ADB to promote economic growth, poverty reduction and capacity building in Afghanistan

MANILA, PHILIPPINES (12 September 2005) - The Asian Development Bank's (ADB's) lending program to Afghanistan is projected to amount to about US$200 million per year between 2006 and 2008, according to the Country Strategy and Program (CSP) Update endorsed by ADB's Board of Directors.

The entire lending program for the country over the three-year period will be allocated to promote economic growth and poverty reduction. Efforts also will be made to mainstream anti-narcotics and alternative livelihood approaches as well as enhanced accountability and anticorruption provisions in all ADB-supported activities.

Up to half of the total lending allocation will be provided on a grant basis from ADB's Asian Development Fund (ADF). The final assistance amount will be subject to overall availability of funds and the performance-based allocation system for postconflict countries, the Update says.

Afghanistan has made remarkable progress since emerging from conflict in 2002. However, the country faces significant development challenges, including extreme poverty, insecurity, weak human capacity, and gender inequality. The country ranked 173 out of 178 countries included in the United Nations Development Programme's 2004 human development index, with Afghanistan's development compromised by lack of social services, poor health, education, nutrition, and human displacement.

"Although ADB will focus its efforts on promoting economic growth as the key means of poverty reduction, given the intractable problems facing the country, social gender and human resource concerns will be incorporated in all of ADB's projects, as will alternative livelihood efforts to counter opium poppy cultivation and the production of illegal narcotics," says Edward Haugh, ADB's Senior Advisor on Afghanistan Operations.

"Given the size of Afghanistan's opium economy, a strategy that creates alternative livelihoods in rural areas, combined with eradication measures and legal reform is required, and in the context of broad-based economic growth."

Mr. Haugh adds that ADB plans to further engage local governments and civil society in the process of planning and carrying out projects as well as to promote women's participation.

The Update also provides for increased effort to incorporate a regional dimension in loan projects, such as border facilities in road projects or ensuring connectivity with regional power transmission grids.

The lending assistance pipeline includes loans to address rural and livelihood concerns, such as rural finance, water resource management, development of commercial agriculture and livestock activities, and irrigated agriculture development.

Transport sector loans are expected to include assistance for a north-south corridor project, a second phase of the rehabilitation of regional airports, and a road network project.

In the energy sector there are projects planned to boost hydropower and transmission, natural gas development, and rehabilitation of gas producing wells and pipelines. There are also finance projects planned, including a financial market and private sector development program and the second phase of a fiscal management and public administration reform program.

ADB supports the Government's strong emphasis on private-sector-led economic recovery. It has already identified loan and equity investments of up to $100 million in partnership with local and foreign investors, as well as guarantees of about $100 million to catalyze private investments.

To support the lending program, ADB also will provide a high level of technical assistance - amounting to about $10 million per year - to address the country's still weak human resource base and government capacity constraints. ADB-supported activities will give continued emphasis to capacity development and institutional strengthening with increased attention to performance measurement.

By the end of 2004, ADB had fulfilled its Tokyo Conference pledge of providing $500 million in highly concessional loans and grant-financed technical assistance and private sector investments. Since resuming operations in Afghanistan in 2002, ADB has approved seven public sector loans totaling $513.7 million (to end of July 2005) and some $40 million in technical assistance.

The Asian Development Bank is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members, with 45 from the region. In 2004, it approved loans and technical assistance totaling $5.3 billion and $196.6 million, respectively.