Afghanistan - Second Road Improvement and Maintenance Project

. iUNIGUIATING COPY TO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. P-1318a-AF REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE REPUBLIC OF AFGHANISTAN FOR A SECOND ROAD IMPROVEMENT AND MAINTENANCE PROJECT December-5, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.   INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF AFGHANISTAN FOR A SECOND ROAD IMPROVEMENT AND MAINTENANCE PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Repulic of Afghanistan for the equivalent of US$11.5 million on standard IDA terms to help finance a second road improve- ment and maintenance project. PART I - THE ECONOMY General 2. A report entitled "Current Economic Position and Prospects of Afghanistan" (SA-29a) dated February 1, 1972, was distributed to the Executive Directors in Februarv 1972 (R72-39 and R72-42). The following comments are based on information obtained by updating missions in September 1972 and July 1973. A Country Data Sheet is provided in Annex I. 3. The Republic of Afghanistan was established in July 1973, following a coup d'etat in which King Mohammed Zahir Shah was deposed by his cousin and brother-in-law, Sardar Mohammed Daud Kahn. Daud, a retired army general who had served as Prime Minister from 1953 to 1963, became President and Prime Minister; he also assumed the portfolios of Foreign Affairs and National Defence. The new Government has abrogated the 1964 Constitution and dissolved the Parliament and Supreme Court. The locus of power is now in the Office of the Presidency and in a revolutionary council. A twelve-man cabinet was ap- pointed on August 1, 1973, though the portfolios of Planning and Commerce still remain to be assigned. 4. Prior to the establishment of the Republic in July 1973, Afghanistan was a constitutional monarchy. The only operative Constitution had been put into effect in 1964 and represented a major political experiment. This Con- stitution excluded members of the royal family from political activity, while the cabinet (which had previously controlled Afghan affairs in concert with the King) was made accountable to an elected assembly. In practice, it proved difficult to establish a satisfactory working relationship between the leg- islative and executive branches of government; inadequate cooperation reflect- ed the persistence of important tribal, regional, ethnic and family loyalties. This situation resulted in several changes of government over the past decade, and there has been only limited progress on constructive development policies and programs. The present Government has indicated its intention to draft a new Constitution, but it is not yet known what the essential elements of the new Constitution will be.  - 2 - Economic Performance and Constraints to Growth 5. Afghanistan is an extremely poor, landlocked country with severe structural, fiscal, and debt service problems. With a population of perhaps 15 million and a per capita income of well below US$100, it is one of the largest of the countries designated as "least developed" by the United Nations. The country's prospects for development have been limited by a rugged physical terrain, arid conditions, a remote geographical position for trade, and a pau- city of economically exploitable mineral and other natural resources. Agri- culture accounts for over half of GDP and engages perhaps 85 percent of the population. Nomads constitute an estimated 15 percent of the population, and less than 10 percent of the total population live in the cities. The Basic Data provided in Annex I highlights some other structural features of the economy: the low degree of monetization; the low share of government revenues in national income; the heavy budgetary dependence on foreign assistance and on central bank financing; the heavy burden of servicing foreign debts; the low level of foreign exchange reserves; and other weaknesses in the country's balance of payments position. 6. Afghanistan may be characterized as a cotintry which has been very successful in mobilizing external resources in support of its development effort, hut relatively unsuccessful either in mobilizing domestic resources or in allocating total resources effectively. Consequentlv, the past decade or so has been a period of rather disappointing economic performance, as national income grew only slightly faster than the population -- implying that per capita income has nearlv stagnated. The responsibility for this situation lies primarily in the inadequacies of the administrative structure. This is reflected in the failure of successive governments to manage the large number of public enterprises efficiently, to allocate funds within projects so as to secure the maximum returns, to gear up an administrative capacity to prepare new projects, to implement projects efficiently through the operating ministries, and to promote the institutional and legislative changes needed to create an appropriate environment for private agricultural and industrial developmnent. 7. Beginning in the early 1950's, Afghanistan ended a long period of isolation from the outside world bv embarking upon an ambitious investment program, supported by substantial loans and grants from both Fastern and Western aid donors--primarily the USSR and the IJSA. This aid, which enabled investment to average between 10-15 percent of GNP, was directed at estab- lishing the basic economic and social infrastructure of a modern society. Consequently, the past decade witnessed some significant improvements in economic conditions. For example, both the primary and secondary school systems were expanded, the road network and telecommunications systems were greatlv extended and improved, some major reclamation and irrigation schemes were undertaken, and a few industries (including natural gas exportation to the Soviet Union) were stimulated. But these improvements have thus far had little effect on the living standards of the vast majority of the population. Nearly half of the foreign assistance received was provided on grant terms. Nevertheless, a heavy debt burden resulted from Afghanistan's cumulative borrowings, as few aid-financed projects had any effect on exports, and  -3- therefore did not give rise to a growth in debt servicing capacity commensu- rate with the growth in debt servicing obligations. To some extent, the slow growth of both output and exports may be attributed to the nature and composi- tion of past investment programs, characterized by infrastructure investment with long gestation periods. Despite its inevitably slow pay-off, much of this investment was perhaps appropriate, given Afghanistan's extreme poverty. But there now appears to be an increasing need to re-orient the country's development strategy towards quicker-yielding projects, and towards a better utilization of productive capacities already created. 8. The Government's ability to mobilize domestic resources for devel- opment is severely limited. Total government revenues in 1972/73 (fiscal year ending in March) were only about $100 million, or about $7 per capita. In an economy which is predominantly dependent on agriculture, the land tax still amounts to less than 2 percent of total tax revenues, while the live'- stock tax has remained suspended since 1966. Moreover, it will be difficult to raise additional revenues from the majority of livestock owners and farmers until these groups begin to receive more direct benefits from development programs than has been the case in the past. The Debt Burden 9. As of March 31, 1973, Afghanistan's total external public debt amounted to US$774 million, of which US$680 million was disbursed. In addi- tion, there is a $211 million outstanding in uncommitted parts of frame agree- ments with the USSR. The major creditors are the USSR (69 percent), USA (13 percent), and Germany (9 percent). Obligations to IDA amounted to 2 percent of the total amount outstanding, and one percent of the disbursed amounts. Over 20 percent of the Government's revenues were budgeted for debt service in 1971/72, and debt service absorbed about 26 percent of export earnings in that year. As a result of both institutional and administrative problems and low absorptive capacity, project aid disbursements declined sharply from a peak of $75 million in 1966/67 to about $35 million in 1972/73. There was a corresponding decline in net capital transfers during this period (from $74 million to $10 million, not including USSR debt relief). 10. Afghanistan has concluded an agreement with the USSR to reschedule $30 million of some $150 million in debt service obligations due on existing debt during the period 1972/73 to 1976/77; repayment of the remaining $120 million is expected to be linked closely to the export of natural gas. Obliga- tions due to the principal Western creditors (IJSA and the Federal Republic of Germany) during the same period are about $54 million. During the past year, the Government also asked these Western creditors to consider rescheduling a portion of their debts, on the expectation that the severe droughts of 1970-71 might create a balance of payments crisis. However, in view of unexpectedly improved export prices and other factors, this proposal has been held in abey- ance for the time being. 11. In mid-1973, the INF extended to Afghanistan an SDR 10 million Standbv credit, which will provide temporary relief but is not intended as a solution to the serious structural problems characterizing the balance of  - 4 - bavme nts. Because of these p;roblems -- whiclh reflect the country's poverty as well as its debt burden Afghanistan does not have the capacity for serv- icing additional debt on conventional terms. Withouit further rescheduling, Afghanistan's debt service pavments during the next five years (excluding additional servicing of newly contracted debt) are projected at an average of about $40 million annually -- compared with merchandise exports projected to average about $125 million annuallv during the same period. This would imply a debt service ratio of 30-35 percent (somewhat less excluding debt service tied to natural. gas exports which totalled $16 million in 1972/73) -- in any event a burdern which would undoubtedly represent a constraint on the country's growth prospects. Recent Developments 12. Afghanistan's economy suffered a major setback when severe droughts in 1970 and 1971, which caused declines in wheat, fruit and livestock produc- tionl, were followed by the severe winter of 1971/72, which compounded especial- lv the heavy losses in the livestock population. The situation improved greatly in 1972 and especially in 1973, when a record wheat crop year mav even have created a surplus of production over domestic requirements. This improved situation resulted mainly from more favorable weather, but also from a surge in the use of fertilizers and improved varieties of seed, The live- stock sector may require a few years to recover. The emergency situation occasioned by the droughts did enable the government to give new impetus to programs aimed at raising the outDut and productivity of the key agricultural sector. This was reflected in the establishment of the Agricultural Fertil- izer Company, the Livestock Development Board, and a livestock export company) the introduction of a law on cooperatives, the implementation of numerous small-scale rural projects through the Provincial Development Department, and in expanded activity of the Agricultural Development Bank. Other encouraging actions--fiscal, institutional, and administrative--in the first half of 1973) gave cause for optimism that a greater commitment to development might be evolving within the country. Further, the Government also began to scrutinize more critically both the role of the many (over 2000) foreign experts and ad-- visers in the country and the role of foreign aid in general. 13. In late August, 197:3, President Daud outlined some of the principal objectives of the new Government. On the political front, the President spoke of the preparation of a new Constitution which would provide for elections, and he stressed the need for f-undamental and far-reaching changes in the coun- try's social system. lie called for strengthening the armed forces, reform in Government agencies to improve their efficiency, and the provision of demo- cratic freedoms for the people. In international affairs, President Daud stated that Afghanistan's foreign policy would be based on neutrality, non- alignment in military blocs, and a desire for friendship with; all nations. In the economic sphere, he visualized that the new Government would strive to industrialize the country (partly through supporting small and medium-scale industries in the private sector); guide the country's trade affairs on the basis of national interests; reform the fiscal system (including through greater emphasis on direct taxation); implement land reform and develop uncultivated land; encourage housing development and reform the urban develoment program; and give attention to railway and highway expansion.  -5- 14. During the next few months, the Government mav be expected to enun- ciate its relative priorities in the pursuit of these several objectives, and specific policies, programs and projects through which they will be implement- ed. Meanwhile, the structural problems of the Afghan economy are such that they call for a continuation of IDA assistance and the basic approach of the Bank Group's lending program and strategy as described below. PART II - BANK GROUP OPERATIONS IN AFGHANISTAN 15. The Bank Group has provided seven development credits totalling US$28.5 million (net of cancellations) to Afghanistan. IFC invested $0.3 million in the Industrial Developnaent Bank of Afghanistan in July 1973. Annex II contains a summary statement of IDA credits and IFC investments as of October 31, 1973, and notes on the execution of the on-going projects. 16. Bank Group lending in Afghanistan began only in 1964, with an educa- tion project, but by agreement between the Government and the Association, a major portion of the credit was cancelled in 1969. A resident mission was established in Kabul in that year, and since that time, with a considerable expenditure of staff time and effort on project preparation, the Bank Group has provided development assistance to Afghanistan at an average level of $5.7 million annually, compared to an average of $25 million in total loan commit- ments from all donors. In FY73 alone the Association committed $13.5 million, and in the coming years, assistance is proposed to be maintained, to the extent possible, around the FY73 level. 17. The Bank Group's lending strategy recognizes that special efforts will be required to help Afghanistan. Its landlocked position, its extreme poverty and difficult economic problems, the structure of its political and economic framework, and shortage of physical and trained manpower resources pose severe limitations on absorptive capacity and development. Considerable staff time will, therefore, be required in identifying, preparing and implement- ing future projects. We aim to finance two or three projects each year, which, in addition to their developmental and institution-building impact, would as- 'sist in expanding production and alleviating the critical foreign exchange shortage, or increasing government's resources for development. In order to ensure sound project implementation, institutional development, training of Afghan counterparts, and improvement in absorptive capacity, technical assist- ance will continue to be an integral feature of most future projects. 18. A tourism development project, for which the detailed design and engineering work has been initiated with UNDP financing and the Bank acting as Executing Agency, is expected to be ready for consideration by the Executive Directors early in FY75. Preparatorv work is in progress for a second agri- cultural credit project and has been initiated for proposed power and water supply/ sewerage projects. The latter two projects, besides satisfying the country's development need, will be designed to effect much needed institution- al and financial reforms in the sub-sectors involved. The UNESCO/IBRD Coop- erative Program is reviewing the manpower and educational needs of Afghanistan,  - 6 - in order to explore the possibility of future assistance in the field of edu- cation by FY76 or FY77. A second livestock development project has also been identified for lending by FY76. PART III - THE TRANSPORT SECTOR General Background 19. Landlocked Afghanistan's mountainous terrain makes internal communica- tions difficult. Its predominantly agricultural population is dispersed, and its principal urban areas are widely separated. The country has no railways 1/ and only a limited amount of water transport on the Amu Darya (Oxus) River along the northern border. A pipeline exports natural gas to the USSR. Im- provements in civil aviation have established air services linking 31 airports, which range in size from the international airports at Kabul and Khandahar to small gravel airstrips in outlying areas. Improved air transport, however, complements but cannot substitute for a sound road transport system upon which Afghanistan must depend for bulk of its internal and international transport requirements. The primary road system is a roughly circular paved road con- necting the population centers of Mazar-i-Sharif, Kabul, Khandahar and Herat. Spurs from this road link Afghanistan with neighboring countries. Secondary roads are poor and frequently closed by snow or flooding. Animals, mainly camels, carry much internal traffic, particularly in mountainous areas and on routes not yet served by roads. Transport Development Strategv 20. In the mid-1950's, Afghanistan recognized the need for a modern transport sector and embarked upon major investment projects which absorbed over $400 million in highway and airport construction. This program was fi- nanced largely by grants and loans from the IJ.S. and U.S.S.R., and included construction of the primary road network and international airports referred to above. A number of secondary roads and airports were also improved during this period. This effort has provided Afghanistan with the basic facilities of a modern transport system. In the late 1960's the transport construction program was curtailed, as Afghanistan became increasingly aware of the need for maintenance of its already substantial transport facilities. It was in this context that the first highway Maintenance Project was undertaken with IDA assistance in 1969. After a difficult period during the drought of 1970 and 1971, the first project has been implemented satisfactorily. Since under- taking tne first project, funds allocated for road improvement and maintenance have increased to 47 percent of total road expenditures in the Fourth Plan (1972-77) as compared with 21 percent during the Third Plan (1967-72). The proposed project would continue and broaden IDA's support for road improve- ment and maintenance in Afghanistan. 1/ Excepting a 600 meter railhead at Torghundi on the Russian border.  -7- The Road Sub-Sector 21. Afghanistan has about 20,900 kilometers of roads of which roughly 2,500 are paved and about 70 percent has been constructed since the 1950's. About half of the paved netwiork is in good condition, while the remaining paved roads and much of the unpaved road network need improvement and better maintenance. Because of work carried out under the first Highway Project in eastern AMghanistan, roads there are in relatively better condition than they are elsew'aere_ The present road network carries about 60,000 vehicles, of which about 40 percent are trucks and buses. This vehicle fleet, represent- ing an average of one vehicle for each 250 persons, is considered adequate for present transport demiand. Over the past five years, road traffic has been increasing at an average rate of 7 percent per annum. Cars are most prevalent in the cities, while 60 percent of inter-urban and rural traffic consists of trucks and buses. 22. 'The Road Construction and Maintenance Department (RGfD) of the Min- istry of Public Works (MPW) is responsible for most inter-urban and rural roads in Afghanistan. Its efforts are augmented by those of regional agricultural development authorities which frequentlv construct and maintain their own fa- cilities, and by the Provincial Development Department (PDD) which has under- talken an extensive rural public works program (including lower standard roads) with labor intensive construction techniques. The PDD works were undertake-L as a relie: effort during the 1970 and 1971 drought emergency, but have assumed a constructive longer-term role in mobilizing national financing and provincial labor for project3 accorded high priority by the provinces. It is expected that a number of PDD constructed roads will be shifted to ICOID responsibility as increasing traffic volumes necessitate intensified maintenance or furtlher improvement. 23. Although the first project has improved the planning and execution of highway maintenance and improvemnent work, much still remains to be done to improve the orgaTnization of the road sub-sector and the regulations under which it operates. In addition to the M1PW, the Ministries of Commerce and Interior are also involved in regulating trucks and buses. There are no regulations for vehicle weights and dimensions, existing traffic laws need improvement, and the present legislation on road rights of way is limited. The first project included the assistance of consultants to study these problems, and improvements were to be undertaken under that project. The Government's pre- occupation with problems arising from the 1970 and 1971 drought and the dif- ferences between the legislative and executive branches of the government did not permit it to consider or process draft legislation on some of these matters. During appraisal of the proposed project, however, the Government indicated that it was prepared to move ahead in these areas, and assurances have been obtained during negotiations that the necessary actions will be taken.  - 8 - PART IV - THE PROJECT Project listory 24, In 1971, Afghanistan requested IDA to assist in financing a second project for road improvement and maintenance in order to continue and broaden the work begun in eastern Afghanistan under the first: Highway Maintenance Project. The proposed second project was identified and prepared with the assistance of the Danish consultants Kampmann, Kieruif and Saxild (Kampsax), financed by UJNDP with the Bank acting as Executing Agency. It was appraised in May 1973, and negotiations were held in Washington from October 15 to 30, 1973. The Afghan delegation was headed by Mr. Abdul Kahir, Director General of the RCMD, and included Mr. Abdul Sami, President of the Finance Department of the Ministry of Planning, cand Mr. Amanuliah Hlassrat, Counselor in the Embassy of Afghanistan in Washington. The Project 25. The proposed project: would continue the road improvement and main- tenance program in eastern Afghanistan covered by the first project and would extend that program to cover the western and southern regions. It would in- clude improvement and maintenance of about1,800 kilometers and maintenance of an additional 2,200 kilometers; of roads in these three regions; construction and improvement of maintenance workshops; purchase of related equipment, spare parts, tools and materials; and provision of services of consultants and ex- perts for programming of road improvement and maintenance works as well as to study priorities for the government-proposed highway construction works for the next Five-Year Development Plan period (1977-82). The Credit and Project Summary in Annex III describes the major features of the proposed project. The Appraisal Report (Report No. 238a-AF) entitled "Appraisal of a Second Road Improvement and Maintenance Project" is being distributed separatelv to the Executive Directors. Project Costs and Financing 26. The estimated total cost of the proposed project is $20.1 million, of which the foreign exchange component is $10.9 million or 54 percent of total cost. The latter amount: includes $1.4 million for purchase of fuel, which Afghanistan normally imports from a non-member country. The foreign exchange cost which is to be financed under the proposed credit therefore amounts to about $9.5 million. In view of Afghanistan's severe economic and fiscal constraints, it is proposed that besides this IDA should also finance about $2.0 million of local costs. The proposed creclit of $11.5 million would thus cover approximately 57 percent of the total cost of the project. The remaining costs amounting to approximately $8.6 million would be borne by the Government. It might be noted that the UNDP will finance consulting services up to Julv 31, 1974 througlh the extension of the INDP project providing con- sultant services for IDA's First Highway Maintenance Project. After such date these services would be financed under the proposed credit.  -9- 27. To ensure timely availability of local funds for the project, the Borrower has agreed to establish a project imprest account with an initial deposit of Afghanis 25 million, as a condition of making the credit effective. This fund will be replenished every quarter by the Borrower to maintain it at a level sufficient to meet the estimated local costs of the project for the succeeding quarter. Organization and Execution 28. The proposed project would be carried out by the MPW through the Road Maintenance First Department (RMFD). The RMFD was the project authority established for the first Highway Maintenance Project and is a part of the Road Maintenance Directorate (RMD) of the RCMD within the Ministry. The dis- tinctions among the RMFD, RMD, and RCMD are blurred, as all three are managed directly by the President of the RCMD, who is an able engineer and experienced administrator. The RMFD faced a number of difficult management problems dur- ing the initial years of the first Highway Maintenance Project. Both the staffing of key posts and the level of staff training presented problems. Encouraging progress, however, was made during 1972 and 1973 when RMFD's management was strengthened and its performance improved substantially. RMFD is now operating at an acceptable level of efficiency, although still it con- tinues to be hampered by a shortage of skilled labor (foreman and mechanics), administrative staff (accountants, clerks, procurement officers, and store- keepers), and an inefficient storekeeping system. These difficulties would be attended to as part of the work to be done under the proposed project. In order to continue the institutional improvement begun in 1972, the proposed project would include a substantial training program to prepare the Afghan staff to take over full operation of the RMFD by the time the project is com- pleted. During the execution of the proposed project the services of consult- ants and interim support through internationally recruited experts in about thirty key operating posts (foreman, mechanics, accountants, etc.) would be provided. Procurement 29. Contracts for the procurement of new imported equipment and related spare parts, materials (except fuels), tools and lubricants would be awarded after international competitive bidding in accordance with the Bank/ITlA guide- lines for procurement. Spare parts for existing equipment would be procured directly from the original suppliers of the equipment. The contract for con- struction of the Kabul maintenance center, estimated to cost $1.1 million and which would use simple building techniques, is not expected to attract international interest and would, therefore, be awarded on the basis of local competitive bidding following advertisements in two local newspapers with large circulation. Because of the high cost of freight on transporting cement to landlocked Afghanistan, cement for road and workshop improvement, costing about $0.2 million, would be purchased directly from government-owned factories at prices which would be subject to the Association's review and approval. The contract for consultants' services would be awarded on the basis of the Bank/IDA guidelines for the use of consultants. Specialists to assist MPW in program execution would be recruited individually on the basis of professional competence and experience, in consultation with the Association.  - 10 - Disbursements 30. The proceeds of the credit would be disbursed as follows: 100 per- cent of foreign expenditures for imported highway maintenance equipment, spare parts, materials (except fuels), and tools and equipment for workshops; 100 percent of the cost of contracts for the services of consultants and inter- nationally recruited experts; 80 percent of total expenditures for civil works cor..tracts for the construction of the Kabul Maintenance Center; and 80 percent of the ex-factory cost of locally produced cement for improvement works. A schedule of projected disbursemtents is included in Annex III. Benefits 31. The proposed project would improve and/or maintain some 4,000 kilo- meters of high priority roads in eastern, western, and southern Afghanistan. Proper maintenance and selective improvement of these roads is essential to Afghanistan's development efforts in other sectors and is consistent with a road sub-sector development strategy which emphasizes road.maintenance and improvement over construction of new roads. The project roads range from.the paved primary network in which major investments were made in the 1950's and early 1960's to lower class, gravel surfaced roads which are essential to linking major rural areas with the rest of the economy. Unfortunately, many of the existing roads have inadequate design standards and have deteriorated through neglect or overuse. Roads have been selected for projected traf.fic volumes, which have also been used as the basis for determining the level.of maintenance or improvement required. The economic analysis measures the benefits which would accrue from savings in vehicle operating costs as a result of the project, but does not take into account other benefits such as institutional improvements in the tTW, reduction in accident rates, or cost savings on generated traffic. On this conservative basis, the economic rate return from the improvement program is estimated to be about 29 percent, and the benefit/cost ratio of the maintenance program about 3.7. PART V - LEGAL INSTRUMENTS AND AUTFORITY 32. The draft Developmenlt Credit Agreement between the Republic of Afghanistan and the Association, the Report of the Committee provided for in Article V, Section 1 (d) of the Articles of Agreement, and the text.of a draft resolution approving the proposed credit are being distributed to the Executive Directors separately. The draft Agreement conforms to the normal pattern for credits for road improvement and maintenance projects. 33. I ain satisfied that the proposed credit would comply with the Articles of Agreement of the Association.  PART VI - RECOMMENDATION 34. I recommend that the Executive Directors approve the proposed development credit. Robert S. McNamara President Attachments Washington, D.C. December 5, 1973   Annex I Pa~ge 1 of2 DOUNTRYT DATA -AF(;ITANM A>~ AREA POPULATION DENSITY 5j",)itolol3Tiio (aid-190) ~7 Per kmsS I 00 Per kelof aralle land SOCIAL INDICATOIRS fitei'ren- C-ustri-. Syrir,n peopi- Rop. 1 N~~~~~~Pkistan tr) o. 0 od T1970 1970 7 GNP PER CAPITA US5$ (ATIAS BASIS) /, BO 15 /u 250 /a 270 /5 Mdebith rate (per thousand) .47I Crude death rate (per thousand) 16 1), 22 Infant mortality rate (per thousand live births) 1 Life expectancy at birth (years) 52 .. 11 Oross reproduction rateL 5.7 S 'i Population growth rate ..2.0 2.85 5.5 21.1 Popu-lation gro,th rate - urban ...4.6 5. 2/,L i_0 Ago structure (percent) ui-1h. 1,5 46.1 14 I 15-66 ... 1 50.1 15X- 65 and over 4. .. l 5.d Deoeddnncy ratio / .1.9 I . 6 0 s/ Urban populatio-n as percent of total . 12 /521 h44 42 Fami Ly PI anniN 4 No. or acceptors cumulative (tbousj*..... No. of users (% of married woeen) . EMPWYXENT Tota. labor force (thousands) I. .. 6oo Om oco lo Percentage employed in agriculture . . s Per centags nesmployed .I,6 / INCOME DISTRIBUTION Percent of national innosie received by highest 5% . Percent of national income received by highest 20% Percent of national income received by lowest 20% Percent of national inoome received by lowast h0% [DISTRIBUJTION OF LAND 0W1ERSHNP % owned by top 10% of owners % ownod by smallest 10% of owners HEALTH AND NUTRITION Peptla-t-ion per physidian .. 20,45,0 Ob4,2) 7,180 (I /1 911)~ Population per nursing person . 221 12 9,2090 4~o 10li , ,, Population per hospital bed . ,1052,K)0( 910 ~i 1( P., -upltu caloris supply as % of requiremontn /5..Al lo-, 10 /I Per capita protein supply, total (grams per day4Y6 ..o5 7i -97 Of wh4ich, animal and pulse....7 D-irth rato I -I. yearn /7 . . A] E011GATION Adjuisted /8 primary school, enrollment ratio 1o /0 IL 4n . Adjusted n -econdary school enrollment ratio I~ ___ 17 T, 1h You- of -chooling pr-vided, first and second level 11 I 10 4. 12 1 Vocot tonal enrollment as % of sac, school enrollment U ( 4 I, Aicit literacy rate % ..I.'.G I0 Aver.go3 No. o,f 1.,r sois per room (urban) .. Percn.t of sorcspiod units without piped water Aln(oss to elont,icity (as % of total population) Ps-rc,>tnt of ?ural population connectsd to electricity... Radio re-ceivers per iDOl population o /. 22/ 224 I PAssenger cars per iDOl) population 0).6 IL .2 / 2.17.v1' i Electric power consfumption (kwh p.c.) il1 7t si l2ip 146 ' Newsprint consumption p.c. kg per year .. .04 ..O.:,. WcT 4s, Figures refer either to t-he lateet periods or to account of environmental temoperature, body weights, ;nd~ the latest years. Latest periods refer in principle to distribution by age wan sex of national populations. the years 1956-60 or 1966-7 ; the latest years in prin- /6 Protein standards (reqi-reinents) for all countriea as estab- cipie to 1960 and 1970. OnlTy sigeificantly different l.ished by USDA Economic Research Service provide for a minimum periods or years are footnoted separately. allowance of 60 grams of total protein per day, and 20 grams of /1 Tho Per Capita (INP estimates for years other than 1960 animeal and pulse protein, of which 10 grams should be animal is at market prices, calculated by the sane conversion protein. These standard.s are somewhat lover than those of 75 techninpe as the 1972 World Bank Atlas. grams of trial protei-n and 23 grams of animal protein as an /2 Average number of daughters per woman or reproductive average for the world, proposed by FAO in the Third World Food age. Survey. /3 Population growth rates are for the decades ending in /7 Some studies have suggested that crude death rates of children 1960 and ]976. ages I through 4 may be used as a first approximation i-ndex of /4i Ratio of under 15 and 65 andi over age brackets to malnutrition. those in labor foern bracket of ages 15 through 64~. /A Peroentage enrolled of coorresponding population of school age 5 FAO reference standards represent physiologic-al re- as defined for each counitry. cqoiremcnts for normal activity antd health, taking /a ITOL fiororon 1.oorot ,n I, S'Oueoooco rot,,. /t, 105 I0./ Wlre th-. 1,000 . Inhabitants. 'd 19-'l. 77 tocl..di o l tcrwtcc unhotnes stuf 1idwiv9s le, 1Jrl onLy. /1)2l9. Li - Including assistntet nlure, midwiv-on sd ... ictnni tidwi,%on. ltr,,.dt,n. / Itoonury choo - 1-t. l grod0'c 11 ro7g A/1 '91ltS . llite education only. /6 Pr,ieary sholjn lo-J ffrol, I 5. /, :;- lry s.b- 1,,,l t roih1-0. / lip to-matri,oulate (10th grade'). 7 ~ Dtinist!osn n.t, known. 1,11. /0 loa 'lot,- 01radio licones tonued. /5 b5. t ul lo-od on number of' ctor Jorn .lOps.OtLO wag,Ons 0-1 -oI 0110 i,Tjs / -cl V 1t613, tas,d ott 12110 popula'ti,n enti.uteo f 5/( million. 'w Data relate Lo nIor1trioAiy POOnor.L-d h14 ,,,-, itii. ttw 40a trzm.mninoin 1osses lso., /x 1966-683.. - R2 November 25, 1973  Annex I page -of 2 COUNTRY DATA - AFGHEhNISTAN GNP PER CAI'ITA IN 19701- US$80 GROSS NATIONAL E'RODUCT IN 1970/71 ANNUAL RATE OF GROWTH (%, constLnt prices) US $ Mln. 7/J - 1960-70 GNP at Market Prices .. 100.0 2-1/2 Gross Domestic Investment Cross National Savings Current Account Balance -29 -2.7 Exports of Goods, NFS 86 8.0 Imports of Goods, NFS 112 10.5 GOVERNMENT FINANCE General Government (AFS Mln.) % of GDP (AFS Mln.) 1970/71 1970/71 1971/72 Current Receipts 5719 12 5821 Current Expenditure 5156 11 5493 Current Surplus 563 1 328 Capital Expenditures 1731 4 1868 External Assistance (net) 628 1 929 MONEY, CREDIT AND PRICES Sept. Sept. 1965 1969 1970 1971 1971 1972 (Million AFS outstanding end period) Money and Quasi-Money 6419 7893 8468 9049 8403 9375 Bank Credit :D Public Sector 5239 9068 9870 10911 10420 11618 Bank Credit to Private Sector 560 979 927 1052 582 915 BALANCE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1968-70) 1969 1970 1971 (Million U, $) US $ Mln. % Exports of Goods, NFS 82.1 85.7 97.2 Dried Fruits + Nuts 18.8 25.6 Imports of Goods, NFS -126.0 -112.1 -120.8 Karakul Skins 11.8 16.1 Resource Gap (deficit = -) -43.9 -26.4 -23.6 Cotton 6.5 8.9 Factor Services and Transfers (net) -8.9 -2.2 -24.7 All other commodities 36.3 49.4 Balance on Current Account -52.8 -28.6 -48.3 Total 73.4 100.0 Net MLT Borrowing + Grants EXTERNAL DEBT, DECEMBER 31 1972 Disbursements 62.4 42.2 49.8 -U Amortization -22.8 -23.6 -28.1 Total, Outstanding + Disbutrsed 607.4 Total 39.6 18.6 21.7 DEBT SERVICE RATIO FOR 1971/72: 27% Other Capital (net) incl. Errors + Omissions 8.1 7.8 6.9 SDR Allocations 4.9 4.0 4.3 Overall Balance -0.2 - -15.4 End of 1969 1970 1971 Jan. '73 Gross Reserves 41.2 45.5 60 6 54.8 Net Reserves 30.9 30.7 49.1 52.4 RATE OF EXCHANGE IBRD/IDA LENDING, Qotober3l, 1973 (Million US$): Official Rate Free Rate. Sept. 19' IBRD IDA US$1.00 = 45 AFS US$1.00 = 58.35 AFS 1.00 = US$0.0222 1 AF = $0.0171 Outstanding + Disbursed - 6.1 Undisbursed - 22.4 Outstandinig incl. Undisbursed - 28.5 1/ Indicative. Reliable estimates of GNP and statistics relating to many other indicators normally provided in this Annex for other countries are unavailable in Afghanistan. Europe, Middle Fast and North Africa Region December 5, 1973  ANNEX II Page,1 of 3 TiE STATUS OF BANK GROUP OPERATIONS IN AFGHANISTAN A. STATEMENT OF IDA CREDIT (as at October 31, 1973) US$ million Credit Amount (less cancellation) Number Year Borrower Purpose IDA Undisbursed 158 1969 Afghanistan Highway 5.0 1.7 Maintenance 202 1970 Afghanistan Agricultural 5.0 2.6 Credit 248 /1 1971 Afghanistan Irrigation 5.0 4.6 374 1973 Afghanistan Aviation 2.5 2.5 Communication 375 /2 1973 Afghanistan Livestock 9.0 9.0 380 1973 Afghanistan Industrial 2.0 2.0 Development Bank Total now held by IDA (excludes exchange . adjustment) 28.5 Total undisbursed 22.4 22.4 B. STATEMENT OF IFC INVESTMENTS (as at October 31, 1973) Amount Investment US$ million Number Year Institution Loan Equity Total 243 1973 Industrial Development Bank of Afghanistan - 0.3 0.3 Total gross commitments, less cancellations, terminations, repayments & sales -- Total commitments now held by IFC _ 0.3 0.3 Total undisbursed - /1 Credit No. 68 for an Education Project in 1964 was cancelled at the Government's request in 1969, $0.3 million which had been disbursed for the project was consolidated under Credit 248. /2 Not yet effective.  ANNEX II Page 2 of 3 C. PROJECTS IN EXECUTION Cr, No. 158 - Highway Maintenance Project: US$5.0 million Credit of June 26, 1969; Closing Date: December 31, 1973 The Highway Maintenance Project of June 1969 (Credit No. 158-AF) became effective in mid-1970 after it was ratified by the Parliament. During much of the two and one half years thereafter, the Government was forced to divert scarce local funds from this and other projects for relief operations following the drought of 1970 and 1971 and the severe winter of 1971/72. Progress on the Highway Maintenance Project, therefore, was constrained by a shortage of local funds during this period, but the Government is now providing sufficient financial support. Difficulties were also encountered in recruiting able Afghan counterpart personnel because of unattractively low civil service salaries. Progress has also been made toward solving this problem, and in February a very capable President was hired to head the RMFD which is responsible for the project. Further measures to help to improve road maintenance operations are proposed as part of the proposed project. It is however anticipated that because of the aforementioned initial delays in implementation, the Closing Date will need a one year extension to December 1974, by which time the proj- ect should be completed. Cr. No. 202 - Agricultural Development Bank Project: US$5.0 million Credit of June 24, 1970; Closing Date: December 31, 1974 The Agricultural Credit Project of June 1970 (Credit No. 202-AF) became effective in December 1970. In conjunction wlth the project, the Agricultural Development Bank of Afghanistan (AgBank) was reorganized with the assistance of a UNDP-funded German management team. AgBank's staff has been strengthened, loan appraisal methods upgraded, and loan collection pro- cedures improved. The number of AgBank on-lending operations has increased significantly; and although disbursements for the project were slowed by the drought, commitments are once again increasing. A second three-year contract with the consultants has just been concluded, and preparation of a second agricultural credit project has begun. Cr. No. 248 - Khanabad Irrigation Project: US$5.0 million Credit of June 11, 1971; Closing Date: June 30, 1976 The Khanabad Irrigation Project of June 1971 (Credit No. 248-AF) became effective in December 1972, after considerablet delay in obtaining parliamentary action on this and a number of other external loans. For eighteen months the Parliament was preoccupied with domestic issues and failed to consider the foreign borrowings negotiated by the Government. The Khanabad Credit was finally considered and approved unanimously in November 1972; thereafter the Government completed the remaining formalities and the credit became effective in late December 1972. Consultants for the project have been in the field since, and work is proceeding satisfactorily.  ANNEX II Page 3 of 3 Cr. No. 374: Aviation Project: US$2.5 million Credit of May 2, 1973: Closing Date: June 30, 1979 The Aviation Project of May 1973 (Credit No. 374-AF) was approved by the Afghan Parliament before the July 17 change of government. This change raised some legal questions relating to effectiveness which an IDA lawyer reviewed in Afghanistan in mid-September. The original date for effective- ness was extended to November 30, 1973, and the credit was declared effec- tive on November 26, 1973. Cr. No. 375: Livestock Development Project: US$9.0 million Credit of May 2. 1973: Closing Date: September 30, 1978 The Livestock Development Project of May 1973 (Credit No. 375-AF) was approved by the Parliament before the change of government. Legal ques- tions relating to effectiveness were reviewed during the visit of an IDA lawyer. To enable these steps and other actions (including the engagement of consultants by the Herat Livestock Development Company) to be completed, the effective date has been postponed to January 31, 1974. Cr. No. 380: Industrial Development Bank of Afghanistan Project: $2.0 million Credit of May 15, 1973: Closing Date: December 31, 1977 The Industrial Development Bank of Afghanistan Project of May 1973 (Credit No. 380-AF) was expected to become effective by August 20, but the deadline for declaring the credit effective was postponed to December 17, 1973 to allow for the clarification of legal questions arising from the recent change of government. Following the visit of an IDA lawyer, necessary actions have been taken and the credit was declared effective on November 20, 1973. Furope, Middle and North Africa Region December 5, 1973   ANNEX III Page 1 of 3 AFGHANISTAN - SECOND ROAD IMPROVEMENT AND MAINTENANCE PROJECT Credit and Project Summary Borrower: Republic of Afghanistan Amount: $11.5 million equivalent Terms: Standard Project: The project consists of the following: (a) execution over 3 years of a highway improvement and maintenance program in the Eastern, Southern and Western Regions of Afghanistan, and purchases of equipment, spares and materials for it; (b) construction of a highway maintenance center in Kabul, and improvements to existing maintenance workshops; (c) consulting services (i) to assist MPW in the manage- ment of the highway improvement and maintenance pro- gram; (ii) to train highway staff in the MPW; (iii) to formulate a highway improvement and maintenance program for the period of Fifth Five-Year Develop- ment Plan, and to study highway construction proj- ects proposed for inclusion in the Plan; and (iv) to assist the Provincial Development Department (PDD) in planning, design and supervision of road works; (d) technical assistance by international recruited specialists, in the execution of the highway improve- ment and maintenance program.  ANNEX III Page 2 of 3 Estimated Cost: Costs IDA Local Foreign Total Credit 1. Road improvement and maintenance works 6.0 7.0 13.0 6.0 2. Kabul maintenance center and workshop improvement 1.0 0.5 1.5 1.3 3. Technical Assistance by consultants 0.3 0.9 1.2 1.2 4. Technical Assistance by internationally recruite(d specialists 0.5 0.7 1.2 1.2 5. Contingencies 1.4 1.8 3.2 1.8 Total 9.2 10.9 20.1 11.5 Financing Plan: Local Foreign Total (US$ million) IDA Credit 2.0 9.5 11.5 Government Contribution 7.2 1.4 8.6 9.2 10.9 20.1 Estimated Disbursements: Year ending June 30 1973/74 1974/75 1975/76 1976/77 1977/78 (US$ million) 0.2 5.8 3.5 1.6 0.4 Procurement Arrangements: International competitive bidding for procurement of new equipment and related spares, and for imported materials, tools and lubricants; spare parts for existing equipment would be procured directly from the original suppliers of the equipment; local bidding for workshop improvements and construction; and purchase of cement from government- owned cement factories at a price subject to the Associa- tion's approval.  ANNEX III Page 3 of 3 Consultants: Proposals would be invited from international firms for technical assistance in the management of the road work programs, training, and for formulating the road work programs for the Fifth Five-Year Plan period. Specialists to assist MPW in program execution would be recruited in- dividually on the basis of professional competence and experience. Economic Rate of Return 29 percent Europe, Middle East and North Africa Region December 5, 1973   ; > 700 DECEMBER 1973~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~DCMER17 AFGHANI ISTANI ,-, '\- sSt )JX i -~~~~~~~A > <, g =_ > X ' :r. _ ' g I; ' 1.\ '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' <' S~kO,T r / R WF S _ J/D Ct, " 5 X r , ~~~~~~~~~~~~~~~~~ IK 4 wN'--= *--- =,-r; P ~~~~~~~~~~~~~~~ Z t ,z' - ~~~~~~~,,i, 4, ,5SHBER .- \ A g A v e 0 ! ,X,2\ - ,7/- t C, z GRAVEL RDACS~~~~~~~~~~~~~~~~ ~ 0 ' ' & < * S0 O R|G O < 1 l | + 5 00M6mR.,,_,J F t5g e g~~~~~~~~~~~~A f, --w ==IMTRATI h:AI 1__,9 < + t-t, g''-'5t t3""" :~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A ,' /E1 + . D ' g X ; :, '. ws* ,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ CHIIArbnk\\TGb/K 0 / b 2fh