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Evaluation of the World Bank Group Program in Afghanistan

Evaluation of the World Bank Group Program in Afghanistan

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Despite extremely difficult security conditions, which deteriorated markedly after 2006, the World Bank Group has commendably established and sustained a large program of support to the country.

This is an evaluation of the World Bank Group's program in Afghanistan.
To enhance program effectiveness, the evaluation recommends that the World Bank Group help the government develop a comprehensive, long-term human resources strategy for the civilian sectors; focus on strategic analytical work in sectors that are high priorities for the government; assist in the development of local government institutions and,in the interim, support the development of a viable system for service delivery at subnational levels; assist in transforming the National Solidarity Program into a more sustainable financial and institutional model to consolidate its gains; help strengthen the regulatory environment for private sector investment; and scale up International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) support to the private sector.
Despite extremely difficult security conditions, which deteriorated markedly after 2006, the World Bank Group has commendably established and sustained a large program of support to the country.

This is an evaluation of the World Bank Group's program in Afghanistan.
To enhance program effectiveness, the evaluation recommends that the World Bank Group help the government develop a comprehensive, long-term human resources strategy for the civilian sectors; focus on strategic analytical work in sectors that are high priorities for the government; assist in the development of local government institutions and,in the interim, support the development of a viable system for service delivery at subnational levels; assist in transforming the National Solidarity Program into a more sustainable financial and institutional model to consolidate its gains; help strengthen the regulatory environment for private sector investment; and scale up International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) support to the private sector.

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Categories:Types, Research
Published by: Independent Evaluation Group on Jan 22, 2013
Copyright:Attribution Non-commercial

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01/22/2013

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Doing Business Report

Doing Business area

2007

2008

2009

2010

2011

2012

Starting a business

Procedures (number)

4

4

4

4

4

4

Time (days)

9

9

9

7

7

7

Dealing with construction permits

Procedures (number)

12

12

12

12

12

12

Time (days)

334

334

334

334

334

334

Getting electricity

Procedures (number)

11

9

9

9

9

9

Time (days)

252

250

250

250

250

250

Trading across borders

Documents to export (number)

10

10

10

10

10

10

Time to export (days)

67

67

74

74

74

74

Cost of export (US$ per container)

2,180

2,180

2,680

3,030

3,545

3,545

Documents to import (number)

10

10

10

10

10

10

Time to import (days)

71

71

77

77

77

77

Cost to import (US$ per container)

2,100

2,100

2,600

3,000

3,830

3,830

Protecting investors

Strength of investor protection index (0–10)

1

1

1

1

1

1

Sources: Doing Business 2007, 2008, 2009, 2010, 2011, 2012.

84

Afghanistan: Country Program Evaluation, 2002–11

despite the entrepreneurship and dynamism exhibited by existing businesses,
private sector expansion and entry have been constrained by an investment
climate that is one of the most diffcult in the world.

World Bank Group contriBution

During the FY02–06 period covered by the TSSs, the Bank Group pursued
activities that refected the strengths of each Bank Group institution.
The World Bank completed the 2005 Investment Climate Assessment (World
Bank 2005c), which generated knowledge about the private sector and was
an important input to both government strategies and donor programs. IFC
supported the frst large foreign direct investment—the Kabul Serena Hotel—
in the country since the Bank Group’s re-engagement in Afghanistan. The
objective was to attract further foreign investment by demonstrating the
feasibility of conducting business in the country. However, the project suffered
losses due to both implementation and security issues—and an IEG evaluation
rated the project less than satisfactory for development outcomes.

IFC implemented several Advisory Services projects, including the pilot
Afghanistan Horticulture Export Clusters Development Project, which
succeeded in introducing innovations that improved productivity in the dried
fruit industry in Kandahar. The World Bank approved an Investment Guarantee
Facility, which was managed by MIGA. The $12 million facility leveraged about
$100 million of foreign investment, mainly for a single telecommunications
transaction. Because of the large presence of donors supporting PSD, including
in the drafting of commercial laws and regulations, the World Bank did not
have grant operations or nonlending technical assistance (NLTA) projects to
support investment climate improvements during the period covered by the
TSSs.

During the FY07–11 period, Bank Group support to PSD was fragmented
and ad hoc, without a clearly articulated assistance strategy that took into
account the large donor presence. During period covered by the ISNs, the main
instrument to support private sector development was the World Bank’s Private

Table 5.3

Initial Investments of New Firms Registered with AISA (2003–11)

2003

2004

2005

2006

2007

2008

2009

2010

2011

Investment ($ millions)

Total

722

657

565

1,180

647

392

517

466

495

Foreign

483

235

177

409

207

109

76

56

55

Domestic

239

422

389

770

439

284

441

410

440

Number of employees (000)

Total

255

90

87

68

47

80

53

48

46

Foreign

171

35

15

25

9

37

7

9

4

Domestic

84

55

72

43

38

44

46

39

42

Source: Afghanistan Investment Support Agency.

Supporting Growth of the Formal Private Sector 85

Sector Development Support Project to develop an industrial park and provide
capacity-building assistance to the Afghanistan Investment Support Agency
and the Ministry of Commerce.

The industrial park7

component, which was meant to help alleviate the problems
of lack of access to land and infrastructure as well as inadequate business
support services, was not yet operational at the time of project closing. As
a result, the planned follow-up to the project to develop a second industrial
park did not materialize. The Private Sector Development Support Project was
technically fawed and the industrial park was constrained by inadequate power
and water supply—the Implementation Completion Report rated outcomes as
unsatisfactory and Bank performance as moderately unsatisfactory.

The World Bank completed another Investment Climate Assessment in 2008
(World Bank 2008b), which was followed by a study of the construction industry
as part of a growth study series. However, follow-up initiatives to help address
the issues raised in the reports were slow in coming and did not match the
scale of the problems. The New Business Development Project (FY11) is expected
to provide immediate support to small and medium enterprises,, but there is no
long-term solution to the problem of lack of skills in the private sector. Ongoing
IFC work on licensing reform would help reduce the cost of doing business
and is well received by the government. There are discussions of Bank Group
support to reforming the judicial system and developing alternative dispute-
resolution mechanisms. But overall, progress in addressing critical constraints
to PSD—unclear property rights, notably with respect to land and land tenure;8
no credible institutional mechanism for adjudication of commercial disputes;9
the prevalence of corruption;10

and policy and regulatory unpredictability—
remains slow, with a lack of systematic and coordinated efforts by the Bank
Group and other development partners to address these weaknesses.

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