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Islamic Republic of Afghanistan: Interim Poverty Reduction Strategy Paper

Author(s):
International Monetary Fund
Published Date:
June 2006
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INTRODUCTION

The Government of Afghanistan’s model of governance and development today derives from an ancient concept of this region called the “Circle of Justice” (daira-yi’idalat). As the ninth century Islamic scholar Ibn Qutayba1, wrote:

  • There can be no government without an army,
  • No army without money,
  • No money without prosperity,
  • And no prosperity without justice and good administration.

A century later, in Afghanistan itself, Sultan Sebuktegin of Ghazni put it this way:2

  • The first thing you should do is to keep the private and public treasuries in a prosperous condition; for a kingdom can only be retained by wealth. Wealth cannot be acquired except by good government and wise statesmanship, and good government cannot be achieved except through justice and righteousness.

In the Circle of Justice, the government depends on the armed forces to ensure security. To maintain the army, the government needs resources, which it can derive only from prosperity and development. Prosperity and development depend in turn on justice and good governance. The Islamic teachings on the Circle of Justice have identified justice with the rule of law, based on the beliefs and provisions of the sacred religion of Islam. These teachings identified good governance with building roads and keeping them safe for travelers and trade, building irrigation works to make farmers more productive, assuring honest weights and measures, resolving disputes justly, and protecting the poor and weak.

Fully consistent with the Circle of Justice, the preamble to our Constitution states that Government will strive:

  • With firm faith in God Almighty and relying on His lawful mercy, and believing in the sacred religion of Islam …
  • To consolidate national unity and safeguard the independence, national sovereignty, and territorial integrity of the country
  • To establish a government based on the will of the people and democracy;
  • To create a civil society free of oppression, atrocity, discrimination, and violence; based on the rule of law, social justice, and protection of human rights and dignity; and ensuring the fundamental rights and freedoms of the people;
  • To strengthen the political, social, economic, and defense institutions of the country;
  • To ensure a prosperous life and sound environment for all those residing in this land;
  • And, finally, to regain Afghanistan’s rightful place in the world community.3

The I–ANDS aims to move Afghanistan towards these obligations by asking and answering four fundamental questions:

  • What are our vision, goals and objectives? This question drives the Government’s policy formulation.
  • What are the contexts and constraints that must be understood and overcome to achieve our vision and objectives? This question drives our analysis.
  • What investments and strategies should we prioritize to overcome those constraints and achieve our objectives? This question drives our strategy and determines the mix and sequencing of programs the Government will prioritize in the I-ANDS.
  • How should we resource, monitor, coordinate and consult on these strategies? This question will drive the implementation of the I-ANDS.

The structure of this Executive Summary follows this logic, and reviews (1) our vision, (2) our context analysis, (3) our strategy and (4) our plan for implementation of the I–ANDS.

1. Vision

This Government’s vision for Afghanistan is fully consistent with our Islamic and cultural values as stated in our Constitution. In the next fifteen years, we aim to ensure that Afghanistan meets all of its Millennium Development Goals (MDGs). If we realize this vision, we will all but eliminate extreme poverty and hunger in Afghanistan. All our children, boys and girls alike, will complete their primary educations. Afghanistan’s women will enjoy greater equity in education, political participation and justice. We will cut by more than half the number of children dying before they reach five and the number of mothers that die in childbirth. We will halt the spread of tuberculosis, HIV/AIDs, malaria, and other diseases and ensure that our development is environmentally sustainable. And we will accomplish all of this through a strong partnership with the international community that helps to provide the security and to support the stable political environment upon which our economic development will depend.

  • “Our vision for the Islamic Republic of Afghanistan is to consolidate peace and stability through just, democratic processes and institutions, and to reduce poverty and achieve prosperity through broad based and equitable economic growth.”4

Like the Circle of Justice, this vision has mutually reinforcing security, political, and economic dimensions.

Our security vision is to create a peaceful and just society, where the state has a legitimate monopoly on the use of force and uses it to protect the rights of all Afghans. With the support of our international partners, we aim to build a well trained, affordable, representative and professionalized national army and police force that provide security and uphold the law.

Our governance vision is to develop Afghanistan into a stable and mature Islamic constitutional democracy where the three branches of government (executive, legislative, and judicial) provide the necessary checks and balances on each other. Government will act as a policy maker, regulator, and enabler of the private sector, not its competitor. Our unitary state will deliver basic services to the Afghan people through a cost–effective national and sub–national administration and ensure that our justice system equally protects the rights of all Afghans.

Our economic vision is to build a liberal market economy in which all Afghans can participate productively without engaging in the trafficking or production of narcotics or other criminal activities. To do this, we will develop an enabling environment for the private sector to generate legitimate profits and pay reasonable taxes, thereby enhancing public revenues that can then be invested in public services. Ultimately, we want to move beyond dependence upon international aid and build a thriving legal private sector–led economy that reduces poverty and allows all Afghans to live in dignity.

To achieve pro–poor growth while eliminating the criminal economy, we aim to make simultaneous strategic investments across the security, governance and economic pillars. While our priorities in each of these areas are presented in the I–ANDS and the 5–year strategic benchmarks of the Afghanistan Compact, we will focus in particular upon those areas that enhance our current and future productivity, including electricity, roads, irrigation, institutional and human capacity building, creating an enabling environment for private sector development, and protecting the rights of the poor. As we target our investments in these areas, we will seek to support likely areas of accelerated economic growth, including rural development (agriculture and rural industries), the management of state assets, mining and extractive industries, and transit.

By creating a secure, politically stable and economically supportive environment for growth, we will enable the private sector to thrive and employ our population, and generate the public revenues that will enable the Government to work towards our MDGs. To achieve the MDGs by 1400 (2020), we must make significant progress in security, governance, and the economy in the next five years, and for that we will need international political and financial support. For that reason, the Government of Afghanistan agreed the Afghanistan Compact with the international community in 1394 (2006). The I–ANDS presents the strategy through which the Government of Afghanistan will fulfill its obligations under the Afghanistan Compact. In so doing, it also aims to fulfill the requirements of an Interim–Poverty Reduction Strategy Paper (I–PRSP)5

2. Analysis Of Context

The Afghan people have demonstrated remarkable bravery and resilience, first to repel the Soviet invasion and then to survive over two decades of war and destruction that followed. By 1 Jaddi 1380 (22 December 2001), when the Interim Authority of Afghanistan was inaugurated, the state’s legitimacy had been damaged by military coups, attempts to use a weak state to transform society by force, the capture of parts of the state by armed commanders, and the hostage taking of Afghanistan by international terrorists. Persecution, killings, arrests and exodus had lowered the already small number of skilled administrators and technocrats and undermined the state’s capacity. Wars and civil disorder killed over a million Afghans, most of them civilians; made over a million Afghans disabled or orphaned; forced about a third of the population into exile as refugees; devastated the villages where most of the population lived; and caused a two–decade long brain–drain, driving much of the country’s educated class into exile. Agricultural land and pastures, water management systems, roads, bridges, schools, clinics, and sources of electrical power were destroyed. International traffickers struck deals with power holders in Afghanistan to start opium production in our country. Toward the end of the 1990s, they also moved heroin processing inside the country, further enriching criminals and illicit armed groups.

In accordance with the Bonn Agreement, the Interim Administration of Afghanistan, led by then Chairman Karzai, was inaugurated in Kabul on 1 Jaddi 1380 (22 December 2001), launching the “Bonn Process.” Over the next four years, the Afghan government met all the milestones of the Bonn Process, holding two Loya Jirgas, approving a new constitution, and holding presidential and legislative elections.

Donor countries have generously assisted the Government with troops supplied through Operation Enduring Freedom, led by the US, and the International Security Assistance force, led by NATO. With assistance from international security forces and donor countries, the Afghan Government has disarmed about 62,000 former combatants, formed a new Afghan National Army, and is reforming the Afghan National Police. Government has launched programs of administrative and judicial reform. The Afghan Independent Human Rights Commission was established, and its role is now guaranteed in the Constitution. The new Constitution guarantees women equality before the law and establishes significant quotas for their representation in both houses of the National Assembly.

Government issued a new currency in 1381 (2002), effectively putting an end to hyperinflation. By the end of 1384 (2005/6) the real licit economy of Afghanistan is projected to have grown by an estimated 85% since the start of the Bonn Process. Inflation has fluctuated at slightly more that 10% per year. While meeting almost all the benchmarks of an IMF Staff–Monitored Program, the Government is expected to have increased its domestic revenue from 3.2% of GDP to 5.4% of a much larger GDP by 1384 (2005/6). The Government launched a counter-narcotics program which reduced the area cultivated in opium poppy by 21% in 1383 (2004/5). The reconstruction of the major road network is well underway. School enrollments have more than quadrupled, Government has expanded coverage of a Basic Package of Health Services, and the government has distributed development grants to a third of the county’s villages.

3. Investment Priorities & Strategies

The I–ANDS proposes a coherent strategy across three interdependent pillars of activity: (1) security, (2) governance, rule of law, and human rights, and (3) economic and social development, eight sectors, and five cross cutting themes, represented as follows:

Figure 3.1Pillars, sectors & Themes for the I–ANDS

First, our cross–cutting themes are summarized below as we aim to mainstream these themes across our programmatic framework. Thereafter, our strategies and investment priorities and programs are summarized below under each of these pillars:

Cross Cutting Themes

Across our security, governance and economic development programs, Government will mainstream the cross–cutting themes of gender, counter narcotics, regional cooperation, anticorruption, and environmental protection into our investment framework.

The Government’s long-term aim is achieve gender equality for women, eliminating all forms of discrimination against women, developing their human capital, and ensuring their full participation and leadership in all aspects of life in Afghanistan.

The Government’s long–term aim for counter-narcotics is to secure a sustainable decrease in poppy cultivation, drug production, consumption of illicit drugs, and trafficking, with a view to complete and sustainable elimination of narcotics from Afghanistan, in order to pave the way for pro–poor, private sector–led economic growth.

Government will promote regional cooperation to contribute to regional stability and prosperity, and to enable Afghanistan to resume its role as a land bridge between Central and South Asia in order to benefit from increased trade and export opportunities.

Government’s long–term aim is to eliminate corruption in the public and private sector in order to improve the effectiveness, transparency, and accountability of government and to create an environment conducive to investment.

Government’s overall aim is to protect the environmental integrity of Afghanistan and to support sustainable development of natural resources through active participation by communities and the private sector in order to achieve economic growth supportive of peace–building, security, and equity.

Pillar One & Sector One Security

In accordance with our vision for security, Government will provide security with the direct support of the international community. We will establish a legitimate monopoly on force and law enforcement that provides a secure environment for the fulfillment of the rights of all Afghans, ensuring freedom of movement for people, commodities and ideas, and social and economic development. Our security strategy contains the following priorities:

  • 1. Through Jaddi 1339 (end-2010), with the support of and in close coordination with the Afghan Government, NATO-led International Security Assistance Force (ISAF), Operation Enduring Freedom (OEF) and their respective Provincial Reconstruction Teams (PRTs) will promote security and stability in all regions of Afghanistan, including by strengthening Afghan capabilities.
  • 2. By Jaddi 1389 (end-2010): the Government will establish a nationally respected, professional, ethnically balanced Afghan National Army that is democratically accountable, organized, trained and equipped to meet the security needs of the country and increasingly funded from Government revenue, commensurate with the nation’s economic capacity. Support will continue to be provided to Afghanistan in expanding the ANA towards a ceiling of 70,000 personnel articulated in the Bonn talks; and the pace of expansion is to be adjusted on the basis of periodic joint quality assessments by the Afghan Government and the international community against agreed criteria which take into account prevailing conditions.
  • 3. All illegal armed groups will be disbanded by Jaddi 1386 (end-2007) in all provinces.
  • 4. By Jaddi 1389 (end-2010), a fully constituted, professional, functional and ethnically balanced Afghan National Police and Afghan Border Police with a combined force of up to 62,000 will be able to meet the security needs of the country effectively and will be increasingly fiscally sustainable.
  • 5. By Jaddi 1389 (end-2010), the Government will strengthen its law enforcement capacity at both central and provincial levels, resulting in a substantial annual increase in the amount of drugs seized or destroyed and processing facilities dismantled, and in effective measures, including targeted eradication as appropriate, that contribute to the elimination of poppy cultivation.
  • 6. By Jaddi 1389 (end-2010), the Government and neighboring and regional governments will work together to increase coordination and mutual sharing of intelligence, with the goal of an increase in the seizure and destruction of drugs being smuggled across Afghanistan’s borders, and effective action against drug traffickers.
  • 7. By Jaddi 1389 (end-2010), the land area contaminated by mines and unexploded ordnance will be reduced by 70%; all stockpiled anti-personnel mines will be located and destroyed by Jaddi 1386 (end-2007); and by Jaddi 1389 (end-2010), all unsafe, unserviceable, and surplus ammunition will be destroyed.

The Government will achieve these security objectives under four key investment programs, which are: (1) national defense (Afghan National Army), (2) internal security and law enforcement (Afghan National Police), (3) disbandment of illegal armed groups and (4) demining. It will coordinate the implementation of its security pillar strategy through the National Security Council.

Pillar Two And Sector Two

Governance, Rule Of Law, And Human Rights

In accordance with our vision, Government’s overall aim is to enhance governance by establishing and strengthening government institutions at the central and sub–national levels. In the next five years, we aim to achieve measurable improvements in the delivery of services and the protection of rights of all Afghans. We will reform the justice system with the aim of assuring Afghans in all parts of the country of access to formal justice and judicial supervision of informal dispute resolution mechanisms. We will strengthen protection of human rights for all, especially women and children, and assure redress for violations. To improve governance, the rule of law and ensure human rights, we have identified the following key priorities for Government:

  • By Jaddi 1389 (end–2010): Government machinery (including the number of ministries) will be restructured and rationalized to ensure a fiscally sustainable public administration; the civil service commission will be strengthened; and civil service functions will be reformed to reflect core functions and responsibilities.
  • A clear and transparent national appointments mechanism will be established within 6 months, applied within 12 months, and fully implemented within 24 months for all senior level appointments to the central government and the judiciary, as well as for provincial governors, chiefs of police, district administrators and provincial heads of security.
  • By Jaddi 1385 (end–2006), a review of the number of administrative units and their boundaries will be undertaken with the aim of contributing to fiscal sustainability.
  • By Jaddi 1385 (end–2010), in furtherance of the work of the civil service commission, merit–based appointments, vetting procedures and performance–based reviews will be undertaken for civil service positions at all levels of government, including central government, the judiciary and police, and requisite support will be provided to build the capacity of the civil service to function effectively. Annual performance–based reviews will be undertaken for all senior staff (Grade 2 and above) starting by Jaddi 1386 (end–2007).
  • The UN Convention against Corruption will be ratified by Jaddi 1385 (end–2006), national legislation adapted accordingly by Jaddi 1386 (end–2007) and a monitoring mechanism to oversee implementation will be in place by Jaddi 1387 (end–2008).
  • The census enumeration will be completed by Jaddi 1387 (end–2008) and the complete results published. Reliable statistical baselines will be established for all quantitative benchmarks by the first quarter of 1386 (mid–2007) and statistical capacity built to track progress against them.
  • The National Assembly will be provided with technical and administrative support by the first quarter of 1385 (mid–2006) to fulfill effectively its constitutionally mandated roles.
  • The Afghanistan Independent Electoral Commission will have the high integrity, capacity and resources to undertake elections in an increasingly fiscally sustainable manner by Jaddi 1387 (end–2008), with the Government of Afghanistan contributing to the extent possible to the cost of future elections from its own resources. A permanent civil and voter registry with a single national identity document will be established by Jaddi 1388 (end–2009).
  • By Jaddi 1389 (end–2010): the National Action Plan for Women in Afghanistan will be fully implemented; and in line with Afghanistan’s MDGs, female participation in all Afghan governance institutions, including elected and appointed bodies and the civil service, will be strengthened.
  • By Jaddi 1389 (end–2010), the legal framework required under the constitution, including civil, criminal, and commercial laws, will be put in place, distributed to all judicial and legislative institutions, and made available to the public.
  • By Jaddi 1389 (end–2010), functioning institutions of justice will be fully operational in each province of Afghanistan; and the average time to resolve contract disputes will be reduced as much as possible.
  • A review and reform of oversight procedures relating to corruption, lack of due process and miscarriage of justice will be initiated by Jaddi 1385 (end–2006) and fully implemented by Jaddi 1389 (end–2010); by Jaddi 1389 (end–2010), reforms will strengthen the professionalism, credibility and integrity of key institutions of the justice system (the Ministry of Justice, the Judiciary, the Attorney–General’s office, the Ministry of Interior and National Directorate of Security).
  • By Jaddi 1389 (end–2010), justice infrastructure will be rehabilitated; and prisons will have separate facilities for women and juveniles.
  • A process for registration of land in all administrative units and the registration of titles will be started for all major urban areas by Jaddi 1385 (end–2006) and all other areas by Jaddi 1387 (end–2008). A fair system for settlement of land disputes will be in place by Jaddi 1386 (end–2007). Registration for rural land will be under way by Jaddi 1386 (end– 2007).
  • By Jaddi 1389 (end–2010), the Government will increase the number of arrests and prosecutions of traffickers and corrupt officials, and will improve its information base concerning those involved in the drugs trade, with a view to enhancing the selection system for national and sub–national public appointments, as part of the appointments mechanism mentioned earlier in this annex.
  • By Jaddi 1389 (end–2010): the Government’s capacity to comply with and report on its human rights treaty obligations will be strengthened; Government security and law enforcement agencies will adopt corrective measures including codes of conduct and procedures aimed at preventing arbitrary arrest and detention, torture, extortion and illegal expropriation of property with a view to the elimination of these practices; the exercise of freedom of expression, including freedom of media will be strengthened; human rights awareness will be included in education curricula, and promoted among legislators, judicial personnel and other Government agencies, communities and the public; human rights monitoring will be carried out by the Government and independently by the Afghan Independent Human Rights Commission (AIHRC), and the UN will track the effectiveness of measures aimed at the protection of human rights; and the AIHRC will be supported in the fulfillment of its objectives with regard to monitoring, investigation, protection and promotion of human rights.
  • The implementation of the Action Plan on Peace, Justice and Reconciliation will be completed by Jaddi 1387 (end–2008).

Government will work towards achieving these priorities primarily through five investment programs: (1) empowering the National Assembly, (2) strengthening justice and the rule of law, (3) supporting religious affairs, (4) reforming public administration, and (5) protecting and promoting human rights, including women’s rights.

Pillar Three

Economic And Social Development

In accordance with our vision, the goal of our economic and social development strategy is to reduce poverty through private sector–led equitable economic growth while progressively eliminating the criminal economy. Our strategy will aim to maintain high growth rates and to assure that the poor benefit from growth. We estimate that we need a sustained real growth rate of 9% per year of licit GDP to provide people with a tangible sense of improvement, while compensating for the contraction caused by elimination of the narcotics sector.

Our counter–narcotics program will target traffickers and corrupt officials while helping the poor to produce licit livelihoods for themselves. As traffickers are attacked through interdiction we will develop licit livelihoods for those who depend directly or indirectly on the narcotics economy. We will also promote licit exports and import substitution by the private sector to address the macroeconomic effects of eliminating the narcotics sector.

To create an enabling environment for pro–poor licit growth in agriculture, rural development and other areas, Government will enhance our national productivity and the productivity of Afghan individuals by prioritizing investments in (1) infrastructure, (2) institutional and human capacity building, (3) protecting the rights of the poor, and (4) private sector development:

Priority Investments To Enable Growth

1. Infrastructure: Government aims to achieve its infrastructure goals (sector three of our programmatic framework), through investment programs in (1) national roads and road transport, (2) air transport; (3) energy and water; (4) telecommunications; (5) natural resources and mining; and (6) urban development and housing. Affordable and uninterrupted electric power is a critical requirement for light industry, private sector investment and irrigation. Until we can increase our generating capacity, we will build transmission lines to enable us to purchase power from neighboring countries. At the same time, we will increase our own generating capacity and recover more of the costs of power supply. We will continue to support private sector and human development through building and maintaining the ring road and roads that connect Afghanistan to neighboring countries. A network of trunk and rural access roads is also needed to get the country’s agricultural produce and the products of rural industries to domestic and foreign markets. Government will expand access to irrigable land and drinking water. To overcome the lag in investment in agriculture, we will prioritize investments in systems of water management and irrigation, as about 90% of water is currently wasted because of outdated systems. Our urban development plans will position our major urban centers to respond effectively to expected urbanization over the coming decade.

2. Institutional and human capacity building: Government will integrate measures for building the capacity of Afghan institutions and individuals into all its development plans. It will aim at development the capacity of the public and private sectors and developing the health, education and skills of the economically active population so that they are more productive, have more marketable skills and are therefore able to compete more effectively.

Government will achieve these goals through investment programs in both education and health. Our key education programs (sector four) will (1) expand access to primary and secondary education, increase enrollment and retention rates, and strengthen the curriculum and quality of teachers; (2) build a well–managed and internationally recognized system of higher education that responds to Afghanistan’s growth and development needs (3) develop an effective skills development system that is responsive to labor market needs and (4) strengthen its support for culture, media, and sports to expand coverage and freedom of the press, safeguard and rebuild Afghanistan’s cultural heritage, and improve access to sports.

Our health investments (sector five) will focus on: (1) extending the basic package of health services which will form the core of service delivery in all primary health care facilities, and will promote a redistribution of health services by providing equitable access, especially in underserved areas; (2) extending the essential package of hospital services to improve the quality of care at the secondary and tertiary health care levels; (3) initiating the national communicable and non–communicable disease control program in order to achieve greater control of tuberculosis, malaria and HIV/AIDS, eye diseases, leprosy and leishmaniasis; and (4) implementing a health sector human resource management program to improve the appropriate selection, appointment and management of trained health professionals.

3. Economic growth on its own will not ensure we meet our MDGs. Together with our international partners, we must also protect the rights and provide social protection for the poor and vulnerable especially in rural areas, including their rights to basic services, land, and freedom from physical harm and human trafficking. In the immediate term, the Government will initiate a country–wide process of land registration and establish a fair system for the settlement of land disputes.

Our social protection programs (sector seven) will include (1) humanitarian and disaster response that effectively deals with both slow and quick–onset disasters throughout the country, resulting from either natural or man–made causes; (2) supporting vulnerable women, particularly those who are chronically poor; (3) enhancing the productivity of unemployed youths and those demobilized; (4) supporting the disabled to create a barrier–free society for all based on the principles of participation, integration, and the equalization of opportunities, as defined by the United Nations; and (5) the refugees and displaced persons program which will work towards the return of all remaining refugees, normalizing their legal status, as well as negotiating long–term agreements with neighboring countries on the number and status of Afghans who remain as economic migrants, while continuing to support the internally displaced and their effective reintegration.

4. Support to the private sector: To create an enabling environment for entrepreneurship and private investment in the formal sector, the Government will ensure macroeconomic stability, strengthen its economic governance capacity, fight corruption and streamline regulatory and tax policy in order to reduce the risks of entrepreneurship. To achieve our economic priorities, Government’s investment programs in economic governance and private sector development (sector eight) will (1) put in place a five–year rolling Medium Term Fiscal Framework to make our budgetary management more predictable and strategic over multiple years, (2) enhance revenue collection, (3) enhance public finance management, (4) improve the investment climate; (5) facilitate trade; and (6) strengthen financial services and markets.

Sources Of Growth

By making these priority investments to enable growth, we will move towards our goal of achieving year. We expect that certain areas of growth will drive the economy, and have identified the following four sources of growth in particular:

  • (a) High–value agriculture, pastoralism, agro–processing and rural industries;
  • (b) Productive use of state assets;
  • (c) Mining and extractive industries; and
  • (d) Regional cooperation and transit trade in energy and goods.

We will make targeted investments to stimulate particular sources of growth that will increasingly drive our economic development. Four examples of sources of growth for the Afghan economy are summarized below.

A. High–value agriculture, pastoralism, agro–processing and rural industries: Agriculture is the largest sector of the licit economy and also employs most of the poor. Improvements in market access, power supply, cold storage, quality control, and standards could greatly improve the productivity of agriculture and pastoralism, expand the range of high–value crops produced, and reduce migration to cities. Such improvements will also help promote small industries with backward and forward linkages, increase the processing of agricultural products for export, and support industries with potential for import substitution, such as production of household goods and construction materials.

Government will work towards its agriculture and rural development priorities (sector six) through investment programs that focus on (1) agriculture, which will promote integrated socio–economic development through a vibrant agricultural sector based on licit farming production and sustainable use of natural resources; (2) rural physical infrastructure including irrigation water management, which will improve access to water for farming, basic services, and better market integration; (3) community development, which will build an inclusive society through participatory decision–making and governance at the village level through equitable and community–based planning and needs prioritization; (4) rural finance, to promote access to credit through microfinance and rural credit schemes and (5) rural enterprises, to promote the licit productive capacity of the rural economy to engage in (farm and non–farm) private sector activities.

B. Productive use of State Assets will be prioritized for generation of government revenues through (1) sale of public land for housing and use of revenues for government investment in infrastructure and urban development; (2) rural and urban housing schemes; and (3) divestment of state owned enterprises (SOEs). The Government will determine whether SOEs should remain in government ownership where the market place cannot or will not provide services, be liquidated, or be privatized.

C. Mining and Extractive Industries: Development of our minerals is the major area where we believe Afghanistan might be able to attract significant foreign direct investment over the next five years. Afghanistan has reserves of iron, copper, coal, hydrocarbons, quarry materials, and gemstones that have not been formally developed. To take advantage of the potential of the mining sector the Government will address regulatory, fiscal, and institutional deficiencies, invest in the infrastructure of roads, energy and water systems, secure sufficient skilled labor, and remove landmines and unexploded ordnance in the relevant areas. We will also promote processing of our minerals rather than exporting the raw materials.

D. Regional Cooperation and Transit Trade in Energy and Goods: Afghanistan possesses potential to generate income from transit through rents and tolls. The best known example of a transit project is the Trans–Afghan Pipeline (TAP), which will carry natural gas from Turkmenistan through western and southern Afghanistan to Pakistan and then, potentially, on to India. Construction of such projects will create employment and build skills, while their operation will produce significant income for the state. Improvements in our road network and border management will bring all Central Asian capitals within 36 hours of a seaport. Establishing such transit corridors will require road improvements, construction of rail heads or railroads, provision of security along transit corridors, and better border management to prevent delays.

4. The Implementation Of The I–Ands

This Section explains how Government aims to translate the I–ANDS from strategy to implementation.

Budget Management and I–ANDS Resource Requirements: Strengthening the central role of the national budget as the instrument of government policy making is essential to achieving our national development priorities. To achieve that objective we must ensure the effective use of resources funded through the budget. This requires effective resource mobilization and public expenditure management systems that are performance–based (not just input based). Over the short– to medium–term, the Government will focus on improving its financial management and accountability while engaging in aggressive revenue mobilization to limit our dependency on foreign aid to fund the operating budget, and to be able to fund our wage bill by 1389 (2010/11) and the full recurrent budget by 1393 (2014/5). Support for revenue collection must be complemented by aggregate fiscal discipline in setting expenditure levels, with implications for staffing establishments and pay and grading structures.

Government seeks to establish a national budget that is realistic; grounded in sound sector strategies; based on measured and unambiguous budget management guidelines that reflect improving government capacities; increasingly involving provinces and districts in both budget formulation and execution (based on a review of functional assignments to be conducted in 1385 (2006)); transparent and with relevant, accurate and timely information provided to decision–makers, including National Assembly and the public at large; and made accountable through government internal and external audits.

Resource needs for the I–ANDS: In order to provide a provisional sector–level costing for the IANDS, Government utilized the thorough analysis in Securing Afghanistan’s Future 1383 (2004) (SAF) to forecast our financial needs for the next five years. Using a set of broad assumptions and realistic costing parameters derived from experience, the SAF model estimated that to make Afghanistan secure and enable its people to live in a typically underdeveloped country, US$27.6 billion dollars would need to be committed over seven years. Two years into the SAF forecast, Government has re–mapped below the figures from the remaining five years of SAF into the I–ANDS programmatic framework in order to provide preliminary costing estimate.

This is not a re–costing exercise (which will happen in 1385). Rather it provides an initial indication of Afghanistan’s overall needs for the next five years by looking back at SAF estimates6. Two important adjustments were made to the SAF figures to better reflect expected costs over the coming years. First, the SAF exercise significantly under–estimated security sector costs, largely because the full pay and grading reviews for ANA had not been finalized, nor had provisional pay scales for the ANP been determined. Second, figures for the operating budget and the domestic revenue in SAF were adjusted based on the MTFF. Table 4.1. below provides the mapped figures.

Table 4.1Mapping of 1385–1389 SAF to I–ANDS sector
I-ANDS SectorsOriginal SAFCosting Projection
Costing Projectionincluding
not includingadjustments (in US$
adjustments (inmillion)
US$ million)
1. Security1,1132,800
2. Governance, Rule of Law & Human Rights749749
3. Infrastructure & Natural Resources8,2668,266
4. Education, Culture& Media2,5462,546
5. Health1,0121,012
6. Agriculture & Rural Development2,6982,698
7. Social Protection233233
8. Economic Governance and Private561561
Sector Development
Total Development Requirement17,17818,865
Total Recurrent Costs5,8725,453
Domestic Revenue(3,578)(4,489)
TOTAL Required19,47219,829

We expect that Afghanistan is almost certainly going to require the $4 billion per year (approximately) envisaged by SAF for the next five years if we are to achieve the goals in the I–ANDS and the Afghanistan Compact. As our absorption capacity increases and multi–year projects mature from project preparation to implementation, our expenditures will increase as well. It is absolutely essential therefore in fulfilling the goals of the I–ANDS that donors maintain external pledges at least at SAF levels, and pledges are converted into commitments and disbursed without undue delays. On its part, Government will aim to strengthen its capacity to prepare project documentation and manage project implementation with the kinds of cost effectiveness, transparency and accountability that the Afghan people and our international partners expect

Enhancing Aid Effectiveness: With over 90% of all national development resources currently provided by international cooperation partners, enhancing the alignment of external funding to support the I–ANDS through the budget is vital to reaching our national development targets. The Afghan Government is committed to improving the effectiveness of external aid in accordance with the Paris Declaration on Aid Effectiveness (2005), which urges donors to strengthen the relationship between national strategies, such as the I–ANDS and their own strategies.

Government has developed a set of aid effectiveness principles. The aim of the principles is to encourage donors to base their programs on the I–ANDS and fund them within the framework of the national core budget. Working within the budget will help eliminate parallel delivery systems and enhance cost effectiveness by, for instance, simplifying donor procedures. Donors should limit the use of top–up payments that the Government will not be able to sustain. They must rationalize technical assistance and develop performance standards for aid delivery. Donors should help build the Government’s capacity to benefit from such policies by supporting anti–corruption measures, improved fiduciary management, and capacity building. In parallel to these core principles, Government commits to strengthening institutional capacities in both aid coordination through the national budget and the management of data and information for policy making.

Coordination and Monitoring: Government, with support from the international community, will monitor the implementation of the I–ANDS through the budget. To this end, the Government will strengthen its capacity to collect, analyze, and manage data through the census, surveys, national accounts, and other means.

The Oversight Committee will be responsible for oversight of the day–to–day monitoring of the I–ANDS. Consultative Groups will work with sectoral ministries and collate the data on annual indicators. To ensure the comprehensive and timely completion of the Afghanistan Compact and to facilitate implementation of the I–ANDS, the Government and the international community will establish a Joint Coordination and Monitoring Board, co–chaired by Government and the UN, with the participation of senior government officials appointed by the President to work with representatives of the international community.

The Board will have a small secretariat staffed by the Afghan Government and UN. The Board will review the implementation of the Afghanistan Compact and take corrective action, as appropriate in order to ensure its full implementation. The annual Afghanistan Development Forum will bring together government and international cooperation partners as well as relevant stakeholders to assess implementation of the I–ANDS, and the benchmarks for the Compact, ensuring adequate funding and coordination of Afghanistan’s development programs.

The I–ANDS and the Afghanistan Compact will effectively ensure coherent government strategy only if they empower Afghan citizens to improve their security, livelihoods, and rights. Monitoring mechanisms should be more than a centralized tool for measuring government performance and service delivery. They should be an institutionalized mechanism for learning from experience and strengthening links between the government and Afghan society. Afghan citizens must see the monitoring mechanisms as credible instruments to ensure that the Government is: accountable; transparent; and focused on improving the entitlements, rights and economic conditions of all Afghans, regardless of ethnicity, gender, or geographical location.

Consultations towards the Development of the Full ANDS: In developing the I–ANDS, the Presidential Oversight Committee lead a series of intensive consultations within Government, with donors, NGOs, community representatives, private sector leaders, and other stakeholders over a twelve–month period. Government will build on this foundation as it widens consultations to prepare the full ANDS. A temporary ANDS Working Group will be responsible for the preparation of the full ANDS (thereafter it will be dismantled and a small support unit for the Oversight Committee will remain). A strategy that is well–understood enjoys greater ownership and, as a consequence, influences the allocation of resources, policy, institutional reform, and the implementation of programs and projects.

The Government plans for the I–ANDS and full ANDS to be living documents that are continually revised and refined through ongoing experience and consultation. Each year, we aim to integrate a review of our strategic priorities into our budgetary planning, our discussions with donors and with the National Assembly and the people of Afghanistan. Over time, the ANDS will increasingly reflect a consensus between Government, the National Assembly, our key donors, and the Afghan people on the path to peace and the hope of future prosperity for all Afghans.

Conclusion

Throughout our history, the name of Afghan has been synonymous with pride, honor, and dignity. We have passed through a time of trial and sacrifice where we feared even to lose the noble name of Afghanistan. Now, with God’s help, we have another chance to rebuild our country

Since 1380 (2001), the Afghan nation has emerged from the ashes of conflict to stand today as a beacon of hope to our people and the world. Much has been accomplished, but far more remains to be done. Our people, in particular our children, now have real hope of living in a time of peace, stability and economic development. The Government must fulfill that hope by planning with vision, leading with strength, and investing with wisdom.

We are grateful for the partnership and generosity of the international community, but we know that generosity cannot last forever. We also know the costs of premature disengagement from Afghanistan. That is why, through this strategy and the Afghanistan Compact, we have renewed our partnership with the international community to complete the work that began in Bonn more than four years ago.

Our vision is to consolidate peace and stability through just, democratic processes and institutions, and to reduce poverty and achieve prosperity through broad based and equitable economic growth. By simultaneously investing across security, governance and economic priorities in partnership with the international community, we aim to ensure that Afghanistan can stand on its own feet as soon as possible.

Our security strategy aims to deliver a state that has the legitimate monopoly on the use of force and uses its power to protect the national and human rights of all Afghans. We will ensure that all our security branches work together to build a national army, police force and intelligence services that can provide security and uphold the law. Our governance strategy aims to nurture a stable constitutional, democratic unitary state where Government is accountable to the people and the public sector at both the national and sub–national levels has the capacity to deliver services to the people.

Our economic and social strategy is to create prosperity and reduce poverty while eliminating narcotics from Afghanistan by creating an enabling environment for legal and equitable, private sectorled growth. We will accomplish this goal by prioritizing investments in electricity, roads, irrigation, education, health, private sector promotion, and social protection. If we succeed in this effort, we expected to see targeted economic growth from agriculture, mining, the use of state assets and transit trade.

Our strategy in each pillar is supported by the international community through a set of commitments. The achievement of our 15–year Millennium Developments Goals will be supported by the United Nations and the international community. In the next five years, we aim to move towards those goals by achieving the benchmarks in the Afghanistan Compact with the full political and financial support of the international community. This strategy will only work if both the Government and the international community align our funding and our strategies behind the stated priorities of the I–ANDS.

To assure this national development strategy is the right path for Afghanistan, we are presenting this strategy to the people of Afghanistan for consultation. As it is said in the Holy Quran:

Instruct them to consult among themselves

Only through this consultation can we ensure this strategy is the right one for Afghanistan. As the prophet Muhammad (peace be upon him) has said, “My community will never agree upon an error.”

Therefore, we ask all of the elected representatives of the nation, all those who have sacrificed, men and women, the learned ulama and spiritual leaders, our respected elders and mothers, the nation’s scholars and intellectuals, those living in this land and those who were forced to become refugees, the representatives of civil society, our businessmen and traders, civil servants, technocrats, farmers, artisans, artists, authors, and all others, to study this plan to the best of their ability, to discuss it among themselves, to join hands7, and to offer us their ideas on how to improve and implement it. Once again, we must ask the Afghan people to make sacrifices, but this time it is to work together for a better future for themselves and their children. We invite the international friends of Afghanistan to participate in this effort.

Let us all join hands to pursue this noble effort in earnest.

1Abu Muhammad Abdullah b. Muslim b. Qutayba, Kitab’Uyun al–Akbar (Sources of Information), 1:9, cited in Linda Darling “’Do Justice, Do Justice, For that is Paradise’: Middle Eastern Advice for Indian Muslim Rulers,” Comparative Studies of South Asia, Africa and the Middle East, Vol XXII No. 1&2 (2002), 3.
2Muhammad Nizam, “The Pand–Namah of Subuktigin,” Journal of the Royal Asiatic Society (1933): 624, cited by Linda Darling, ibid., 4–5.
3Constitution of the Islamic Republic of Afghanistan, Preamble, para.1, 6–11.
4The ANDS Oversight Committee, Presentation to the International Community Jawza 1384 (June 12, 2005).
5The PRSP process was developed by the World Bank and International Monetary Fund to encourage developing countries to develop poverty reduction strategy plans. Countries submitting successful PRSPs are entitled to debt relief and concessional loans.
6Chapter 9 of the I–ANDS provides detailed explanations of our mapping methodology and caveats on the use of SAF figures for current costing estimates.
7For all of this, we believe we need to develop a Social Compact of a joint vision and strategy for achieving our goals. The development of the full ANDS will help us formulate such a Social Compact, which would complement the Afghanistan Compact and the benchmarks that we have developed with the international community.

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