1 using economic modeling to prioritize infrastructure development projects to achieve...
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3 Threats to the Future of Afghanistan The most serious threat is lack of funding: Fiscal Year $3.2 billion USD shortfall $18 billion USD shortfall through 2015 2009 GDP growth only 3.4% missed targeted 9%TRANSCRIPT
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Using Economic Modeling to Prioritize Infrastructure Development Projects to Achieve Afghanistan’s Socio-Economic and
Political Goals.
L.M. Stehr, Ph.D.S.J. Whidden, MD, Ph.D.
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Reconstruction
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Threats to the Future of Afghanistan
The most serious threat is lack of funding:
Fiscal Year 2009-2010 $3.2 billion USD shortfall
$18 billion USD shortfall through 2015
2009 GDP growth only 3.4% missed targeted 9%
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Addressing the Threat
Maximize the economic growth derived by reconstruction investments
Reduce reliance on international donors
Prioritize reconstruction investments using the Integrated Investment Prioritization Model
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The Integrated Investment Prioritization Model
Integrates economic modeling with Bayesian probability trees and System of Systems Analysis
Identifies projects which return the greatest degree of rapid economic growth per dollar invested
Uncertainty is presented in the results so decision makers clearly understand the value of the model output
Output is shown as a expected value of economic growth
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Uncertainty Bands
Economic Growth in Dollars
Potential ProjectsBridge
12 km of Road
Mean
95%
5%
5 km of Ir
rigation
$100,000
$200,000$300,000$400,000
$600,000
$500,000
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Afghanistan’s Foreign Aid and Gross Domestic Product Trends
Year Foreign Aid Aid Growth From Prior Year
GDP Aid As A Percentage Of GDP
2000 $135,970,000 - - - 2001 $404,640,000 66% $2,461,638,802 16% 2002 $1,300,490,000 68% $4,387,847,002 30% 2003 $1,590,700,000 18% $4,762,517,011 33% 2004 $2,169,220,000 27% $5,729130,575 38% 2005 $2,750,380,000 21% $6,851,669,702 40% 2006 $2,999,410,000 8% $8,186,204,489 37% 2007 $3,951,080,000 24% $10,169,548,111 39%
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Afghanistan’s Needs
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Afghanistan’s Development Goals
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Status of Infrastructures
Government Infrastructure 2003 2015Paved roads 16 % 48%Paved roads in Km per 1,000 people 0.15 0.23Motor vehicles per 1,000 people 13.71 40Buses per 1,000 urban population 0.06 0.30Electricity access to national grid 6 % 33%Urban electricity access to national grid 27 % 89 %Countrywide natural gas access 8 % 42 %Population with basic services 10 % 100 %Kabul water supply coverage 20 % 80 %Kabul sanitation coverage 20 % 80 %
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Urban Services in 2004
City/Town Access to Safe Water Destroyed Roads
Kabul 29% 60%
Kandahar 20% 25%
Mazar-I-Sharif 40% 13%
Jalalabad 50% 50%
Herat 85% 46%
Kunduz 0% 23%
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Social Indicators 2003 2015Poverty (rural) 53% 21%
Population below min level of dietary energy consumption 70% 35%
Male Literacy (age 15 and older) 43% 56%
Female Literacy (age 15 and older) 14% 56%
Primary school enrollment males 67% 100%
Primary school enrollment females 40% 100%
Life expectancy at birth (2001) 42.8 yrs
Infant mortality per 1,000 births (2001) 165 55
Under-five mortality per 1,000 births (2001) 257 130
Maternal mortality (per 100,000) 1600 205
Measles cases per year 718 0
Polio cases per year 10 0
Malaria (% at risk) 16% 8%
Tuberculosis cases per year 321 48
Access to safe drinking water 13% 80%
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Afghanistan’s National Development Strategy
Requires $50 billion from international donors from 2008 through 2015.
Sets 9% GDP growth as the annual average required through 2015 to achieve a per capita GDP of USD $500 in a drug eradicated economy.
Increases in economic growth result in increases in personal income and government revenues to allow them to hit 2015 targets.
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Economic Development Goals
GDP (USD Million) 2003 2004 2005 2006 2010 2015 2011-15 2004-15
Non-drug GDP 4,868 5,428 6,085 6,744 9,886 14,454 12,510 9,618Drug related income 2,449 2,262 2,075 1,888 885 - 367 1,103Growth (%)
20 118.8
1216.1
118.2
910%
8 8 9
2009- 3.4%
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Required Economic Growth
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Sector Components of the Development Budget 2004 -2010
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Re-Prioritizing Afghanistan’s Development Goals
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Input-Output Models
Based on theory that when new money enters a region through investment, revenues or income, some creates additional economic impacts beyond the initial investment, as it is re-spent one or more times in the local economy.
Focus on the interrelationships of purchases (inputs) and sales (outputs). Captures sector purchases from other sectors required to produce a dollar’s worth of goods or services.
Widely used for economic impact analysis
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Multipliers
Input-output models use multipliers to quantify economic impact of certain industries
Multipliers reflect degree of sector interdependencies
If the agriculture industry has a multiplier of 0.29, every $1.00 increase in sales results in a $1.29 increase in the regional economy’s output.
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Business Enterprise Survey
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Prioritization of Afghanistan’s Development Goals
GOVERNANCE ECONOMIC & SOCIAL DEVELOPMENT
1 Transportation2 Information and Communication Technology3 Governance, & Public Administration Reform4 Justice & Rule of Law
5 Energy 6 Agriculture & Rural Development7 Water Resource Management8 Private Sector Development & Trade9 Mining
10 Urban Development
SECURITY
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Sectors Receiving Maintenance Funding
Education Health Refugees Social Protection Culture, Media, and Youth Religious Affairs
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Education and Health
Evaluate on a province by province basis. If adequate education or access to health care isn’t provided by the government, the Taliban will provide it.
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Education
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Agriculture
52% of GDP is Agriculture
70% of the population in 2003 consumed less than the daily minimal dietary caloric intake
Afghanistan's Gross Domestic Product
Agriculture
Industry
Services
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Bayesian Probability Tree
Project
Selection
Transportation
Energy
Buses
Road
Electricity Lines
Micro-Hydro
B
C
D
E
Growth = B x Transportation Multiplier
Growth = C x Transportation Multiplier
Growth = D x Energy Multiplier
Growth = E x Energy Multiplier
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Project
Selection
Energy
Transportation
Micro-HydroB
B = BX1 * BX2 * BX3 * BX4 * BX5 * BX6 * BX7 * BX8 * BX9
Reliability of Supporting Infrastructures
Security
Corruption
Illegal Narcotics Trade
Local Resources for Operation, Maintenance, and Repair
Transportation Resources
Availability of Markets
Weather Conditions
Ability to Collect Service Fees
BX1
BX2
BX3
BX4
BX5
BX6
BX7
BX8
BX9
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Transportation
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Highway to Hazarajat
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Road and Drainage Improvements
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Access to Markets
Priority should be on those districts that have reasonable access to markets first.
Kandahar
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Access to Markets
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Corruption
Who gets access to the service? Who collects the fee? Is the fee going to be invested for maintenance
and repair? Does everyone pay the same fee ?
New mansion of a Karzai Minister.
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Illegal Narcotics Trade
If we eradicate opium production have we provided alternative livelihoods for all engaged in production.
Currently 1.2 million Afghanis are engaged in opium production
Opium accounted for 4% of GDP in 2009.
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The Drug Economy
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Integrated Investment Prioritization Model
The Integrated Investment Prioritization Model offers a means to prioritize DOD, ISAF, and USAID reconstruction projects to maximize economic growth.
Flexible and can expand to incorporate better data as it becomes available such as:
Threat/security information Economic data Mechanical performance data Contractor performance metrics PRT team reports NGO data
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RECOMMENDATIONS
Quantitative data at the provincial level and below is virtually non-existent. Yet this is the level where the development projects are implemented.
Contractors on USAID and DOD funded projects provide measureable metrics and statistics in their quarterly status reports. We recommend that a data warehouse be created to capture these in a single repository to improve data availability and enable quantitative results analysis.
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Our Motivation
Securing Afghanistan’s future isn’t just about maximizing our investments, it is about creating a better life for the citizens of Afghanistan, creating stability in the region, and depriving terrorist organizations of a safe haven, which makes us all safer.