COMPONENT 4: MARKET ENABLING INFRASTRUCTURE AND REFORMS FOR KABUL MUNICIPALITY26 (US$40 m) This component aims to address the challenges faced by Kabul’s private sector in accessing economic opportunities. Kabul’s private sector is dominated by a very large number of small and micro enterprises (SMEs) located throughout the city in: (a) formal market areas, (b) small semi‐formal shops and factories located in commercial areas, and (c) on the sides of main transport roads informally. In general, these businesses are performing in a suboptimal manner due to productivity, value (quality), and connectivity challenges. This component aims to address these problems by (a) assisting Kabul Municipality to implement selected municipal level regulatory reforms associated with market upgrading; and (b) financing investments in market upgrading and connectivity improvements (e.g. roads and drainage) that promote economic opportunities.
Subcomponent 4.1: Regulatory and process reforms. Kabul Municipality will develop and implement several regulatory reforms with the immediate focus on simplification of construction permits. Other reforms relevant to Doing Business (DB) indicators will also be supported. The reduction in processing steps for construction permits will be measured against baseline figures from the Afghanistan Doing Business Reform Memorandum (March 2018). The table above outlines the procedures and triggers (but not the PFM reforms) which will be applied to release the three tranches to the municipality before works can begin. The payments would be made upon receipt of third party verification by MoEC.
Subcomponent 4.2: Prioritized Urban Investments. Kabul Municipality will identify “Priority Project” investments through consultations with businesses. The funding for these investments will be released in three tranches and will be conditional on meeting the regulatory reform triggers for Component 4. The type of investments that are likely to be funded include work on public markets (including women’s markets) and roads, the provision of electricity connections, and logistics infrastructure (e.g., warehouses). Investment resources will Feasibility studies and detailed designs will incorporate climate resilient elements. Note: Kabul is the only municipality that does not fall under IDLG’s mandate. For this reason, a separate component has been set up for Kabul, even though the type of activities, reforms and objectives may seem similar to those in Components 2 and 3. “Priority Projects” are urban infrastructure investment projects that will be: selected based on criteria and a permissible menu that will be elaborated in the Operations Manual and provide pro‐market / pro‐business economic opportunities to displaced populations, women, and host communities; (2) aligned to city‐level Strategic Development Frameworks that will determine optimal location and appropriate project types; (3) aligned to any Gozar / Business Gozar subprojects proposed or being implemented under EZ‐Kar in the same geographic catchment area; and (4) under Safeguards Category B. There will be operations and maintenance (O&M) plans in place with a system to ensure user fees are collected where possible. Examples of Priority Projects include, inter alia, construction and/or rehabilitation of markets, shops, connectivity, shared commercial toilets and storage and ICT infrastructure, power grids etc. be allocated on a performance basis in three tranches in line with Table 1. These investments will be screened to ensure: (i) feasibility and (ii) a focus on economic opportunities. Eligible investments will be limited to those that meet criteria such as: (a) improve economic opportunities through improved productivity (reductions in wastage and pilfering), (b) increase the value of products (hygiene, packaging, etc.) or (c) improve connectivity to the market, and that (d) are located on land owned by the municipality, (e) are limited to a maximum of US$2.5 million (and are of safeguards category B), (f) consistent with Kabul’s master plan (zoning, future development, avoidance of hazard‐prone areas), and (g) have the concurrence of the private sector. To ensure that Priority Project proposals identified for implementation by KM are aligned with and inform national development plans, the approval procedure shall be aligned with the national PIM approach. KM, as the proposing entity, shall submit the
proposals for strategic fit screening and final approval by MoEC. For such screening and approval, MoEC shall use a screening tool. It is recommended that KM uses the same screening tool while proposing Priority Projects to reduce the risk of rejection/revision during MoEC’s approval process. The details of the process shall be elaborated clearly in the Component 4 Operations Manual.
Subcomponent 4.3: Component 4 Management. Activities under this component will be implemented using the existing PIU established under Kabul Municipality Development Program (KMDP). This subcomponent will cover all the additional operations and management costs associated with implementing the EZ‐Kar activities in Kabul (up to 10 percent of Component 4 amount).