Country Operations Business Plan November 2015 Afghanistan 2016 2018 This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.
CURRENCY EQUIVALENTS (as of 3 November 2015) Currency unit afghani (AF) AF1.00 = $0.0154 $1.00 = AF64.8800 ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund COBP country operations business plan CPS country partnership strategy MFF multitranche financing facility TA technical assistance NOTES (i) (ii) The fiscal year (FY) of the Government of Afghanistan and its agencies ends on 21 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2014 ends on 21 December 2014. In this report, "$" refers to US dollars. Vice-President W. Zhang, Operations 1 Director General S. M. O Sullivan, Central and West Asia Department (CWRD) Team leader Team members T. Panella, Country Director, Afghanistan Resident Mission, CWRD A. Aleem, Senior Energy Specialist, CWRD M. Hanif Ayubi, Senior Project Officer, CWRD F. Catacutan, Programs Officer, CWRD M. Davila, Country Specialist, CWRD D. Hill, Principal Transport Specialist, CWRD D. Oldfield, Senior Economist, CWRD W. Tawisook, Senior Transport Specialist, CWRD M. Thiruchelvam, Portfolio Management Specialist, CWRD H. Woldring, Senior Water Resources Specialist, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
CONTENTS Page I. CONSISTENCY OF BUSINESS PLAN WITH COUNTRY TNERSHIP STRATEGY 1 II. INDICATIVE RESOURCE AMETERS 1 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 2 APPENDIXES 1. Country Assistance Results Areas 3 2. Indicative Assistance Pipeline 4 3. Assistance Program for Current Year 7
1 I. CONSISTENCY OF BUSINESS PLAN WITH COUNTRY TNERSHIP STRATEGY 1. The country operations business plan (COBP), 2016 2018 is aligned with the priorities set by the country partnership strategy (CPS), 2009 2013, and extended by the interim CPS, 2014 2015 for Afghanistan. 1 These documents prioritized investment in infrastructure including energy, transportation, and agriculture and natural resources. The COBP 2016 2018 is consistent with these priorities, and will promote inclusive economic growth, regional integration, governance, and capacity development. 2 The new government, which assumed office in September 2014, launched its policy and reform agenda through its Realizing Self-Reliance paper at the London Conference on Afghanistan in December 2014. 3 ADB s strategic focus supports the government s priorities as set out in this paper, and is aligned with the Afghanistan National Development Strategy and the National Priority Programs, which are being updated by the new government in line with its Realizing Self-Reliance agenda. II. INDICATIVE RESOURCE AMETERS 2. Afghanistan is a group A developing member country. Afghanistan is eligible only for Asian Development Fund (ADF) grants, as its 2014 debt distress classification was assessed as high risk. The indicative ADF grant allocation for 2016 2018 is $507 million. 4 The final allocation will depend on the available resources and the country performance assessments. The COBP 2016 2018 will be funded by the ADF exceptional post-conflict assistance grant and the Afghanistan Infrastructure Trust Fund. Funding from other sources, including the subregional pool under concessional resources, will be actively explored as well. Afghanistan is undergoing a phase-out from exceptional post-conflict assistance, which began with the 2009 2010 ADF biennial country allocation. The phase-out was suspended for 2011 2012. In March 2012, ADF donors agreed to extend the post-conflict phase-out period from 2016 to 2018. 3. Five ADF-financed projects are programmed for 2016 2018: (i) transport one multitranche financing facility (MFF) tranche and one technical assistance (TA) grant for $77 million (15.2% of funds); (ii) energy two MFF tranches for $301 million (59.4% of funds); and (iii) agriculture and natural resources two projects for $129 million (25.4% of funds). The scope of some projects can be expanded if additional funding becomes available during the COBP period, and there is a strong standby pipeline for 2017 2018 ready to absorb any additional ADF allocation. 5 In addition to the ADB grants, $665 million in cofinancing and $14 million in government contributions will support the programmed projects. 1 Asian Development Bank. 2008. Country Partnership Strategy: Afghanistan, 2009 2013. Manila; Asian Development Bank. 2014. Interim Country Partnership Strategy: Afghanistan, 2014 2015. Manila. 2 A conflict-sensitive approach will be used to implement this COBP, following the Operational Plan for Enhancing ADB s Effectiveness in Fragile and Conflict-Affected Situations. Asian Development Bank. 2013. Operational Plan for Enhancing ADB s Effectiveness in Fragile and Conflict-Affected Situations. Manila. 3 Islamic Republic of Afghanistan. 2014. Realizing Self-Reliance: Commitments to Reforms and Renewed Partnership. Kabul. 4 Afghanistan receives exceptional post-conflict assistance from the Asian Development Fund (ADF). The ADF grant financing for Afghanistan is determined by the sum of the performance-based allocation and a portion of the postconflict premium. In accordance with the ADF grants framework, the country is to receive 100% of its country allocation in grants in 2015. The proportion of grants for the resource allocations in 2016 2018 will be determined by future annual debt distress classifications in accordance with the ADF grants framework. 5 ADB plans to propose under the ADF 12 Replenishment Meeting that ADB suspend the phase-out of post-conflict assistance to Afghanistan for 4 years, during 2017 2020. This proposal, which is subject to endorsement by ADF donors and approval by ADB s Board of Directors, would provide additional resources for Afghanistan during 2017 2020. These additional resources would be programmed in consultation with the government during the next programming cycle.
2 III. SUMMARY OF CHANGES TO LENDING AND NONLENDING PROGRAMS 4. The following changes have been programmed for the COBP: (i) (ii) (iii) (iv) Transport. The MFF Transport Network Connectivity Investment Program, originally programmed for 2015, will be processed in 2016. The MFF will cover strategic roads, railway, and operations and maintenance. The estimated cost of tranche 1 has been revised to $258 million from $200 million, while ADF allocation is decreased to $63 million from $115 million allocated in 2015, and cofinancing is increased from $85 million to $190 million. For 2016, a technical assistance grant for the Preparation of the Central Asia Regional Economic Cooperation Corridors 5 & 6 (Salang Corridor) Project has been added. Other changes include: MFF tranche 2 is moved from 2016 to 2018 standby, and MFF tranche 3 has been dropped from 2017. Energy. Tranche 1 of the MFF Energy Supply Improvement Investment Program, originally scheduled for approval in 2016, is advanced to 2015. The estimated cost of the tranche is $280 million, with the ADF allocation increasing from $164 million to $200 million (including a regional ADF allocation). The cost of MFF tranche 2 increased from $250 million to $335 million, with ADF grant increasing from $50 million to $165 million. Agriculture, natural resources, and rural development. The $63 million Panj- Amu River Basin Project for 2015 is reprogrammed to 2016. The Helmand River Basin Project is now firm for 2017 and the estimated project cost has increased from $180 million to $300 million, with ADF allocation increasing from $50 million to $116 million. The Kabul Managed Aquifer Recharge Project is deferred from 2016 to 2018. The cost of the Agriculture Market Infrastructure Project Additional Financing is increased from $7 million to $11 million. Nonlending products. For 2015, Sheberghan Gas to Power Development was dropped, and Building Resilience to Fragility in ADB-Supported Projects in Afghanistan was reduced from $7.2 million to $1.5 million. The savings are moved to a new TA in 2016 for Support for Infrastructure Investments and Policy II. Also for 2016, the programmed TA on Transport Sector Operations and Maintenance Support has been dropped. Preparing the Water Sector Development Project Preparatory TA has been added for 2017. The project preparatory TA for the Kabul Managed Aquifer Recharge Project, cofinanced by the Afghanistan Infrastructure Trust Fund, is renamed and the amount has been reduced to $7.6 million. Other TA changes include: (i) increased amount for Preparing the Helmand River Basin Project from $800,000 to $1.5 million, (ii) dropped the project preparatory TA on Torghundi to Herat Railway Feasibility Study from 2015, (iii) dropped Policy Support in Gas Sector from 2017, and (iv) added Gas Sector Development Master Plan to 2015 with $200,000 cofinancing. 5. ADB s private sector operations will continue to focus on some of the areas identified in the CPS 2009 2013 and carried over to the interim CPS 2014 2015, including energy and mining.
Appendix 1 3 COUNTRY ASSISTANCE RESULTS AREAS ADB Key Country Development Outcomes that ADB Contributes to 1. Transport Improved low cost, reliable transport for goods and people within Afghanistan and cross-border 2. Energy Improved access to affordable and reliable energy for most households Key Areas of Assistance Road transport (nonurban) Rail transport (nonurban) Transport policies and institutional development Electricity transmission and distribution Renewable energy generation: solar Renewable energy generation: wind Indicative Resource Allocation in 2016 2018 Amount: $77 million (ADF) and $206 million (cofinancing) Share of COBP envelope: 15.2% Amount: $301 million (ADF) and $205 million (cofinancing) Share of COBP envelope: 59.4% Changes from Last COBP Sector development outcome modified Sector development outcome modified Renewable energy generation: small hydro Energy efficiency and conservation Energy sector development and institutional reform 3. Agriculture, Natural Resources, and Rural Development Improved food self-sufficiency and Irrigation increased agriculture exports Agricultural drainage Rural flood protection Agro-industry, marketing, and trade Water-based natural resources management Land-based natural resources management Amount: $129 million (ADF) and $254 million (cofinancing) Share of COBP envelope: 25.4% Sector development outcome modified Agricultural policy, institutional, and capacity development ADB = Asian Development Bank, ADF = Asian Development Fund, COBP = country operations business plan, CPS = country partnership strategy. Source: Asian Development Bank.
4 Appendix 2 INDICATIVE ASSISTANCE PIPELINE Project/Program Name 2016 Firm Sector Poverty Targeting Table A2.1: Grant Products, 2016 2018 Strategic Agendas and Drivers of Change Division Year of PPTA/ PDA Total MOL COL Cost ($ million) ADB a ADF Grants Total Gov t Cofinance Preparation of Central Asia Regional Economic Cooperation Corridors 5 & 6 (Salang Corridor) Project TA Grant MFF Transport Network Connectivity Investment Program (tranche 1) b MFF Energy Supply Improvement Investment Program (tranche 2) c Panj-Amu River Basin Project TRA GI IEG, RCI, TRA GI IEG, RCI, ENE GI IEG, GEM, CWTC 30.0 0.0 0.0 13.0 13.0 0.0 17.0 CWTC 258.0 0.0 0.0 64.0 64.0 5.0 189.0 CWEN 2013 335.0 0.0 0.0 165.0 165.0 5.0 165.0 ANR GI IEG, ESG, CWER 2013 63.0 0.0 0.0 13.0 13.0 0.0 50.0 Total 686.0 0.0 0.0 255.0 255.0 10.0 421.0 2017 Firm Helmand River Basin ANR GI IEG, ESG, CWER 2015 300.0 0.0 0.0 116.0 116.0 0.0 184.0 Project Total 300.0 0.0 0.0 116.0 116.0 0.0 184.0 2017 Standby MFF Energy Supply Improvement Investment Program (tranche 3) Kabul Managed Aquifer Recharge Project ENE GI IEG, GEM, CWEN 2013 180.0 0.0 0.0 136.0 136.0 4.0 40.0 ANR GI IEG, ESG, CWER 2015 20.0 0.0 0.0 0.0 0.0 0.0 20.0 Total 200.0 0.0 0.0 136.0 136.0 4.0 60.0
Appendix 2 5 Project/Program Name 2018 Firm Sector Poverty Targeting Strategic Agendas and Drivers of Change Division Year of PPTA/ PDA Total MOL COL Cost ($ million) ADB a ADF Grants Total Gov t Cofinance MFF Energy Supply Improvement Investment Program (tranche 3) Kabul Managed Aquifer Recharge Project ENE GI IEG, GEM, CWEN 2013 180.0 0.0 0.0 136.0 136.0 4.0 40.0 ANR GI IEG, ESG, CWER 2015 20.0 0.0 0.0 0.0 0.0 0.0 20.0 Total 200.0 0.0 0.0 136.0 136.0 4.0 60.0 2018 Standby MFF Transport Network Connectivity Investment Program (tranche 2) Central Asia Regional Economic Cooperation Corridors 5 & 6 (Salang Corridor) Project TRA GI IEG, RCI, TRA GI IEG, RCI, CWTC 360.0 0.0 0.0 210.0 210.0 0.0 150.0 CWTC 2016 500.0 0.0 0.0 300.0 300.0 0.0 200.0 Total 860.0 0.0 0.0 510.0 510.0 0.0 350.0 ADB = Asian Development Bank; ADF = Asian Development Fund; ANR = agriculture, natural resources, and rural development; COL = concessional OCR lending; CWEN = Central and West Asia Energy Division; CWER = Central and West Asia Environment, Natural Resources and Agriculture Division; CWTC = Central and West Asia Transport and Communications Division; ENE = energy; ESG = environmentally sustainable growth; GEM = gender equity and mainstreaming; GI = general intervention; Gov t = government; IEG = inclusive economic growth; MFF = multitranche financing facility; MOL = market-based OCR lending; OCR = ordinary capital resources; = partnerships, PDA = project design advance; PPTA = project preparatory technical assistance; RCI = regional integration; TRA = transport. a Reflecting the approved combination of ADF lending operations with the OCR balance sheet that will become effective on 1 January 2017. For 2016, COL and MOL should be understood to mean ADF lending and OCR lending. b The MFF Transport Network Connectivity Investment Program is estimated to be $800 million. c The MFF Energy Supply Improvement Investment Program is estimated to be $1.22 billion. Source: Asian Development Bank.
6 Appendix 2 Table A2.2: Nonlending Products and Services, 2016 2018 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($'000) Source Amount ($'000) Total ($'000) 2016 Policy Support in Natural Resources ANR CWER CDTA TASF 800.0 0.0 800.0 Support for Infrastructure Investments and ANR, AFRM CDTA TASF 500.0 AITF 5,000.0 5,500.0 Policy II ENE, TRA Total 1,300.0 5,000.0 6,300.0 2017 Preparing the Water Sector Development ANR CWER PPTA TASF 300.0 AITF 1,200.0 1,500.0 Project Total 300.0 1,200.0 1,500.0 2018 Public Management Support II FIN CWPF CDTA TASF 1,500.0 AITF 2,000.0 3,500.0 Total 1,500.0 2,000.0 3,500.0 ADB = Asian Development Bank; AFRM = Afghanistan Resident Mission; AITF = Afghanistan Infrastructure Trust Fund; ANR = agriculture, natural resources and rural development; CDTA = capacity development technical assistance; CWER = Central and West Asia Environment, Natural Resources and Agriculture Division; CWPF = Central and West Asia Public Management, Financial Sector and Trade Division; ENE = energy; FIN = finance; PPTA = project preparatory technical assistance; TASF = Technical Assistance Special Fund; TRA = transport. Source: Asian Development Bank.
Appendix 3 7 ASSISTANCE PROGRAM FOR CURRENT YEAR Table A3.1: Grant Products, 2015 Strategic Agendas Year of Cost ($ million) ADB Project/Program Name Poverty and Drivers PPTA/ ADF Co- Sector Targeting of Change Division PDA Total OCR Loans Grants Total Gov t finance 2015 Firm MFF Energy Supply ENE GI IEG, GEM, CWEN 2013 280.0 0.0 0.0 200.0 200.0 5.0 75.0 Improvement Program (tranche 1) a Agriculture Market ANR GI IEG, ESG, CWER 2005 11.0 0.0 0.0 0.0 0.0 0.0 11.0 Infrastructure Project (Additional financing) Total 291.0 0.0 0.0 200.0 200.0 5.0 86.0 2015 Standby Preparation of Central Asia Regional Economic Cooperation Corridors 5 & 6 (Salang Corridor) Project TA Grant TRA GI IEG, RCI, CWTC 30.0 0.0 0.0 14.0 14.0 0.0 16.0 Total 30.0 0.0 0.0 14.0 14.0 0.0 16.0 ADB = Asian Development Bank; ADF = Asian Development Fund; ANR = agriculture, natural resources, and rural development; CWEN = Central and West Asia Energy Division; CWER = Central and West Asia Environment, Natural Resources and Agriculture Division; CWTC = Central and West Asia Transport and Communications Division; ENE = energy; ESG = environmentally sustainable growth; GEM = Gender Equity and Mainstreaming; GI = general intervention; Gov t = government; IEG = inclusive economic growth; MFF = multitranche financing facility; OCR = ordinary capital resources; = partnerships; PDA = project design advance; PPTA = project preparatory technical assistance; RCI = regional integration; TRA = transport. a The MFF Energy Supply Improvement Investment Program is estimated to be $1.22 billion. Source: Asian Development Bank.
8 Appendix 3 Table A3.2: Nonlending Products and Services, 2015 Sources of Funding ADB Others Assistance Name Sector Division Assistance Type Source Amount ($'000) Source Amount ($'000) Total ($'000) Preparing the Helmand River Basin Project ANR CWER PPTA TASF 100.0 AITF 1,400.0 1,500.0 Public Management Support FIN CWPF CDTA TASF 1,500.0 0.0 1,500.0 Gas Sector Development Master Plan ENE CWEN CDTA 0.0 AITF 200.0 200.0 (Additional Finance) Building Resilience to Fragility in ADB- ANR, AFRM CDTA 50.0 AITF 1,450.0 1,500.0 Supported Projects in Afghanistan ENE, TRA Kabul Managed Aquifer Recharge Project ANR CWER PPTA 0.0 AITF 7,600.0 7,600.0 Total 1,650.0 10,650.0 12,300.0 ADB = Asian Development Bank; AFRM = Afghanistan Resident Mission; AITF = Afghanistan Infrastructure Trust Fund; ANR = agriculture, natural resources, and rural development; CDTA = capacity development technical assistance; CWEN = Central and West Asia Energy Division; CWER = Central and West Asia Environment, Natural Resources and Agriculture Division; CWPF = Central and West Asia Public Management, Financial Sector and Trade Division; ENE = energy; FIN = finance; PPTA = project preparatory technical assistance; TASF = Technical Assistance Special Fund; TRA = transport. Source: Asian Development Bank.