DOING BUSINESS IN AFGHANISTAN
1. Business and Investment within Afghanistan
Historically, Afghanistan has been at the heart of major trading routes. Amongst them, the fabled Silk Road is one of many that have served the region throughout the centuries. Over the past seventeen years, the Afghan people have steadily progressed towards peace and prosperity, and its economy has seen meteoric growth until 2014. Military, political and economic changes after 2014, led to a slow economic growth in Afghanistan. Nonetheless, Afghanistan is emerging, once again, as a central hub for trade as the economies of Central and South Asia continue to grow and become increasingly integrated into the global economy.
Over the past decade and a half Afghanistan has made immense progress in development. Significant reform efforts and international donor support has allowed Afghanistan to maintain macroeconomic stability, implement important structural reforms, build policy buffers and a comfortable reserve position, lower debt and inflation, create a balanced budget, and make progress toward achieving social and development objectives, including the Millennium Development goals (MDGs) and Sustainable Development Goals (SDGs). Afghanistan also reached an economic milestone by becoming the newest member of the World Trade Organisation, reaffirming a commitment to free market principles.
The Government of Afghanistan understands the critical role it must play to create a favorable environment for investment. The passage of the Private Investment Law in 2006 was an important milestone demonstrating the Government’s commitment to attracting new investments. The law allows for 100% foreign ownership, easy repatriation of profits, and treats foreign investors in the same fashion as domestic investors. With this in mind, the Government has adopted a pro-private sector stance and a liberal trade regime. The Gross Domestic Product (GDP) in Afghanistan contracted 2.23 percent in 2016 from the previous year. GDP Annual Growth Rate in Afghanistan averaged 7.16 percent from 2003 until 2016, reaching an all-time high of 21 percent in 2009 and a record low of 1.11 percent in 2015, during the mentioned period.
The economy of Afghanistan has improved significantly since 2002. Increased Foreign Direct Investment (FDI) and improved domestic production has resulted in economic growth. Inflation has been low and public finance management has made healthy progress. Afghanistan, currently, in an economic recovery stage, is in transition from a centrally planned and heavily regulated economy towards an open and free economy based on the market system. The economy has been through a structural change over the last decade after the political shift in 2001 occurred due to international intervention. The new constitution acknowledges ‘market economy’ as the economic system and guarantees promotion and protection of private investment (Article 10 of the Constitution).
Invest in Afghanistan: http://investinafghanistan.af/economic/
Although the country remains dependent on foreign aid, Afghanistan’s economy is recovering, and the government has increasingly focused on private sector-led growth.
Investing in agriculture in Afghanistan is critical as the sector accounts for a quarter of the national economy, and plays an important role in the livelihoods of the approximately 76% of the population.
Caption and Image: The World Bank
Investing in agriculture sector is crucial, and will bring stability in Afghanistan. Agriculture is one of the main sources of income and exports of the country. The sector accounts for about a quarter of the national economy, and plays an important role in the livelihoods of the approximately 80% of the population. Following the decades of conflict, the government, farmers, and relevant stakeholders have worked hard to revitalize the agriculture sector. Rural economic development is among the highest priorities of the Afghan government. There is high emphasis on investment in agri-business and agri-processing as it has a significant positive impact on production and consumption of domestic products, and overall economic development. Agriculture sector has a widespread potential for creating jobs in Afghanistan.
Invest in Afghanistan: http://investinafghanistan.af/investing-in-agriculture-sector/
Exhibition in Kabul
In addition to agriculture, there are other industries that have great investment opportunities. An initiative to bring about economic development within Afghanistan was made by the Bright Business Complex (est. in 2015). Services offered include business consultancy, event management, exhibition, taxation service, legal services, travel & visa and many more.
The second Afghan Plast will be held in 2018; further details are provided below. This event provides market expansion opportunities to all the participants of the plastic industry. This in-turn will achieve improvements in machinery usage and production lines, product quality improvement and global marketing and exports.
• Title: Second Afghan Plast 2018: The International Exhibition of Plastic and Rubber Industry in Afghanistan
• Date: 6 – 9 February 2018
• Place: Uranus Palace, Kabul Afghanistan
The first international plastic industry exhibition of Afghanistan was organized on the 2nd-5th of May 2017. The aim of the event was to expose the domestic plastic industry by attracting investors, manufacturers and experts of the said industry.
For more information about this event, please visit: http://www.afghanplast.af/index.html
Sites and Links
For more information about investment in agriculture, please visit this site: http://investinafghanistan.af/investing-in-agriculture-sector/
Key Business and Economic conditions in Afghanistan - http://www.doingbusiness.org/data/exploreeconomies/afghanistan/
• Summary of comprehensive annual data collated by the World Bank giving key indicators for business and economic conditions. Includes information on typical business procedures, showing time to complete and associated costs for each step.
Afghanistan Investment Support Agency (AISA) - http://investinafghanistan.af/about-aisa/
Ease of doing business in Afghanistan - http://www.bakertillyinternational.com/media/2906121/doing-business-in-afghanistan.pdf
• Country guide from Baker Tilly International providing an overview of rules and regulations covering business entities and accounting, finance and investment, employment regulations and tax. Published in August 2017.
Law and Regulations
• Collection of business laws and regulations from economies around the world, linking to official government sources. Topics include company law, labour, tax and trade.
2. Invest in Afghanistan
Building a strong economy is crucial to Afghanistan's long-term success. The Government of Afghanistan is dedicated to creating an investor-friendly business environment. During the past three years, significant improvements have been made in infrastructure, banking, customs, and legal reforms. The Government has also enacted one of the most liberal investment laws in the region and is committed to offering low taxes and tariffs to promote investment and trade.
Afghanistan is a well-positioned central trading hub. Today, Afghanistan's principal trading partners include Pakistan, India, Korea, China, Japan, Germany, and the UAE. One of the Government’s priorities is to appropriate donor aid being provided by our international partners to promote investment, trade, and the development of the private sector. Most of the major foreign direct investments in Afghanistan are by Afghan entrepreneurs, who have made lucrative careers in telecommunications, IT and other sectors.
The Embassy of Afghanistan in Geneva is your link to investing and doing business in Afghanistan. We are able to provide you with resources, answer your questions, and refer you to relevant organizations and companies.
Why should you invest in Afghanistan?
• Strategic Geographical Position Connecting Central Asia to South Asia, and Leading to Europe.
Trade & Economy:
• Free market economy led by private sector initiatives .
• Unprecedented economic growth (GDP growth from USD 2.2 billion in 2002 to USD 21.8 billion in 2014).
• Utilization of Preferential Trade Agreements and Systems (with India, China, Europe, USA, and etc.) .
• Availability of skilled labor .
• Increased market demand .
Tax & Duties:
• Flexible tax and duty regime.
• 20% corporate tax .
• 0% Duty on import of machineries.
• 1% Duty on import of raw materials.
• Carry forward of losses (An accounting technique that applies the current year’s net operating losses to future years’ profits in order to reduce tax liability).
• Strong Government Commitment for Investment Climate Reforms.
• Airfields 08
• Trade Ports 09
• Roads 12371 km
• Railways 3429 km
• Industrial Parks 10 constructed and 17 planned.
• Dispute Resolution Centre.
• Business Integrity Initiative (BIN).
Liberal Investment Law:
• Investment Law
• Commercial Arbitration Law
• Law of Commerce
• Law of Tax on Consumer Goods
• Business Trademarks Law
• Contracts Law
• Agencies Law
• Mining Law
• Banking Law
• Insurance Law
Ownership & Profit:
• 100% foreign ownership .
• Foreigners can lease real estate, for periods up to 90 years for arable land or longer for non-arable land.
Agreements & Memberships:
• Bi-Lateral and Multi-Lateral Trade Agreements (APTTA, ECOTA, SAFTA).
• Membership of International Road Transport TIR.
Source: Invest in Afghanistan http://investinafghanistan.af/why-invest-in-afghanistan/
Your guide to investing within Afghanistan: http://mfa.gov.af/Content/Media/Documents/Your_Guide_on_Investing_in_Afghanistan1372016113045288553325325.pdf
Invest in Afghanistan campaign: http://mfa.gov.af/Content/Media/Documents/about_compaign_english1372016113344241553325325.pdf
Procedure for a Foreign Company Registration at the Ministry of Foreign Affairs of Islamic Republic of Afghanistan
1. The company must verify its necessary documents at the embassy/consulate of the Islamic Republic of Afghanistan in the residence country through a letter addressed to the MFA. In the absence of the Afghan Mission, the company must provide an introduction letter from its respective embassy or commercial attaché in Kabul.
2. The above-mentioned letter should contain information about the president, vice president and legal representative and the request regarding opening a new company or a branch in Afghanistan.
3. All submitted documents must be authenticated by the Afghan Embassy/consulate in the respective country or by the company’s consulate /commercial attaché in Kabul and verified by Consulate Directorate of the Ministry of Foreign Affairs of Afghanistan.
4. The registration form issued by Directorate General for Economic Cooperation of the MFA should be filled out and signed by the president, vice president or legal representative.
5. Brief background information of the company and future plans /activities in Afghanistan should be attached with registration form.
6. All above aforementioned documents should be submitted in two sets (original and copy). Once the procedure is completed the company will be officially introduced (within 24 hours) to the Ministry of Commerce and Industries for the issuance of business license.
Note: For more details or questions please contact the Economic Cooperation Department at +93202100374
3. Afghan Investment Law
The Afghan High Commission for Investment (HCI) www.commerce.gov.af has established a Technical Commission in order to facilitate and streamline private investment.
The Technical Commission of National & Foreign Private Investment in Afghanistan has the pleasure to present the list of necessary document prior to the registration of a foreign company in Afghanistan and request for an Investment License.
Some of the documents which are essential for obtaining a Trade/investment (Import- Export) License in Afghanistan are as follows:
• The Original copy of the application form of Investment License, signed by the competent authority of the company.
• The original copy of statement of incorporation and bylaws of the company and the registration number of the company in the country of origin.
• The original transcript of Criminal Record for the President & Vice President of the company. To be certified by the by the Afghan Embassy.
• Three passport-sized photographs of the President & Vice President of the company.
• A copy of the Director(s) passport.
• The Company's bank account references in the country of origin and in Afghanistan (if any). To be certified by the Afghan Embassy.
• An official letter of introduction by the Embassy of the home country of the company in Kabul to the Afghan Ministry of Foreign Affairs
• Registration of the firm at the Economic Department of the Afghan Foreign Affairs. (Please contact the Embassy in relation to registration)
• A completed investment application with a copy of the investment project including feasibility studies (if any).
Click to see the Laws on Domestic and Foreign Private Investment in Afghanistan
Click to see the Laws on Private Investment in Afghanistan
4. AISA: Afghanistan Investment Support Agency
AISA, which was merged into the Ministry of Commerce and Industry (MoCI) in 2016, began as a One Stop Shop services for investors that provided licenses to companies which desired to invest in Afghanistan. AISA, established in 2003, was a pro-active institution in promoting and attracting investment to Afghanistan. The merger of AISA with MoCI was finalized after the Government decided to merge parallel administrations and enhance efficiency.
Visit their site here: http://investinafghanistan.af/about-aisa/
5. Investment License and Trade License
Obtaining an investment license is the same for all non-Afghans. This type of license is issued only to foreign investors interested in operating within Afghanistan. The procedures are different with regard to registration of the company as a separate entity or a branch of a foreign company. The procedures for Trade, NGO and trade union licenses are also mentioned within this link.
Please complete the require steps in order to obtain the investment license.
Information from Afghan Embassy in the United States
You may also look at gaining an AISA license via Invest in Afghanistan: http://investinafghanistan.af/investment-license/
6. Obtaining a Trade License
In order to obtain a ‘Trade’ Business License (for import/ export activities) follow all procedures and steps stated within ‘Investment License’ link, with the following exception:
• instead of getting the license from AISA, you will obtain the license from the Ministry of Commerce and Industry’s Business Licensing Department.
7. Starting a Business in Afghanistan
Investment in any country requires legal registration/license to perform its business activities. Similar is the case for investing and starting business in Afghanistan. For a comprehensive guide on licensing your business in Afghanistan, click here: https://www.cdn.law.stanford.edu/wp-content/uploads/2015/12/A-Guide-to-Licensing-your-Business-in-Afghanistan-AUAF-Legal-Clinic-Program.pdf
You may also refer to this link for updated information on Afghanistan’s economic conditions and: http://www.doingbusiness.org/~/media/wbg/doingbusiness/documents/profiles/country/afg.pdf
For further information regarding; 1) investment license, 2) industrial land and 3) work permit, Invest in Afghanistan is a useful link: http://investinafghanistan.af/starting-a-business-in-afghanistan/
8. Articles and Links
EIU Country Profile of Afghanistan
Economic Climate of Afghanistan
Improving the Business Climate for Afghanistan
Improving the Business Climate in AFG - the Investor Roadmap
Ministry of Mines and Petroleum
Ministry of Communication and Information Technology
Ministry of Agriculture, Irrigation and Livestock