Afghanistan,a landlocked country in South East Asia, whose growth story has been scuttled by years of regime changes, political instability and countless civil wars. After democracy kicked in 2004, it is trying to match pace with the rest of the world. With huge untapped resources, Afghanistan could be the next big growth story. This essay presents viability of the energy sector and investment opportunities for unlocking the the same.

1. FINANCING FOR DEVELOPMENT
- Unlocking Investment Opportunities
AFGHANISTAN
- Unlocking private investment opportunities
through IDA integration
By BHASKARNIL HAZARIKA,
India

2. Historical perspective
• Pre-1919: Acted as a buffer state between
British and Russian Empire
• 1919 : End of 3rd Afghan war, declared as
independent sovereign state
• 1919-78 : Amanullah khan to Zahir Shah –
kingdoms and progressive governments.
• 1978-89: Marxist revolution and Soviet
war
• 1992- 2001: Afghan Civil war and rise of
religious extremism and Taliban.
• 2001- 04: US led war on Taliban
• 2004-present: Democratically elected civil
Government.

3. AFGHANISTAN: Country at a glance
• Population: 33.37 Million
• Surface Area : 652,864 Sq. Km
• Population density: 51.1 per Sq. Km
• Population growth rate : 3.0% per annum
• Capital City : Kabul
• President: Ashraf Ghani
• Currency : AFN (Afghani)
• GDP (2014) : 21,122 million USD
• GDP growth rate (2015): 2.2%
• Balance of Payment: -6855 million USD
• Trade balance : -7126.7 million USD
• Mobile Cellular penetration : 74.9%
• Net ODA received (2014) : 23% of GNI
• GINI index : 29 (low)
• HDI index : 0.465

4. Opportunity for Private sector
investment in Development

5. Overview : Energy Sector
• Only 10-15% of the Afghan population have access to electricity, one of the lowest in
the world
• About 3 % households are connected to the national grid ( About 650.000)- most of
them in the large cities: Kabul, Mazar-i-Sharif, Herat, Kandahar, Jalalabad etc.
• 340,000 customers are connected to the public power grid, of which 182,000 are in
the Kabul area
• Per head total energy consumption is less than 25 kWh/year (in comparison to:
India 520 kWh/year, Germany 6200 kWh/year, world average 3060 kWh/year)
• Continuously rising energy demand, but power station mostly older than 40 years
and need to be rehabilitated
• 85% from energy demand are covered by traditional biomass (for example Wood,
Dung)

6. Afghanistan : Energy sector
Energy generation and Utilization

7. Energy efficiency Measurement

8. Available Renewable Resources
 Hydro power potential for Afghanistan is in excess of 23,000 MW
 (large, medium and micro hydro power plants )
 Solar power potential is best in Southern Afghanistan (see map)
 Wind power potential best in the Western Region of Afghanistan
 USAID has provided support for the establishment of a Clean
Energy Program in Afghanistan. Program has developed pilot
projects:
‐ Solar pilot projects have been implemented at 6 schools in
Bamyan and Nuristan, and 2 clinics in Ghazni
‐ Solar pilots for water pumping and solar heaters also being
developed
‐ Mini‐hydro rehabilitation project was implemented in Panjshir
‐ Wind water pumping projects also planned in Heart and Balkh
Provinces

9. Status and Potential of Renewable
Energy Utilization
Wind Energy : (Possible max 158 GW)
• Wind resources in Afghanistan show promise
on the basis of satellite data158 GW Electricity
production theoretical possible
• High theoretical potential particularly in the
West like Herat, Farah (at the border to Iran
with its 120 days- Winds ( at wind speeds
above 7 m/s in 50 m height )
• Very dependent on micro climate; projects
need long lead time for measurements
• Household systems (e.g. up to 500W) are
more complicated in maintenance (sand, dust)
than solar-photovoltaic systems; solar- wind-
hybrid systems most feasible
• Big wind power needs a power grid to feed
in the electricity

10. Solar Energy
• Afghanistan also has significant solar resources,
averaging 300 days of sunshine per year. That’s
average 6.5 kWh per square meter per day
• Solar heaters and solar photovoltaic cells could
be important sources of energy for Afghanistan,
• Current biggest program is the National
Solidarity Program : more than 2000 individual
projects for the dissemination of Solar Home
Systems in the range 20 till 40 W implemented;
in total about 103 kW electricity for lighting
supplied.
• Some small single projects (per example
Schools, Hospitals, Police buildings, Mosques,
etc.)
• Very high technical potential but economically
feasible only in absence of hydro resources/
main grid

11. Hydro power

12. Investments for Improvement
The following factors will help in the
improvement of the energy sector -
1. Increased Private Sector
Provision of Energy
2. Better Sector Governance
3. Increased trade with
neighbouring countries,
focusing on the transmission of
energy
4. Expand the availability of
electric power
5. Develop a Master Plan for Rural
Energy; and Establish market-
based tariffs with a clear
timetable to phase out
subsidies

13. Investment environment in
Afghanistan
The top 3 markers for investment scenario are : ( with latest review data)
1. Ease of doing Business : Rank 183, due to lower growth in infrastructure and low
GDP
2. Business Enterprise survey : Among 15 areas of business environment, political
instability is being rated as the biggest obstacle, followed by corruption, access to
land and available finance.
3. Transparency international index : 169 out of 176 countries ; Corruption in
Afghanistan is fueling the ongoing war and undermining the effectiveness of
billions of dollars of international aid. As the country faces critical threats from
insurgents, curbing corruption is vital for the survival of the state

14. To create investment environment
Government of Afghanistan with help
from World Bank expertise ,has to create
a suitable and conductive business
environment for investments to kick in –
1. NDP ( National Development Plan)
to set macroeconomic scenario for
investment strategies
2. Policy reforms
3. Establish Rule of law
4. Good institutions for reviewing &
maintaining policy guidelines
5. Political stability
6. Consistency in policy framework
7. Effective use of DRM
• The Afghan Investment Support Agency
(AISA) is responsible or registering all foreign
and domestic businesses in Afghanistan and
assisting companies with navigating the
multitude of profitable investment
opportunities in Afghanistan.
• The World Bank’s Doing Business Survey has
consistently rated AISA’s ability to register a
new business among the best in the world,
with fewer procedures than any other
developing country.
• The Afghanistan Chamber of Commerce and
Industry is the leading private sector
organization in Afghanistan. They can also
assist prospective investors to find partners
and navigate the exciting Afghan market.
• The

15. ODA For Development
• ODA- Official Development Assistance by
World Bank
• IDA – International Development
Assistance for poor/conflict area countries
• Afghanistan is the highest recipient of IDA,
with a 3 year average of 5584 Million USD
i.e. 4.2% of total IDA in this period.

16. Government Initiatives for Private
Investments - Energy Sector
Afghanistan Govt. assistance
• 30 projects in 20 provinces
• Land in provided by the
government
• Tax incentivized.
• 25% subsidy or PPP
• Security assistance for project
implementation
• Long term Power Purchase
Agreement (PPA).
• Attractive tariff – based on the
project location, type of technology
and source of energy
Domestic Projects Available for
Investments
1. Kukcha Hydro-Electric Power
Station - 445 MW
2. Kunar Hydro-Electric Power
Station – 798 MW
3. ADB North-South Power
Transmission Enhancement
Project -225 Km, 500 KV
4. Turkmenistan-Afghanistan-
Pakistan-India (TAPI) Gas Pipeline
5. Turkmenistan-Uzbekistan-
Tajikistan-Afghanistan-Pakistan
Power Interconnection Project

17. Opportunity for Private investors in
Rural Renewable Energy sector
Private investment opportunity
• Ownership of energy kiosks /energy
centres
• Ownership of energy generation
systems of energy centres
• Suppliers and installers of
renewable energy components and
systems – market is already
developing
• Suppliers of other materials
(cement for construction etc)
• End use customers of energy
generated
• Managers of decentralised mini
grids
• Off takers
Business Model

18. Untapped Potential

19. Financing solution
IDA integration approach
• Use of Blended Finance
• Private sector can leverage
benefits of IDA sponsored
projects
• Governments for risk sharing
and mitigation.
• Innovative finance modules
such as long term bonds,
MIGA
• Asset based green bonds for
Renewable energy sector
projects
• Result based finance

20. Investment Requirement of
Energy sector

21. Afghanistan Has tremendous untapped potential for
growth, it’s time to unlock Investment opportunities.
THANKS