Country Assistance Program Evaluation Islamic Republic of Afghanistan Independent Evaluation Country Assistance Program Evaluation October 2012 Islamic Republic of Afghanistan Reference Number: CAP:AFG 2012-13 Independent Evaluation: CE-28 NOTES (i) In this report, "$" refers to US dollars. (ii) For an explanation of rating descriptions used in evaluation reports of the Asian Development Bank, see ADB. 2010. Revised Guidelines for the Preparation of Country Assistance Program Evaluations. Manila. Director General V. Thomas, Independent Evaluation Department (IED) Director H. Hettige, Independent Evaluation Division 2, IED Team leader T. Yokota, Senior Evaluation Specialist, IED Team members A. Brubaker, Evaluation Specialist, IED K. Hewitt, Evaluation Specialist, IED R. Vasudevan, Evaluation Specialist, IED J. Dimayuga, Senior Evaluation Officer, IED A. Morales, Evaluation Officer, IED O. Nuestro, Evaluation Officer, IED E. Li-Mancenido, Associate Evaluation Analyst, IED The guidelines formally adopted by the Independent Evaluation Department on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of the management of Independent Evaluation Department, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the Independent Evaluation Department does not intend to make any judgments as to the legal or other status of any territory or area. Abbreviations ADB – Asian Development Bank ADF – Asian Development Fund AITF – Afghanistan Infrastructure Trust Fund ANDS – Afghanistan National Development Strategy ANR – agriculture and natural resources ARTF – Afghanistan Reconstruction Trust Fund CAPE – country assistance program evaluation CAREC – Central Asia Regional Economic Cooperation CPS – country partnership strategy CSO – Central Statistics Organization CSP – country strategy and program DABM – Da Afghanistan Breshna Moassassa DABS – Da Afghanistan Breshna Sherkat DFID – Department for International Development of the United Kingdom DMF – design and monitoring framework EIRR – economic internal rate of return FMPARP – Fiscal Management and Public Administration Reform Program GDP – gross domestic product IED – Independent Evaluation Department IMF – International Monetary Fund JFPR – Japan Fund for Poverty Reduction km – kilometer LARP – land acquisition and resettlement plan m – meter MDG – Millennium Development Goal MEW – Ministry of Energy and Water MFF – multitranche financing facility MOF – Ministry of Finance MPW – Ministry of Public Works NGO – nongovernment organization NPP – national priority program O&M – operation and maintenance PBA – performance-based allocation PCR – project completion report PIU – project implementation unit PSFMDP – Private Sector and Financial Market Development Program PSM – public sector management RRP – report and recommendation of the President TA – technical assistance TCR – technical assistance completion report UN – United Nations UNDP – United Nations Development Programme US – United States USAID – United States Agency for International Development Contents Preface v Acknowledgments vii Executive Summary ix Management Response xvii Chair’s Summary: Development Effectiveness Committee xxi Maps xxiii Chapter 1: Introduction 1 A. Objectives 1 B. Scope and Approach 1 Chapter 2: Country Context 4 A. Background 4 B. Economic and Social Development Since 2001 5 C. New Challenges in the Post-Transition Period 11 Chapter 3: Country Strategies and Program 14 A. Government Strategy 14 B. ADB’s Country Strategies and Program 15 C. ADB Portfolio 16 D. Allocation of Funding from the Asian Development Fund 18 E. Afghanistan Infrastructure Trust Fund 20 Chapter 4: Design and Implementation of the Strategies and Program 22 A. ADB’s Role in the Extensive Foreign Support 22 B. A Decade of Operating in a Conflict-Affected Situation 32 C. Effects of Security Concerns and Inadequate Implementation Support 37 Chapter 5: Support for Capacity Development 42 A. Public Sector Managemet 42 B. Private Sector Development and Financial Sector 44 Chapter 6: Results and Sustainability 46 A. Three Infrastructure Sectors 46 B. Private Sector Development and Financial Sector 50 C. Capacity Development for Public Sector Management 50 D. Impacts 52 E. Sustainability 54 Chapter 7: Assessment 56 A. Assessment by Evaluation Criteria 56 B. Overall Rating 60 Chapter 8: Challenges, Lessons, and Recommendations 63 A. Security and the Kabul Process 63 B. Making Development Demand-Driven 64 C. Sustainability 65 D. Capacity Development and Governance 66 E. ADB Administration 66 Appendixes 1. Evaluation Framework 69 2. Afghanistan’s Opium Economy 71 3. Country Economic and Social Improvements and Millennium Development Goals 73 4. Summary of ADB's Country Partnership Strategies for Afghanistan 82 5. ADB Program Implementation and Portfolio 89 6. Summary of Transport Sector Assessment 100 7. Summary of Energy Sector Assessment 114 8. Summary of Agriculture and Natural Resources Sector Assessment 125 9. Summary of Public Sector Management Assessment 135 10. Summary of Private Sector Development and Financial Sector Assessment 154 11. Summary of Resettlement Assessment 171 12. ADB and Government Performance 189 Preface In 2002, the transitional government of Afghanistan, supported by the international community, established priorities and implemented some important early measures laying the foundations for economic stability, resumption of growth, and provision of social services. The Asian Development Bank (ADB) assumed a key role in the international community’s efforts to plan for and help in the reconstruction. With the significant support of the international community, starting from the very basics, Afghanistan achieved some progress. But the gaps are crucial and the challenges daunting. This first country assistance program evaluation report for Afghanistan provides an independent assessment of ADB’s strategy and program in Afghanistan covering the period from ADB’s reengagement with the country in 2002 through 2011. During this period, support approved by ADB totaled $2,732 million, 65% of which came from grants. ADB’s operations in Afghanistan have continued under highly uncertain, extremely difficult, and risky conditions with the continued dedication and hard work of staff. Initial years called for an emergency approach for infrastructure provision, and ADB responded to this urgency. Situations of emergency call for quick actions. Equally important, they stress the need for protocols and quality standards in order to ensure effectiveness and sustainability of outcomes. The 750-kilometer network of improved roads, rehabilitated with support from ADB, allows travel in less time. Four airports are functional, providing access to remote parts of the country. ADB-supported transmission lines have improved power supplies to Kabul, where electricity is available almost around the clock in 2012 compared with about 4 hours a day in 2002. ADB has also contributed to financial reforms and the emergence of the private sector. At the same time, several important program outcomes have yet to be realized, particularly in the vital areas of agriculture and natural resources, attributable to implementation weaknesses, inter alia, because of the security situation. Capacity development efforts call for substantial improvement, human resources need strengthening, and institutional reforms require careful support. While there were achievements in supporting gender equality, a much stronger and sustained approach is needed. Monitoring of outcomes has been weak; ADB must set concrete, achievable targets and ensure systematic and regular monitoring. The evaluation finds the crucial need for continued support from the international community, including ADB. This, however, must be accompanied by far stronger action on capacity development and reforms to improve development effectiveness. The evaluation recommends that ADB acknowledge the conflict more clearly and set the next country partnership strategy period for 3 years or less. In responding to country demands, it calls for an effort to link development efforts across sectors and partners. It asks for a greater stress on the sustainability of interventions supporting reforms and fiscal implementation, and on capacity development and governance improvements tailored to the country’s unique circumstances. It also suggests a strengthening of the operational capacity of the resident mission and of the management procedures of the Afghanistan Infrastructure Trust Fund. Vinod Thomas Director General Independent Evaluation Acknowledgments This country assistance program evaluation (CAPE) report for Afghanistan was prepared in 2012 by a team led by Toshiyuki Yokota, Senior Evaluation Specialist, Division 2, Independent Evaluation Department (IED), under the overall guidance of IED Director General, Vinod Thomas and IED Division 2 Director, Hemamala Hettige. The CAPE report integrates the findings of sector assessments on agriculture and natural resources, capacity development for public sector management, energy, private sector development and financial sector, and transport. These sector assessments were conducted in 2011–2012 by IED staff: Andrew Brubaker, Kelly Hewitt, Rajesh Vasudevan, and the team leader, with support from Ma. Juana Dimayuga,