@Business DNA
AS OF MAY 2018
INTRODUCTION
Amid headlines of security challenges in Afghanistan, it is easy to miss positive news for the private sector. Let’s highlight and recognize herculean efforts by the Government of Afghanistan that facilitate and encourage private sector investment in the country.COMPANIES GET TAX PENALTY AMNESTY
On January 29, 2018, the Ministry of Finance waived 95% of tax penalties for companies who have not yet filed their tax forms for any of the years 2002 through 2017. The condition is for the companies to file and pay in full any overdue principal tax liabilities within the next 9 months. On February 7, 2018 the Tax Penalty Amnesty Ruling No. 7 was published and provided step-by-step instructions for taxpayers to utilize this special window. We strongly encourage all entities with overdue tax liabilities or unfiled forms to take advantage of this opportunity and save 95% on their tax penalties. Please note monthly, quarterly and annual income tax filings are mandatory even if a company is fully tax-exempt or has no activity.
FOREIGN INVESTORS TO RECEIVE VISA-ON-ARRIVAL
On February 29, 2018 an international businessman received the first investor visa-on-arrival at the Hamid Karzai International Airport. The new program allows international investors to obtain a visa upon arrival in Kabul through an easy and quick process. The government fees for a 3-year visa is currently announced at $300 (only 10% of what several Afghan Consulates charge abroad). We strongly encourage foreign investors to save significant time and resources previously required for repeatedly submitting visa applications prior to traveling to Afghanistan.
THE GOVERNMENT DRAFTS NEW COMPANY LAW AND INSOLVENCY LAW
The Government of Afghanistan has drafted a new Company Law to replace the 1957 Corporations and LLC Law. Additionally, it has prepared the very first Insolvency Law of the country, ready for presentation to the Parliament for approval. The newly drafted laws protect the rights of domestic and foreign investors, including minority shareholders in Afghanistan. These laws serve as the overarching legal framework across the private sector, encouraging investment and reducing disputes.
KABUL RING ROAD TO IMPROVE TRAFFIC
The Afghan Government is working on numerous plans to tackle Kabul’s infamous traffic. Everyone is counting on the Kabul Ring Road as one of the most critical infrastructure projects to reduce bottlenecks by drawing traffic around the city instead of through it. Construction has begun with $74 million in funding from the Islamic Development Bank. The road will run from the Darunta area near Jalalabad in Nangarhar province, pass through Logar province, and cross parts of Kabul province including Dashte Barchi, Paghman, and Farza districts. The Kabul Ring Road is expected to ease traffic congestion for commuters as well as improve delivery routes for goods to and from the city.
IMPROVED INTERNET THROUGH OPEN ACCESS POLICY AND FIBER LICENSES
The Afghan Government has established an Open Access Policy to increase investment in the national fiber optic grid. Six fiber licenses have been awarded and the government is seeking additional applications. The requirements for obtaining a 15-year national fiber license include a non-refundable application fee of 500,000 AFN, bid security of $200,000, a license fee of $100,000, and a 1.5% annual fee of the company’s gross income. The policy is a significant step towards strengthening the country’s economy through access to internet. Now, licensed firms can invest directly in Afghanistan’s fiber infrastructure, from connecting to neighboring countries all the way to providing last mile connectivity to homes and businesses, for a faster, cheaper and more reliable nationwide network.
MILLIONS OF DOLLARS OF INVESTMENT IN ENERGY DEALS
The Government of Afghanistan has signed four Public Private Partnerships (PPPs), including the Shebarghan Gas Power Plant Project and the Mazar-e Sharif Power Plant Project. Building the 40 MW Sheberghan gas-fired power plant involves Bayat Power Company and is estimated to cost $38.8 million. The 50 MW plant in Mazar-i-Sharif involves Ghazanfar Group and International Finance Corporation (IFC) and is estimated to cost $75 million. While gas extraction at Sheberghan is forecasted to continue for at least five years, the reserve in Mazar-i-Sharif is projected to last for 20 years. These projects will assist in making Afghanistan energy self-sufficient and reducing costs for consumers.
CONSTRUCTION BEGINS ON GAS PIPELINE IN AFGHANISTAN
The Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project completed the Turkmenistan section of the project and President Ashraf Ghani inaugurated the start of work on the Afghanistan section in Herat Province on February 23, 2018. The pipeline will pass through Herat, Farah, Nimroz, Helmand, and Kandahar, and then via Quetta and Multan to India. Read further about TAPI on page 51 of this issue of Business DNA.
GOVERNMENT DEVELOPS NEW MINING LICENSE FRAMEWORK
The Afghan government has completed the development of a new Mining License Framework which requires the National Procurement Authority (NPA) and the High Economic Commission (HEC) to review all mining permits. Development of the mining sector will improve the government’s revenue base, create thousands of sustainable jobs, and provide the needed resources for the country to grow over the long term.
ROLL OUT OF NATIONAL IDENTIFICATION CARDS
The Government of Afghanistan has started rolling out electronic National Identification Cards, eTazkiras. This would dramatically improve administration, allow for the establishment of financial credit, improve security checks and make national statistics much more reliable. Currently, only about 30% of the Afghan population hold paper Tazkiras which are easily forged and very difficult to verify. President Ashraf Ghani, CEO Dr. Abdullah Abdullah, and First Lady Rula Ghani became the first Afghan nationals to apply for eTazkiras in February 2018.
DRAMATICALLY REDUCED NEW BUSINESS LICENSE REGISTRATION FEES
The High Economic Commission (HEC) has now approved 100 AFN as the official government registration fee for a new Limited Liability Company (LLC). New business license registration fees at the Afghanistan Central Business Registry (ACBR) previously were 19,000 AFN for Sole Proprietors and 31,000 AFN for other entity types. Before that, at the Afghanistan Investment Support Agency (AISA), license fees ranged from $50 to $5,000 per year depending on the sector and size of investment, with most sectors falling under $1,000 per year.
LAUNCH OF ONE STOP SHOP FOR EXPORTS
The new One-Stop-Shop office at Hamid Karzai International Airport brings 7 government entities under one roof to help exporters use the air corridors with India and Indonesia more efficiently. As part of this effort, custom clearance steps have been reduced from 29 to 14 steps. Since the launch of the first air corridor, businesses have exported to India over 10,640 tons of fresh produce, dried and fresh fruits, medicinal plants, and handicrafts worth more than $20 million. The Government of Afghanistan is seeking to expand the air corridor to include other countries in the region to further promote exports including Kazakhstan and Singapore.
ONE STOP SHOP FOR LICENSING ON THE HORIZON
The Government of Afghanistan, under Presidential Decree 2943, has started assembling licensing representatives from 17 government entities into the Afghanistan Central Business Registry (ACBR). The goal of this one-stop licensing initiative is to allow private sector investors to obtain all business licenses under one roof. This will eliminate unnecessary and inefficient bureaucratic procedures that take over one month and require businesses to get separate approvals from line ministries to obtain a license.The new One-Stop-Shop office at Hamid Karzai International Airport brings 7 government entities under one roof to help exporters use the air corridors with India and Indonesia more efficiently. As part of this effort, custom clearance steps have been reduced from 29 to 14 steps. Since the launch of the first air corridor, businesses have exported to India over 10,640 tons of fresh produce, dried and fresh fruits, medicinal plants, and handicrafts worth more than $20 million. The Government of Afghanistan is seeking to expand the air corridor to include other countries in the region to further promote exports including Kazakhstan and Singapore.
AUTHENTICATION OF BUSINESS DOCUMENTS SIMPLIFIED
Under the Presidential Decree 2942, the Afghan government will accept documents directly from the corresponding Ministry of Commerce, licensing authority, or chamber of commerce of foreign countries. Previously individuals were required to have their documents authenticated by the Afghan Embassy, Ministry of Foreign Affairs (MOFA) Consular Section in Kabul, and MOFA Economic Section, taking up to two months to process. In addition, the requirement for a Letter of Introduction for non-Afghans from the corresponding foreign Embassy in Kabul has been removed.
FROM CASH TO MOBILE MONEY PAYROLL
The Afghan government has issued contracts for converting cash to mobile-money-based payroll across ministries, reducing corruption, fraud and risk while increasing transparency, accountability and efficiency. The Ministry of Interior, the Ministry of Labor and Social Affairs, the Ministry of Education and the Ministry of Defense have been the first to pilot mobile money payroll. Other ministries are expected to follow soon. There are three primary mobile money providers in Afghanistan – Roshan’s mPaisa, Etisalat’s mHawala and Afghan Wireless’ myMoney. AHG has developed a platform to consolidate all accounts and easily make transfers to anyone. Visit www.hesab.af/app.
