Afghanistan was invaded and occupied by the Soviet Union in 1979, in the
attempt to rescue and consolidate the pro-Soviet regime in place. It took
10 years before the USSR could withdraw its forces, having been delayed by
the fierce resistance of anti-communist mujahidin forces, supplied and
trained by the US, Saudi Arabia, Pakistan, and others. The pro-soviet
regime survived for two years and a half, contrary to the expectations of
many, and then fell in April 1992, having outlived its own mentor, the
USSR. Fighting subsequently continued among the various mujahidin
factions, but the fundamentalist Islamic Taliban movement had been able to
seize most of the country. In addition to the continuing civil strife, the
country suffers from enormous poverty, a crumbling infrastructure, and
widespread land mines.
During the first half of 2002, the interim administration led by Hamid Karzai was mostly busy preparing the ground for re-establishing a government structure and getting reconstruction help from the international community. Perceived as an honest and well-intentioned man, but at the same time as a weak ruler, Karzai faced the resistance of the warlords who rule the various regions of the country, but also the difficulty of keeping his own coalition together. The interim government was an alliance between Pashtun monarchists of secularist tendencies and the various factions of the United Front, mostly composed of moderate Islamists from the ethnic minorities, who favour an Islamic republic. The coexistence between these radically different approaches would have been difficult in any case, but the situation was made worse by the fact that one of those factions, the so-called Panjsheris, quickly monopolised the real power by getting not just three of the most important ministries (defence, interior and foreign affairs), but also most top positions in the bureaucracy and in the army. The resentment caused by the attitude of the Panjsheris led to rising political tensions within the interim government, while the return of the former king Zaher Shah in April emboldened the monarchists to become more assertive. Other political factions, apart from the monarchists and the moderate Islamists, mostly opted to keep a low profile during 2002, siding with either faction depending on their own interests, but might become more active in the future.
The watermark in the consolidation of the regime in Afghanistan was expected to be the Loya Jirgah (June), which was to select a new transitional administration and a parliament. However, in many regards the Loya Jirgah turned out to be disappointing, although it did elect Karzai as President. The government was not subjected to approval by the Jirgah and no parliament was selected. A significant opposition emerged from the ranks of the Loya Jirgah, showing how the monarchists were increasingly divided between moderates favourable to Karzai and more assertive elements, who resented the relatively marginal role played by the Pashtuns in the new regime. As a result, Hamid Karzai, had to slightly increase the weight of the Pashtuns within the new government, succeeding in enlisting the cooperation of some groups previously opposed to him.
Starting from August, there were also signs that he was trying to reduce the power of the Tajik Panjsheri faction within army and the state administration, causing a deterioration of his relationship with them. Nonetheless, opposition to his government continued to rise in the following months, especially among Pashtun monarchists, who felt that remnants of the Taliban and other fundamentalist groups might gain from the inability of the monarchists to defend the interests of the Pashtuns.
The "Jihadi" alliance of mostly moderate fundamentalists, led by former president B. Rabbani, emerged on the other hand as an important force and ended up supporting to some extent the pro-Karzai coalition, being then rewarded with some ministerial positions and a vice-presidency, but at the same time continuing to work for Karzai's replacement. Meanwhile, the central government tried to increase the pressure on the regional warlords, to force them to come to terms with it, but only achieved moderate success. In November Karzai took his boldest step yet, dismissing about 20 officials across the country on charges ranging from negligence to corruption, extortion and drug trafficking. The move was widely welcomed, especially in Kabul, although many were quick to point out how the 20 officials were just the tip of an iceberg of wrongdoing. Karzai also tried to weaken the total control exercised by the warlords over whole regions, confining them to specific institutional roles. However, the credibility of the central government's campaign against the abuses of governors and local officials suffered a severe blow in mid-November, when Kabul's policemen repressed with extreme violence a student demonstration in favour of better living conditions in their dormitories, leaving as many as seven dead. By the year's end the discussion about the legal system began to heat up, with tensions arising between those who want the Sharia (Islamic law) confirmed as a basis for the legal system and those who want a more secular approach. A similar split was emerging within the commission working on the new constitution of Afghanistan, with the debate focusing on issues such as equality between men and women and the separation of religion and the state.
The row between the US and Iran, which is being accused of meddling in Afghanistan, with the aim of destabilising the interim administration of Hamid Karzai, faded away from the centre stage over the summer and autumn, after having attracted much attention during the first half of the year. Russia remained relatively indifferent to the internal politics of Afghanistan, but clearly wanted to ensure the presence of a government compatible with its geopolitical aims. Its strongest links were with Jamiat-i Islami, a party mostly composed of Tajiks, which it supported during the war against the Taliban. The former Soviet republic of Tajikistan is a Russian 'de-facto' protectorate, a fact that also favoured Russia's alignment with Afghanistan's Tajiks.
While Pakistan and Uzbekistan kept a low profile, the role of the US in affecting events in Afghanistan was undoubtedly dominant. The debate was mostly centred on the scope of military operations and the extent of US involvement in the consolidation of the new regime in Kabul. The relationship of the US armed forces with private militias remained controversial and one of their allied warlords even ended up fighting against government militias. During autumn 2002, the scale of American military operations was cut down, although this might well be more due to lack of suitable targets than to political considerations.
By the end of 2002, the international politics of Afghanistan was characterised by renewed efforts to secure its freedom from the interference of neighbouring states, in the wake of the forthcoming war in Iraq. The fear was that the presence of Americans and ISAF forces in Afghanistan might weaken after the start of a war in the Middle East. On 22 December China, Iran, Pakistan, Uzbekistan and Turkmenistan pledged not to interfere again in the internal affairs of Afghanistan. However, such agreements took place amid reports that Iran continued to support Ismail Khan, the warlord who rules over most of Western Afghanistan, that Russia continued to provide arms for the Panjsheri faction of Jamiat-i Islami and the Pakistani intelligence service was helping the radical Pashtun groups in the East of the country.
The return of the old King Zahir Shah at the end of April was interpreted by many Afghans as a further sign that peace might really be at hand, a feeling that was already prompting hundreds of thousands of Afghans to come back to their native country from Pakistan or Iran. By mid-November, 1,870,000 had already done so. However, this development, while welcome in itself, added a further strain to an already difficult economic situation. By the autumn there were clear signs that scratching a living was a major challenge for most Kabulis, while in the countryside the population was often still at risk of starvation.
The economic situation was compounded by the slow start of the reconstruction. International donors pledged US$4.5bn in March and another US$600 million before that, of which a total of US$2.3 billion was for the current year. However, only US$1.7 billion has been confirmed in the form of actual commitments and by the end of August just about US$1.2 billion had been received. Of this amount, the largest part ($840 million) went to humanitarian relief, while US$160 million were spent on staff salaries and the armed forces, with just US$200 million going to actual reconstruction and development. Between the end of the summer and the beginning of autumn, however, there started to be signs of a growing willingness of donors, including the US, to make more funds available. On the other hand, the interim government was unable to raise funds on its own until the end of the summer, when some of the provincial warlords started paying in at least some of the income deriving from taxes and customs. The government itself expected to be able to raise just US$83 million in 2002.
Apart from merely trying to start to reconstruct the country, the government had to keep international donors happy. For example, the international organisations decided that the Afghan government would be in charge of the reconstruction process, but demanded a properly scrutinised process of allocation of resources. They also expected the interim government to act towards the eradication of the poppy fields in several regions of the country, but during 2002 the Karzai administration has had only a very limited success in this regard. The UN estimated the 2002 harvest at 3,400 tons of opium this year, short of the peak of 4,600 tonnes reached in 1999, but still much more than 74 tons of 2001 under the Taleban, and higher than previous estimates. Even discounting the many allegations of fraud that have been surrounding the operation, it appeared obvious that a great deal more has to be done in order to reduce the impact of the Afghan opium on the European markets. Many of the warlords and military leaders of both Northern and Southern Afghanistan were reportedly involved at least indirectly in the trade, which made the eradication of the crop all the more difficult.
The focus of the reconstruction effort during 2002 was on investment on transport infrastructure, which is in extremely bad shape. Iran was at the forefront of such efforts in 2002, in part also due to its willingness to exercise some influence on its Eastern neighbour. During the autumn, a number of other projects, funded by a variety of donor countries and the Asian Development Bank, also kicked off, but the rebuilding of the highway network is not expected to be completed before two years. Longer-term projects were discussed at length during 2002, mostly the plan for a 850 km pipeline crossing Afghanistan, which could provide the Afghan government with as much as US$205m in transit fees every year. By the end of the year the plan was slowly progressing towards a detailed feasibility study, funded by the Asian Development Bank, but it still looked likely to struggle to find suitable funding, despite the support of the Turkmen, Pakistani, Afghan and US governments, and of the Asian Development Bank. Many international financiers would regard it as the highest of high risk investments.
During the whole of 2002, the government struggled to bring the money supply under control yet and as a consequence the local currency (Afghani) fluctuated wildly. This negatively affected whatever economic life was left in the country, with traders and state employees being hit especially badly. A first serious currency crisis took place in April, when the Afghani hit a new low of 45,000 to a dollar, the Afghan central bank for a while succeeded in stabilising the Afghani at around 36,000 to a dollar. However, the currency continued a slow decline during the following months, until a new crisis developed in November, when the Afghani slipped to a new low of 58,000 to a dollar in November. The introduction of a new currency starting from 7 October, which was key to the stabilisation plans of the government, proceeded too slowly to appease a population which, wary of being left with worthless notes, rushed to the money changers to convert their savings. However, when the transition to the new currency was completed in January, its value stabilised at 43 for a dollar.
Despite the slow start, in Kabul and other main cities, by the autumn there were already clear signs of a new economic vitality, as small trades were re-opening or being created ex-novo, although most of the rural areas had seen little improvement yet. After some initial enthusiasm, the various communities of Afghans in exile, who were expected to play a key role in the economic recovery, are now showing signs of losing faith. Many who returned from exile in the West are already reported to have left the country again. More than the slow pace of reconstruction, these potential investors were scared off by the high level of corruption and red tape in the Afghan state administration.
Forecast for 2003
If the consolidation of a central state in Afghanistan succeeds, in the longer term those countries will be rewarded which invested in befriending the Kabul government rather than regional factions. In this regard, a potentially very important development was in early January the signing of an agreement for the routing through Iran of Indian goods aimed for Afghanistan and Central Asia, with the concession of preferential treatment and tariff reductions. At about the same time, Afghanistan and Iran signed an agreement which allowed Afghanistan to trade with the rest of the world through the Iranian port of Chabahar, where it would enjoy a 90% customs discount. Taken together, the two agreements represented a massive blow for Pakistan's aspirations in Afghanistan and a resounding victory for both India and most of all Iran. Most commentators agreed that Pakistan courted disaster during the previous months, by exercising pressure on the Afghan government through raising the costs of Afghan imports and exports though the Pakistan territory and increasing the restrictions on Afghan goods. The choosing of Iran as a leading trade partner for Afghanistan might even have contributed to President Bush's decision to grant Afghanistan preferential trading status in mid-January. After touching their lowest level in mid-April, Afghanistan's relations with Pakistan showed some sign of improvement in late April and May, after president Bush's envoy to Afghanistan Khalilzad issued a veiled warning to Pakistan, saying that a threat to stability in Afghanistan is a threat to us interests. After the Karzai visit to Islamabad, the two countries agreed on upgrading the trade levels, improving banking links and facilitating travel between them. Trade with Pakistan is up on last year, but has not yet reached the peak level of the Taliban period, when Pakistan was by far the main source of imports.
At the beginning of May the departing commander of US forces in Afghanistan Mcneill hinted at the possibility of the beginning of the withdrawal of US troops starting from summer 2004. Assurances that this is not going to be the case routinely followed, but it is likely that president bush will want to start some sort of withdrawal, however slow, before next year's elections. As long as the international community will maintain a strong presence in Afghanistan in 2003, the transitional government appears likely to survive without major crises for another year, continuing slowly to push the reconstruction of Afghanistan forward. The institutional debate is likely to contribute to gradually shaping the political landscape of the country. While the Taleban and their allies showed signs of recovering some operational capability by spring 2003, they are unlikely to go beyond a low-level guerrilla warfare against the government and international troops. However, the growing signs that the Pakistani intelligence is supporting the guerrilla, together with rising discontent at the behaviour of the government troops, mean that the insurgency has the potential to develop into something rather more serious. Among the political forces which support the transitional government, the increasingly heated debate about secularism and religion will begin to challenge the ethnic divide as a major factor in deciding political alliances. A large part of Afghan popular opinion appears opposed to the fundamentalists desire to maintain a strict code of behaviour in the country, but the conservatives are well entrenched in the judiciary and within the government and state administration. Anti-fundamentalist groups tried to organise a National Democratic Front in March 2003, but were immediately targeted by the security services with threats and arrests. President Karzai will continue in his weak efforts to improve the ethnic and political balance within the state administration, as shown in January by the appointment of a new and younger interior minister, Ahmad Ali Jalali. In February, then, Defence Minister Fahim appeared to give way to pressures and announced a spate of new appointments to his ministry, which were supposed to break the virtual monopoly of Tajiks belonging to the Panjsheri faction. It is unclear, however, whether these changes will be enough to appease the critics. Federalism will also be a matter of a heated debate. Key efforts like poppy eradication and the disarmament of the private militias will continue to see the government struggling. In International politics, tensions are being caused within the government by the situation in the Middle East and especially the war in Iraq, with the Islamist elements within the government opposing US policies and the moderate monarchists being more inclined to approve them. There are also contrasts with regard to how to deal with Pakistan, especially since its intelligence service is widely believed to be helping insurgent groups along the border shared by the two countries. Again, the moderate monarchists headed by Karzai favour a rapprochement with Pakistan, which is however opposed by the Islamists of Jamiat.
During 2003 Afghanistan will continue to be kept afloat mainly by international help. Towards the end of 2002, the Oslo meeting of the donors to Afghanistan indicated that the level of international support will be maintained in 2003 at roughly the same levels of 2002, that is US$1.7bn. The government appears considerably less optimistic and stated that it would be happy to receive half that amount, perhaps trying to prevent the negative impact that a drop in the levels of help actually received might have among the population. The mid-March Brussels conference of donor countries ended with the promise of another US$2 billion of help to Afghanistan, an outcome judged a "success" by Finance Minister Ghani. However, even if help was forthcoming, there is increasingly an issue of delivering it to the rural areas, where the lack of security is hampering reconstruction efforts.
The growing presence of foreign personnel, both military and civilian, will stimulate the economy, but any recovery that will take place will be limited to the services. The bad state of the roads will contribute to feed inflation and the government's efforts to contain it will not be very effective, as shown in January, when it tried to introduce price controls and cut prices of consumer goods by an average of 20%. Even the agriculture will need to wait for much reconstruction work to be done before starting to climb out of its present depressed condition.
In other terms, 2003 will still be a year of transition in Afghanistan. At the end of it, the country will still not be able to function on its own, even if all the current plans are accomplished. No viable independent army is expected to be deployed before 2004, that is about the same time when the highway network should be completed. Even the repatriation of Afghan refugees should be mostly complete only by 2004. The United Nations expect another 1.2 million refugees to return to Afghanistan in 2003.
During the first half of 2003 the reform and reconstruction of the Afghan state proceeded slowly as in 2002. The bureaucracy is reported to be becoming somewhat more efficient, although admittedly starting from a very low level, while communication between regions has increased and improvements in the tax-collection system have also been reported. The Afghan state is still building up capacity in most sectors. During 2003, however, the first elements of a banking system should be re-established in Afghanistan, contributing to create a somewhat more favourable business climate. A draft of the new commercial law, prepared by US and European attorneys and expected to encourage foreign investment to flow in, is also ready. The government will likely continue to be short of cash, much to the chagrin of officials, soldiers and policemen, who will continue to be underpaid (if at all). The central Bank will continue to struggle to stabilise the currency. Attempts to reform what is left of the Afghan economic system will intensify. In January, a privatisation commission was launched, with the purpose of handing over to private businessmen what is left of Afghanistan's state industries. Only about 74 state-run businesses are still in existence and those active in the transport, construction and agricultural sectors will be targeted for privatisation, while the energy and water sectors are expected to remain under state control. In April, the National Solidarity Program was launched, a US$95 million program to provide village leaders with cash to spend locally in improvements and rebuilding activities. In some regards the government efforts to maintain the economy under control appear clumsy. The attempts to impose price and to increase its control over the NGOs that operate in the country are unlikely to deliver any good, given the inability of the country's bureaucracy to work with any degree of efficacy. Plans to cut the state bureaucracy staff by 20%, announced in April, might contribute to increase social tensions, which might also be stimulated as some elements of the middle class, involved in trade or working for the international community, will increasingly lift themselves above the mass of the population, who will by contrast continue to scratch for a living.
The economic recovery is not proceeding any faster than institution-building and administrative reforms. Electricity supply is still precarious or missing in large parts of Kabul, mainly because the dams have not been repaired, which affects agriculture negatively too, due to lack of irrigation. Even in Kabul most roads have not been repaired yet. The land phone system is still waiting for repair, while the new mobile system is already running into trouble due to oversubscribing.
This year's budget has been set at US$500 million, plus US$1.2 billion which are expected to be spent on reconstruction. Of last year's US$460 million budget, only US$380 million could be spent, due to lower-than-expected tax and custom revenues. Since the government had planned to receive US$83 million from that source in 2002/2003, it can be seen that very little of that money entered the coffers of the state. Hence the growing political pressure to improve revenue collection. Moreover, this year, like in 2002/2003, international funding is coming through slowly.
Update No: 19 - (26/06/03)
A turnaround, finally?
The meeting of 18 May between President Karzai and the provincial governors had at first been dismissed by many as yet another rhetorical exercise, unlikely to wield any results. The governors promised to start transferring custom revenues to the central government, but they had done so before in a number of occasions. In 2002/2003, government income (excluding international help) had not exceeded US$80 million, but this year Karzai and Finance Minister Ghani are hoping to get at least US$200 million. This plan too, at first, had been dismissed as wishful thinking. By early June, however, there were signs that the government might actually capture at least part of the customs revenue this year. The most obvious indication was that the governor of Herat, Ismail Khan, sent US$20 million, but possibly an even greater achievement was the government's takeover of the custom post of Hayratan, in Northern Afghanistan. The plan is to replace tax officials at all custom posts with new ones, loyal to the central government. There are also plans to start taxing the telecommunications, mining and oil and gas extraction industries. Although it remains unlikely that the whole estimated US$500-600 million in custom revenue earned yearly by regional leaders and warlords will end up in the coffers of the state this year, a sizeable part of it could actually do so.
Behind the success appears to be an agreement between Finance Minister Ghani and Defence Minister Fahim, previously sworn enemies. Fahim needs money to pay the troops and since he does not control any custom post himself, he did not find too difficult to agree with Ghani on the plan to bring the other regional leaders and warlords in line. In exchange, part of the money entering the state coffers will be spent paying the troops, including Fahim's own.
It appears clear that under American pressure to start delivering, Karzai is becoming bolder. However, in some key areas he has not dared to confront key players yet. Fahim himself is the most obvious example. Pressure to reform the Ministry of Defence has reached new heights in May and June, to the point that the UN itself has taken a position officially, demanding a Ministry more representative of the country as a whole as a prelude to the start of the demobilisation of the militias. As the end of June approached, however, little had happened. Somewhat more successful were the efforts to reform the Ministry of the Interior, as in June the power of some of the more controversial characters was reduced. Donors are also becoming louder in their demand that the Afghan state bureaucracy be brought under control. Harassment and corruption are not only discouraging foreign investors from becoming active in Afghanistan, but are also contributing to frustrate the reconstruction effort. After his trip to Britain in June, Karzai issued on 10 June a decree aimed at reforming the state administration. A commission will be established, with powers to appoint and dismiss state bureaucrats. It remains to be seen whether this will be enough to tame the multitude of 262,000 underpaid state employees, who are often forced to seek bribes to feed their families.
Stable currency, little growth
The main achievement of the government in the economic field so far has been the stabilisation of the currency. It took 48 Afghanis to buy a dollar in June, almost the same rate as over the previous few months. Although many shops have been opening throughout the country, however, deeper signs of actual economic recovery are still scant. The carpet industry is enjoying a revival and an estimated 200 carpet workshops have opened over the last 18 months, employing 40,000 people, but otherwise industrial activities have lagged. Good news is coming from the agricultural sector, at least. Good rains after years of draught are expected to lead to a record harvest this year. Unfortunately, they will also lead to a record poppy harvest, especially since the harvest area has been expanding during 2003, reaching provinces previously never affected by the opium business.
The disappointing economic performance of the government led to growing acrimony over the last few months, with Finance Minister Ghani often becoming a target. The accusation is that the government never had a strategy to reactivate the economy of the country. Within the government itself, some are suggesting the establishment of a National Economic Council, which would be in charge of overseeing the economy and the reconstruction. Of course, this would mean a reduction of the powers of the Finance Minister.
Over the last few months, the Afghan National Bank has started transferring money in and out of the country, a major development for Afghanistan. Little more is expected from the National Bank and hopes of further improvements are focused on foreign banks. Recently a large Dutch bank, ING Group, was reported to be considering to open branches throughout the country. Efforts to bring international banks into Afghanistan are facing scepticism, however, given the general environment and the lack of a banking law, which is still in the development stage.
UK bank targets Afghanistan
UK-based Standard Chartered is planning to be the first international bank to open its doors in Afghanistan. Standard Chartered has applied for a licence from the Central Bank of Afghanistan and hopes to open its first branch in Kabul, BBC News reported on June 27th.
The bank said it initially expects to offer a range of banking services including saving accounts in both US dollars and Afghanis, and money transfer services. It may also offer a training programme for local banks.
A banking system is key to Afghanistan's economic recovery. Although the war-torn country has had many expressions of interest from foreign firms, few have actually carried through with an investment to date.
The bank reportedly spent two months weighing the risks and benefits of setting up shop in the country that is still politically volatile.
Standard Chartered already has a focus on developing economies and has a strong regional presence, including branches in Pakistan, Bangladesh, Sri Lanka and India.
The Kabul branch is expected to be opened within three months of receiving the government go-ahead, and could be by the end of the summer
Growth of 12-14 per cent targeted
Afghanistan's Finance Minister, Ashraf Ghani Ahmadzai, said the government was targeting annual economic growth of 12-14 per cent over the next five years to reach a goal of self-sufficiency, Reuters has reported.
"I hope we will have double digit growth this year," Ahmadzai told reporters at an extraordinary meeting of the World Economic Forum in Jordan.
"Last year we had 10 per cent growth and we suffered from a continuation of drought. This year we expect agriculture to show a significant improvement and the housing market is booming in major cities."
The government had also set a goal of collecting $200 million in tax revenues this year, mainly from customs taxes, he said.
The government is so far on target, having collected $42 million in taxes as of last week, the minister said. "I am fairly confident we will meet it and exceed it (our target)."
Last year tax revenues totalled $80 million.
The government was seeking to attract foreign investment, having already issued telecommunications tenders, he said. The first lines awarded would soon begin operating.
Two hotel projects are in the works and several foreign banks are expected to set up operations in Afghanistan within weeks.
The government is in the process of passing banking legislation to enable international banks to open. In addition, it is preparing a central bank law.
The country is also seeking investment in oil and natural gas. "We have natural gas in fairly large quantities and we have oil flowing from wells but we have no refineries," he said.
The country is seeking investment to mine its copper reserves, which he said amount to the second or third largest deposits in the world, as well as iron and some 110 minerals.
Afghanistan is also interested in investment to expand agricultural production, particularly high value crops such as cumin and saffron.
The country would also like to award contracts on a BOT (build, operate, transfer) basis for construction of airports, highways and plants.
In addition, he estimates the country will need $667 million for water projects over the next three years.
"The bulk of this will have to come from borrowing," he said, citing as sources lenders such as the World Bank and the Asian Development Bank among others.
Draft Afghan laws aim to lure foreign investment
It was hoped the visit of Washington lawyer Mariam Nawabi an attorney with Dechert LLP, and eight of her colleagues landed in Kabul in early May, would mark the turning point in the history of Afghanistan's much-trampled economy, Reuters has reported.
The team met the leadership of the new Afghan government and presented a draft of commercial law that, once enacted, is expected to encourage foreign investment to flow into this war-torn South Asian nation.
Three decades of fighting and war has left Afghanistan with hardly any industry and with battered buildings the only signs of infrastructure. President Hamid Karzai said that the country will need up to $20 billion over the next four years to rebuild the country.
Nawabi and a team of 100 attorneys, mainly from the United States and Europe, have been working for the past few months on a 'code of commerce' covering a range of areas including registration of property and businesses, antitrust and competition issues and project finance.
"The project will help not only in rebuilding an important part of Afghanistan's legal system, but will also promote the development of private foreign direct investment in Afghanistan," Nawabi told Reuters.
Nawabi is coordinating the project of drafting Afghan laws at the behest of the Centre for International Management Education (CIME) which is working with the American Bar Association (ABA) to help in developing Afghanistan's laws.
The Ministry of Justice in Kabul has authorized CIME and ABA to propose laws governing commercial transactions.
A key proposal that Afghan officials and Nawabi's team have been working on is to set up a system of private arbitration to resolve disputes involving commercial transactions. This system will follow an international code of conduct that would bypass the local court system.
"We do not have the luxury of time. It is very important that we provide whatever assistance is necessary to develop a system of interim laws that will facilitate economic development in Afghanistan and we do so quickly," the draft of guidelines said.
The draft of the new commercial code is using some of Afghanistan's existing laws that are largely indigenous but to some extent based on the Turkish commercial code.
The new code will not be a set of laws drafted by a group of western lawyers, serving western interests, said Nawabi who herself is of Afghan origin. Almost of all laws are being written with Afghan sentiments in mind.
For instance, a lot of recommendations have been taken from models in vogue in rich Arab nations like the United Arab Emirates, Bahrain and Kuwait, where modern laws good enough to attract foreign investments live in harmony with Islamic, civil and common law traditions. Even the law in the U.S. state of Louisiana has been recommended as a model for a blend of civil law and common law influences.
"The laws must create a sense of security for the investment of investors," Nawabi said.
Since the fall of the repressive Taliban regime over a year ago the country has not been able to attract as much donor aid as was initially forecast. At a recent donor conference in Tokyo, Afghanistan was pledged $4.5 billion for a period of four to five years and for last year it was given $1.8 billion.
Most elements of the draft code are expected to be enacted by decree in the next two to three months.
INTERNAL ECONOMIC AFFAIRS
Afghan women encouraged to play role in economic reconstruction
Senior Afghan officials said recently that the government is encouraging women to play an active role in commerce and business activities for their empowerment and the country's economic reconstruction, Xinhuanet News Agency has reported.
"The government is ready to provide every kind of facility to business women, including business and investment licenses, in order to empower women's business capacity," Commerce Minister, Sayed Mustafa Kazemi, told a conference.
The two-day Afghan Women's Business Conference, with the theme of "Enterprise for Empowerment," is discussing issues including women's role in the country's private sector and international business opportunities for Afghan women.
Participants including government officials, women entrepreneurs and representatives of aid agencies are expected to provide suggestions on how women's business initiatives could be supported, organizers said.
The event, sponsored by the United Nations Development Fund for Women (UNIFEM), followed a three-day business exhibition in a Kabul hotel, where 160 women from across the country presented their products like semi-industrial wood and stone carvings and traditional fabric-based handicrafts.
A business delegation of US and Canadian businesswomen, invited by the UNIFEM, is also present at the gathering to assess business potential for Afghan women's products and give advice on their access to the international market.
"Many of the Afghan women's products have incredible potential for the world marketplace, and the challenge is how to export and market them," said Canadian businesswoman, Barbara Mowatt, who created the Uniquely Programs, an international program to help micro-entrepreneurs access the global market.
Saying that economic empowerment provides women with social empowerment, Mowatt urged the Afghan government to improve the finance and business infrastructure to facilitate women's participation in economic activities.
A landmark Afghan Women's Business Council was officially launched on Mondays conference with a view to supporting business initiatives of Afghan women, who had been prohibited from all social and economic activities during the Taliban regime before 2002.
Afghan Woman Affairs Minister Habiba Sarabi said at the conference that Afghan women could play an effective role in rebuilding the country's war-torn economy, promising her ministry's support to their involvement in the economic field.
Calling women "heroines" for their endurance with the sorrows and difficulties in 23 years of war, Sarabi said the Afghan women will benefit the country economically with their talent and capabilities.
Kamada Sidiqi, who started an underground business to organize women to produce handicrafts after losing her job as a teacher during the Taliban regime, said the deeply entrenched mindset in the Afghan society is still hindering women's business activities.
Sidiqi normally collects handicraft products from women in her neighbourhood and asks her brother to sell them at his shop in Downtown Kabul, as women are seldom allowed by their husbands and families to sell the products by themselves.
"My dream is to help my sisters strengthen their economic status, and increase Afghan women's living condition up to a standard similar to women in the world," she told Xinhua.
Afghanistan woos private investments
Afghan Finance Minister, Ashraf Ghani, said on 23rd June that his country's oil and gas sectors were among those open to private investment, Gulf Daily News. He said at the World Economic Forum meeting on the shores of the Dead Sea that the "acceleration of the programme to attract private investment" was one of the "challenges" faced by his government. "Oil and gas, that is an area very important for us," he added when asked about sectors that were open for private capital.
He said oil was discovered in Afghanistan in the "last days of the Soviet occupation" but not developed.
Other sectors open to private investment were telecoms, hotel, cement, mining and transport.
He said the government was now drafting a banking law to facilitate private investments, mentioning Standard Chartered and Pakistani banks among those interested in setting up branches in Afghanistan. .
Ghani said the government's fiscal situation as well as the country's overall economic condition were improving. .
He expected tax revenue to reach US$200 million this year, compared to US$80m last year, and expected 12 to 14 per cent economic growth over the next five years.
Afghans launch new mobile network
Afghanistan is to get a second mobile phone service within weeks. The Telecom Development Company of Afghanistan (TDCA) officially launched Roshan - which means "light" in Pashto - on Thursday 26th June, BBC News reports.
The new GSM network will now undergo tests for the next four to six weeks before its commercial launch.
The firm says it will roll out its service in Kabul and the main cities of Herat, Kandahar, Mazar-i-Sharif, Jalalabad and Kunduz by the end of the year, at a cost of about $55m (£33m).
It will compete with customers of Afghanistan's first GSM provider, Afghan Wireless Communication Co, which is still offering a patchy service.
Many officials and aid workers are still using expensive satellite phones due to the unreliability of the existing GSM network.
TDCA is owned by an international consortium which includes France's Alcatel, US-based MCT and Monaco Telecom International.
Its majority shareholder is the Aga Khan Fund for Economic Development which commands a 51% stake.
Afghanistan's third GSM network starts trials
An international consortium lead by the Aga Khan Fund for Economic Development has begun testing its GSM network in Kabul, Afghanistan. This is the country's second commercial GSM network, although a third license award has been claimed by Ariana Telecom which has yet to start building an infrastructure, Cellular News reported recently.
There is also a GSM network in Kabul operated by Ericsson for the UN forces in the city. Telecom Development Company Afghanistan (TDCA), is owned by a consortium in which the Aga Khan Fund for Economic Development holds 51%, Monaco Telecom International 35% and MCT Corp. 9%. France's Alcatel holds 5% and is providing vendor loan financing of US$55 million for the network equipment.
The Afghan Communications Minister Masoom Stanekzai made the first call on the new network.
The new network is urgently required as the existing system set up by Afghan Wireless Communication has been unexpectedly successful and now regularly suffers from network congestion. The new wireless phone service will be called Roshan, which means "light" in Afghanistan's two main languages, Dari and Pashtu.
Initially targeted at six main cities, the "Aga Khan" network Kabul, Herat, Kandahar, Mazar-i-Sharif, Jalalabad and Kunduz, the phased initiative, entailing an initial investment of US$55 million, is expected to expand its network to other cities over the next four to five years. Subsequent phases will raise investment in the GSM network to US$120 million over the coming decade.
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