VZCZCXRO8707
PP RUEHDBU RUEHIK RUEHLN RUEHVK RUEHYG
DE RUEHBUL #0294/01 0281124
ZNR UUUUU ZZH
P 281124Z JAN 07 ZDK
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 5762
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC 0316
RUEKJCS/SECDEF WASHINGTON DC
RUEHML/AMEMBASSY MANILA 1551

UNCLAS SECTION 01 OF 02 KABUL 000294 
 
SIPDIS 
 
STATE FOR SCA/A, SCA/FO (A/S BOUCHER, GASTRIGHT, DEUTSCH) 
NSC FOR AHARRIMAN 
USAID/ADA/AID FOR JKUNDER 
USAID/AA/ANE FOR MWARD 
TREASURY FOR ABAUKOL 
OSD FOR KIMMITT 
MANILA PASS ADB/ED 
 
SIPDIS 
 
E.O.12958: N/A 
TAGS: EINV ECON ETRD EAID PGOV AF
SUBJECT:  Afghan Budget Execution and Capacity Development - Another 
JCMB success story. 
 
KABUL 00000294  001.2 OF 002 
 
 
SUMMARY: 
 
¶1. Prodded by JCMB III Semi-annual Report and an Embassy-led donor 
White Paper, the GoA has taken the first step towards the 
preparation of an Afghan National Capacity Development Strategy, 
targeted for release at the spring Afghan Development Forum (ADF). 
A draft Framework Paper identifies four Capacity Development pillars 
and a notional focal point for policy and execution leadership for 
each. The Strategy will identify GoA leadership/oversight roles, 
contain a "gap" analysis that establishes current versus required 
capacities, identify short and medium term priority actions, outline 
ways to monitor progress and impact, and identify a GoA 
governance/oversight structure.  This Strategy has much potential 
for harmonizing both GoA and donor efforts to build capacity, and 
for leading to more efficient investment of capacity building 
resources.  More important, it appears to be a welcome signal of a 
more aggressive GoA ownership of the capacity building agenda.  END 
SUMMARY 
 
BACKGROUND: 
 
¶2. Since 2005 a clear consensus has emerged regarding the need to 
shift the Afghan development framework from emergency reconstruction 
to long-term sustainable development, with an emphasis on host 
government capacity building.  In response major donors - World 
Bank, Asian Development Bank, European Commission, DFID, UNDP and 
USAID - began designing a wide range of capacity development 
programs.  Often these programs targeted the same problems, and 
often the same institutions, leading to confusion and difficulties 
in planning and executing.    By late summer 2006, the capacity 
shortcomings of the GoA were on display as attention was drawn to 
the challenges of budget execution. The GoA appeared to struggle to 
program and effectively spend the development resources that were 
available. 
 
¶3.  The JCMB Semi-Annual Report issued in concert with the November 
2006 meeting, highlighted the need to remove bottlenecks in project 
implementation and to focus capacity building efforts on 
procurement, policy/strategy development and finance as top 
priorities.  Somewhat in parallel with the JCMB process, the Embassy 
launched a Budget Execution/Capacity Building White Paper that 
identified the need to clarify the roles and responsibilities of GoA 
entities at both the national and sub-national levels, and the 
policy and execution levels, in order to begin to address capacity 
shortfalls.  It further emphasized the need to better coordinate the 
myriad donor activities seeking to strengthen GoA capacity. 
 
¶4. In response to the White Paper and JCMB report, key GoA 
stakeholders (e.g. Dr. Ishak Nadiri, Economic Advisor to the 
President, Deputy Minister of Finance Sharani, Minister of Economy 
Shyams, Civil Service Commission Chair Mushahed and ANDS Executive 
Director Farhadi, among others) quickly proposed a capacity building 
policy framework and challenged the GoA parties and donors to move 
rapidly ahead on the development of this framework and strategy. 
 
PROPOSED STRUCTURE OF THE CAPACITY DEVELOPMENT STRATEGY: 
 
¶5. The Framework Paper identifies four "pillars" of the Afghanistan 
Capacity Development "house," and a notional focal point for policy 
and execution leadership for each.  The four pillars are: Justice 
Sector - Ministry of Justice; Public Service - Independent 
Administrative reform and Civil Service Commission (IARCSC); Private 
Sector/NGOs - Ministry of Economy; and, Afghan society at large - 
Ministry of Education.  While it is clear that the IARCSC will play 
a lead role in the Public Service pillar, the policy and execution 
leadership of the other three pillars remains open to discussion. 
 
 
GOA VISION: 
 
¶6. During initial discussions, the GoA made it clear that policies 
will be forward looking, and seek private sector provision of 
capacity building wherever possible.  Each pillar will have a 
Strategy and Work Plan, addressing the following elements:  Gap 
Analysis, addressing current capacities versus the desired levels of 
performance; Quick Impact and Intermediate-term Activities to 
address the performance gap; Resources required and potential 
sources; and, Progress indicators, including baselines and targets. 
 
KABUL 00000294  002.2 OF 002 
 
 
Each pillar will establish a governance and oversight structure, 
using existing mechanisms (eg- using the Public Administration 
Reform Cabinet Sub-committee and Steering Committee for the Public 
Service pillar) and the ANDS, wherever possible.  Given the short 
timeframe until the ADF, the Public Service Pillar will likely 
receive more detailed treatment than the other three.  It is also 
clear that the leadership entities of all four pillars will need 
substantial capacity building if they are to develop and implement 
the strategy that emerges. 
 
DONOR COORDINATION ON BUDGET EXECUTION: 
 
¶7. The most telling expression of GoA capacity is found in the 
budget execution data, a useful approximation of GoA ability to 
effectively plan, contract, oversee and evaluate the development 
budget.  The trends are positive, with the GoA expenditures rising 
from $440 million (44%) of the $1 billion budget in 1384 to $650-800 
million of the $1.4 billion development budget in 1385. 
 
¶8. However, much work remains, and the Donors have responded to the 
White Paper process by identifying the World Bank and the Ministry 
of Finance as the lead "partners" for this effort.  The World Bank 
is submitting a "Note" on this topic at the JCMB in Berlin. (An 
Issues Paper on Budget Execution and Capacity Development has been 
prepared for the US Delegation to Berlin.) 
 
COMMMENT: 
 
¶7. Donors have been seeking a unified GoA counterpart for capacity 
building efforts for the past year, but were frustrated that the 
logical choices such as the IARCSC seemed incapable of stepping up. 
The speed with which the GoA seized the leadership of this process 
since the JCMB III is an important signal of ownership, and a chance 
for lagging institutions to start afresh at the ADF.  More 
important, it also demonstrates that the JCMB process can be 
effective in breaking bureaucratic logjams, on both the GoA and 
donor sides.   END COMMENT 
 
 
Norland