are food assistance, food security, agriculture and environment, nutrition, health, water and sanitation, shelter, housing and urban renewal, protection and promotion of human rights, gender, mine action, education, refugees, returnees and reintegration assistance, governance, employment, infrastructure, and coordination and common services. Appendix 3 summarizes the level of commitments and the main areas of external assistance to Afghanistan.

D. ADB's Assessment of the Government's Development Strategy

27. ADB is in full agreement with the priorities set out by the IAA. A number of areas require the Government's further attention in the coming months as it more fully appreciates Afghanistan's situation.

28. First, the stress on livelihood support for returned refugees is important, but seamless transition from humanitarian to reconstruction assistance needs to be focused on more sharply. Second, the Government needs to address more vigorously the issue of building capacity, not just at the central but also at the local level. Third, NGOs and community organizations or traditional community institutions could be used to support and assist whenever possible to implement development work. Fourth, security is a most critical concern, because operations outside Kabul and a few other cities and areas will depend on it. Therefore, the Government should continue to vigorously create conditions for national and international assistance efforts to be implemented successfully. Fifth, there is a strong case for the Government to articulate clear strategies with regard to subregional cooperation and open trade regime, industrial development, and decentralization.

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