House of Commons - International Development

Select Committee on International Development Written Evidence

Memorandum submitted by the Department for International Development (DFID)

EXECUTIVE SUMMARY

1. Following twenty-five years of turmoil and conflict, Afghanistan is one of the poorest countries in the world, and remains off-track on all of the Millennium Development Goals. Because of conflict and insecurity, the people of Afghanistan were in the past denied basic services including health care and schooling.

2. There has been real progress since 2001, with life improving for many Afghans. Around 5.4 million children are now in school, over a third of them girls. 4.8 million refugees have returned home to Afghanistan. Infant mortality rates have declined. Under-five mortality rates have dropped. In the last three years, the proportion of women receiving ante-natal care has increased from 5% to 30%.

3. In economic terms, Afghanistan's progress over the last six years has been impressive. Afghanistan started from a very low base. Gross Domestic Product (excluding opium) grew 42% from 2002-03 to 2005-06, and by an average of 10% every year for the past three years. Real income has also been growing steadily since 2001, up to $335 per capita in 2006. But it is still less than a dollar a day per person and half the average in the South Asia region ($684). Afghanistan has one of the lowest rates of revenue mobilisation in the world (6% of Gross Domestic Product) and is heavily aid dependent. In 2006 aid accounted for about one third of total Gross Domestic Product and made up more than half of the national budget.

4. DFID is committed to supporting poverty reduction in Afghanistan over the long term. At the London Conference on Afghanistan in January 2006, the UK committed to provide £330 million of development assistance to Afghanistan over three years (2006-09) as part of a total UK package of £500 million. DFID's programme is focused on three of the Afghan Government's own objectives, as set out in their Interim Afghanistan National Development Strategy: building effective state institutions; improving economic management and improving the livelihoods of rural people.

5. We support the Government to deliver development and reconstruction nationwide. Over 80% of our assistance goes through Government channels. This helps the Government to develop the capacity to deliver basic services; to manage public finances effectively; and to build credibility and legitimacy with the Afghan people. It is also more cost effective.

6. DFID uses the Afghan Reconstruction Trust Fund as the main financing instrument to a support the Government of Afghanistan's National Priority Programmes. These include the flagship National Solidarity Programme, which supports local community development priorities across Afghanistan. NSP is implemented through 23 national and international Non-Governmental Organisations, plus United Nations Habitat.

7. Nationally, NSP has set up over 17,500 Community Development Councils across Afghanistan with over 29,000 projects in the areas of agriculture, education, health, irrigation, power, transport and water supply. Through the national micro-finance programme over £140 million worth of small loans have been given to 375,000 recipients. The national roads programme has built over 9,300 km of rural roads and generated over 13.5 million days of labour The Helmand Agricultural and Rural Development Programme supported the construction of four roads, 554 wells, and 482 community projects.

8. The drugs trade in Afghanistan presents an enormous challenge. According to the United Nations Office on Drugs and Crime's 2007 Annual Opium Survey the area under opium cultivation rose to 193,000 hectares from 165,000 in 2006 and the total harvest increased from 6,100 tonnes in 2006 to 8,200 tonnes this year. Opium production is heavily concentrated in areas of insecurity with Helmand now the world's biggest source of illicit drugs with 102,770 hectares under opium production. The Afghan Inter-Departmental Drugs Unit (London) and the British Embassy Drugs Team (Kabul) lead on the UK's counter-narcotics effort. DFID is assisting the Government of Afghanistan with institutional reform to help ensure that Government policies and strategies support the growth of legal livelihoods. DFID also has a substantial livelihoods programme aimed at strengthening and diversifying legal livelihoods.

9. Corruption is also a major problem. According to the Corruption Perception Index of Transparency International in 2005, Afghanistan ranked 117th out of 159 countries. In the Investment Climate Assessment for Afghanistan (2005) survey 53% of enterprises cited corruption as one of the top four major or severe constraints—along with electricity, access to land, and access to finance. High levels of corruption are a key indicator of a weak an ineffective state.

10. Co-ordination of the military and development effort stems from the strategic level discussions that take place in Whitehall, to operational discussions in Kabul, and to the tactical activities in Helmand. Security and development are linked in the UK Joint Plan for Helmand. Getting the balance right between security efforts and reconstruction and development, along with political engagement, requires robust, integrated planning. The Helmand Executive Group provides the mechanism through which this integrated planning can take place on an ongoing basis in the Provincial Reconstruction Teams. Provincial Reconstruction Teams are international civil-military teams, intended to further security and development across the provinces and help extend the reach of central Government. Originally a US concept, there are now 25 Provincial Reconstruction Teams in Afghanistan, led by 13 different nations. The UK led the Provincial Reconstruction Team in Mazar-i-Sharif from July 2003, handing over to Sweden in March 2006, and has led the Helmand Team since April 2006.

11. DFID is playing a major role in helping improve donor coordination. There are two main areas of focus: (a) getting donors to help the Government develop a comprehensive National Development Strategy; and (b) the development of a joint donor strategy process which aligns donor support to the Government's National Development Strategy.

12. DFID is fully committed to the UK Government's comprehensive approach to Afghanistan, whereby all departments work towards a jointly-owned UK Strategy in support of the Afghan Government. Adopting an integrated approach to support the Government of Afghanistan to extend its influence and authority is being achieved through close cooperation and coordination between Departments. Each department contributes to overall strategy formulation and delivers according to its skills. DFID leads on the economic and social development strand, FCO on governance, rule of law and human rights, and MOD on security. The inter-departmental Afghanistan drugs unit leads on counter-narcotics, a cross-cutting priority.

CONTEXT FOR DEVELOPMENT ASSISTANCE IN AFGHANISTAN

13. Following decades of turmoil and conflict, Afghanistan is one of the poorest countries in the world, and remains off-track on all of the Millennium Development Goals. Because of conflict and insecurity, the people of Afghanistan have for years been denied basic services including health care and schooling. Against all human development indicators, Afghanistan ranks amongst the lowest in the world. One in five Afghan children dies before their fifth birthday; around one-third of the population are eating less than the minimum daily calorie requirement; and under one-third of 15-24 year olds are literate (only one-third of these are girls). The UN's 2004 figures measure Afghanistan's life expectancy as 46 years and adult literacy rate as 28.1%, compared to an average of 52.4 years and 63.7% for the world's least developed countries.

14. But we have also seen real progress since 2001, with life improving for many Afghans. Around 5.4 million children are now in school, over a third of them girls. This is up dramatically from an estimated one million children in school in 2001, of whom very few were girls, who were officially denied access to education under the Taliban. 4.8 million refugees have returned home to Afghanistan. Infant mortality rates have declined from an estimated 165 per 1,000 live births in 2001 to about 129 per 1,000 in 2005—equivalent to around 40,000 more babies surviving per year now than in 2002. Since 2000, under-5 mortality rates have dropped from around 1 in 4 to around 1 in 5. The proportion of women receiving antenatal care increased from 5% in 2003 to 30% in 2006.

15. In economic terms, Afghanistan's progress over the last six years has been impressive. Afghanistan started from a very low base. Twenty-five years of conflict destroyed much of the country's limited infrastructure, severely impeded private sector development and undermined normal patterns of economic activity. But the economy (excluding opium) grew 42% from 2002-03 to 2005-06 and has grown by an average of 10% every year for the past three years. The International Monetary Fund has forecast 12% economic growth this financial year, driven by a rebound in agricultural output and a sustained growth in the construction and services sectors. Key macroeconomic indicators such as inflation and the exchange rate have remained relatively stable. The Government, assisted by the donor community, has taken forward much needed reforms in public financial management and public administration reform.

16. But tough decisions on economic reforms are now needed to sustain growth and stability. Afghanistan has one of the lowest rates of revenue mobilisation in the world (6% of Gross Domestic Product compared to an average of 19% for African countries). At these rates, it is impossible for the Government to meet its own costs. In June 2006 the International Monetary Fund agreed a three year Poverty Reduction and Growth Facility arrangement with the Afghan Government to support macroeconomic reform, setting a series of targets for the Government to meet. This includes a set of challenging revenue mobilisation targets which (if met) will strengthen the Government's ability to cover its costs by 2013. However, progress on meeting the revenue targets is by no means guaranteed and will require tough policy decisions from the Government.

17. Politically, Afghanistan has progressed considerably since the fall of the Taleban in 2001: adoption of the constitution; Presidential (2004) and Parliamentary (2005) elections (with over 40% of votes cast by women) and the inauguration of the National Assembly in 2005. 28% or 87 MPs (out of 351) are women. 25% of these are constitutionally mandated. While the Assembly takes its oversight responsibility seriously, the relationship between, and authority of, Parliament and the Executive is weak. Former warlords and those running the drugs trade still exercise significant power across the provinces. The challenges faced by President Karzai and his Government are daunting in managing the different political constituencies and in exercising Government control over a complex and largely rural territory affected by corruption, the narcotics trade, and a long history of conflict.

18. Outside of Kabul, central government influence is (very) slowly being felt. But the links remain tenuous, and traditional local ethnic and tribal structures are still very important. Capacity in Afghan line ministries is variable. For example, the Ministry of Finance and Ministry of Reconstruction and Development are running as well as Afghanistan's limitations allow, however the Ministry of the Interior is weak. The major ministries have offices in each province but links between the centre and province are invariably weak.

19. Corruption is a major problem, and is viewed by most Afghans as getting worse, with the security sector and judiciary seen as the most corrupt institutions. In the short term President Karzai has established a high level Anti-Corruption Commission, chaired by the Chief Justice. However corruption is an ongoing challenge and long term success will require changes in behaviour at senior levels. Tackling corruption is a major focus of the UK's long term effort. DFID has supported this effort so far by working with the Civil Service Commission and other donors to scale up support for public administration reform. DFID has also provided advice to the Government of Afghanistan in developing an anti-corruption roadmap.

20. International development support for Afghanistan was cemented by the International Compact for Afghanistan, agreed at the London Conference in January 2006. The Conference was chaired by the Afghan Government and the United Nations, and the agreed Compact represents a framework for cooperation for the five years up to the end of 2010, with benchmarks for success. It includes commitments on improving aid effectiveness and is monitored by the Joint Coordination and Monitoring Board co-chaired by the Afghan Government and the UN Special Representative of the Secretary General. The Interim Afghanistan National Development Strategy was also launched at the London Conference, and was supported by pledges totalling $10.7 billion from the international community.

21. The full Afghanistan National Development Strategy is currently being developed by the Afghan Government. It is due to be launched in March 2008 and needs to be implemented for one year as part of Afghanistan's bid for debt relief under the Heavily Indebted Poor Countries Initiative. It will be a key challenge to ensure that the strategy is realistic and credible, aligned with the national budget, and has full buy-in across the Government of Afghanistan and the donor community. It will be important for Afghanistan's future development that the donor community coordinates its assistance in support of the final strategy. Although the second largest bilateral donor, DFID's $216 million commitment this year is small compared to US and multilateral financing which accounts for a large proportion of the $4.3 billion international financing committed to development in Afghanistan this financial year. Coordination of international assistance and improved effectiveness of aid is a major objective of DFID's policy support to Afghanistan. Aid effectiveness would also be helped by a stronger UN coordination role, which DFID is encouraging.

22. Working in an insecure environment brings its own challenges. We invest a substantial amount of resources in ensuring that our staff are protected. The impact of the security situation in Kabul and neighbouring provinces limits the ability of UK staff to undertake regular project monitoring, increasing our reliance on project partners. In Helmand, the fragile security situation makes operating even more difficult. Civilian travel is limited and it is difficult to attract Non-Governmental Organisations as implementing partners, especially while the United Nations does not have a permanent presence. Coordination with the military is particularly important in Helmand, to ensure the comprehensive approach is implemented.

KEY QUESTIONS

The objectives of DFID's programme in Afghanistan; the trade-off between short term gains and long-term transformation; balancing and prioritising multiple goals and objectives; DFID's experience and knowledge of working in insecure environments

23. DFID is committed to supporting poverty reduction in Afghanistan over the long term. At the London Conference on Afghanistan in January 2006, the Prime Minister and Afghan President Hamid Karzai signed a 10-year Development Partnership Arrangement, showing the UK's long-term commitment to Afghanistan. This includes a commitment of £330 million of development assistance to Afghanistan over the next three years (2006-09) as part of a total UK package of £500 million—which includes funding for other activities such as counter-narcotics. DFID is Afghanistan's second largest bilateral donor, spending over £100 million in 2006-07 (the US is the largest, spending $4.39 billion between 2002 and 2006 and with a budget of around $1.4 billion for 2007). Over the last three years the size of DFID's programme has grown substantially. In 2007-08 we expect to spend £107 million, rising to £115 million in 2008-09.

24. Our programme is prioritised at the request of the Government of Afghanistan. We support three of the Afghan Government's own objectives, as set out in their Interim National Development Strategy:

— Building effective state institutions;

— Improving economic management; and

— Improving the livelihoods of rural people.

25. In addition to these three objectives, which account for the majority of our spending in Afghanistan, DFID's wider goals are to improve donor coordination in Afghanistan; to support the Government of Afghanistan in developing a full Afghanistan National Development Strategy; and to contribute to the wider UK government effort in Helmand. We support development in Helmand both through our rural livelihoods programme and through HMG's Quick Impact Projects, designed to deliver immediate benefits to local communities. DFID spent around £16 million in Helmand in 2006-07, and we have committed to spend up to £20 million this year.

26. The majority of our programme is focused on work which will support the long-term transformation of Afghanistan. We direct over 80% of our assistance through Government channels because this helps the Government to develop the capacity to deliver basic services; to manage public finances effectively; and to build credibility and legitimacy with the Afghan people. We support the Government to deliver development and reconstruction nationwide, including in Helmand.

27. DFID has adapted the way we work to take account of the insecure environment in Afghanistan. DFID follows FCO advice on security related matters, including risk mitigation. We invest a substantial amount of resources in ensuring our staff are protected, both through provision of close protection and armoured cars and planning and monitoring movements. The security situation in Kabul and neighbouring provinces limits the ability of UK staff to undertake regular project monitoring, which is mainly undertaken by project partners, in close consultation with us. This is also to lower the profile of visits, which may increase the risk to local partners.

28. In Helmand, the fragile security situation makes operating even more difficult for a number of reasons. It is often difficult for civilians to leave the Provincial Reconstruction Team base, and the number of locations in the Province to which civilians can travel is limited. The number of project implementing partners prepared to work in Helmand is limited: there are currently only four national/international Non-Governmental Organisations working in Lashkar Gah (with limited outreach to the districts) and the United Nations is still not present. Security concerns also hamper Government of Afghanistan outreach in Helmand, with Governor Wafa rarely venturing beyond Lashkar Gah, and visits from Kabul-based Government of Afghanistan representatives even less frequent. Also, some partners are not willing to visit the Provincial Reconstruction Team compound as this can compromise their own security. The UK is working to improve the security situation and to help create the conditions in which longer-term development can be successful.

How much of DFID's work is in fragile states?

29. Fragile states are increasingly DFID's core business. 11 out of DFID's 25 Public Sector Agreement countries are fragile states (according to the list in DFID's 2005 policy paper, Why we need to work more effectively in fragile states). Between 2001 and 2006 DFID increased bilateral expenditure in fragile states from £243.5 million in 2000-01 to £745.6 million in 2005-06. This represents an increase from 17% to 30% of DFID's overall bilateral spend. In 2006-7 this increased further to £800.1 million or 31% of our bilateral spend. [1]

30. Six of the top 20 recipients of DFID bilateral aid in 2005-06 were fragile states. In 2006-07, the 10 largest fragile states recipients accounted for 87% of DFID's expenditure in fragile states. These are Sudan, Afghanistan, Nigeria, Kenya, Ethiopia, Democratic Republic of the Congo, Indonesia, Nepal, Sierra Leone and Zimbabwe.

31. The late 1990s marked the beginning of a more systematic and strategic approach to fragile states in DFID and in other aid agencies. The Organisation for Economic Co-operation and Development Assistance Committee Principles on Good International Engagement in Fragile States and Situations, endorsed by Development Assistance Committee members in April 2007, represent a strong consensus on how to improve development effectiveness in fragile states and are in line with our own experience.

32. There is no single approach to programming—fragile states are too varied and we need a different mix of instruments depending on the circumstances. Our experience is showing that sustained commitment (eg through five to 10 year agreements), an integrated approach that brings together development, diplomatic and security actors, and innovative and flexible use of instruments can all help improve performance.

How does DFID manage risk in fragile states?

33. The risk of increasing our activities and focus in fragile states has to be balanced against the cost of not engaging, and the potential for significant gains. DFID is implementing an action plan to strengthen our business process to cope with risk and uncertainty, following the Capability Review. The Statement of Internal Control, the annual report on DFID's overall control environment, signed off by the Permanent Secretary, has been re-written to reflect a much more comprehensive treatment of the risks managed by our internal controls.

34. We are also putting in place additional risk management measures, such as contingency and emergency planning, in our most risky programmes. Scenario and contingency planning is currently being carried out in a number of fragile states in Africa and will be part of all future Country Assistance Plans in South Asia including Afghanistan. Detailed contingency planning and business continuity plans are already in place for Europe, Middle East, Americas, Central and East Asia Division countries, and ongoing contingency planning is routine for Iraq and Palestine. In Iraq and Afghanistan contingency planning is put into practice on a regular basis, and forms part of operational security procedures which are reviewed on a daily basis. DFID's risk management in these countries is conducted jointly with the FCO.

35. Concerns over financial and political risk will continue to be strong factors in our choice of aid instruments in fragile states. For example, we are managing fiduciary risk by using instruments such as trust funds, pooled funding and social funds, where a third party (often the World Bank) administers the fund. Shifting staff resources to fragile states, using a mix of aid instruments and regular assessments of the political context, including through the Country Governance Analysis, are steps already being taken to help manage risk.

The geographical balance in the distribution, especially between the north and the south

36. Over 80% of DFID's assistance goes directly to the Government of Afghanistan in support of its own priorities. This includes support for the government's National Priority Programmes, which operate throughout the country. Maintaining nationwide support is important as Afghanistan remains in a fragile situation.

37. Decisions on which projects to support, and where, are driven by the Government Ministries in Kabul through which we provide support and locally, by the Provincial Department of Rural Reconstruction and Development. They decide their own priorities, in full consultation with local communities.

38. For example, the National Solidarity Programme and the National Rural Access Programme operate in all 34 provinces of Afghanistan. The Microfinance Investment and Support Facility Afghanistan operates in 23 provinces, and the Horticulture and Livelihoods Programme (still at an early stage) operates in seven provinces.

39. DFID has also provided support for Quick Impact Projects in Helmand (£4 million in 2006-07 as part of a total £6.2 million UK contribution), which are focused on delivering immediate benefits. In addition £10 million of our support to Helmand last year was directed through Government of Afghanistan National Priority Programmes, including work to improve rural infrastructure, water and sanitation facilities, and access to micro credit to promote legal livelihoods.

The contribution of budget support, through the Afghanistan Reconstruction Trust Fund, to strengthening institutional capacity and accountability

What form of support to the Government of Afghanistan's budget does DFID provide?

40. DFID channels 81% of its aid through Government of Afghanistan systems, of which a significant proportion (£70 million this year) goes through the Afghanistan Reconstruction Trust Fund. This Fund is managed by the World Bank and receives contributions from 24 countries. It has two strands: a recurrent window to support the operating costs of the Afghan Government (predominantly public sector wages) and an investment window to fund development programmes. DFID is the largest single contributor,to the Trust Fund since it began, accounting for a third of all unearmarked contributions in 2006-07.

41. The Afghanistan Reconstruction Trust Fund differs from more conventional forms of budget support in two major ways. First, resources are provided to Government of Afghanistan on a reimbursement basis. Funds are transferred to the Government only when it has demonstrated that actual expenditures (such as salaries) have been paid, and conform to strict criteria that are scrutinised by an independent monitoring agent. Second, funds are not totally fungible; they cannot for example be used for security expenditures.

42. DFID's largest Afghanistan Reconstruction Trust Fund contribution is to the recurrent window—£55 million this financial year. Since 2002-03, the recurrent window has disbursed close to $900 million ($437 million of which is from DFID). Around 70% of this funding goes to paying the wages of non-security public sector workers, including around 90% of the Ministry of Education's wage bill. This has contributed to the increase in pupils from 2 million in 2002 to 5.4 million today and the increase in teachers from approximately 21,000 in 2001 to more than 128,000 today.

43. DFID also provides funding to the investment window of the Afghanistan Reconstruction Trust Fund to support the Government's National Priority Programmes. These programmes help put the Afghan Government in the driving seat on development. After two decades of conflict it is critical to national solidarity that it is the Government—and not donors—that are seen to be providing services and investment programmes. In addition, the Government has demonstrated that it can deliver services at a fraction of the cost of international donors and NGOs. The investment window has provided around $300 million of development spending since 2002. DFID has contributed £40 million to the investment window since 2003, supporting key rural development programmes such as the National Solidarity Programme, the Government's micro-finance facility, and the National Rural Access Programme. In addition, DFID funds Government-led programmes specifically in Helmand through the Helmand Agriculture and Rural Development Programme to which DFID has committed up to £30 million over three years.

Institutional Capacity

44. The majority (70%) of the Afghanistan Reconstruction Trust Fund recurrent window currently supports the salaries of teachers, nurses and other public servants. In the absence of a large revenue base (Afghanistan currently mobilises only 6% of Gross Domestic Product in domestic revenues), the Afghan Government will be reliant on donors to cover a large percentage of its recurrent and development costs for many years to come.

45. Public sector salaries are currently low. This makes it difficult for the Government to attract and retain enough high quality recruits, especially as it is in competition with the private sector and donors who can offer higher salaries. This undermines prospects for building basic state capacity. Consequently, in 2007 the Afghan Cabinet agreed a new Pay and Grade system for the public service, intended to introduce pay increases linked to grade and responsibility. The Afghan Ministry of Finance devised the system on the basis of sustainability—they think Afghanistan will be able to cover the wage bill in ten years. While the Government of Afghanistan revenues grow, the Afghanistan Reconstruction Trust Fund will continue to ensure adequate financing of the new public sector wage bill and public administration reforms, hence strengthening the Government's basic capacity.

46. Financing the Afghan Government's own development programmes through the Afghanistan Reconstruction Trust Fund has also helped to build core capacity in key Ministries. Ministries are improving their performance in delivering basic services through Government systems, often subcontracted to Non-Governmental Organisations at the point of service delivery. The Ministries of Reconstruction and Rural Development, Health and Education are demonstrating progress in delivering basic services across the country, which has contributed in large part to the improvement in education and health indicators since 2001. Institutions which have not channelled the same level of support from Afghanistan Reconstruction Trust Fund investment resources are demonstrating much lower performance, including the justice sector. Alignment of the budget to the Afghanistan National Development Strategy will further strengthen key sectors' capacity to match resources and staffing to institutional priorities.

Accountability

47. Accountability is built between state and people when citizens have incentives and opportunities to hold Government to account on the use of resources. Building this link is going to be a very long-term effort in Afghanistan because democracy is young and Afghanistan has a very low revenue base and small economy. The challenge in the medium-term for donors is how to promote accountability between Afghan citizens and the state on how it spends available aid resources—$2.6 billion of aid is projected to be spent "off budget" in the external budget for fiscal year 1386. Afghan citizens cannot hold lots of different donor projects to account, nor should they. Our aim is to help build a sustainable Afghan state where donor money flows through Afghan systems.

48. The Afghanistan Reconstruction Trust Fund is a key mechanism through which greater accountability can be achieved. The National Solidarity Programme is a good example. Using Afghanistan Reconstruction Trust Fund money, communities, with help from Non-Governmental Organisations, have identified their own priorities. Since 2003, DFID has provided £17 million support to the National Solidarity Programme. As of July 2007, the National Solidarity Programme has established over 17,832 Community Development Councils across Afghanistan with over 30,463 projects approved and 12,887 projects completed. Rural people in all 34 of Afghanistan's provinces have benefited from National Solidarity Programme projects including improved water, roads and other small infrastructure projects. That builds a strong link and oversight between state and citizens. We want to extend the principle to other big sectors like education.

49. Since the inception of the Afghanistan Reconstruction Trust Fund, revised legislation on Public Financial Management and Procurement has been adopted, and the World Bank, through the independent monitoring agent, is helping the Afghan Government to apply best practice measures and improve public financial management procedures. Donors and the Government have recently agreed that the Trust Fund will be underpinned by a results framework (the Performance Assessment Matrix). This will help to track the development impact of Trust Fund funds on key pro-poor sectors such as health and education and will strengthen mutual accountability and dialogue between the Government and donors on strategic resource allocation.

Coordination of the military and development effort, in particular the UK military effort; progress in the "whole of government" approach

50. Co-ordination of the military and development effort stems from the strategic level discussions that take place in Whitehall, to operational discussions in Kabul, and to the tactical activities in Helmand. In Helmand, the co-ordination comes under the control of the Helmand Executive Group. The Helmand Executive Group comprises the leaders of each of the four strands of the UK Joint Helmand Plan: the Deputy Commander of Task Force Helmand for security, senior FCO representatives for Governance and Rule of Law, and a senior DFID representative for Development. These four are co-located to facilitate joined up decision making on issues such as disbursement of Quick Impact Project funds (US$17 million in the last year) and reviewing progress on implementing the UK Joint Helmand Plan.

51. The UK Joint Plan for Helmand was predicated on the military establishing a secure zone around Lashkar Gah (often referred to as a secure "lozenge" due to its shape) and preparations were made on that basis. The original concept of establishing a "lozenge" remains substantially sound but owing to changed circumstances, it has extended beyond the area of Lashkar Gah, Gereshk and the road in between, to include the gateway towns of Sangin and Garmsir. This has in some way been driven by the military's involvement in counter insurgency operations but also changes in the UK's priorities, such as to provide support to the USA in Kajaki, the site of USAID's largest project in Afghanistan—the rehabilitation of the Kajaki multi-purpose dam in the Helmand river valley. This hydropower project will restore water supplies for local communities, rehabilitate irrigation systems for farmlands, and provide electricity to around 200 residents, as well as industries.

52. The comprehensive approach is being followed in the Provincial Reconstruction Team. The security context has a major impact upon sustainability of development efforts. To the maximum extent possible, the current stabilisation effort ensures that projects benefit from community partnership and Government of Afghanistan support, and that they are fit for purpose. However, where security is not yet adequate, and the rule of law is absent, from the beneficiary's and the donor's perspective, ensuring interventions are sustainable is hard to achieve.

53. It is important to note the relationship between the military effort, reconstruction and development work and the ongoing political transition through national development programmes. The concept of the "lozenge" is driven by military action, yet it can only be stabilised by reconstruction and development, governance and political engagement. The National Development Programmes engage in the "space" created. It is only through sustainable efforts being encompassed in all the activities that the objectives set out in the UK Helmand Plan will be realised.

54. More widely, the UK Strategic Plan for Afghanistan (December 2005) provides an agreed cross-government strategic framework and reflects UK priorities, resources and capabilities. The strategy outlines the UK contribution to the Afghanistan Compact, the Afghanistan National Development Strategy and the National Drug Control Strategy. The plan has six objectives: security; governance, rule of law and human rights; economic and social development; counter narcotics; international and regional engagement; and strategic communications. The Joint UK Plan for Helmand was also agreed across Whitehall. Both plans were reviewed and revised in late 2006 (Helmand) and early 2007 (Afghanistan). Departments work closely together on implementing these strategies in Helmand, Kabul and Whitehall.

Possible tensions between the development and the security agendas; clarity of budget lines and overlap of stabilisation, reconstruction, humanitarian and development assistance

55. DFID does not consider development and security to be separate agendas in Afghanistan. They are interdependent, and both are central to the UK's comprehensive approach. They are intrinsically linked in the UK Joint Plan for Helmand, with its four "strands" of governance, security, economic and social development, and rule of law. There is common consensus that you cannot have sustainable development without security, nor maintain security without development.

56. Nevertheless, there are issues around how to achieve both development and security, and the best order in which actions should be taken to achieve this. The UK addresses this in Helmand through the Helmand Executive Group, the executive decision-making body in the Provincial Reconstruction Team which brings together all four strands of the UK Plan. Civilians and military work together on the Helmand Executive Group to develop operational approaches that serve the interdependent security and development agendas. The DFID Development Adviser in the Provincial Reconstruction Team is a core member of the Helmand Executive Group.

57. There is clarity of budget lines for UK activities in Helmand. DFID provides funding in two main ways: central funding of Government of Afghanistan's National Priority Programmes to bring longer-term development to the Province (£30 million through the Helmand Agriculture and Rural Development Programme with £10.3 million allocated this financial year); and funding to the Provincial Reconstruction Team for Quick Impact Projects through the Global Conflict Prevention Pool. DFID, FCO and MOD all currently contribute funds through the Global Conflict Prevention Pool for Quick Impact Projects, supporting work across all four strands of the UK Plan and ensuring good coordination and simple application of processes for disbursement and accountability.

58. Stabilisation, reconstruction, humanitarian and development assistance can (and do) overlap. There is no clear point at which one stops and another begins. For example, in Helmand development activities are currently taking place in and around Lashkar Gah, where some DFID-funded Government of Afghanistan National Priority Programmes are being implemented, while stabilisation activities (aimed at supporting the preconditions for longer term development) are being pursued in Sangin and Gereshk. Ideally, over time we will see a shift from "consent winning activities" through Quick Impact Projects and stabilisation activities to more long-term development. Getting the balance right between security efforts and reconstruction and development, along with political engagement, requires robust, integrated planning. A good understanding of local politics and dynamics is also essential. The Helmand Executive Group provides the mechanism through which this integrated planning can take place on an ongoing basis in the Provincial Reconstruction Team.

The effectiveness of the Post Conflict Reconstruction Unit stabilisation effort in Helmand Province

59. The Post Conflict Reconstruction Unit has been involved in delivering UK stabilisation objectives in Helmand since October 2005. To date, the unit has played an important contributory part in delivering the UK's stabilisation effort in Helmand. As the Unit's role increases, the Post Conflict Reconstruction Unit's performance will become ever more critical to the overall success of the UK's efforts. The Unit's role to date has been in three important areas.

60. First, supporting Departments to undertake integrated stabilisation planning. The UK Joint Plan for Helmand was the UK's first attempt at creating a genuinely integrated plan for a joint (civilian-military) operation in a complex environment. The Post Conflict Reconstruction Unit played a key role in "facilitating" this process by:

— supporting the Cabinet Office to coordinate planning involving numerous parts of government;

— providing experienced advisers to assist in the analysis of issues and development of options;

— providing the logistical means which allowed an inter-departmental planning team to deploy.

61. Secondly, supporting the critical review and revision of the UK's stabilisation effort. The 2006 joint review of the Helmand Plan came at a critical time in the UK's engagement. Post Conflict Reconstruction Unit's support to Cabinet Office in facilitating the review helped to ensure a rigorous and "joint" exercise. The subsequent adoption of key review recommendations, particularly those around co-location of the civilian and military leads, has been important in improving the effectiveness of the UK's efforts.

62. Thirdly, providing stabilisation expertise. The Post Conflict Reconstruction Unit's comparative advantage in finding and deploying staff to deliver stabilisation tasks is increasingly recognised across Whitehall. Throughout the Helmand deployment, the Unit has been able, often at short notice, to deploy experienced, security trained and cleared staff to the Provincial Reconstruction Team. Initial interim deployments in 2006 gave impetus to the Helmand Plan, notably the Quick Impact Projects programme and early direction on governance and rule of law issues.

63. More recently, deployment of the Stabilisation Adviser and the creation of the Stabilisation Cell has significantly increased the overall civilian effort and improved civilian-military linkages, particularly the link to military planning. Deployment of a Stabilisation Adviser in Regional Command South Head Quarters has added an important civilian advisory capacity to that Head Quarters which has a bearing on stabilisation in Helmand.

The sustainability and effectiveness of counter-narcotics policies and their impact on development

64. The drugs trade in Afghanistan accounts for just under 30% of the Afghan economy and involves 12% of the population. Poppy cultivation has risen for the second successive year, with Helmand responsible for over half of the crop. At the same time, the number of "poppy free" provinces in the north and centre—where there is access to development, rule of law and security—has risen to 13 from 6 last year. While noting this success, we need to bear in mind evidence from other countries that sustainable results will require effort over a number of years across a range of issues such as improved governance, rural livelihood opportunities, security, and justice systems. We must be wary of thinking that there is a quick, simple solution to the drugs problem in Afghanistan and of diverting attention away from our main effort in pursuit of a "silver bullet". For example, untargeted eradication of poppy crops would risk alienating farmers and increasing rural poverty. Legalising poppy growth would also fail to solve the problem; there is insufficient infrastructure to administer a licit cultivation scheme and Afghanistan's farmers would only be contributing to an already over-supplied opiates market. The solution to the narcotics problem in Afghanistan will be long-term and multi-faceted, and led by the Government of Afghanistan, which has ruled out both untargeted spraying of poppy crops and legalisation.

65. The UK supports the Afghan government's five year National Drug Control Strategy, which is now in its second year. The goal is to secure a sustainable decrease in cultivation, production, trafficking and consumption of illicit drugs, with a view to complete elimination. This goal is pursued through four national priorities: disrupting the trade by targeting traffickers and their backers, strengthening and diversifying legal rural livelihoods, developing state institutions, and reducing the demand for illicit drugs and the treatment of problem drug users. The UK has focused on the first three of these (livelihoods is covered in a separate brief).

66. Law enforcement is essential to increase the risk associated with the drugs trade. Improved law enforcement also helps improve wider governance and security, which are essential for development. The UK has: (i) provided substantial support to the Counter-Narcotics Police, widely considered to be the most effective Afghan law enforcement body; and (ii) allocated over $20 million to the Criminal Justice Task Force which prosecutes key figures in the drugs trade. Since May 2005, the Criminal Justice Task Force has secured around 400 convictions. The UK is also seeking tough action against narco-corruption, which will make a key contribution to strengthening support for the Government.

67. Eradication of the crop can reinforce rule of law as part of a comprehensive Counter-Narcotics strategy. The UK supports eradication where alternative legal livelihoods exist. Eradication this year reached 19,000 hectares, and we are now working to improve the capability of the Afghan eradication forces.

68. Strong state institutions are essential to ensure coordinated implementation of the National Drug Control Strategy. The UK is pressing for reform of the Ministry of Counter-Narcotics to ensure the Ministry's costs are sustainable, and affordable by the Government of Afghanistan. The Ministry of Counter-Narcotics leads the annual pre-planting campaign which highlights the risks and negative impacts associated with poppy. Such a voluntary approach to the reduction of cultivation is likely to be more sustainable in the longer-term; this is therefore a key element of the overall strategy.

The level of funding for and the appropriateness of the Alternative Livelihoods Programme

69. DFID is playing a major role in supporting the development of legal livelihood opportunities through Government of Afghanistan national programmes, and providing policy advice to key ministries on how to support the growth of legal livelihood opportunities. DFID's alternative livelihoods programme contributes to the National Drugs Control Strategy as well as to the Interim National Development Strategy.

70. In order to spread risk, most Afghans need several income streams to survive. In rural areas, these income streams may include agriculture, remittances and welfare. Poppy is one of the most profitable Afghan crops, and provides an income for many poor labourers. Legal alternatives therefore need to provide a reasonable rate of return.

71. There are also a number of other factors that need to be in place for farmers to be able and willing to take up legal livelihoods. These include security, access to markets, access to credit, agricultural inputs and equipment, labour opportunities and training. More broadly, rural Afghans need access to education, healthcare and adequate sanitation if they are to be in a position to take advantage of livelihood opportunities. DFID is working to help create these positive conditions, recognising that substantial progress will need sustained effort over many years.

72. DFID is one of the biggest donors in the livelihoods sector. The majority of this funding supports the Government of Afghanistan's own national programmes. These programmes are:

National Solidarity Programme

Microfinance Investment and Support Facility Afghanistan

National Rural Access Programme

Horticulture and Livelihoods Programme

73. In addition to funding these programmes at a national level, DFID funds the Helmand elements of the National Solidarity Programme, National Rural Access Programme, Microfinance Investment and Support Facility for Afghanistan, and the Government's Rural Water and Sanitation Programme, under its Helmand Agriculture and Rural Development Programme (£30 million). Since the start of this year, the programme has funded the construction of over 550 wells, and the rehabilitation of 40 km of rural roads.

74. DFID also funds a number of bilateral projects designed to support the National Drug Control Strategy objectives of strengthening and diversifying legal livelihoods:

Alternative Livelihoods Programme

Research in Alternative Livelihoods Fund

Sustainable Livelihoods in Eastern Hazarajat

75. The final element of DFID's livelihoods programme is the Support to Strategic Planning for Sustainable Rural Livelihoods programme (£4.5 million over five years), which provides advisory support to strengthen the Ministries' capacity in policy formulation and planning, budgeting, and monitoring and evaluation.

76. DFID is working with the World Bank on a study of economic incentives to reduce opium cultivation, to be completed mid-October. Initial analysis has identified rural enterprise development, support for high value agriculture, and improved infrastructure as the most promising avenues to encourage farmers to move away from poppy. Once the work is complete we will be discussing with the Bank and the GoA how best to take forward its recommendations.

The role of Non-Governmental Organisations; the impact of the decline in direct core funding on the provision of humanitarian services; the impact of the security situation on Non-Governmental Organisation activity

The role of NGOs

77. As well as independent operations funded directly from donors, Non-Governmental Organisations are the main implementing agencies in many UN programmes and in the Government of Afghanistan's National Priority Programmes. For example, the flagship National Solidarity Programme is implemented through 23 national and International Non-Governmental Organisations. Non-Governmental Organisations also play an important donor and implementation role in the health and education sectors.

78. DFID values its partnerships with Non-Governmental Organisations in Afghanistan and conducts regular consultations on programme and policy issues. DFID, MOD, and FCO hold quarterly meetings on Afghanistan with Non-Governmental Organisation representatives in London. DFID would like to see international and national Non-Governmental Organisations focus increasingly on building local civil society and appropriate accountability mechanisms.

The impact of the decline in direct core funding on the provision of humanitarian services

79. DFID's funding to the Afghanistan Reconstruction Trust Fund goes towards key GoA-led programmes which are delivering essential services and encouraging long-term development. Non-Governmental Organisations are the main implementing partners for the National Solidarity Programme and the Microfinance Investment and Support Facility for Afghanistan, and are therefore continuing to use their skills to deliver humanitarian services and foster sustainable development.

80. UK funds are also directly available for Non-Governmental Organisations working in Afghanistan—through the FCO/MOD/DFID Global Conflict Prevention Pool, and the DFID-wide Civil Society Challenge Fund, Global Conflict Fund, and Governance and Transparency Fund. The Civil Society Challenge Fund is currently supporting Womankind and War Child programmes in Afghanistan and proposals for work in Afghanistan are currently being developed by Non-Governmental Organisations for submission to other funding pools. DFID's Conflict, Humanitarian, and Security Department also funds Non-Governmental Organisation de-mining work in Afghanistan.

81. Since 2001 DFID has provided £120 million of humanitarian assistance to Afghanistan. Prior to 2003, the majority of DFID aid to Afghanistan was focussed on immediate reconstruction and humanitarian needs. In 2003-04, following a change in the needs of the Government of Afghanistan our focus shifted to long term developmental programmes.

82. DFID continues to provide humanitarian assistance. In 2006-07, the UK committed the following humanitarian aid to Afghanistan: £1 million for drought mitigation; £1.2 million to support HALO Trust's de-mining programme; and £30,000 to provide food and other essential items like soap and blankets for 3,000 internally displaced families in Helmand.

83. In addition to our own bilateral aid to Afghanistan, DFID provides 17% of the European Commission's 2007 commitment of EUR 140 million and over 10% of the World Bank's commitment of $250-300 million a year. We also contribute to UN agencies and to the Asian Development Bank. A proportion of this funding can be attributed to Humanitarian assistance.

The impact of the security situation on NGO activity

84. Security in most provinces across Afghanistan allows the Government, Provincial Reconstruction Teams, the United Nations, donors, and Non-Governmental Organisations to continue their work. The large United Nations and Non-Governmental Organisation presence in Afghanistan is testament to their ability to operate in the majority of the country. However, in the southern provinces where violence has been more intense, security is a major constraint on Non-Governmental Organisation activity.

85. Many international Non-Governmental Organisations have decided that it is too insecure to have bases in the southern provinces. However, there are some United Nations agencies and Non-Governmental Organisations operating in Helmand and the other southern provinces. DFID and other Provincial Reconstruction Teams members in Helmand work closely with these Non-Governmental Organisations who are involved in identifying and implementing Quick Impact Projects, and who act as implementing Government of Afghanistan partners for DFID-funded rural development programmes operating in Helmand. DFID works hard to ensure the needs of Non-Governmental Organisations on security and independence are met in this complex, civil-military environment.

Harmonisation and coordination of the donor response; the relationship between different aid modalities; the role and effectiveness of the integrated mission

86. DFID Afghanistan is deeply engaged in work to improve harmonisation and coordination of the donor response in Afghanistan, which at present is weak. Around two-thirds of aid does not go through the Afghan government's budget, and is therefore difficult to track, monitor or factor into planning. DFID strongly believes that putting funding through the government, using proven funding mechanisms with rigorous safeguards, is far better value for money and significantly reduces burdens on government. Going beyond both our Paris Declaration obligations and our commitment under the Development Partnership Agreement (which was for 50% of our money to go through the government budget), we now put 80% of our live portfolio through government.

87. This is supported by evidence from the Peace Dividend Trust, who in a recent study estimated the local economic impact of aid spent through government systems to be more than four times greater than aid spent through international contractors or Non-Governmental Organisations. The World Bank, similarly, estimates that health services contracted outside Government are 50% more expensive than those contracted by Government.

88. DFID is therefore supporting the Government of Afghanistan to produce a full Poverty Reduction Strategy Paper (the Afghanistan National Development Strategy) which will enable it to set clear priorities for the coming five years. To ensure this can be effectively implemented, DFID is also leading work on a joint donor response to the Afghanistan National Development Strategy. This aims to improve harmonisation and coordination of the donor response—bringing a greater proportion of aid into alignment with government priorities, as well as aiming to increase the proportion which is on-budget.

89. DFID is also working closely with other donors on an external review of the Afghanistan Reconstruction Trust Fund, due to report at the end of this year. The review will have two areas of focus:

(a) a backward looking focus ie reviewing the extent to which the Afghanistan Reconstruction Trust Fund, as originally designed, has achieved its aims and objectives; and

(b) a forward looking focus which will determine the extent to which the Afghanistan Reconstruction Trust Fund as currently structured is an appropriate vehicle to meet the development challenges of the next 10 years in Afghanistan. The World Bank will work with donors to examine the potential for the Afghanistan Reconstruction Trust Fund to evolve into a broader financing mechanism capable of supporting a wider range of sectors.

Provisional 2006-07 figures from Statistics for International Development.

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© Parliamentary copyright 2008	Prepared 14 February 2008