Islamic Republic of Afghanistan Ministry of Finance
د افغانستان اسالمی جمهوریت
وزارت مالیید جمهوری اسـالمی افغانستان
مالیهوزارت
Self-reliance Accelerators Package: implementing the Afghanistan National Peace
and Development Framework.
Introduction: The Government of Afghanistan is planning to introduce an accelerators
package to address the challenges of increasing poverty and respond to adverse economic
shocks i.e. drought by creating employment opportunities through designing and
implementing labor intensive programs in different sectors of the economy in order to
distribute economic gains amongst the population particularly the bottom poor. While at the
same time aiming to realize fiscal self-dependency and to spur economic growth across the
country.
The Government therefore would like to identify and prioritize development projects as a
mean to reach its aims in addition to the current development budget, the package will either
aim to increase allocations to the existing programs to expand their scope or allocate funds
to other new viable programs through which the aforementioned objectives are realized. To
this end, certain criteria are developed that will be used as a standard for projects identification,
prioritization, and more importantly for projects selection. In specific, projects will be selected
having one or more of the characteristics below.
Project selection criteria:
1. Projects are commercially and economically feasible;
2. Labor intensive to create employment opportunities and to reduce poverty;
3. Improve domestic production to substitute for imports;
4. Accelerate domestic revenue generations or having the characteristic to generate
revenues itself to realize fiscal sustainability and self-reliance agenda;
5. Improve public service delivery, government processes, and reduce corruption;
6. Most part of the projects and the bulk of investment take place in the next five years;
7. Contain regional integration components;
8. Enable private sector investments;
9. Alignment with the ANPDF, the NPPs, and the recently developed economic growth
strategy.
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All projects that are selected for this purpose shall have complete feasibility studies or shall
have the studies within the next six months.
The projects will be identified and prioritized in the following sectors/areas in consultation
with the line ministries and agencies:
Physical Infrastructure Agriculture & Rural
Development Service delivery Revenue Management
1. Road tolls and
Railways;
2. Affordable Housings
construction;
3. Hydropower dams,
Solar Projects,
energy transmission
line;
4. IT and fiber optics;
5. Government
buildings for basic
service delivery.
1. Irrigation
channels and
expansion;
2. Extension
programs to
consider saffron,
pine nuts, and
pistachio farms.
Specialized
Hospitals based on
international
standards to
minimize capital
flights in the
sector.
1. Toll plaza
establishments in
major highways;
2. Real time data
Management;
3. Scanners in
Customs houses;
4. Border
Management.
Financing the package:
The projects are selected based on commercial and economic viabilities to aim expediting
realization of government self-reliance agenda, deliver efficient public services, and distribute
economic gains amongst the wide majority of the population. The financing options will
mainly be through borrowing either on concessional or non-concessional basis but these
options will further emerge specifically when consultation with the donors, development funds,
and the financial institution starts. In addition, private sector capital and mobilization of PPP
financing will be considered for certain projects that are fit for those arrangements.
Current borrowing policy settings:
Under the IMF Extended Credit Facility (ECF) for Afghanistan, the Government of Afghanistan
can only borrow concessional loans for specific development projects subject to approval of
the IMF. The IMF approves the loans based on feasibility studies of the project conducted by
a third party i.e. the World Bank, ADB, or the Islamic Development Bank (IDB). Where
concessionality of the loans is defined under the IMF Program as a grant element of 60 percent
or higher (i.e. the present value of the loan is less than 40 percent of the nominal value of the
loan).
In general, the IMF and the World Bank strongly discourage non-concessional borrowing for
a country like Afghanistan, which faces high risk of debt distress and weak debt management
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capacity. A non-concessional loan therefore triggers the following implications, which need to
be carefully managed in case we were to borrow a non-concessional loan.
1. Non-Compliance with IMF Program: the IMF Extended Credit Facility Program
includes a performance criteria of zero-limit on non-concessional borrowing. This is
consistent with the IMF Debt Limit Policy, under which countries facing high risk of debt
distress and with weak debt management capacity have a zero limit for non-
concessional debt. Breaching the IMF Performance Criteria on borrowing could off-
track or even stop the Extended Credit Facility Program;
2. Implications under the World Bank Non-concessional Borrowing Policy
(NCBP): http://ida.worldbank.org/financing/non-concessional-borrowing-0; this policy
aims to manage risks of over-borrowing among IDA-only countries (including
Afghanistan). The policy effectively aligns the World Bank position on non-concessional
borrowing with the IMF program. Therefore, any non-concessional borrowing that was
inconsistent with the IMF Debt Limits Policy (and as reflected in Extended Credit Facility
performance criteria) would trigger the World Bank’s Non-Concessional Borrowing
Policy. According to which non-concessional borrowing could lead to a hardening of
IDA term (e.g. a change from grants to credits), a reduction in IDA allocations, or a
combination of both. Such hardening of terms or reduction in allocations have been
applied in several countries, including Ethiopia, Ghana, and Chad.
3. Implications for other donors. Non-concessional borrowing that was inconsistent
with IMF program requirements (and, therefore, would trigger the World Bank Non-
Concessional Borrowing Policy) would be likely to have implications for broader donor
confidence in fiscal management, potentially impacting overall allocations or the
provision of on-budget aid. Other donors may view their grants as being used to
subsidize the loans, and therefore may tighten the terms of their support.
4. Overall debt sustainability considerations and debt management
capacity. Afghanistan is rated at high risk of debt distress under the World Bank/IMF
Debt Sustainability Framework, and new borrowing on non-concessional terms would
lead to increased debt sustainability risks. While current debt levels are low, the existing
Debt Sustainability Analysis shows that Afghanistan would face challenges in servicing
external debt under even a gradual hardening of terms for international assistance
(from grants to concessional loans). Further, Afghanistan’s debt management capacity
is assessed as weak under the IMF’s Debt Limits Policy and the World Bank’s Non-
Concessional Borrowing Policy. Overall, Afghanistan faces significant risks in any
movement towards a non-concessional borrowing.
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However, the IMF and the World Bank both have the capacity under their policies to allow
non-concessional borrowing on a case-by-case basis and in exceptional circumstances, based
on:
a. The economic impact of the project, for borrowing is intended;
b. Adequacy of debt management systems;
c. Implications for overall debt sustainability and risks; and
d. Availability of financing from alternative sources.
Keeping these in mind, this package intends to strategize financing some of the most
commercially and economically feasible projects in sectors of agriculture, housings, and
electricity transmission and distribution facilities. The package, therefore, focuses on the two
main areas of physical infrastructure, and agricultural and rural development.
Fiscal Accelerators’ Package Summary
This package reflects the planned investment in sectors of agriculture and irrigation, urban
development and housing, and in electricity transmission and distribution. This whole package
will require an investment of $ 8,704.5 million. Around 66% of the investment is devoted to
agriculture and irrigation, 15% to the power infrastructure, and 19% to urban housing.
Of the total investment amount, the government will invest $ 5,850.6 million, which makes
67% of the total investment package. The private sector contributes 33% of the total
investment.
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Almost 80% of the government investment takes place in the initial 5 years. The table below
provides the distribution of the government investment over the 9 years of the package period:
The successful implementation of the package will create 1.48 million full-time equivalent jobs.
The cost per job is lowest for the agriculture and irrigation component followed by the urban
housing component. The overall package cost per job is $ 5,868.
The government revenue generated by the whole investment package is projected, on average,
to be $ 948.9 million per year during the first 10 years. While after 10 years, the revenue
generated by package could reach, on average, to $ 1,881.4 million per year until 2050.
The package is projected to cumulatively generate $ 10.8 billion in government revenue by
2030. This revenue could reach $ 48.9 billion until 2050. The main sources of the revenue are
receipts and corporate taxes, export duties, profits and rents from the properties. The table
below provides the year-wise revenue until 2030.
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The analysis of the impact of the revenues, that are generated by the projects, on fiscal
sustainability can be considered in terms of two scenarios. Under continued conflict scenario,
the expenditure composition will not change much from the current levels. The
implementation of the investment package will help government achieve self-sufficiency
target for operating expenditures by 2026.
Under peace scenario, where peace with the Taliban leads to substantial improvement in
security, the expenditure composition will change significantly as more funds can be diverted
to the development expenditures. The implementation of the package will help in achieving
self-sufficiency for the operating expenditures by 2022. Moreover, by 2030, more than half of
the development expenditures could also be financed with domestic resources.
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1. Expanding Agriculture Sector:
Agriculture is one of the main growth sectors, recently approved as part of the Afghanistan
Growth Strategy in Geneva Conference. Agriculture and agribusiness present substantial
opportunities for growth, job creation, and niche exports. In the Growth Strategy, the
Government has set itself to achieve the following objectives:
Land under cultivation will be increased by an average 150,000 ha per year, and reach
3.5 million ha by 2030, allowing an additional 1 million tons of wheat production;
Agro-processing value added will increase by around $ 330 million through the
establishment of agri-business parks;
Agricultural exports will increase by 5 percent per annum through improvements to
export procedures and certification. The number of farmer learning centers will
increase to 400. Agricultural growth will be driven by grains and horticulture, including
grapes, almonds, pomegranates, and pine nuts.
The sector has the following economic potential
Jobs: 2.5 percent faster employment growth by 2024. Development of
agriculture will disproportionately benefit women, who account for the majority
of the agricultural workforce.
Exports: 1.7 percent higher export growth by 2024 through agro-processing
Growth: Full implementation of agriculture potential could drive growth of 7.5
percent by 2024 – 2.6 percentage points over baseline.
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To realize the objectives of the growth strategy, a total of six highly feasible irrigation
expansion and rehabilitation projects and three horticulture development projects are
selected to be part of the fiscal accelerators’ package.
MAIL Investment Package and its associated economic returns
The Ministry of Agriculture, Irrigation and Livestock (MAIL) is working on the development and
modernization of agriculture, livestock and horticulture. The ministry launches programs in
the fields of agriculture, livestock and horticulture to support farmers, manage natural
resources, and strengthen the agricultural economy. In pursuit of this objective, it aims to
invest $3,455.2 million for a 9-year period from 2020 to 2028 involving 6 projects in irrigation
and 3 projects in horticulture. This will be complemented by a further investment of $2,295.6
million for farms development and improvements by the farmers/entrepreneurs.
Irrigation projects include Musa Qala Dam Canal, Zamin Dawor Canal, Salma Downstream
Rehabilitation (including canals and watershed), Andkhoy Irrigation Project, Khush Tepa
Irrigation Canal, and Shah-wa-Arus Irrigation Project. The horticulture projects include Injel
Pistachio & Cumin Farms, Development of Ferula (Assafoetida), Licorice, and Cumin value
chains, and National Horticulture Development Program which includes Apple, Pomegranate,
Almond, Walnuts, Citrus, Peach and other sub-sectors. The table below list these projects with
their associated government investment amounts, their relative share, land area coverage, and
duration:
Each of these projects are briefly described as under:
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1.11 Irrigation Projects
Project 1: Musa Qala Dam Irrigation Project Musa Qala Dam is an irrigation project of the MAIL, which will cover 17,000 hectares of land.
The implementation period of the project is 4 years excluding one year of the feasibility study.
The development & construction work of the project will start in 2020, which is expected to
be completed by the end of 2023. The investment required for the project is $ 254.5 million,
which is distributed as $ 50 million in the first year, $ 55 million in second and third year each
and $ 94.6 million in fourth year. In addition, farmers will make an investment of $ 34 million
on the farm-level.
Investment Return: The project will create 17,000 full time jobs (1 job per hectares of new
irrigated land). It is assumed that the land will be allocated for the production of pomegranates
and grapes equally. Assuming better connectivity and storage facilities, 60% of the production
will be exported and 40 percent will be used for the domestic market needs.
Assumptions
Project Start Year 2020
Project End Year 2023
Project Development Period (yrs) 4
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Dam O&M and Supervision Cost % of CAPEX
5%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
2,000
Musa Qala Dam Cost (Million $) 254.6
Land Irrigation - Ha 17,000
Upon successful implementation, the project will generate NPV of $ 1,328 million over the
appraisal period. The IRR of the mentioned investment is 21.2%. The payback period of the
investment is 9 years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 1,327.8
Internal Rate of Return (IRR) 21.20%
Payback Period (Years) 9
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Project 2: Zamin Dawar Irrigation Project It is expected that the project development work will initiate in 2020 and reach the final stage
in 2023. The investment required for the project is $ 110.5 million, distributed in the first and
second years each at $ 20 million, in the third year at 50 million and in the fourth year at $ 20.5
million. In addition, $ 18 million will be invested on the farm-level by the farmers. It is assumed
that the project will irrigate 9,000 hectares of new land, which will be used for the production
of pomegranates and grapes. The project will create 9,000 full – time new jobs.
Assumptions
Project Start Year 2020
Project End Year 2023
Project Development Period (yrs) 4
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Project O&M and Supervision Cost % of CAPEX 5%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
2,000
Project Cost (Million $) 110.5
Land Irrigation – Ha 9,000
Upon successful implementation, the project will generate NPV of $ 752 million over the
appraisal period. The IRR of the mentioned investment is 23.6%. The payback period of the
investment is 9 years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 752
Internal Rate of Return (IRR) 23.6%
Payback Period (Years) 9
Project 3: Salma Downstream Rehabilitation (canals and watershed)
The project's development work is expected to begin in 2020 and will be completed by the
end of 2024. The project is expected to add 45,000 hectares to the irrigated land, with 9000
hectares each year. The required investment for the project is $ 78.76 million and a further
$ 90 million will be spent by the farmers on the farms development. The land will be used to
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produce vegetables, fruits, pulses, saffron, and pistachios. The project's revenue generation is
likely to begin in 2021. The contribution in government revenue will be $ 20.5 million in 2021,
while by 2026 this amount will reach to $ 178.0 million. The project is expected to create 45,000
full-time new jobs.
Assumptions
Project Start Year 2020
Project End Year 2024
Project Development Period (yrs) 5
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Project O&M and Supervision Cost % of CAPEX
5%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
2,000
Project Cost (Million $) 78.8
Land Irrigation - Ha 45,000
After successful implementation, the project will generate NPV of $ 7,277.5 million over the
appraisal period. The IRR of the mentioned investment is 117.2%. The payback period of the
investment is 3 years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 7,277.5
Internal Rate of Return (IRR) 117.20%
Payback Period (Years) 3
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Project 4: Andkhoy Irrigation Project
The project's feasibility study is expected to be carried out by the end of 2019. The project's
development and construction work will start in 2021 and is expected to be completed by
2027. The project's predictable investment amount is $ 548 million, from which 189,994
hectares of agricultural land will be developed. Farmers and entrepreneurs will spend
additional $ 380 million on the farm level. The land is presumed to be used for the cultivation
of grapes, of which 90% will be exported and 10% used for the domestic market. The project
will create 189,994 full time jobs.
Assumptions
Project Start Year 2021
Project End Year 2027
Project Development Period (yrs) 7
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Project O&M and Supervision Cost % of CAPEX 5%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
2,000
Project Cost (Million $) 548
Land Irrigation – Ha 189,994
When successfully implemented, the project will generate NPV of $ 6,729.8 million over the
appraisal period. The IRR of the mentioned investment is 53.5% and the payback period is 5
years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 6,729.8
Internal Rate of Return (IRR) 53.5%
Payback Period (Years) 5
Project 5: Khush Tepa Irrigation Canal
The project's feasibility study has already begun. The project's development work is expected
to start in 2021 and completed by the end of 2028. The estimated investment required for the
project is $ 1503 million. Farmers and entrepreneurs will make additional investment of $ 1000
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million on the farm level. The project will probably irrigate 500,000 hectares of new agricultural
land, which will be used to produce cotton, grapes, melons, soybeans, almonds and pistachios.
The project's revenue generation is expected to begin in 2024. The project's contribution to
government revenue will be $ 62.5 million by 2024, while it will reach $ 688.9 million by 2030.
It is expected that the project will create 500,000 new jobs.
Assumptions
Project Start Year 2021
Project End Year 2028
Project Development Period (yrs) 8
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Project O&M and Supervision Cost % of CAPEX
2%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
2,000
Project Cost (Million $) 1,503.6
Land Irrigation – Ha 500,000
Upon successful implementation, the project will generate NPV of $ 33,447.8 million over the
appraisal period. The IRR of the mentioned investment is 53.5% and its payback period is 7
years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 33,447.8
Internal Rate of Return (IRR) 53.5%
Payback Period (Years) 7
Project 6: Shah-wa-Arus Irrigation Project
The project's development and construction work will start in 2021 and is expected to be
completed by 2023. The project's estimated investment amount is $ 12.9 million, from which
3,585 hectares of agricultural land will be developed. A further investment of $ 3.6 million will
be on the farm-level by the farmers. The land should be used to grow grains and grapes. The
project creates 3,585 full - time jobs.
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Assumptions
Project Start Year 2021
Project End Year 2023
Project Development Period (yrs) 3
Discount Rate 5%
Depreciation Period (yrs) 50
Appraisal Period (yrs) 30
Project O&M and Supervision Cost % of CAPEX
5%
Farms O & M Cost % of Revenue 30%
Land Development Cost per Hectare - $ (Farmers Investment)
1,000
Project Cost (Million $) 12.9
Land Irrigation - Ha 3,585
When successfully implemented, the project will generate NPV of $ 316.2 million over the
appraisal period. The IRR of the mentioned investment is 170.8% and the payback period is 2
years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 316.2
Internal Rate of Return (IRR) 170.8%
Payback Period (Years) 2
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1.12 Horticulture Projects
Project 1: Injel Pistachio and Cumin Farms The project will cover 30,000 ha of land under Pistachio and Cumin in the Injel district. It is
expected that the implementation work of the project will start in 2020, and completed by 2024.
The estimated total investment for the project is $ 57.8 million or $ 11.6 million annually for five
years. Farmers or community will make additional investment of $ 100 million as well. The
project will create 30,000 full-time jobs.
Assumptions
Project Start Year 2020
Project End Year 2024
Project Development Period 5
Depreciation Period (yrs) 30
Appraisal Period (yrs) 30
Discount Rate 5%
Project Supervision Cost as % of Last Project Year CAPEX (after farms establishment)
2%
Farms O & M Cost % of Revenue 30%
Project Cost (Million $) 57.8
Land under Cultivation - Ha 30,000
After successful implementation, the project will generate NPV of $ 8,462.9 million over the
appraisal period. The IRR of the mentioned investment is 44.9%. The payback period of the
investment is 8 years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 8,462.9
Internal Rate of Return (IRR) 44.9%
Payback Period (Years) 8
Project 2: Ferula (Assafoetida), Licorice, and Cumin Farms
The development work of the project is expected to start in 2020 and completed in five years.
The project will develop 280,000 ha of land, which will be used for the medicinal plants i.e.
Hing (Ferula), Shereen Boya (Licorice) and Cumin. The predictable government investment cost
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for the project is $ 39 million and a further $ 20 million will be contributed by the farmers. It
is estimated that the project will create 280,000 full time jobs.
Assumptions
Project Start Year 2020
Project End Year 2024
Project Development Period 5
Appraisal Period (yrs) 9
Discount Rate 5%
Project Supervision Cost as % of Last Project Year CAPEX (after farms establishment)
2%
Farms O & M Cost % of Revenue 30%
Project Cost (Million $) 39
Land under Cultivation - Ha 280,000
When successfully implemented, the project will generate NPV of $ 9,422.2 million over the
appraisal period. The IRR of the mentioned investment is 211.7%. The payback period of the
investment is 3 years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 9,422.2
Internal Rate of Return (IRR) 211.7%
Payback Period (Years) 3
Project 3: National Horticulture Development Program
The estimated investment cost of the project is $ 1.5 billion, where the government will
contribute $ 850 million. The project implementation period is 5 years, which is likely to initiate
in 2020 and end in 2024. It is assumed that the project will develop 163,300 hectares of land for
high-value fruit trees, i.e. walnuts, almonds, citrus trees and others. It is assumed that 90% of
the production will be exported and 10% will be used to meet the needs of the domestic market.
It is expected that the project will create 217,733 full time new jobs.
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Assumptions
Project Start Year 2020
Project End Year 2024
Project Development Period 5
Depreciation Period (yrs) 25
Appraisal Period (yrs) 25
Discount Rate 5%
Project Supervision Cost as % of Last Project Year CAPEX (after farms establishment)
2%
Project Cost (Million $) 850
Land under Cultivation - Ha 163,300
After successful implementation, the project will generate NPV of $ 24,607.1 million over the
appraisal period. The IRR of the mentioned investment is 29.4% and the payback period is 9
years.
Economic Viability Indicators
Net Present Value (NPV) - Million $ 24,607.1
Internal Rate of Return (IRR) 29.4%
Payback Period (Years) 9
1.2 Consolidated Analysis
The whole investment package amounts to $ 5,750.8 million. Of this amount, 60.1% is
undertaken by the government and the rest is borne by the farmers or entrepreneurs who
mainly invest on the farm-level.
Almost 66% of the total investment takes place in the initial 5 years. The table below provides
the distribution of the total investment over the 9 years of the project period:
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Upon successful completion, these projects have the potential of irrigating 1,237,879 hectares
of agricultural land. The investment cost per hectare is projected at $ 4,646. As shown below
68% of the target land coverage will be achieved by the end of 2024.
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The government revenue generated by the MAIL package is projected, on average, to be $ 864
million per year during the first 10 years. While after 10 years, the revenue generated by
package could reach, on average, to $ 1,732 million per year until 2050.
Up to 2030, the package has the potential to cumulatively generate over $ 9.8 billion as
revenue for the government. By 2050, the cumulative revenue could reach $ 45.0 billion. The
main sources of revenue are receipts taxes, income taxes, profit-sharing arrangements and
export duties. The table below displays the project-wise and year-wise revenue until 2030.
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The investments that needs to be undertaken by the government are financed with loans. The
moratorium period is generally assumed to be 5 years. The loan will be repaid within 10 years
after the moratorium period. Only for Ferula, Licorice, and Cumin Farms, the moratorium
period is assumed to be 2 years and loan is repaid within three years after the moratorium
period.
The economic appraisal is conducted mostly using the useful economic life of the individual
projects as the appraisal time horizon. Upon successful implementation of these projects, the
average annual income earned by the community during the next ten years is $ 2,619 million.
After which it will reach $ 4,607 million per annum until 2050.
The economic analysis was conducted using real discount rate of 5%. Upon successful
implementation, the whole package will generate Net Present Value (NPV) of $ 90,415 million
over the respective appraisal periods of the assets. The package Internal Rate of Return (IRR)
is 46.5% and its Payback period is around 7 years. Thus, the package as whole therefore
represents a viable investment for the Ministry of Agriculture. The economic viability indicators
for individual projects are given in the table below:
The package will contribute, on average, 2.65 % to the GDP growth each year during the next
five years and in terms of employment, the investment package will create 1,292,312 full-time
equivalent jobs.
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2. Improving electricity transmission and distributions channels
Da Afghanistan Breshna Sherkat (DABS) is established to supply and expand electric energy
to all areas of the country. In support of this objective, it aims to invest $ 1,289.5 million over
a five-year period from 2020 to 2024 covering 27 provinces. This investment covers three types
of the DABS projects, namely transmission lines, substations, and network distribution.
There will be 32 transmission lines sub-projects, 21 of which will start in 2020, while five will
start in 2021 and the rest in 2022. These projects will be implemented in 24 provinces of the
country. The total length of the transmission lines is estimated at 3,484.4 Kms. The TAP
transmission line from Torghondi to Spin Boldak with 800 Kms is the longest sub-project to
be implemented in the provinces of Herat, Nimroz, Helmand, and Kandahar between 2020
and 2024 with an estimated cost of $ 240 million.
It is also planned to implement 34 Substation (SS) sub-projects in 25 provinces. Twenty - two
of them will begin in 2020, with six SS projects beginning in 2021 and 2022 each. The most
expensive sub-project with a capacity of 2*160 MVA is Kandahar East SS (TAP Project) with
required investment of $ 30 million. All the SS sub-projects are carried out by DABS / MEW
with the exception of Darul Aman SS (for ministries complex), which will be implemented by
MUDL / MEW in 2020 - 2022.
The total number of Network Distributions sub-projects reach 68 and most of these are
planned for 2020. The projects will be implemented in 27 provinces, Baghlan province is at the
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top of the list, where nine projects will be implemented, Jawzjan has the second position in
the list by receiving 7 projects. Among these sub-projects the largest is the Barik Ab
Distribution Network in Kabul, by having 20 MW capacity with an estimated cost of $ 7 million.
Unlike network distribution projects, transmission lines and substations do not generate
revenues directly. Hence, all of these three projects are considered as a single projects package
for the financial analysis purpose.
The table below provides the overall investment amount and relative share of each project in
the whole investment package:
This investment is front-loaded with 76% taking place during the initial 3 years. The table
below provides the distribution of the investment over the five years of the project period:
Upon completion, these projects have the potential of adding 485.5 Megawatt (MW) per
hour electricity to the national grid. The investment cost per MW is estimated at $ 2.66
million. As shown below almost 59% of the electricity will be added by the end of 2022.
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These projects will be fully financed with loans. Loan will be obtained according to the required
investment in each year so as to reduce the payment burden. Loan duration is 10 years and
the borrowing rate is assumed at 5% per annum. The moratorium period is five years during
which principal will not be paid and the interest will be accumulated. After five years, DABS
will start paying both principal and loan interest, depending on when the loan is borrowed,
for the next 10 consecutive years.
The total revenue to government generated by the DABS package is projected, on average, to
be $ 16.2 million per year during the first 10 years. While after 10 years, the revenue generated
by package could reach, on average, to $42.6 million per year until 2045.
Up to 2030, the DABS package have the potential to cumulatively generate over $ 175 million
as revenue for the government. By 2045, the cumulative revenue could reach almost $ 843
million. The main sources of revenue are receipts taxes, corporate taxes, and DABS profits. The
graph below illustrates the year-wise revenue until 2030.
The feasibility cost per MW is $ 6000. Land acquisition and resettlement cost is assumed at 3%
of the capital expenditure (CAPEX). Moreover, contingency of 3% of CAPEX is also assumed
and will be used to mitigate potential risks and to ensure smooth implementation of the
projects.
System losses are projected at 15% and the system’s annual rate of degradation is 0.37%.
Considering both these factors, the projects will, on average, provide 2,336,686 MWh energy
annually. The import cost for each MWh is projected at $ 50 and the average selling price for
each MWh is $ 120. The operation and maintenance (O&M) costs are estimated to be 1.5% of
24
the system cost and will escalate by 0.1% each year. The annual depreciation rate is 3.2% and
the assets residual value after 25 years is only 20% of the initial investment amount.
The economic life of the assets is estimated to be 25 years. The financial appraisal was
conducted using real discount rate of 5%. Upon successful implementation, the projects will
generate financial Net Present Value (NPV) of $ 203.2 million over the appraisal period. The
financial IRR of the investment is 6.4%. The package as whole therefore represents a viable
investment for the DABS. The average debt service coverage ratio is projected to be 0.73. This
ratio is low and the company may have to use funds from the overall projects portfolio to
service the debt.
The economic benefits of the package could be much higher than the financial benefits that
are shown above. This is because the consumer willingness to pay for energy is much higher
than the price charged by the DABS. In the absence of grid electricity, the consumers are
forced to use costly fuel generators to satisfy their energy demands.
In terms of employment, the investment package will create 11,265 full-time equivalent jobs.
Of these 3,399 are direct jobs and 5,438 are indirect jobs. Indirect jobs will be created in the
supply and distribution chains. Moreover, 2,428 induced jobs will also result from the spending
effects created by the direct and indirect employments.
This investment package will add, on average, 0.9% to GDP each year during the next five
years. As result of the successful implementation of projects, 109,641 new connections will be
added to national grid and 598,500 people will benefit from electrification. New connections
include 85,500 residential, 23,940 commercial, and 211 industrial customers.
25
3. Building affordable housings, and developing commercial and industrial
properties
The Ministry of Urban Development and Land (MUDL) is tasked with establishing cities with
requisite facilities based on policy of equal and sustainable development. In support of this
objective, the MUDL aims to invest $ 1,664.2 million over a period of five years. The investment
will be used to undertake 17 projects in major provinces to develop residential, commercial,
and industrial properties to satisfy the demands of urban residents. The investment package
covers two types of projects, namely Projects with Rental Return and Projects with Sales Return.
The former are business centers and will be leased to the potential entrepreneurs while the
later include residential, commercial, and industrial properties that are sold to prospective
investors.
3.11 Projects with Rental Return
Project 1: Mukhabirat Business Center Mukhabirat Business Center is a project of the MUDL with rental return, which will cover 13,000
SQMs land. The cost of land is assumed to be $19.5 million. The development period of the project
is 2 years (2020 to 2021) and the economic life cycle of the project is assumed to be 30 years. Upon
completion, this project will provide 67,600 SQMs rentable area. The construction investment
required for the project is $65.5 million, which is distributed as $33.7 million in the first year and
$31.8 million in the second year.
Investment Return: The project will create 1,310 direct jobs and 6,552 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs. It will
generate $1,305 million rental revenue, with the occupancy rate of 40% (first year) to 85% (after
4th year), over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 52.4
Cycle O&M Cost (Million $) 15
Construction Cost (Million $) 65.5
Land Cost (Million $) 19.5
Land Required (SQM) 13,000
Rentable Area (SQM) 67,600
26
Upon successful implementation, the project will generate Financial NPV of $ 497 million over the appraisal period. The Financial IRR of the mentioned investment is 56.3%. The payback period of the investment is 4 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 497
Internal Rate of Return (IRR) 56.30%
Payback Period (Years) 4
Project 2: Qazi Plaza Business Center Qazi Plaza Business Center is a project of the MUDL with rental return, which will cover 7,000 SQMs
land. The cost of land is assumed to be $7 million. The development period of the project is 2
years (2020 to 2021) and the economic life cycle of the project is assumed to be 30 years. Upon
completion, this project will provide 36,400 SQMs rentable area. The construction investment
required for the project is $35.28 million, which is distributed as $18.1 million in the first year and
$17.1 million in the second year.
Investment Return: The project will create 706 direct jobs and 3,528 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs. It will
generate over $700 million rental revenue, with the occupancy rate of 30% (first year) to 85% (after
4th year), over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 28.2
Cycle O&M Cost (Million $) 6.9
Construction Cost (Million $) 35.3
Land Cost (Million $) 7.0
Land Required (SQM) 7,000
Rentable Area (SQM) 36,400
27
Upon successful implementation, the project will generate Financial NPV of $ 268.9 million over the
appraisal period. The Financial IRR of the mentioned investment is 67.2% and the payback period is
4 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 268.9
Internal Rate of Return (IRR) 67.2%
Payback Period (Years) 4
Project 3: Darul Aman Business Center Darul Aman Business Center is a project of the MUDL with rental return, which will cover 45,000
SQMs land. The cost of land is assumed to be $9 million. The development period of the project
is assumed to be 2 years (2020 to 2021) and the economic life cycle of the project is 30 years. Upon
completion, this project will provide 117,000 SQMs rentable area. The construction investment
required for the project is $75.6 million, which is distributed as $38.8 million in the first year and
$36.7 million in the second year.
Investment Return: The project will create 1,512 direct jobs and 7,560 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs and it will
generate over $749.8 million rental revenue, with the occupancy rate of 30% (first year) to 85%
(after 4th year), over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 60.4
Cycle O&M Cost (Million $) 15.6
Construction Cost (Million $) 75.6
Land Cost (Million $) 9.0
Land Required (SQM) 45,000
Rentable Area (SQM) 117,000
28
Upon successful implementation, the project will generate Financial NPV of $ 244.7 million over the
appraisal period. The Financial IRR of the mentioned investment is 15.6% and its payback period is
5 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 244.7
Internal Rate of Return (IRR) 15.6%
Payback Period (Years) 5
Project 4: Jalalabad Business Center Jalalabad Business Center is a project of the MUDL with rental return, which will cover 7,600 SQMs
land. The cost of land is assumed to be $7.6 million. The development period of the project is
assumed to be 2 years (2020 to 2021) and the economic life cycle of the project is 30 years. Upon
completion, this project will provide 19,760 SQMs rentable area. The construction investment
required for the project is $12.7 million, which is distributed as $6.5 million in the first year and
$6.2 million in the second year.
Investment Return: The project will create 255 direct jobs and 1,277 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs and it will
generate over $126.6 million rental revenue, with the occupancy rate of 30% (first year) to 85%
(after 4th year), over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 10.2
Cycle O&M Cost (Million $) 3.6
Construction Cost (Million $) 12.7
Land Cost (Million $) 7.6
Land Required (SQM) 7,600
Rentable Area (SQM) 19,760
Upon successful implementation, the project will generate Financial NPV of $ 36.1 million over the
appraisal period. The Financial IRR of the mentioned investment is 10.8% and the payback period of
the investment is 9 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 36.1
Internal Rate of Return (IRR) 10.8%
Payback Period (Years) 9
29
Project 5: Mazar Business Center Mazar Business Center is a project of the MUDL with rental return, which will cover 7,400 SQMs
land. The cost of land is assumed to be $7.4 million. The development period of the project is 2
years (2020 to 2021) and the economic life cycle of the project is assumed to be 30 years. Upon
completion, this project will provide 19,240 SQMs rentable area. The construction investment
required for the project is $12.4 million, which is distributed as $6.39 million in the first year and
$6.04 million in the second year.
Investment Return: The project will create 249 direct jobs and 1,243 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs. It will
generate over $123.3 million rental revenue, with the occupancy rate of 30% (first year) to 85%
(after 4th year), over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 9.94
Cycle O&M Cost (Million $) 3.6
Construction Cost (Million $) 12.4
Land Cost (Million $) 7.4
Land Required (SQM) 7,400
Rentable Area (SQM) 19,240
Upon successful implementation, the project will generate Financial NPV of $ 35.1 million over the
appraisal period. The Financial IRR of the mentioned investment is 10.8%. The payback period of the
investment is 9 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 35.1
Internal Rate of Return (IRR) 10.8%
Payback Period (Years) 9
Project 6: Herat Business Center Herat Business Center is a project of the MUDL with rental return, which will cover 5,000 SQMs
land. The cost of land is assumed to be $5 million. The development period of the project is 2
years (2020 to 2021) and the economic life cycle of the project is assumed to be 30 years. Upon
completion, this project will provide 13,000 SQMs rentable area. The construction investment
required for the project is $8.4 million, which is distributed as $4.3 million in the first year and $4.08
million in the second year.
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Investment Return: The project will create 168 direct jobs and 840 indirect jobs. The project aims
to construct a business center which will be leased to the potential entrepreneurs. It will generate
over $83.3 million rental revenue, with the occupancy rate of 30% (first year) to 85% (after 4th year),
over the project life cycle.
Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 6.7
Cycle O&M Cost (Million $) 3.0
Construction Cost (Million $) 8.4
Land Cost (Million $) 5.0
Land Required (SQM) 5,000
Rentable Area (SQM) 13,000
Upon successful implementation, the project will generate Financial NPV of $ 23.5 million over the
appraisal period. The Financial IRR of the mentioned investment is 10.8% and the payback period is
10 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 23.5
Internal Rate of Return (IRR) 10.8%
Payback Period (Years) 10
Project 7: Khost Business Center Khost Business Center is a project of the MUDL with rental return, which will cover 10,000 SQMs
land. The cost of land is assumed to be $15 million. The development period of the project is
assumed to be 2 years (2020 to 2021) and the economic life cycle of the project is 30 years. Upon
completion, this project will provide 26,000 SQMs rentable area. The construction investment
required for the project is $16.8 million, which is distributed as $8.6 million in the first year and
$8.1 million in the second year.
Investment Return: The project will create 336 direct jobs and 1,680 indirect jobs. The project
aims to construct a business center which will be leased to the potential entrepreneurs. It will
generate over $278.4 million rental revenue, with the occupancy rate of 40% (first year) to 85%
(after 4th year), over the project life cycle.
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Assumptions
Appraisal Start Year 2020-21
Appraisal End Year 2051
Project Development Period (yrs) 2
Discount Rate/Interest Rate 5%
Depreciation Period (yrs) 30
Cycle Depreciation Cost (Million $) 13.4
Cycle O&M Cost (Million $) 6.0
Construction Cost (Million $) 16.8
Land Cost (Million $) 15
Land Required (SQM) 10,000
Rentable Area (SQM) 26,000
Upon successful implementation, the project will generate Financial NPV of $ 93.4 million over the
appraisal period. The Financial IRR of the mentioned investment is 24.0% and the payback period is
7 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 93.4
Internal Rate of Return (IRR) 24.0%
Payback Period (Years) 7
3.12 Projects with Sales Return
Project 1: Banayee Residential and Commercial City Banayee Residential and Commercial City is a project of the MUDL with sales return, which will
cover 100,000 SQMs land. The cost of land is assumed to be $5.4 million. The implementation
period of the project is 5 years (2020 to 2024). Upon completion, this project will provide 108,000
SQMs saleable area. The construction investment required for the project is $31 million, which is
distributed as $6.9 million in the first year, and $6 million per year for the remaining period.
Investment Return: The project will create 621 direct jobs and 3,103 indirect jobs. The project
includes residential and commercial properties which will be sold to prospective investors and it
will generate $48.6 million sales revenue over the project life cycle.
32
Upon successful implementation, the project will generate Financial NPV of $6.1 million over the
appraisal period. The Financial IRR of the mentioned investment is 54.2% and the payback period is
3 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 6.1
Internal Rate of Return (IRR) 54.2%
Payback Period (Years) 3
Project 2: Diplomatic Area Township Kabul Diplomatic Area Township Kabul is a project of the MUDL with sales return, which will cover
640,000 SQMs land. The cost of land is assumed to be $24.5 million. The implementation period
of the project is 5 years (2020 to 2024). Upon completion, this project will provide 490,680 SQMs
saleable area. The construction investment required for the project is $126 million, which is
distributed as $28 million in the first year, and $24.5 million per year for the remaining period.
Investment Return: The project will create 2,520 direct jobs and 12,601 indirect jobs. The project
includes residential and commercial properties which will be sold to prospective investors and it
will generate $196.2 million sales revenue over the project life cycle.
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 31
Land Cost (Million $) 5.4
Land Required (SQM) 100,000
Area for Sale (SQM) 108,000
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 126
Land Cost (Million $) 24.5
Land Required (SQM) 640,000
Area for Sale (SQM) 490,680
33
Upon successful implementation, the project will generate Financial NPV of $21.3 million over the
appraisal period. The Financial IRR of the mentioned investment is 43.5% and its payback period is
3 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 21.3
Internal Rate of Return (IRR) 43.5%
Payback Period (Years) 3
Project 3: Herat Residential Area Herat Residential Area is a project of the MUDL with sales return, which will cover 400,000 SQMs
land. The cost of land is assumed to be $5.2 million. The implementation period of the project is
5 years (2020 to 2024). Upon completion, this project will provide 132,300 SQMs saleable area. The
construction investment required for the project is $35.4 million, which is distributed as $7.9 million
in the first year, and $6.9 million per year for the remaining period.
Investment Return: The project will create 708 direct jobs and 3,539 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate $52.9
million sales revenue over the project life cycle.
Upon successful implementation, the project will generate Financial NPV of $5.7 million over the appraisal period. The Financial IRR of the mentioned investment is 55.6% and the payback period of the investment is 3 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 5.7
Internal Rate of Return (IRR) 55.6%
Payback Period (Years) 3
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 35.4
Land Cost (Million $) 5.2
Land Required (SQM) 400,000
Area for Sale (SQM) 132,300
34
Project 4: Khost, Balkh, Kabul, Herat and Kandahar Industrial Parks The industrial parks are part of the projects of the MUDL with sales return, which will be constructed
in Khost, Balkh, Kabul, Herat, and Kandahar provinces that will cover 2,000,000 SQMs lands in each
province. The cost of land in each province is assumed to be $2 million. The implementation period
of the project is 3 years (2020 to 2022). Upon completion, these projects will provide 7,705,875
SQMs saleable area. The construction investment required for the project is $315 million, which is
distributed as $111 million in the first year, and $102 million in the second and third years.
Investment Return: The project will create 6,300 direct jobs and 31,500 indirect jobs. The project
includes industrial properties which will be sold to prospective entrepreneurs and it will generate
$315.9 million sales revenue over the project life cycle.
Upon successful implementation, the project will generate Financial NPV of $ -75.9 million over the
appraisal period. The Financial IRR of the mentioned investment is -23.9%.
Financial Viability Indicators
Net Present Value (NPV) - Million $ (75.9)
Internal Rate of Return (IRR) -23.9%
Payback Period (Years) NA
Despite having negative Financial NPV, the government should still proceed with this project due
to its economic and industrial benefits to the country.
Project 5: Khost Residential Takhtabeg Area Khost Residential Takhtabeg Area is a project of the MUDL with sales return, which will cover
200,000 SQMs land. The cost of land is assumed to be $4.5 million. The implementation period of
the project is 5 years (2020 to 2024). Upon completion, this project will provide 112,800 SQMs
saleable area. The construction investment required for the project is $30.2 million, which is
distributed as $6.7 million in the first year, and $5.9 million per year for the remaining period.
Investment Return: The project will create 603 direct jobs and 3,017 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate $45.1
million sales revenue over the project life cycle.
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 3
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 315
Land Cost (Million $) 10
Land Required (SQM) 2,000,000
Area for Sale (SQM) 7,705,875
35
Upon successful implementation, the project will generate Financial NPV of $4.9 million over the
appraisal period. The Financial IRR of the mentioned investment is 55.6% and the payback period of
the investment is 3 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 4.9
Internal Rate of Return (IRR) 55.6%
Payback Period (Years) 3
Project 6: Kamaz Residential Area
Kamaz Residential Area is a project of the MUDL with sales return, which will cover 633,679 SQMs
land. The cost of land is assumed to be $23.5 million. The implementation period of the project is
5 years (2020 to 2024). Upon completion, this project will provide 783,419 SQMs saleable area. The
construction investment required for the project is $184.4 million, which is distributed as $41
million in the first year, and $35.8 million per year for the remaining period.
Investment Return: The project will create 3,688 direct jobs and 18,442 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate
$274.1 million sales revenue over the project life cycle.
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 30.2
Land Cost (Million $) 4.5
Land Required (SQM) 200,000
Area for Sale (SQM) 112,800
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 184.4
Land Cost (Million $) 23.5
Land Required (SQM) 633,679
Area for Sale (SQM) 783,419
36
Upon successful implementation, the project will generate Financial NPV of $32.7 million over the
appraisal period. The Financial IRR of the mentioned investment is 70.1% and its payback period is
2 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 32.7
Internal Rate of Return (IRR) 70.1%
Payback Period (Years) 2
Project 7: Laghman Residential Area
Laghman Residential Area is a project of the MUDL with sales return, which will cover 66,000 SQMs
land. The cost of land is assumed to be $1.9 million. The implementation period of the project is
assumed to be 5 years (2020 to 2024). Upon completion, this project will provide 62,860 SQMs
saleable area. The construction investment required for the project is $16.1 million, which is
distributed as $3.6 million in the first year, and $3.1 million per year for the remaining period.
Investment Return: The project will create 323 direct jobs and 1,614 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate $23.8
million sales revenue over the project life cycle.
Upon successful implementation, the project will generate Financial NPV of $ 2.9 million over the
appraisal period. The Financial IRR of the mentioned investment is 68.2% and its payback period is
2 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 2.9
Internal Rate of Return (IRR) 68.2%
Payback Period (Years) 2
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction cost (Million $) 16.1
Land Cost (Million $) 1.9
Land Required (SQM) 66,000
Area for Sale (SQM) 62,680
37
Project 8: Qasaba Residential Area
Qasaba Residential Area is a project of the MUDL with sales return, which will cover 672,000 SQMs
land. The cost of land is assumed to be $8.4 million. The implementation period of the project is
5 years (2020 to 2024). Upon completion, this project will provide 168,750 SQMs saleable area. The
construction investment required for the project is $43.3 million, which is distributed as $9.6 million
in the first year, and $8.4 million per year for the remaining period.
Investment Return: The project will create 867 direct jobs and 4,334 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate $67.5
million sales revenue over the project life cycle.
Upon successful implementation, the project will generate Financial NPV of $7.3 million over the
appraisal period. The Financial IRR of the mentioned investment is 43.5 % and the payback period
of the investment is 3 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 7.3
Internal Rate of Return (IRR) 43.5%
Payback Period (Years) 3
Project 9: Nangarhar Residential Area
Nangarhar Residential Area is a project of the MUDL with sales return, which will cover 776,000
SQMs land. The cost of land is assumed to be $3.1 million. The implementation period of the
project is 5 years (2020 to 2024). Upon completion, this project will provide 465,600 SQMs saleable
area. The construction investment required for the project is $182.7 million, which is distributed as
$40.6 million in the first year, and $35.5 million per year for the remaining period.
Investment Return: The project will create 3,653 direct jobs and 18,267 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate
$209.5 million sales revenue over the project life cycle.
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Cycle Construction cost (Million $) 43.3
Cycle Land Cost (Million $) 8.4
Land Required (SQM) 673,000
Area for Sale (SQM) 168,750
38
Upon successful implementation, the project will generate Financial NPV of $ 0.5 million over the
appraisal period. The Financial IRR of the mentioned investment is 5.8%.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 0.5
Internal Rate of Return (IRR) 5.8%
Payback Period (Years) NA
Project 10: Kandahar Residential Area
Kandahar Residential Area is a project of the MUDL with sales return, which will cover 2,000,000
SQMs land. The cost of land is assumed to be $7.9 million. The implementation period of the
project is 5 years (2020 to 2024). Upon completion, this project will provide 108,000 SQMs saleable
area. The construction investment required for the project is $308.2 million, which is distributed as
$68.5 million in the first year, and $59.9 million per year for the remaining period.
Investment Return: The project will create 6,163 direct jobs and 30,816 indirect jobs. The project
includes residential properties which will be sold to prospective investors and it will generate $480
million sales revenue over the project life cycle.
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 182.7
Land Cost (Million $) 3.1
Land Required (SQM) 776,000
Area for Sale (SQM) 465,600
Assumptions
Appraisal Start Year 2020
Appraisal End Year 2024
Project Development Period (yrs) 5
Discount Rate/Interest Rate 5%
Construction Cost (Million $) 308.2
Land Cost (Million $) 7.9
Land Required (SQM) 2,000,000
Area for Sale (SQM) 1,200,000
39
Upon successful implementation, the project will generate Financial NPV of $ 104.3 million over the
appraisal period. The Financial IRR of the mentioned investment is 542.8% and the payback period
of the investment is 2 years.
Financial Viability Indicators
Net Present Value (NPV) - Million $ 104.3
Internal Rate of Return (IRR) 542.8%
Payback Period (Years) 2
3.2 Consolidated Analysis
The table below provides the overall investment amount allocated to both the rental and non-
rental projects along with their relative shares in the whole investment package:
This investment is front-loaded with 60% happening during the initial two years. The table
below provides the distribution of the investment over the five years of the projects period:
These projects will be financed using combination of debt, equity and investors prepayments.
The land cost will be borne by the MUDL and this is included as equity. The land cost amounts
to USD 165.1 million and will cover 9.9% of the projects fixed cost. MUDL will borrow $ 940.8
million to finance the projects during the initial three years. Of this amount $ 226.8 million will
be used for rental projects and $ 714.0 million will be utilized for non-rental projects. The
borrowing rate is assumed at 5% and the loan moratorium period is two years. Loan for rental
projects will be repaid in ten years while that for non-rental projects will be repaid in three
years. The remaining investment will be sourced from investors as prepayments. Almost
$ 186.1 million will come as prepayments annually during the last three years of the project.
40
The revenue to government generated by the MUDL package is projected, on average, to be
$ 69 million per year during the first 10 years. While after 10 years, the revenue generated by
package could reach, on average, to $ 117 million per year until 2050.
Up to 2030, these projects have the potential to cumulatively generate over $ 750 million as
revenue for the government. By 2050, the cumulative revenue could reach $ 3,137 million. The
main sources of revenue are receipt taxes, rents and profits from the sale of properties. The
graph below illustrates the year-wise revenue until 2030.
41
Upon completion, these projects will provide
299,000 square-meters (SQMs) rentable area
and 11,230,284 SQMs area that will be put
up for sale.
The economic life of the rental assets is
estimated to be 30 years. The non-rental
assets will be sold over a period of five years.
The investment cost for rental projects is $994
per square meter while for non-rental projects
it is $ 122 for each square meter.
The depreciation rate for rental assets is 2.7%
per annum. A specific amount is allocated
each year for the regular maintenance and
supervision of the individual rental projects.
After the moratorium period is over, MUDL
will start repaying its loan in annual equal
installments.
The financial appraisal for the projects was conducted using real discount rate of 5%. Upon
successful implementation, the projects will generate Financial NPV of $ 1,309 million over the
appraisal period. The Financial IRR of the mentioned investment is 54%. The payback period
of the whole investment package is 3 years. Thus, the package as whole therefore represents
a viable investment for the MUDL. The financial viability indicators for individual projects are
given in the table below:
The investment package will add, on average, 1% to GDP each year during the next five years.
In terms of employment, the investment package will create 179,895 full-time equivalent jobs.
Of these 29,982 are direct jobs and 149,913 are indirect jobs. Indirect jobs will be created in
the supply and distribution chains.