The World Bank Report No: ISR4383 Implementation Status & Results Afghanistan Sustainable Development of Natural Resources (P098118) Public Disclosure Copy Operation Name: Sustainable Development of Natural Resources (P098118) Project Stage: Implementation Seq.No: 6 Status: ARCHIVED Archive Date: 21-Jul-2012 Country: Afghanistan Approval FY: 2006 Product Line: IBRD/IDA Region: SOUTH ASIA Lending Instrument: Emergency Recovery Loan Implementing Agency(ies): Ministry of Mines Key Dates Board Approval Date 20-Jun-2006 Original Closing Date 31-Jul-2011 Planned Mid Term Review Date Last Archived ISR Date 16-Jan-2011 Effectiveness Date 20-Sep-2006 Revised Closing Date 31-Dec-2012 Actual Mid Term Review Date 17-Jun-2010 Project Development Objectives Project Development Objective (from Project Appraisal Document) - Enhance the governance of the mineral and hydrocarbon resources sector. - Effectively regulate Afghanistan's minerals and hydrocarbons in a transparent manner. - Foster private sector development. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Component(s) Component Name Component Cost Improving internal efficiencies 0.30 Developing regulatory capacity 10.60 Developing mineral resources 19.40 Enhancing sector governance 1.30 Program management and other 8.40 Public Disclosure Copy Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Moderately Satisfactory Overall Implementation Progress (IP) Satisfactory Moderately Satisfactory Overall Risk Rating Substantial Substantial Implementation Status Overview This ISR reflects on the findings and discussions of the World Bank's missions to Afghanistan in September and December 2011, as well as of March and April 2012. In its fifth year Page 1 of 5 The World Bank Report No: ISR4383 of effectiveness, SDNRP1 continues to make satisfactory progress towards meeting its Project Development Objective (PDO) of assisting the Ministry of Mines in improving its capacity to effectively regulate Afghanistan's minerals and hydrocarbon resources sector in a transparent manner and foster private sector development. Major achievements with regard to the development objectives of SDNRP include: 1) Drafting a new mineral law based on international good practice, which has undergone extensive consultations and is currently under review at the Ministry of Justice, Public Disclosure Copy 2) Ensuring transparency and accountability in tender processes, highlighted by the successful Aynak and Hajigak transactions which was supported at all stages by the International Advisory Panel (IAP), 3) Implementing EITI and the complementary disclosure of mining-generated revenues, 4) Substantially increasing in the capacities of key sector institutions such as the Ministry of Mines, the Cadastre office and the Geological Survey, and 5) increasing enforcement capabilities of agencies such as the Mines Inspectorate and the National Environmental Protection Agency. Private sector development is being supported through the adoption of policies, such as a good practice Resettlement Policy Framework, the continuous availability through the IAP which has expanded its expertise to include transport infrastructure, and the ability of the regulating agencies to answer on a variety of social and environmental issues. Furthermore, the project has put in substantial effort to promote the Aynak operation with a parallel emphasis on safeguarding the Mes Aynak antiquities, in close collaboration with cultural experts and scientists. The project has also made satisfactory progress towards meeting its intermediate results, with most of them already having been met. Progress has been made in the following areas: 1) the recent transactions for both mining and oil were reviewed by the Ministry with additional support by the IAP, 2) the number of both exploration licenses and actual operations is continuing to increase, including for the petroleum sector. Other key highlights during the recent months include substantial progress: i) around the archaeological recovery works in Mes Aynak; ii) significant improvements in the Government's monitoring capacity, reinforced by training of mining inspectors; iii) the modernization cadastre; and iv) the successful recruitment of a firm which will monitor the social and environmental contractual obligations of the Aynak operator. In addition, the project-supported tender process for the Hajigak mine has reached another milestone with the Government working on the ancillary infrastructure agreements. Compliance on environmental and social standards is on track, with two public workshops having been conducted for the Environmental and Social Management Framework (ESMF), which is currently in the final draft phase with the Ministry. The Ministry has also submitted the Resettlement Action Plan to the Bank, and the grievance redress mechanisms and institutions, including an ombudsman are being currently set up. The project remains also effective regarding the improvement of sector governance by increasing transparency, mainly through support to the EITI initiative. The latter is now in a very active phase, conducting the process towards production of its first independent reconciliation report, and also preparing the validation process. However, given the complexities of working in the country and the need to adapt to continuously changing circumstances, procurement has been slow and disbursements low. For these reason ratings for progress towards achievement of the PDO and overall implementation progress has been downgraded. Plans are being developed to overcome those factors effecting procurement and disbursements that are under the projects control. Locations No Location data has been entered Public Disclosure Copy Results Project Development Objective Indicators Page 2 of 5 The World Bank Report No: ISR4383 Indicator Name Core Unit of Measure Baseline Current End Target Transparency, competition, and fairness of Text Value Baseline = No process for New IAP positions taken and International Advisory Panel mineral and hydrocarbon development transparent review of mineral IAP operational; EITI operational and reviews major Public Disclosure Copy agreements contracts validation process initiated (>$20 mil) contracts. EITI EITI implementation on track adopted (validated) Date 14-Jun-2006 14-Jun-2012 31-Dec-2012 Comments Strict adherence to the dispositions of the Text Value Baseline = No competitive (or Mining cadastre is working, all licenses issued through the Minerals Law and Hydrocarbons Laws and otherwise) assignments of and continues to be mining cadastre associated regulations in the issuance of mineral licenses. modernized and digitalized miningtitles, licenses, and contracts. Date 14-Jun-2006 14-Jun-2012 31-Dec-2012 Comments Ability to attract new investments Text Value Baseline = no major new Aynak tender completed; Three new sector investments investments in the sector. Hajigak negotaiations ongoing with the winning bidder consortium; additionally, two petroleum operations and one gold mine have been successfully tendered Additional mid-size tenders (Baghlam gold, and one oil tender) have been sucessfully completed Date 14-Jun-2006 14-Jun-2012 31-Dec-2012 Comments USAID, in close collaboration with the Bank, has identified and collected data for an additional 9-12 tender packages. Intermediate Results Indicators Public Disclosure Copy Indicator Name Core Unit of Measure Baseline Current End Target Effective review of licensing (mineral Text Value baseline = 0 Aynak and Hajigak 100% reports on all major (> development agreements) by the Ministry with development agreements $20 mil) transactions advice from the International Advisory Council have been drafted and reviewed with international support Date 14-Jun-2006 14-Jun-2012 31-Dec-2012 Comments Page 3 of 5 The World Bank Report No: ISR4383 Issuance of mining titles consistent with the Text Value Exploration licenses - 0 Exploration licenses - 13 Exploration licenses - 37 Mining Law and Regulations Quarry authorizations - 0 Quarry authorizations - 97 Quarry authorizations - 210 Exploitation Licenses - 0 Exploitation Licenses - 12 Hydrocarbon licensing rounds Hydrocarbon licensing rounds Public Disclosure Copy -0 -2 Date 14-Jun-2006 07-Sep-2011 31-Dec-2012 Comments Two new medium-size mines under Text Value baseline = 0 One medium sized gold mine 2 development by 2010 and two oil blocks under development. Date 14-Jun-2006 14-Jun-2012 28-Dec-2012 Comments Two hydrocarbon licensing rounds by 2011 Text Value 0 Two hydrocarbon licensing 2 rounds have been successfully completed by 2012 Date 14-Jun-2006 14-Jun-2012 31-Dec-2012 Comments Budget reflecting the priorities of developing Text Value 0 100 regulatory capacity and mineral resources Date 14-Jun-2006 14-Jun-2012 28-Dec-2012 submitted to and approved by MoF Comments Geological Information - infield district studies Text Value 0 4 completed mineral district and promotional events studies 5 sector promotions Date 14-Jun-2006 14-Jun-2012 28-Dec-2012 Comments Geological Survey Capacity building is now in second phase Data on Financial Performance (as of 18-Jun-2012) Public Disclosure Copy Financial Agreement(s) Key Dates Project Ln/Cr/Tf Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P098118 IDA-H2380 Effective 20-Jun-2006 05-Jul-2006 20-Sep-2006 31-Jul-2011 31-Dec-2012 P098118 IDA-H5030 Effective 11-Jun-2009 20-Dec-2009 16-Mar-2010 31-Jul-2011 31-Dec-2012 Disbursements (in Millions) Project Ln/Cr/Tf Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P098118 IDA-H2380 Effective XDR 20.60 20.60 0.00 20.20 0.40 98.00 Page 4 of 5 The World Bank Report No: ISR4383 P098118 IDA-H5030 Effective XDR 6.80 6.80 0.00 0.32 6.48 5.00 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation The following key decisions have been reached with the Government as part of the last supervision missions: - Maintain focus on supporting archaeological recovery works in Mes Aynak, particularly in the area identified as the "red zone". All works to be conducted in close cooperation with the Ministry of Information and Culture, as well as with the wider scientific community. - Implement media campaign to disseminate information to the public on the project and sector developments in general. - Strengthen procurement capacities of the PMU. - Supervise the EITI validation process. Restructuring History Public Disclosure Copy Level two Approved on 13-Jun-2011 Related Projects P116651-Sustainable Development of Natural Resources - Additional Financing Page 5 of 5