Boosting foreign and domestic investment is considered as a key factor for developing the Afghan fragile economy. The National Unity Government (NUG) officials stress that encouraging and facilitating investments is a top priority for the government to help grow the country’s economy. At an introductory ceremony held for Qurban Haqjo, the new head of the Afghanistan Investment Support Agency (AISA), Chief Executive Officer Abdullah Abdullah stressed on commitment of the NUG to expanding and facilitating investment in Afghanistan. According to CEO Abdullah Abdullah, backwardness, poverty, unemployment, drug trafficking, graft, and lack of implementation of laws are impediments for investment in the country. He hoped the new chairman of AISA would make the institution more vibrant and improve cooperation among relevant government agencies businessmen, investors and industrialists.

Boosting investment has been a major objective of the government of Afghanistan in last over a decade of efforts for improving Afghanistan’s economy. A key for development of Afghanistan’s economy is increased domestic production and improved exports. This is while Afghanistan suffers a huge trade deficit while the country is relying on imports of foreign goods for domestic use. The investment support agency, AISA, was established in 2003 aimed at removing investment barriers and providing facilitations for potential investors. The Afghan government also established a ministerial-level High Economic Council for overseeing efforts to improve the economy and attract foreign investors for investments in Afghanistan. Since then, AISA has had considerable achievements as the focal point in the government for coordinating investment-related efforts and providing incentives to attract investors.

However, the protracted presidential election held last year was a major blow for Afghanistan’s ailing economy including investment in the country. The anticipated challenges arising from the 2014 elections had profound impacts on the trend of the Afghan economic recovery while the controversial outcome of the elections further worsened the situation. In recent two years, Afghanistan experienced the most serious economic meltdown during past fourteen years due to the anticipated withdrawal of the NATO forces and the prolonged presidential elections held last year. During the period, there have been huge economic losses, as the government officials said, worth over two million dollars. The most damaging impact of the recent security and political transitions were on investments and businesses in the country. The widespread concerns related to fears of political instability and security deterioration resulted to a hike in capital flight from the country, prompting the government to take extra measures for reversing the capital flight.

Promoting investment will help domestic production and decrease Afghanistan’s reliance on imports of foreign goods. Afghanistan has a high deficit in trade balance given the size of its imports of foreign goods. The Afghan government needs to take dedicated measures for promoting domestic products and improve Afghanistan’s exports. The key for this is dedicated plans by the NUG to boost investment in the country and support the private sector. Improved environment for investment and enabling conditions for doing business will help Afghanistan to reach to the objective of economic self-sufficiency and prosperity.

So far, Afghan government seems to be committed to facilitate foreign and domestic investments in the country. In addition to establishing AISA for supporting investment, Afghanistan also has created two major high-level economic decision-making bodies: High Commission for Investment chaired by Minister of Commerce and Industry and High Economic Council chaired by the president. Afghanistan has been taking specific measures to gain access to the World Trade Organization (WTO) and improve its World Bank ranking of Doing Business Indicator. In the eve of the looming deterioration of economic conditions and in an attempt to prevent economic decline, Afghanistan announced new incentive packages to potential investors which are still valid.

However, major barriers to investment in Afghanistan are insecurity, corruption, lack of financial resources and required infrastructure. Improved security is the prime factor needed for boosting investment and promoting and economic growth led by private sector. The Afghan government needs to take extra measures for assuring investors and industrialists for their security. Overall security situation is related to the war and peace efforts in the country and the government’s ability to defeat the insurgency and improve security across the country. However, there is room for improving security for businesses and the traders and industrialists involved in trade and economic activities.

Corruption is another factor considerably undermining any efforts for promoting investment and boosting the economy through supporting the private sector. The Afghan government has committed to seriously fight the pervasive corruption. Afghanistan made specific commitments in the Tokyo International Conference on Afghanistan to efficiently fight corruption and embezzlement. The leaders of the NUG also declared fighting corruption as their main electoral slogans. So far, the government has taken concrete measures to curtail high-level corruption in the government. However, there is yet to be a nationwide consistent fight for eliminating corruption. If determined to boost investments, the government will need to lead a comprehensive anti-corruption campaign that will directly address government entities involved in economic and trade affairs.

Afghanistan needs to improve the regulatory environment for encouraging investors in doing business and making investments. Potential foreign investors have fears and concerns regarding the future of the investments they make in a country not only stable politically but also with less structural services and regulatory and financing backing. Afghanistan’s legal and regulatory frameworks for making investments and doing business are nascent and to some extent and some areas flawed. The Ministry of Commerce and Industry and other related agencies have been modifying some of the country’s key legislations for meeting the WTO requirements and standards. These are the laws that cover issues such as partnerships, competition, arbitration, corporations and limited liability companies, mediation, trademarks, patents, copyrights and intellectual rights. Improved regulatory framework would assure the investors of protection of their capital, investment and rights at any circumstances.

In order to spur economic growth, all major economic and trade agencies need to work hard to reverse the recent economic and trade decline in the country. The government will only be able to spur investments and improve the economy only if it serious in creating an enabling environment for business and secure conditions for investments.