Market Enabling Infrastructure and Reforms for Kabul Municipality / KMDP

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).