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Afghanistan eases doing business

Shubham Chaudhuri's picture
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Doing Business Better in Afghanistan


Despite a volatile business environment, Afghanistan has made gains to improve the ease of doing business in the country.

These gains resulted in Afghanistan’s ranking in Doing Businessa World Bank report that measures business regulations across 190 economies—jumping from 183 in 2018 to 167 in the 2019 report, earning the country a coveted spot in this year’s global top improvers.

This is a first for Afghanistan and the upshot of the record five reforms was to improve the business environment for small and medium companies, increase shareholders’ rights and role in major corporate decisions, and strengthen access to credit.

With more than half of the Afghan population living below the national poverty line, Afghanistan needs to catalyze private investment and create jobs, helping entrepreneurs advance their business initiatives and helping established private businesses, small and large, to grow and create jobs.

There is a great deal of work to do in this regard, but the good news is that Afghanistan is serious about improving its investment climate. An overview of the key reforms Afghanistan has undertaken in the last year shows how the country is easing constraints faced by entrepreneurs and investors:

  • Ease of starting a business: Previously, obtaining a business license would cost entrepreneurs 32,000 afghanis (about $420). In 2017, GDP per capita in Afghanistan was $585. This means that for many, the fee to register a business could equate to an entire year’s salary. Following the modernization of administrative procedures under the One Stop Shop for business licensing across 21 provinces, entrepreneurs need only pay 100 afghanis for a three-year license.
     
  • Electronic tax declarations: Large taxpayers can now submit their tax declarations online through the Large Taxpayers Office and have their taxes calculated automatically. This significantly decreases the time, burden, and unpredictability involved with paying taxes for companies.​​
     
  • New Limited Liability Company Law: This new law, signed on March 8, 2018, strengthens Afghanistan’s corporate governance and protection of minority investors.
     
  • New Insolvency Law: This law streamlines insolvency proceedings, promotes reorganization for distressed companies, and ensures that secured creditors are repaid first during business liquidation.
     
  • Access to credit: The insolvency law also makes it easier for businesses to get access to credit as it establishes that secured creditors are repaid first during business liquidation, and hence have priority over other claims.
Afghanistan Rural Enterprise Development Project, Ghaizan District, Western Herat Province
Afghanistan Rural Enterprise Development Project, Ghaizan District, Western Herat Province. Photo Credit: Rumi Consultancy/ World Bank

Greater prosperity and self-reliance are both pillars of the country’s 2016 National Peace and Development Framework. Afghanistan’s Doing Business reforms are helping to put the country on the path towards achieving these goals – so that all Afghans can enjoy economic opportunities.

The challenges remain significant. Just over half (55 percent) of all working-age Afghans participate in the labor force—that is, are currently employed or looking for a job—and just one-third of those holding a job are salaried workers. The formal labor market struggles to absorb the 400,000 Afghans that join the workforce each year.

Insecurity and population movement are straining service delivery and increasing competition for scarce economic opportunities in host communities. The private sector continues to face bottlenecks, for example, processing times and uncertainty about regulatory requirements remain a challenge for many Afghans looking to start businesses.

With funding support from the United States Agency for International Development (USAID), the World Bank Group has been supporting the government of Afghanistan’s efforts to improve the business environment and address private sector challenges through the ongoing Business Enabling Environment (BEE) advisory services project. Going forward, the work will focus on helping the government realize the benefits of the reforms it has already made.

Ensuring that its improved legal and regulatory frameworks are fully implemented – and continuing to pursue ambitious and well-targeted policy reforms to unlock potential investments and help the private sector will be essential for Afghanistan to realize the full potential of its recent changes.
 
With a robust private sector driving innovation, serving the needs of consumers and businesses, and creating jobs for youth, Afghanistan will be one step closer to providing a peaceful and prosperous future for its people.
 

Comments

Submitted by Edrees Ahmad on

This is great news for people, private sector and government.
We request form government to do evaluations and monitoring on the opportunity and laws to grow more and more.
The same time we thanks from world banks work with our government and brining hippy ness to our people and improvement to our government.

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