Ministry Introduces “Investor Roadmap”

On 17 October 2006, H.E. Excellency Dr Mir Muhammad Amin Farhang, Minister of Commerce and Industries, made the first public presentation of the MoCI’s “Investor Roadmap” to an audience of donors and other organizations supporting private sector development in Afghanistan.  

The Investor Roadmap is a tool that helps government identify and understand the regulatory and administrative constraints (red tape) that hinder commercial activity. The Investor Roadmap details the licenses and procedures that an investor must fulfill to invest and operate in Afghanistan: step by step procedures required to obtain the license, documents required, time frame and costs. It also identifies bottlenecks and inefficiencies in this process, and makes recommendations on how best to streamline the process. 

The development of the Investor Roadmap is also a reflection of the MoCI’s commitment to enhance the regulatory environment of business in Afghanistan. It is consistent with the Government’s commitments within the Afghanistan Compact, which requires that all legislation, regulations and procedures related to investment be simplified and harmonised by end-2006 and implemented by end-2007.  

Based on the data collected, several issues were identified: 

1. There are significant information gaps between government regulators and investors: only a very few post any information about the licensing process so that investors do not know what documents are required, how much to pay, what process steps to take or how long the process should take. This information gap gives power to government bureaucrats and their allied expediters to extract processing fees from investors.

2. The steps in process of obtaining a license are all external, i.e., the investor must carry the paperwork from office to office – and wait outside each office for days and days while the application is being processed. Not only is this an inefficient use of investors’ time, it also is an invitation to corruption to “expedite” the paperwork.

3. In most organizations, the entry point of the process is at the top of the organization at the minister or deputy minister level. These high level personnel review the application, sign it, and order the next level down in the organization to take appropriate action. Yet this appropriate action is usually another review, signature, and an order for the next level down to take appropriate action. And so on for up to five levels of the organization until something is actually done to assess the application. This procedure wastes both the time of investors and these high-level ministry personnel to no apparent purpose. It also increases the number of people who have to be "satisfied”.

4. Licenses are often cross referenced, such that to obtain one license requires having another or being in good standing with another organization. As examples, obtain a water connection, the investor must have be registered with AISA or the MoCI, must have a land transfer title certificate validated by the court, and have a building permit validated by Kabul Municipality. To renew a trading license from the MoCI or an AISA license, the investor must provide documentation form the tax authorities that the project’s taxes are paid up to date. This system increases the power of each organization whose permit is required to extract payments since, without their license, another vital license cannot be obtained.

5. A similar aspect of the system is that not only do some licensing procedures require another license to be obtained already, but, even if the investor has this license, he/she must obtain a revalidation of the license in order to obtain another license. For example, to register with the Ministry of Urban Development as a construction company, the investor obtains letters from this Ministry to AISA, the Ministry of Finance, the Kabul tax office, and the Ministry of the Interior all checking if in fact the clearances that the investor already has are in fact authentic.

6. Foreign investors (and in most of these sectors domestic investors as well) in twenty two sectors not only have to be registered with the Commercial Court to be a legal entity, obtain an AISA license, they also have to obtain sectoral licenses.

While licenses in some of these sectors have the potential for creating economic value, in many others there would not seem to be any economic rationale for mandating them. 

The MoCI is in a strong position to advocate regulatory reform since it has already accomplished reform under a BearingPoint/TSG Investor Roadmap project in 2004. This project reduced the number of signatures needed to obtain a Business License from 53 to 5 and the time to obtain a license from six to eight weeks to five to seven days.  

The Roadmap’s main recommendations are as follows: 

1. The information gathered for each license and process be posted on the MoCI and AISA websites for the use of investors.

2. All organizations that administer these licenses and processes that have websites also post them.

3. This information be posted in the relevant offices in the organizations.

4. The reform process be composed of:

a.      reduction in the number of sectoral licenses.

b.      reexamination of the AISA and MoCI licenses.

c.      streamlining of the licensing process within organizations by moving the entry point of the process further down in the organization and reducing the “cross referencing” and “cross checking” of one license with another.

d.      assisting in other TA initiatives to reduce the regulatory burden of several licenses and process, such as land transfer, building permits, customs, and tax administration from an investor point of view. 

Way Forward 

The meeting on 17 October was the first step in what will be an extensive consultation process as part of implementing the Roadmap’s recommendations. We look forward to updating the status of the Roadmap initiative on the MoCI Website. For more information please contact: 

Adam Smith International (ASI) Technical Assistance and Capacity Building Project

Ministry of Commerce and Industries

Contact:

Yousuf Jabarkhil (tel: 070 680405, email: yousuf.jabarkhil@asi.org.af

Click here to see the Investor Roadmap in English.

Click here to see an Executive Summary of the Investor Roadmap in English.

Click here to see an Executive Summary of the Investor Roadmap in Dari.