Regions and Countries

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p. 2 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Afghanistan: Country Strategy and Program Updates 2004-2006

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II. Implementation of the Country Strategy and Program

A. Progress in Poverty Reduction

15. The Government intends to prepare a national poverty reduction strategy paper that ADB and other development partners can support. Assuming national elections are held in September 2004, work will begin then on a full CSP including data collection and preparation of sector road maps.

16. Poverty in Afghanistan is associated with previous low rates of economic growth and the collapse of livelihood opportunities due to the long period of conflict. Other factors are environmental degradation, land tenure status, livestock ownership, access to water and inputs, access to off-farm employment, access to poppy cultivation, refugee/displaced person status, gender, ethnicity, and physical disability. Under the frequently used consumption criterion of $1/day, poverty incidence ranges from 60% to 80%.

17. ADB has kept a strategic poverty reduction framework in view for Afghanistan. The Postconflict Multisector Program Loan (PMPL) and Agriculture Sector Program Loan (ASPL), for example, established enabling environments for efficient production, trade, and market liberalization. The Emergency Infrastructure Reconstruction and Rehabilitation Project (EIRRP), technical assistance (TA), and pilot projects will also contribute to poverty reduction through employment generation, production increases, improved economic and social services, private sector development, increased household income, community development, gender development, environmental preservation, reintegration of refugees and internally displaced persons, and improved security.

B. Progress in the Country Strategy and Program Focus Areas

18. ADB follows a three-pronged approach to support Afghanistan's reconstruction: building capacity, establishing an appropriate policy and institutional framework, and rehabilitating essential infrastructure. In March 2003, the Government requested ADB and all other development partners to focus assistance on three or fewer sectors to minimize duplication of effort and improve the effectiveness of aid efforts. ADB agreed to focus loan and technical assistance on transport (roads and civil aviation), energy (power and gas), and natural resource management (agriculture, irrigation, and environment); TA would also cover governance and the financial sector. In March 2004, it was agreed that loan assistance would support governance and the financial sector, and that ADB's private sector interventions would also focus on banking and telecommunications. No restructuring of ADB's portfolio would be necessary until 2005.

19. Afghanistan's security and future prosperity will be more easily achieved and more sustainable by promoting effective regional cooperation on sectors such as transport, energy, and water. ADB will continue its support for the participation of Afghanistan in regional cooperation initiatives: in 2004 it will continue supporting the Central and South Asia Trade and Transport Forum (CSATTF), the key objectives of which are to promote regional trade and economic cooperation in Afghanistan and neighboring countries through improved road corridors connecting Central Asia and South Asia with Arabian Sea and the Persian Gulf ports via Afghanistan. Another ADB-supported initiative in which Afghanistan plays a key role is the Turkmenistan-Afghanistan-Pakistan (TAP) Gas Pipeline Project, to transport up to 30 billion cubic meters of natural gas from the Dauletabad fields in Turkmenistan to consumers in Afghanistan and Pakistan by constructing a 1,600 kilometer gas pipeline. ADB was requested by the project steering committee to serve as the facilitating development partner for project design and implementation, including preparation of a feasibility study.

C. Highlights in Coordinating External Funding and Partnership Arrangements

20. Three major Government initiatives are improving coordination of external funding. First, the national budget remains the central instrument for policy and institutional reform as well as for mobilizing and coordinating domestic and external resources. Second, aid agency-government CGs were established covering 12 sectors, chaired by a concerned government ministry or department with one or two aid agencies designated as focal point⁸. Third, the Government is leading the CG process to improve budget preparation and aid coordination.

21. ADB continues to work closely with other development partners, particularly Australia, Denmark, Germany, Japan, Kuwait, Netherlands, Norway, United Kingdom, United States, World Bank, European Commission, and UNDP, the major sources of ADB cofinancing and/or official development assistance to Afghanistan. Division of responsibilities has been worked out based on the Government's priorities and ADB's comparative advantage vis-à-vis other funding agencies. Coherence and consistency of approach within sectors are achieved through frequent country consultations between the Government and funding agencies.

22. During 2002-2003, ADB approved $65.6 million in grant cofinancing from the Japan Fund for Poverty Reduction (JFPR, $50 million), Kuwait Fund ($15 million), Denmark ($450,000), and Australia ($136,000). ADB will try to secure additional 2004-2006 cofinancing of about $425 million from various sources: Abu Dhabi Fund ($30 million grant) for irrigation; Australia ($271,000 grant) for capacity building at the Ministry of Finance (MOF); Canada ($730,000 grant) for irrigated area development; DFID ($750,000 grant) for renewable energy development; Japan ($30 million grants) for water supply, river basin development and community development; Saudi Fund ($100 million parallel loan) and Iran ($25 million-$30 million in parallel grant) for the Herat-Andkhoy road; U.S. Agency for International Development (USAID, $215 million in parallel grants) for road projects; Multilateral Investment Guarantee Agency (MIGA, $20 million in parallel loans) for investment guarantees; and Global Environment Facility (GEF, $810,000 grant) for environmental protection.

23. ADB's Resident Mission in Kabul was formally opened on 16 March 2004. The Resident Mission is facilitating the coordination of ADB assistance to Afghanistan as it gradually takes on responsibility for programming and project implementation.

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