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In-depth Business Intelligence
Books on Afghanistan
REPUBLICAN REFERENCE
Area (sq.km)
647,500
Population
26,813,057
Capital
Kabul
Currency
afghani (AFA)
President
Hamid Karzai
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Update No: 045 - (25/08/05)
Countdown to elections, money allowing
The electoral campaign for the 18 September parliamentary elections has
started in Afghanistan, although the UN claimed that elections might be
postponed if the final US$31 million needed to run them are not paid in by the
donors who have pledged the funding. Otherwise, the logistical mobilisation for
the elections started on time and if the money is made available, the elections
should take place at the expected date. The Taleban offensive to disrupt the
elections, which had been repeatedly announced by US officials, has not showed
up yet. However, a series of joint US/Afghan raids against Taleban strongholds
led to an unprecedented number of casualties in the 3-year guerrilla war,
including among the ranks of US troops. Attacks on electoral staff have been
even fewer then during last year's presidential elections, raising doubts about
whether the Taleban ever planned such an anti-elections offensive.
Taxes round the corner
In August the government announced that from September 23 (five days after
the elections!) Afghans earning upwards of US$250 will be required to pay a 10%
income tax. The plan had been announced earlier, but this is the final
confirmation of a start date. The tax is to be paid monthly and it is expected
that 6,000 to 20,000 Afghans will be liable. The numbers could be much higher
except that most wealthy Afghans earn their money from the shadow economy. The
government calculates that it will earn US$200 million annually from the tax.
Companies registered with the government, on the other hand, will have to start
paying a 20% corporate tax. There is increasing evidence that the tax might be
too high for many Afghan companies. In August, yet another Afghan factory has
closed down, unable to compete with cheap imports and high costs. This time it
was a car battery factory, with a capital of US$2 million. The rising pressure
on Karzai concerning high taxes forced Karzai to accept the demand of a group of
businessmen, that the tax law be reviewed. The businessmen demand that imports
of raw materials should be free from taxation.
Telecoms more promising than pipelines
The industry which has been doing best so far in Afghanistan, that is
telecoms, is set for a major development now that the government started
accepting applications from private companies for the two new licences which
will be made available. Five companies seem to be seriously interested,
including one from Germany and one from the UAE. Conditions set by the
government for the two new licenses are stricter than those set for the two
existing ones, including higher fees.
Plans for the building of a gas pipeline from Iran to the Afghan city of Herat
surfaced in August. Herat's local authorities have expressed interest in the
project, which should take one year to complete. In matters of pipelines, the
big story remains that of the much discussed Turkmenistan-Afghanistan-Pakistan
pipe, which suffered another blow in August when the ninth trilateral meeting
was postponed due to a reshuffle in Ashgabat.
While Pakistan and Afghanistan continue to discuss how to improve their trade
cooperation, including through the establishment of a joint Customs Committee to
examine the issue of transit trade, there are clearly factions within both
governments, which are trying to derail any such improvement. In August it was
the turn of the Afghans to provoke the Pakistanis, with a wave of harassment of
Pakistan construction workers at the hands of Afghan police. Many Pakistanis are
crossing back into Pakistan, with the risk of leaving Afghanistan's building
industry short of skills.
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