Afghanistan tries to lure
investments By Farangis
Najibullah and Zarif Nazar
Foreign forces
are preparing to leave the country, capital is
fleeing, and it's the Afghan government's job to
stop it.
To meet its objective, the Afghan
Finance Ministry has drafted a package of
incentives to assure companies and individual that
their investments in Afghanistan will be safe
after the expected withdrawal of Western troops in
2014.
Outlined in a bill facing a
parliamentary vote in February, the incentives
would reward those who invest in the country over
the next two years with significant tax breaks and
the right to purchase land for a symbolic price.
Najibullah Manalai, an adviser to Finance
Minister Omar
Zakhilwal, says the
manufacturing, mining, and agricultural sectors
would be the most likely areas of investment.
According to the Afghan National Bank, at
least US$4.6 billion has been taken out of
Afghanistan in the past year, a development that
has been attributed to fears over increased
insecurity and corruption after the 2014 pullout.
Manalai downplays the impact the
withdrawal of the North Atlantic Treaty
Organization will have on the Afghan economy, but
he acknowledges the incentive package is intended
to "minimize such economic effects".
"We
don't think there would be a major economic
impact, but we are concerned about such
speculation in the mass media," he says. "Such
speculation could easily lead to economic
downturn. So our aim is to counter such
speculation and also to attract investors to
Afghanistan over the next two years, which is a
sensitive period."
Attractive
incentives According to Finance Ministry
spokesman Wahid Tawhidi, the goal is to entice
entities willing to invest at least $1 million
each into the country's ailing economy.
"Investors will be exempt from tax and
customs duties for the next 10 years," Tawhidi
says. The spokesman says that companies would
effectively be given land free of charge and
electricity would be made available at a fraction
of the current rates.
"In addition, if
some companies are willing to invest but don't
have enough money, we would help them to borrow
the money from two state-owned banks - the
National Bank and the Pashtani Tujarati Bank,"
Tawhidi says. "Five hundred million dollars would
be allocated for this purpose. We would enable
them to borrow the money with low tax and low
interest rates and to invest it in the Afghan
economy."
While the incentives are looked
upon as a potential boon to government coffers,
not everyone shares the Finance Ministry's
optimism that they can win over investors.
"Afghanistan has two major problems that
scare away investors, and they are corruption and
a lack of security," says Azarakhsh Hafizi of the
Afghan Chamber of Commerce and Industries.
Afghanistan ranks among the three
most-corrupt countries in the world in
Transparency International's Corruption
Perceptions Index.
"When investors have to
bribe to operate and have to pay for additional
security measures because of the constant attacks
and kidnappings, it costs them more money to stay
here," Hafizi says.
Half of
GDP The Afghan government has had trouble
providing security even for some of its most
high-profile foreign investors.
Earlier
this year, a group of Chinese miners left
Afghanistan after militants attacked the Aynak
copper mine in eastern Logar Province. The deal to
lease the mine to the China Metallurgical Group
for 30 years was the country's biggest private
business venture when it was agreed in 2007.
The government has high hopes for similar
investments in Afghanistan's lucrative energy and
mineral sectors. The country boasts significant
copper, iron, gold, and oil and gas reserves.
Manalai notes that the goal is for revenue
generated from investment in these areas to
eventually "provide half of the country's gross
domestic product".
Nasiruddin Shansab, the
head of the US-based Afghanistan-Central Asia
Transnational Company LLC, says Afghanistan's
natural resources and its geographical location
offer great investment potential.
However,
"in the climate of constant security threats and
notoriously widespread culture of bribery",
Afghanistan isn't going to see major Western
companies rushing to invest there anytime soon,
says the Afghan-born businessman.
"Tax
breaks and other incentives for investors exist
everywhere," Shansab says. "Afghanistan should
know that it is competing with the rest of world
to get investors."
Afghan officials insist
they have been addressing the corruption issues.
As part of the campaign against corruption, the
country has introduced so-called merit-based
hiring tests to employ managers to government
agencies. Several district governors and deputy
provincial governors have recently been appointed
after passing such tests, scrutinized by
independent monitors.
The Afghan Chamber
of Commerce and Industries' Hafizi says the
country still has a long way to go to eliminate
corruption. "But I wouldn't say it's an impossible
task," he says.
As for the lack of
security, Hafizi believes many investors will
still stay and watch what happens beyond 2014.
Copyright (c) 2013, RFE/RL Inc. Reprinted
with the permission of Radio Free
Europe/Radio Liberty, 1201 Connecticut Ave NW,
Washington DC 20036.
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