Country Partnership Strategy Final Review. December Afghanistan (2009 to mid-2015)

Transcription

1 Country Partnership Strategy Final Review December 2015 Afghanistan (2009 to mid-2015)

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3 ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund AIB Afghanistan International Bank AIGF Afghanistan Investment Guarantee Facility AITF Afghanistan Infrastructure Trust Fund ANDS Afghanistan National Development Strategy ANR agriculture and natural resources APPF Afghan Public Protection Force CAPE country assistance program evaluation CAREC Central Asia Regional Economic Cooperation COBP country operations business plan CPS country partnership strategy CSPU country strategy and program update DABS Da Afghanistan Breshna Sherkat (Afghanistan Electricity Corporation) DMF design and monitoring framework EIRR economic internal rate of return FCAS GDP fragile and conflict-affected situation gross domestic product GWh gigawatt-hour ICSP interim country strategy and program ICT information and communication technology IWRM integrated water resources management JFPR Japan Fund for Poverty Reduction km kilometer kwh kilowatt hour MAIL Ministry of Agriculture, Irrigation, and Livestock MEW Ministry of Energy and Water MFF multitranche financing facility MW megawatt MPW Ministry of Public Works MRRD Ministry of Rural Rehabilitation and Development NPP National Priority Program O&M operation and maintenance PMO project management office PSM public sector management TA technical assistance

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5 CONTENTS EXECUTIVE SUMMARY I. INTRODUCTION 1 II. STRATEGIC CONTEXT 1 III. ASSESSMENT OF CPS PERFORMANCE 3 A. Relevance 3 B. Effectiveness 7 C. Efficiency 11 D. Sustainability 14 E. Development Impacts 15 F. Performance of Nonsovereign Operations 18 G. ADB and Borrower Performance 19 H. Overall Assessment 20 IV. LESSONS 21 V. RECOMMENDATIONS 22 A. Inclusive Economic Growth 22 B. Cross-Cutting Themes and Drivers of Change 23 C. Sector Selection 23 D. Enabling Environment for Private Sector 23 E. Addressing Security Risks 24 F. Enhance Monitoring and Reporting of Outcomes and Impacts 24 i APPENDIXES 1. ADB Loans, Grants, and TAs Active During 2009 to mid Afghanistan Country Partnership Strategy : Objectives and Expected Outcomes 3. Consistency of Country Partnership Strategy and Afghanistan National Development Strategy Objectives and Priorities 4. Performance Ratings of Completed Sovereign Projects, 2009 to mid Performance Assessment of Physically Completed Projects and Technical Assistance, 2009 to mid Performance Assessment of Ongoing Projects and Technical Assistance, 2009 to mid Progress Under Results Framework from Country Operations Business Plan Performance Assessment of Nonsovereign Operations, 2009 to mid CPS Final Review Ratings Methodology 10. Comparison of CPS Final Review Ratings and CAPE Ratings

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7 i EXECUTIVE SUMMARY This Country Partnership Strategy (CPS) final review covers the Afghanistan CPS and up until mid The purpose of the CPS final review is to assess the performance of ADB s operations in the country and guide the development of the next CPS for Afghanistan. The criteria used in the final review entail relevance, effectiveness, efficiency, sustainability, and development impacts. The final review also assesses ADB s and the government s performances in the implementation of ADB-financed operations and offers lessons and recommendations for the next CPS. The CPS followed ADB s Initial Country Strategy and Program and the subsequent Country Strategy and Program Updates, and its strategic directions were extended to the Interim CPS The objective of the CPS was accelerated economic growth and poverty reduction. The priority sectors were energy, transport, and agriculture and natural resources (ANR). The CPS was closely aligned with the Afghanistan National Development Strategy (ANDS), the government s poverty reduction strategy. ADB has operated in an extremely challenging environment in Afghanistan. While it appeared that the conflict was ebbing in the mid-2000s, violence escalated substantially in 2009 and then again in 2015, demonstrating that the conflict is increasing in its intensity rather than winding down. Insecurity remains the largest constraint to development in Afghanistan. Other key challenges include a large illicit economy driven by narcotics, high poverty, low school enrollment rates, inequality for women and girls, and a substantial percentage of the population comprised of returned refugees. In the assessment of the CPS, the program is rated relevant. The CPS was consistent with the needs of Afghanistan as defined under the ANDS priorities, aligned with ADB s Strategy 2020, and the sector choices were focused and appropriate. The design of the CPS was relevant to supporting inclusive growth, with most of the operations supporting ADB s inclusive growth pillars 1 and 2. Inclusiveness figured prominently in program and project designs, particularly for transport and ANR projects. ADB s coordination with other development partners varied from sector to sector, but overall ADB performed fairly well in building partnerships and coordination. ADB s Afghanistan Infrastructure Trust Fund contributed in part to this result. A key shortcoming in the relevance criterion, however, was that security issues and the conflict situation were not factored adequately into ADB s project designs and operations. ADB s program is rated effective due to the progress made towards achieving outcomes during the review period, with the transport sector being given the most weight due to its large proportion of the overall portfolio. The transport sector is rated effective due to (i) the number of kilometers of roads constructed, (ii) a decrease in intercity travel time, (iii) increased access to public service facilities, (iv) increased traffic volume, (v) reduced transport costs, and (vi) vehicle operating costs savings. The energy sector is given a rating of effective because of a higher grid connected electrification rate, increased megawatts in the North East Power System, surpassing the target for reduced system losses, and other achievements. The ANR sector is rated less than effective as a result of some cancellations, reductions in project scope, and low project effectiveness ratings. Other sectors such as public sector management, finance, and multisector were all rated less than effective. However, important contributions have been made by ADB to policy dialogue, reforms, and sector planning and governance in the sectors that ADB has engaged.

8 ii The efficiency rating is less than efficient. Most projects across all sectors have consistently experienced start up and implementation delays, cost overruns, and occasionally underutilization of funds. Most of the delays can be attributed to security conditions at project sites, limited capacities of government agencies, project design and recruitment issues, a changing legal environment, long customs clearances, and harsh weather. Contract award ratios and disbursement ratios were typically below the ADB average, but in some years they were as good or better. Overall, the program is assessed as less than likely sustainable, but developments in government actions and improved capacities to finance operations and maintenance indicated greater likelihood of sustainability in the near future. The energy and ANR sectors are rated as likely sustainable because, in the case of energy, the electricity utility DABS is able to cover all of its operations and maintenance costs, while in ANR communities and farmers groups are taking care of operations and maintenance for small irrigation infrastructures. The transport sector is rated less than likely sustainable because of a shortfall in necessary financing for operations and maintenance for roads despite the imposition of a fuel tax. The railway, however, is deemed sustainable as a result of the successful performance-based operations and maintenance contract. Finance, public sector management, and multisector are all assessed as less than likely sustainable. The rating for development impacts is less than satisfactory due to limited or inconclusive contributions to Afghanistan s broader development results and inclusive growth, and only mixed results for cross-sector and thematic areas. However, sector level impacts are more notable, particularly in energy and transport. ADB had limited nonsovereign operations during the review period, but these operations are rated successful. Projects for the telecommunications firm Roshan and Afghanistan International Bank performed well, and both companies are leaders in their respective fields. The two downsides to ADB s nonsovereign operations were that the nonsovereign political risk guarantee was not utilized and no new private sector operations were initiated during the CPS period. ADB s performance is assessed as satisfactory based on close alignment with the government s priorities, focused operations, attention to capacity building, and contributions to the preparation of sector road maps. Also, ADB mobilized over $375 million in official cofinancing during the review period. The government s performance is rated as less than satisfactory due to issues about lack of ownership in some ministries, capacity weaknesses, governance concerns, and shortcomings on fulfilling project covenants. However, the government has shown improvements in financial and project management capacities, donor coordination, and delivering a consistent message to development partners about the country s development priorities. The overall assessment for ADB s operations during 2009 to mid-2015 is successful on the borderline with a rating of 1.64 (with successful on the borderline meaning a rating between 1.60 and 1.75 in ADB s rating system, and a successful score ranging between 1.60 and 2.49). A successful rating is considered to be a remarkable and significant achievement given the challenging circumstances in which ADB s operations take place in Afghanistan. Key lessons learned from the final review are the following:

9 iii (i) Security issues and security risk management need to be more central in project design and implementation in conflict situations such as Afghanistan, even in areas of the country that are considered relatively secure. (ii) A focused program concentrated in a few sectors eases the burden on governments with limited capacities. (iii) Improving efficiency requires ensuring better quality at entry, strengthening capacities at startup, increasing supervision, and having realistic timeframes. (iv) Improved results frameworks and monitoring systems can strengthen the results orientation of ADB support. In preparing the next CPS, the final review offers several recommendations: (i) ADB should focus on inclusive economic growth. This ought to include: a. Ensuring greater local participation in planning. b. Ensuring that project designs include explicit benefits for lower income groups. c. Developing synergies with other development partners to address a greater totality of communities development needs. d. Achieving greater balance among the pillars of ADB s inclusive economic growth strategic agenda. (ii) Devote more attention to cross-cutting themes and drivers of change. (iii) ADB and the government should continue to partner on transport, energy, and agriculture and natural resources sectors in the next CPS. (iv) Devote more efforts to developing an enabling environment to support prospective nonsovereign opportunities. (v) Strengthen risk assessment and risk management approaches for ADB projects. Ways to strengthen could entail: a. Training for ADB project officers and counterpart government officials on assessing and managing security risks. b. Require security assessments, security plans, and risk mitigation for all projects. c. Give a greater role to the Afghanistan Resident Mission s Security Unit in project security matters. d. Apply conflict-sensitive approaches to ADB s operations. (vi) Enhance results orientation and measurement, and strengthen results tracking and reporting. (vii) Discontinue the use of design-build contracts.

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11 1 I. INTRODUCTION 1. Afghanistan has been a member of the Asian Development Bank (ADB) since Cumulative assistance (lending, grants, and technical assistance [TA]) totals $4.03 billion. 1 ADB is currently one of the leading development partners in Afghanistan in terms of level of assistance, and it is the largest on-budget supporter in the transport and energy sectors. 2. ADB s Operations Manual Section A2/OP calls for an evaluation of a country partnership strategy (CPS) prior to preparing a new one. A Country Assistance Program Evaluation (CAPE) for Afghanistan was prepared in 2012 and covered operations from 2002 to Since the CAPE did not cover the whole CPS for Afghanistan during , a CPS final review is being conducted. This final review assesses ADB s country operations in Afghanistan during the CPS and up until June 2015 (see Appendix 1 for list of projects). It also considers the performance of loans, grants, and advisory TAs approved before 2009 that were ongoing during the CPS period. 3. The final review serves as an input to formulating the new CPS by assessing past performance and identifying lessons and recommendations for future operations. The final review follows the evaluation criteria contained in ADB s 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. 3 The criteria entail relevance, effectiveness, efficiency, sustainability, and development impacts. This review also considers ADB and the Afghanistan government s performance in the implementation of ADB-financed operations, and concludes with lessons and recommendations for the new CPS. II. STRATEGIC CONTEXT 4. Afghanistan is an extremely challenging environment for development assistance. The conflict in Afghanistan has continued since the Taliban were driven out of power in While it appeared that the conflict was ebbing in the mid-2000s, violence escalated substantially in 2009 and then again in 2015, demonstrating that the conflict is increasing in its intensity rather than winding down. Insecurity remains the largest constraint to development in Afghanistan. 5. Although the Afghanistan economy averaged over 8.0% annual growth during , much of the growth was attributed to the surge in foreign aid and security spending. Growth, however, has slowed considerably the last two years (2013 and 2014) due to the drawdown of the international security forces and the uncertainty during and after the presidential election in 2014, which was the first democratic transfer of power in Afghanistan. Into 2015, the escalating insurgency and the lengthy delay in appointing a complete government contributed to another year of relatively slow growth, with economic growth forecasted to reach only 2.5%. 4 The prospects for growth are limited over the medium-term, as foreign assistance is expected to decline in the coming years. 6. Afghanistan faces extensive challenges in other realms. The illicit economy due to narcotics is large and exacerbates corruption and the insurgency. Poverty is estimated to be 1 Based on ADB s Loan, TA, Grant and Equity Approvals database as of 10 July Asian Development Bank Country Assistance Program Evaluation: Afghanistan. Manila. 3 Asian Development Bank Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila. 4 Asian Development Bank Asian Development Outlook Update. Manila.

12 2 36.5%, essentially unchanged from , 5 which means the high growth rates between 2007 and 2012 had virtually no impact on poverty. Despite the impressive gains made in school enrollments for boys and especially girls since 2001, an estimated 30% of school age children are not enrolled in school. The situation for women and girls has improved considerably from the Taliban regime, but gender equality indicators are among the worst in Asia. Additionally, around one quarter of the population is made up of refugees who have returned to Afghanistan during the past decade. Many of these people are homeless and jobless living in temporary camps for returnees with no public services available to them such as schools, water and sanitation, and electricity. These and other problems pose extensive challenges and strains to the government beyond the critical security issues. However, the government s ability to finance the numerous development priorities is extremely limited, with domestic revenue equivalent to a mere 8.5% of GDP in Due to these conditions, Afghanistan has relied heavily on development assistance from a number of multilateral and bilateral partners. 7. Since the resumption of ADB s operations in Afghanistan in 2002, ADB and the government have had an Initial Country Strategy and Program (ICSP) , three Country Strategy and Program Updates (CSPUs) for , , and , the CPS , and an interim CPS The ICSP of 2002 included as priority sectors agriculture and natural resources (ANR), education, health, transport and communications, energy, finance, and water supply and sanitation. The three CSPUs dropped the social sectors and water supply and sanitation, leaving ANR, energy, transport and communications, and to a limited extent finance as the priority sectors. The reduction in priority sectors was in response to the government s request for each development partner to prioritize three sectors. 9. The objective of the CPS , the focus of this final review, was accelerated economic growth and poverty reduction (Appendix 2). 6 The priority sectors under the CPS were energy, transport and communications, and ANR. The thematic focus intended to cover counternarcotics, gender, governance, private sector development, and regional cooperation. 7 The interim CPS extends the validity of the CPS and continues ADB s focus on the three priority sectors. 10. The key government strategy during this review period is the Afghanistan National Development Strategy (ANDS) , the government s poverty-reduction strategy. 8 ANDS envisioned a stable Afghanistan by 2020 based on constitutional democracy with social equity, environmental sustainability, and a market economy led by the private sector. The three pillars of ANDS are (i) security; (ii) governance, rule of law, and human rights; and (iii) economic and social development. The third pillar, economic and social development, is most relevant to ADB s operations and contains 13 sector strategies : (i) private sector development, (ii) energy, (iii) mining, (iv) water and irrigation, (v) transport, (vi) ICT, (vii) urban development, (viii) education, (ix) culture, media, and youth, (x) health and nutrition, (xi) agriculture and rural development, (xii) social protection, and (xiii) refugees, returnees, and internally displaced persons. In addition, ANDS includes six crosscutting issues covering (i) regional cooperation, (ii) 5 Central Statistical Office National Risk and Vulnerability Assessment Kabul. 6 Asian Development Bank Country Partnership Strategy: Afghanistan, Manila. 7 It is not clear if capacity development was intended to be a thematic focus in the CPS or not. It is included in the main text in para. 73, but it was excluded from the CPS thematic focus shown in Figure 1 of the main text and from Appendix 6 on Country Sector and Theme Road Maps. 8 Islamic Republic of Afghanistan Afghanistan National Development Strategy ( ): A Strategy for Security, Governance, Economic Growth & Poverty Reduction.

13 3 environment, (iii) gender equity, (iv) anticorruption, (v) capacity development, and (vi) counternarcotics. To attain this vision, ANDS set goals to be achieved by 2013 through 22 national priority programs (NPPs). 9 The programs have been continued by the government beyond 2013 in order to achieve the goals and vision by The government has also prepared an economic development strategy, Towards Self- Reliance, 10 which covers the transition period ( ) and the transformation decade ( ). It contains three pillars: infrastructure development, private sector development, and agriculture and rural development. The cross-cutting themes are gender, counter-narcotics, and environment. Additionally, the government put out Realizing Self-Reliance: Commitments to Reforms and Renewed Partnership in December 2014 for the London Conference on Afghanistan. The document serves as a statement of commitment to the reform agenda that can help Afghanistan move towards peace, recovery, productivity, and growth. 12. The key challenge in Afghanistan is to overcome the widespread insecurity that the country currently faces. An improved security environment would lead to significant improvements in economic growth and the effectiveness and efficiency of development programs and projects. ADB s operations in the country would also benefit from lower costs, higher efficiency, enhanced monitoring, and greater development impacts. III. ASSESSMENT OF CPS PERFORMANCE A. Relevance 13. The formulation and implementation of the CPS is rated relevant given its (i) consistency with country needs, (ii) alignment with ADB s Strategy 2020, (iii) appropriateness of sector focus, (iv) mix of lending modalities including grants and TA, (v) design for inclusive growth, (vi) inclusiveness of program and project designs, and (vii) enhanced partnerships. 14. Consistency with country needs. The CPS was consistent with the needs of Afghanistan as defined under the ANDS priorities (Appendix 3). To achieve social and economic development, ANDS called for strategic interventions in, among other sectors, energy, transport, agriculture and rural development, and water and irrigation main areas which the CPS focused on. Specific sector programs and interventions were also aligned with those identified in ANDS and its respective sector plans/road maps. Government ministries as well as development partners have confirmed the proper matching of ADB priority sectors to the country s needs. 11 Thematic priorities identified in the CPS were also consistent with ANDS which include counter-narcotics, capacity development, gender mainstreaming, regional cooperation, and governance. 15. Alignment with the ADB strategy. The CPS was aligned with ADB s Strategy 2020 in moving towards inclusive growth and regional integration. 12 The CPS aimed to support the country s economic and social development and poverty reduction. In particular, the CPS and 9 NPPs were grouped in six clusters: (i) peace, (ii) human resources development), (iii) infrastructure development, (iv) private sector development, (v) agriculture and rural development, and (vi) governance. 10 Islamic Republic of Afghanistan Towards Self-Reliance: Strategic Vision for the Transformation Decade. Kabul. 11 Central and West Asia Department, ADB. July Back to Office Report on the Country Partnership and Strategy Final Review. 12 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank Manila.

14 4 the accompanying country operations business plans (COBPs) intended to enhance inclusive growth through infrastructure investments resulting in higher economic growth, connecting poor people to markets, and increasing access of the poor to basic productive assets and social services. Programmed interventions were also directed at regional integration, particularly in transport and energy, to boost mobility, trade, and access to services among countries. The CPS was also in sync with the ADB strategy as it placed importance on the role of good governance, capacity development, gender equity, private sector development and partnerships in achieving development outcomes. 16. Sector selectivity. Sector choices in the CPS were appropriate, focusing on three priority sectors that are in line with ADB s strengths. ADB also ensured continuity in its Figure 1. Sovereign Portfolio: choice of priority sectors going back to the Percentage Share of Grants and TA Approved in 2009 to mid-2015 earlier CSPUs. During 2009 to mid-2015, approved sovereign operations amounting to $2.2 billion largely went to the transport sector ANR 12% (59%), energy (29%), and ANR (12%) (Figure 1). Transport ($1.3 billion) comprised mostly the Ring Road and other corridors. Projects in energy ($641 million) and ANR ($266 million) ENE TRANS 29% were mostly in electricity transmission and 59% distribution and irrigation, respectively. The sector selections and spread were strategic in FIN terms of the synergies of their results towards 0.02% the country s socio-economic development. 17. Less than 1% of the total sovereign portfolio approved during the CPS was allocated to finance, public sector management (PSM), and multisector operations. These were mostly TAs which complemented operations of the three core sectors. 13 PSM 0.05% MULTI 0.09% ANR=agriculture and natural resources, ENE=energy, FIN=finance, MULTI=multisector, PSM=public sector management, TRANS=transport Source: ADB database. 18. In terms of all projects ongoing during the CPS review period (i.e., those approved before 2009 but active during the CPS period and those approved between 2009 and mid- 2015), the portfolio totaled $3.7 billion. The sector breakdown was similar to approvals during 2009 to mid-2015 with transport: 51.9%, energy: 23.9%, ANR: 12.3%, multisector: 8.4%, finance: 1.8%, and PSM: 1.7%. 19. Selection of modalities. As proposed in the CPS, Afghanistan was provided with 100% grant support through the Asian Development Fund (ADF), Afghanistan Infrastructure Trust Fund (AITF), Japan Fund for Poverty Reduction (JFPR), Clean Energy Fund, and Water Financing Partnership Facility. This is consistent with the debt sustainability analysis which placed the country at high risk of debt distress. The use of the multitranche financing facility (MFF) was also seen as appropriate given its flexibility, predictability, and frontloading of analytical work which facilitated project execution. The use of MFFs also helped to execute 13 Technical assistance focused on strengthening government capacity to coordinate financing of infrastructure projects (multisector), strengthening capacity of microfinance institutions and commercial banks (finance), and preparation of the security plans for project implementation (public sector management).

15 5 sector priorities that aimed to address gaps in infrastructure, policy, and capacity within the transport, energy, and ANR sectors. 14 However, there were instances when tranche releases were used to augment financing of other projects outside of the scope of the MFF The CAPE critiques the frequent use of design-build contracts by ADB in Afghanistan. While there are downsides to these contracts as noted in the CAPE, there are also some benefits to them and their applicability to Afghanistan s circumstances, such as the difficulty in getting qualified contractors to work in the country. However, this final review concurs with the CAPE that design-build contracts have been overall unsuccessful. Rather than shortening implementation periods and achieving savings as expected from design-build contracts, their use has caused extensive cost overruns and delays. Moreover, as noted in the CAPE, the design-build contracts have not enabled government ministries to build their capacities in planning and design, contract management, and construction oversight. 21. Relevance of CPS design for inclusive growth. The design of the CPS is assessed as relevant to support inclusive growth. The selection of the three priority sectors intended to support pillar 1 (growth and expansion of opportunities) and pillar 2 (access to jobs and opportunities) of ADB s inclusive economic growth strategic agenda. The transport and energy sectors supported pillar 1, and the agriculture and irrigation initiatives supported pillar 2. Although no sectors were selected in the CPS to directly support pillar 3 on social protection, the Road Employment Project for Settlement and Integration of Returning Refugees and Displaced Persons project 16 helped to address pillar 3 by providing livelihood and employment opportunities to returning refugees and displaced persons. Additionally, most of the transport initiatives and all of the agriculture and irrigation initiatives can be seen as pro-poor because they took place in rural areas where a higher proportion of the poor live. 22. Inclusiveness of program and project designs. Inclusiveness figured prominently in transport and ANR projects. Investment projects and TAs in transport incorporated inclusive growth strategies that provided livelihood and employment opportunities and increased access to social services among vulnerable and disadvantaged groups, including poor farmers and women. In ANR projects, while designs were mainly inclusive, baselines and targets were formulated with ambiguity (i.e., no data disaggregation between poor and nonpoor, women and men) and obtaining reliable data has been problematic. In more recent projects, improved results frameworks for gender mainstreaming were observed. 23. Enhanced partnerships. The strength of ADB s coordination with other development partners has varied from sector to sector. In some sectors, such as transport and energy, strong donor coordination has occurred. The Interministerial Commission for Energy, financed through ADB TA, was noted by some donors as making important coordination contributions to the sector. But in other sectors such as PSM ADB has not been very active in coordination, partly because no one at the Afghanistan Resident Mission is assigned to cover the sector. Also, in ANR one ministry noted the lack of coordination among donors, many of whom are interested in working in the Panj-Amu basin While delays in project start up and implementation were experienced in most MFFs, these issues were not inherent in the use of the modality. Most operations in the country were constrained by security and capacity issues which negatively affected project duration and cost. In the case of Andkhoy-Qaisar Road Project ( ), an MFF tranche ( ) was used to finance the counterpart contribution ($18.6 million) that the government failed to provide. Total civil works contract cost was $76.6 million. Asian Development Bank Road Employment Project for Settlement and Integration of Returning Refugees and Displaced Persons. Manila. First approved in 2002 but also supplementary financing approved in 2007.

16 6 24. Division of support among development partners has worked well within some sectors. For example, in the transport sector ADB has been focused on road construction and rehabilitation while USAID has focused on institutional development of the road authority and road fund. Working within each sector s road map created synergies on the development partners efforts in supporting government priorities Additionally, the establishment of the ADB s AITF in 2010 has helped to harmonize aid and build partnerships in key infrastructure sectors, but the number of contributors has remained limited to only three. As of 30 June 2015, the total amount committed by AITF donors was $490.5 million and the total amount received was $ million from the governments of Japan (Embassy of Japan, $126.0 million), United States (USAID, $105.0 million), and United Kingdom (DFID, $119.6 million out of a total commitment of $259.5 million). AITF has been seen by some donors as lacking flexibility, particularly in the early years. As a result, AITF s implementation arrangements were revised and approved by the ADB s Board of Directors in May 2012 to make AITF operationally more flexible and more responsive to contributors own requirements. The AITF s Implementation Guidelines were accordingly revised to reflect these changes. 26. Feedback from the government and other development partners indicates that ADB has done fairly well overall in building partnerships and coordination, but more efforts could be done in some sectors. One concern from development partners is that ADB needs to improve the quality and frequency of its reporting to cofinanciers. Furthermore, enhancing intersectoral linkages is an area where coordination can be improved (footnote 11). 27. Addressing security risks. Security is deteriorating in many parts of the country that were previously identified as relatively safe, thereby affecting ongoing ADB projects. ADB is also now implementing projects in higher risk areas such as Helmand province. While security risks have been recognized as a major constraint in program and project implementation in Afghanistan, measures to mitigate these risks were often not well thought out or made specific to the project context and location. In some cases, general statements on mitigating security risks were mentioned in project documents (often copied from other projects) instead of specific fragility and security measures tailored to the project, and their cost implications were often not well integrated in the design, or the security budgets are often unrealistic in order to lower the bid proposal. In most cases, project designs have been similar to what would be done in nonconflict settings. Also, some projects became reactive as security risks emerged, often as a result of unanticipated changing security conditions in project sites. Failure to properly forecast risks and actual security costs as well as to integrate and implement appropriate detailed measures to address security concerns have led to costly delays and contributed to some projects (or their components) being suspended or cancelled altogether. This has affected the amount of benefits to local communities. Despite these ongoing issues, the security unit at the Afghanistan Resident Mission has not been adequately harnessed to advise on security issues, review proposed security measures in projects, or assist in monitoring or assessing security conditions at project sites In the energy sector, particularly MFF Energy Sector Development Investment Program (42094), components that were cancelled or dropped were picked up by other development partners. 18 The current Field Security Advisor s terms of reference is to provide security advice on AITF projects, but he has been used almost exclusively for managing security at the Afghanistan Resident Mission.

17 7 28. Interviews with government ministries highlighted the need to consistently include security as part of project design. The security arrangements, usually provided through the Afghan Public Protection Force (APPF) for larger projects, have often not adequately secured project sites, but it is currently a requirement from the government when security is needed for a project. 29. Afghanistan continues to be regarded as a post-conflict country despite the difficult security environment. Overall, it is deemed that security issues and the conflict situation were not adequately factored into ADB s project designs and operations during the CPS period. This is the key shortcoming under the relevance criterion. 30. Quality of CPS results framework. The CPS results framework needed improvement. Some outcome statements could have been better used as indicators, and some indicators could have been appropriately used as outputs or intermediate outcomes. More critically, there was a lack of consistency between the CPS period and the target years in which outcomes were to be achieved. Much of the results framework adopted the target year set forth in the Afghanistan Compact and ANDS which was set for 2010, while the CPS coverage was up to The COBP for updated the 2009 results framework. Furthermore, many indicators in the CPS results framework lacked baselines. The quality of the design and monitoring frameworks (DMFs) of projects was also often lacking. Outcomes were often actually outputs, and frequently DMFs needed more realistic and monitorable targets. This also applies to the preparation of overall MFF and tranche results frameworks. 31. Relevance ratings of completed and ongoing projects. Of the 32 projects completed during the CPS period, 27 had a relevance rating. Out of these 27, 96% (N=26) were rated relevant or highly relevant (Appendix 4). 19 All projects in energy, transport, finance, multisector, public health, and PSM have been assessed with positive relevance ratings. Relevance of operations in ANR is 83% (1 project out of 6 with a rating was less than relevant). The high percentage of relevant projects reflects the appropriateness of the CPS objectives and the focus on addressing country needs and alignment with ADB s strategies (paras ). Appendices 5 and 6 provide matrices of the assessment of relevance and the other evaluation criteria for completed and ongoing projects. B. Effectiveness 32. Progress towards achieving outcomes during the CPS period is assessed as effective. This assessment is based on the (i) measure of outcomes identified under the COBP s results framework which provides updated targets for the CPS under review (Appendix 7), 20 (ii) overall effective rating of the projects completed during the CPS period (Table 2 in Appendix 5), and (iii) likelihood of ongoing projects in achieving outputs and outcomes (Table 2 in Appendix 6). ADB support in Afghanistan has yielded encouraging outcomes in transport and energy but less so in other sectors. 33. Transport. The transport sector is rated effective. The objective of ADB operations in transport is to provide improved low cost, reliable transport connectivity for goods and people within Afghanistan and cross-border. There have been some consistency issues with regard to what was targeted and what has been measured. For example, one indicator in the results 19 Eight projects (29.6%) were rated highly relevant. 20 COBP indicators and targets are seen as more appropriate than the CPS results framework because of the inherent weaknesses in the results framework and an inability to measure many of its indicators for lack of data.

18 8 framework was increased connectivity, but the actual measured result is kilometers of roads. 21 Despite differences in measuring progress against the target indicators, measures of results have indicated (i) 643 km of roads constructed/rehabilitated, 22 (ii) a decrease in intercity travel time (65-75%), (iii) an increase in access to the nearest health, primary education and other essential services given the reduction in travel time, (iv) an increase in traffic volume, (v) 40-50% reduction in public transportation costs on selected routes, (vi) 25-41% savings on vehicle operating costs, and (vii) freight transport via railway increased by 41 million tons with 45% cost reduction. Despite delays in implementation, most ongoing projects are likely to contribute to these outcomes. 34. Other achievements that were not targeted in the sector results framework include (i) 50% increase in the number of flights and passengers with the rehabilitation of airports, (ii) at least 10,000 refugees and displaced persons obtained opportunities for livelihood, and (iii) enhanced capacities of the Ministry of Public Works (MPW) and Ministry of Transportation and Civil Aviation. In response to the potential for undesired outcomes of improved transport networks, mitigating interventions under transport projects have achieved positive results in sensitizing people on HIV/AIDS and other sexually transmitted diseases. Most of the completed transport projects were rated effective (88%). 35. ADB has engaged in extensive policy dialogue on a wide variety of issues in the transport sector. Among the policy issues progressing with the Afghan transport sector authorities are: Making a more coherent institutional landscape: helping with reforms to streamline sector responsibilities across multiple transport ministries and agencies, and make sector governance more effective. This includes assisting in the establishment of new institutions such as a road authority and road fund (both pending), a railway authority (established), and an autonomous civil aviation agency (pending). Maintenance management of road assets: engaging with the government to address to backlog of maintenance needed for road assets in order to break the cycle of buildneglect-rebuild. O&M financing needs: through the ADB-financed Transport Master Plan Update, ADB has helped the government to estimate the total annual maintenance requirements at $251 million. Road asset management system: engaging in discussions to develop a rational and systematic O&M regime for the road sector that would create and maintain transport infrastructure in a cost-effective manner. Sustainable asset financing: conducting dialogue on the user-pays (cost recovery) principle in which users should be charged in accordance with the wear-and-tear they inflict on infrastructure assets. 21 Another example is the indicator for average speed in kilometers per hour but actual measurement in average travel time. 22 An additional 707 km of road improvements are in progress.

19 9 Road contracting industry: promoting the development of the local road contracting industry to ensure that national contractors are assigned a greater share of the road works performed in Afghanistan. Trade logistics: assisting the country to reduce its trade transaction costs and improve its transport logistics. Transport and climate change: working with the government to build resilient transport infrastructure systems to significantly reduce hazard exposure and vulnerability to climate change. 36. Energy. The energy sector is rated effective. The objective of the energy sector is to improve access to affordable and reliable energy to most households. Despite mixed results in the effectiveness of completed projects (2 out of 3 were rated effective), ADB support has generally yielded positive outcomes. Progress has been made in increasing the grid connected electrification rate to 30% in 2015 which is ahead of meeting the 30% target in The North East Power System was capable of supplying 658 MW as of 2014 (from 150 MW in 2009) to make progress towards the target of 1,000 MW of connected load in The sector has already surpassed the 2017 target of 30% systems loss reduction, as it went down to 25% in However, the enactment of the Electricity Law is progressing much slower than expected. 23 While the Cabinet has already approved the Electricity Law, it has yet to be passed by the Parliament. This legislation would give full financial and operational autonomy to the electricity company DABS, ensure appropriate tariff setting, and establish the electricity regulatory authority. 37. Other achievements cited in project completion reports that are not targeted in the CPS results framework include the reduction in electricity cost and increased electricity consumption. Connection targets for households, however, are not likely to be achieved as this component has sometimes been scrapped when the need to reduce project scope becomes necessary. 24 For completed projects, the overall effectiveness rating is at 67% (N=3). As for ongoing projects, despite a difficult start, these will likely contribute to the achievement of sector outcomes as most projects are on track in terms of disbursements and contract awards as well as progress in completing outputs. 38. The government is implementing the energy sector road map, policy framework, and the envisaged investment plan as confirmed in the ADB-assisted power sector master plan, and the gas development master plan, , which have been integrated into the National Energy Supply Program. Vital achievements on the policy and institutional side were the (i) signing of power purchase sales agreements with Tajikistan and Turkmenistan that enhanced regional cooperation, (ii) creation of an autonomous power utility and formulation of tariffs for its operation making progress towards unbundling, (iii) implementation of an Operations and Maintenance Program to ensure sustainability of operations and the Disconnection and Anti-theft Policy in various sector projects which addresses non-technical systems loss, (iv) revitalizing the Interministerial Commission for Energy that has proven to be an effective mechanism for programming investments and governance support, (v) updating of 23 Although the Electricity Law should be considered an output, it is listed as an outcome under the TA for Supporting the Interministerial Commission for Energy (46347). 24 The reduced household connections have occurred under the Power Transmission and Distribution Project (37078) and the MFF Energy Sector Development Investment Program tranches 1 and 2 ( /022 and ).

20 10 the power sector master plan, (vi) formulation of the first ever gas development master plan, and (vii) a roadmap for renewable energy development Agriculture and Natural Resources. The ANR sector is rated less than effective. ADB s objective in agriculture and natural resources is to improve food self-sufficiency and increase agricultural exports. Projects in the ANR sector have experienced cancellations, reductions in project scope, and an effectiveness percentage of 20% of completed projects (N=5), and so the effectiveness in ANR is not as strong as in transport and energy. However, operations in the sector have exceeded the CPS target on irrigation coverage. Irrigation facilities from three ongoing projects are so far serving 60,389 hectares of agricultural land, which is more than the expected coverage by Furthermore, progress has been made in the operationalization of water users associations and community development councils as most are capable of undertaking operations and maintenance work on small-scale irrigation systems. 40. Other project achievements that contributed positively to the sector include, among others, 185,000 households that benefitted from agriculture-based livelihood activities in the provinces of Faryab, Sari Pul, and Jawzjan; 27 and increased income of 10,000 producers and processors in Balkh, Bamyan and Nangarhar. 28 Ongoing projects, despite initial delays, are likely to achieve their expected outputs and outcomes. 41. For policy and planning dialogue, ADB has led with the preparation of the Afghanistan Water Resource Sector Development Plan. The draft plan was developed in close cooperation with the Ministry of Energy and Water as the lead agency, plus seven other water related ministries, agencies, and entities. There are over 30 policy and regulatory recommendations in the plan. In addition, detailed water resource development master plans were prepared for the Helmand and Harirud river basins. There is also an ongoing TA on the economics of climate change that contains policy advice on climate change mitigation. 42. Contributing to a less than effective rating of some operations in the sector are lack of interest from implementing agencies (particularly during the introduction of integrated water resources management (IWRM) approach where the implementing agency requested changes in project activities to focus more on physical investments), and delays that led to reduced project scope and relevance as projects were affected by developments from other national programs (i.e., subprojects selected were no longer in demand, were seen as redundant, or had diminished linkages to the project they were supposed to support). 43. Public Sector Management. This assessment finds the PSM operations to be less than effective. ADB support focused on strengthening fiscal management, public administration, and statistical capacity of government offices. Most of these operations were characterized by extensions, cost overruns, and cancellation. While crucial building blocks for stronger PSM have been put in place, some targets have only been partly achieved or are still ongoing, suggesting 25 Future interventions under discussion include (i) development of a tariff model and framework, and (ii) development of a business plan for the power utility. 26 Actual coverage may be much higher as actual command areas served by some irrigation subprojects were not monitored and reported. Also of note is that the Emergency Infrastructure Rehabilitation and Reconstruction project ( ) achieved 100,000 ha of irrigated farm land in the Lower Balkh river basin. Asian Development Bank Afghanistan: Emergency Infrastructure Rehabilitation and Reconstruction Project. Technical Assistance Completion Report. Manila. 27 Asian Development Bank Implementation Completion Memorandum: Rural Recovery through Community- Based Irrigation Rehabilitation Project. Manila (JFPR 9039). 28 Asian Development Bank Implementation Completion Memorandum: Rural Business Support Project in Afghanistan. Manila (JFPR 9100).

21 11 the need for more time to overcome capacity constraints. Support was also provided to enhance capacity to address security of ADB assets and investments. Even with the successful completion of the first TA on addressing security risks, integration of mitigation measures and corresponding costs have yet to be consistently reflected in project designs across sectors. Positive outcomes were evident on the statistical capacity building TA specifically for poverty monitoring and assessment to support ANDS. Also, ADB has provided policy advisory support to the Ministry of Finance, specifically the Minister of Finance and two Deputy Ministers of Finance. Advisors support the Ministry in making critical decisions on economic reforms, macroeconomic policy, fiscal policy, and the effective operation of government. By ensuring that these decisions are undertaken with as much information as possible, the costs and benefits are known, and sound analysis supports policy decisions that are more effective and contribute to the development of the country. The Ministry requested that this support from ADB continue, and ensure that capacity continues to be built more broadly in the Ministry. 44. Finance. Sector operations are assessed as less than effective. Completion reports of key sector programs confirmed that some targets were only partially achieved. Long gestation periods needed by institutional reform interventions in order to produce results as well as the need for complementary reforms account for this performance. There is also a difficulty in obtaining relevant statistics to compare with baseline data. However, ADB has been making contributions to policy development in the financial sector. ADB has supported financial sector development through specialist legal support to grow the nascent Islamic finance market. With many people not accessing formal finance and international investors looking for opportunities to invest in Shariah compliant ways, Islamic finance is seen as a significant growth opportunity. Quality regulation and financial oversight is critical to this growth and to ensure confidence in Islamic finance. ADB has therefore supported the Islamic Finance Division in Afghanistan's Central Bank as the regulator of Islamic banking in terms of the development of regulatory rules and guidelines, and building capacity of the division. 45. Multisector. Completion reports of sector operations have indicated mixed results for effectiveness. While most institutional and policy reform targets for the energy and transport sectors were achieved, physical targets under the emergency infrastructure operations were not. 29 Sector operations are therefore assessed as less than effective. C. Efficiency 46. ADB operations have been less than efficient in achieving results given project efficiency ratings, startup and implementation delays, slow disbursements, and cost adjustments. These have led to the reductions in project scope and inputs including project cancellations reducing effectiveness of ADB support. On average, loans, grants and TAs have been extended by about 28.7 months before closing, with 16 projects having closing delays of more than 40 months. 47. Efficiency ratings. Out of 17 completed projects with an efficiency rating, 2 (11.8%) were rated highly efficient, 4 (23.5%) efficient, and 11 (64.7%) less than efficient. One project, the Hairatan to Mazar-e-Sharif Railway Project, was rated highly efficient in the completion report as a result of having exceeded its expected economic internal rate of return (EIRR) as well as thorough planning and management of construction, complemented with enhanced ADB project supervision, and expeditious approvals and release of payments. 30 Two other transport 29 Asian Development Bank Project Completion Report: Emergency Infrastructure Rehabilitation and Reconstruction. Manila. 30 Asian Development Bank Project Completion Report: Hairatan to Mazar-e-Sharif Railway. Manila.