Editor in Chief: Moh. Reza Huwaida Sunday, March 29th, 2020

Obstacles to Investment in Afghanistan


Obstacles to Investment  in Afghanistan

Afghanistan is the victim of the three decades of what is called the foreign-imposed war. After the Taliban was toppled in late 2001 as result of US-led invasion, a new window of hope and affluence opened for Afghanistan. One of the areas under international focus was to boost up Afghan economy by encouraging investments. Encouraging the private sector was deemed vital for reaching this purpose.

Attracting the foreign and domestic investment – in agriculture, industries (including mining), education, telecommunication, transportation and etc - fell among the key plans of the government and its foreign backers, although plans remain plans only. As we moved ahead, the security situation has gotten worse with each passing year hampering all kinds of expected developments including attraction and encouragement of foreign and domestic investments.

The efforts of government to attract investments have not completely gone futile. Afghanistan Investment Support Agency (AISA) was established in 2003 to facilitate registration and licensing of private investments in Afghanistan. In experts' opinion, the AISA is a success for Afghanistan. According to the World Bank's 2011 "Doing Business" figures, it takes fewer bureaucratic steps and days to start a business in Afghanistan than in many other countries of the world. Undoubtedly, establishment of AISA, amendment of laws, better customs procedures and approval of new taxation law etc have been very useful for supporting the investment and business activities in Afghanistan but yet hindrances remain at large, the greatest of which is deemed safety of the life of investors and country's general security environment.

Today the Afghan businessmen face multifaceted problems – security on the top - and the government is failing to counter them. In the last ten years, we have witnessed abductions and killings of businessmen and investors. These incidents have gone discouraging people – in Afghanistan and abroad – who are having on mind to invest in this war-ravaged country.

On June 23, Haji Hakimi, a money exchanger was attacked by unknown gunmen. The attacks took place in the central Wazir Akbar Khan area of Kabul. The gunmen killed Hakimi's bodyguard and took away $ 3.24 million which he was carrying with himself. Wazir Akbar Khan is an area where security is the strictest and on high alert 24/7 because majority of the foreign offices including embassies are located there. Until today, there is no improvement in capturing the culprits which has disappointed and demoralized many of the high-profile Afghan businessmen and foreign investors.

Apart from threats to the lives of businessmen and traders, the overall security condition of Afghanistan has turned extremely horrific and not at all feasible for attracting investments. Taliban have continued their attacks. The first half of 2011 has been deadlier - in regard to civilian deaths - as compared to the same period of the last year. The series of targeted killing - that has been continuing in the country since long and government fails to counter it – has caused many important personalities including businessmen and investors to escape the country.

Ahmad Wali Karzai, Head of Kandahar provincial council and brother of President Karzai, Jawad Zahak, head of Bamiyan provincial council, Gen. Dawood Dawood, police commander in north zone and Khan Muhammad Mujahid, Kandahar police chief were all killed in July, June, May and April respectively. Such news presents a bleak image of Afghanistan to the world which is a great harm to efforts aimed at attracting investments. The security factor is majorly responsible for the concerning economic condition and low-level of investment we have today. Although Afghanistan could be an attractive market for investors, bad security has turned attaining a desirable level of investment into a dream. If the condition persists as is, it is far difficult for Afghanistan to become self-reliant in economy – for which attracting investment has a vital role to play.

In spite of the low level of security that prevails in Afghanistan, the AISA recently said that there has been a 4 percent increase in the domestic investment in the first half of 2011 as compared to the same period of the last year. That is quite encouraging news but still the domestic investment is insignificant while the foreign direct invest or FDI which holds more importance for Afghanistan has largely dropped over the past few years. The increment in the amount of investment by Afghan shows the capability of Afghanistan for economic growth.

Lack of electric power in the country is deemed another great obstacle to investment. The long term war has resulted in destruction of the little infrastructure through which Afghanistan had to generate power. Today our country imports electricity from central Asian countries like Tajikistan and Uzbekistan. The imported power is not enough to lighten the major cities of Afghanistan and there we should not be thinking of it to fulfill the needs of heavy machineries used in industry and agriculture sectors.

Reportedly, last year Roshan, a private telecommunication company and Ministry of Telecommunication spent about $1 million for purchasing fuel so that its systems can operate. If there is no proper and consistent source of power, attracting international investment in Afghanistan is something very tough.

Due to low capacity the government has no proper planning for the growth of economy and currently more than 90 percent of its activities are being funded by international community. According to experts, international funds are not going to last for long.

With the international community's withdrawal in 2014, the foreign funding to Afghanistan is expected to shrink largely. The DW has quoted Thomas Ruttig, a researcher with the Kabul-based Afghanistan Analysts Network as saying, "We have heard unofficially, but very clearly from many European and other Western governments that when the soldiers go, the money will go with them. I am afraid that after 2014, Afghanistan will be treated just as any other developing country." Rutting warns, "An economic depression could sling Afghanistan back for years and it could end up as a failed state like Somalia." In the absence of a long term strategic plan aimed at economic development, investment is subject to diminish.

Unskilled labor force, deep-rooted corruption, destructed infrastructures, drug trafficking, political instability, lack of transparency and accountability at all levels and several other such factors contribute to keeping investors away from Afghanistan. Nonetheless, all these factors can be countered over the passage of time. The one thing the government and international community need to focus on is improving security. As good security is the key to economic prosperity.

Sher Ali Yecha is the permanent writer of Daily Outlook Afghanistan and Writes on National and International issues. He can be reached through mail@outlookafghanistan.com

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