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afghani (AFA)

Hamid Karzai


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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