Investment Turn-off

Government plans to encourage foreign investment are hampered by, amongst other things, the absence of a private banking system and labyrinthine bureaucracy.

Investment Turn-off

Government plans to encourage foreign investment are hampered by, amongst other things, the absence of a private banking system and labyrinthine bureaucracy.

Hidden among the predictable list of issues President Hamid Karzai presented as pressing at last week's Loya Jirga, there was a surprising addition: foreign investment in Afghanistan, or rather the lack of it.


"Foreign investors have huge problems in this country. They are threatened, told to give bribes, their assets are not safe. So many of them go away and take their money with them. This is a big loss to Afghanistan and I will solve those problems," he told the grand assembly.


Karzai announced there would be a new commission for foreign investment - one of 11 such bodies designed to supplement and in some cases bypass government ministries. So far no further details have been nnounced.


For large multi-nationals, used to international business procedures, Afghanistan must present one of the least attractive investment environments in the world.


There is relative calm after decades of war, but the country is still bristling with weapons and ethnic rivalries linger. There is no private banking system to speak of, even major deals are done in cash.


But worst of all is the labyrinthine bureaucracy, which creates immense confusion, mountains of paperwork and an atmosphere ripe for corruption.


Technically, there is already a body responsible for handling foreign investment, the central investment administration, but its chairman, Mohammad Ahmadi, openly admits he is completely in the dark about the government's plans.


"Our rules are made by the ministry of trade and reconstruction. They held a seminar about foreign investment recently but I wasn't invited. I went there using my friend's invitation card, but was not given the chance to speak. So far, I have not been able to convey my views to (President) Karzai," he told


IWPR.


Government offices spew a string of statistics which deal only with the official status of businesses, not whether they are actually operating in the real world. According to the central administration for investment, hundreds of production projects have been approved in Afghanistan in recent months, but few, if any, have any prospect of getting off the ground in the near future.


Meanwhile, Kabul is full of hopeful import-export men, looking to sell four wheel drives, and logistics and transportation services to the hundreds of non-governmental and international organisations that have poured in since the interim administration took power.


They can be seen in the more expensive hotels and restaurants, sometimes huddled in corners with their Afghan fixers, sometimes sitting alone looking rather despondent.


As the political situation stabilises slowly, attention is turning from foreign organisations to the big prize - a government contract, providing insulation from random petty corruption, a base to expand into the country and, sooner or later, certain payment.


"I have been waiting for four days to see our man," said one Iranian businessman who wants to sell refrigeration units to government security forces. "He already supports us but now we need to get him to clear the paperwork."


Trade ministry official Ghulam Ali Sadim said to get a trading license foreign investors need a ertificate proving that they are not criminals; an assurance that they will only import goods from their own country; and, in theory, a large deposit.


A trading license for a company costs about 700 US dollars but traders say they sometimes incur extra costs.


Those importing cars from over the Iranian border, for instance, say they have to pay about 400 dollars per vehicle to the local authorities in Herat province. But when they get to Kabul, officials there do not recognise the local tax stamps of the western province and make them pay another 450 dollars.


While traders and foreign business representatives converge on Kabul, there's growing speculation over a deal that could dwarf any of the deals currently being negotiated.


Officials are whetting their lips at the prospect of an oil and gas pipeline from Turkmenistan through Afghanistan to Pakistan.


There have been sporadic reports about the project since it was discovered in 1998 that executives from California-based Unocal had gone to Kandahar to talk to Taleban leaders about the scheme. And renewed interested was sparked by Karzai's reference to it in one of his speeches to the Loya Jirga. "We are already in discussions about this pipeline. It could earn us 300 dollars million a year in transit fees," he said.


So far, though, it seems no oilmen are in town. Unocal have said they are not interested "at this juncture". And while many Afghans naturally assume their country is bristling with mineral resources and offers strategic advantages, petroleum executives say the reported pipeline route is merely one of many possibilities perpetually under discussion.


Danesh Kerokhel is an IWPR trainee journalist.


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