Afghanistan has always been at the heart of the major internal trading routes between Asia and other continents especially Europe. Afghanistan is emerging once again as the crucial center or hub for trade as the economies of central and south Asia continue to grow and become increasingly integrated into the global economy. Constitution of Afghanistan allows for private sector growth.[1] The laws of Afghanistan are friendlier to both internal and foreign investor. Investment law of Afghanistan was amended in order to make it friendlier to investors in 2014.[2] 100% foreign ownership is allowed, easy repatriation of profits, treats foreign investors identically to domestic ones and gives generous tax breaks.[3] The company law gives shareholders comparable rights to those in the developed countries such as US. Afghanistan has opted and adopted a very liberal foreign exchange system, which allows people to legally bring money to the country and easily take the money out again.[4] Afghanistan banks have permission to foreign exchange accounts.[5]

In addition to investor friendly laws, Afghanistan has signed many transit agreements with neighboring countries, for instance the one, which is signed with Pakistan to give access for Afghanistan to the massive Indian Market.

The ring road around Afghanistan has been open for quite a few years now and is almost completely paved. Afghanistan has built important highways connecting Afghanistan to Turkmenistan, Iran, Pakistan and Tajikistan. In other words, Afghanistan has created a highly pro-business investment regime with the limited sources that Afghanistan have and with the security challenges that Afghanistan faces.

The World Trade Organization (WTO) manages the worldwide principles of trade between countries. Its fundamental purpose is to guarantee the smooth, easy, predicable and free flow of trade since it’s established in 1995.[6]

At the WTO’s Tenth Ministerial Conference (MC10) in Nairobi, on 17 of December 2015 Afghanistan got membership deal of WTO with the presence of Mohammad Khan Rahmani, Afghanistan’s First deputy chief executive and Director-General, Roberto Azevêdo. At the end of the ceremony the protocol of Accession was formally signed by both Mr. Rahmai and Mr. Azevêdo. Afghanistan has time till 30 June 2016 for ratifying the deal, and 30 days after its notification of acceptance of the protocol it will become a complete member of this Organization. Afghanistan will be the ninth least-developed country for joining WTO as a member.[7]

Mr. Mohammad Khan Rahmani stated: “Today is a historic day for the people of Afghanistan who have embraced democratic values and market economy principles. Our WTO membership will cement our long-standing commitment to an open economy, transparency, rule of law, good governance, non-discrimination, and market instruments for the development of our economy and private sector, and for the alleviation of poverty. Trade-led growth will create new economic opportunities and jobs, especially for women; it will reduce poverty, and increase prosperity. It will certainly contribute in a major way to dramatically reduce extremism and achieve regional peace and security.” Afghanistan had applied for WTO membership in 2004 and finally members of the Working Party finished up the negotiations on 11 November 2015.[8]

WTO and General Implications:

Firstly, since WTO has certain criteria and guidelines to offer membership to a nation so it’s Accession will give Afghanistan the financial validity and credibility. Afghanistan and its brands would be recognized by the international community, which would spare Afghanistan from confronting various types of preferences and prejudices.

Secondly, the population of the nation would get the chance to have access to the cheap markets and commodities. A wide range of products would come to the nation with no barriers and along these lines, the costs will diminish and the poor will get advantage. By and large, the entire economy will get advantage.

Thirdly, export will enhance however, competition would increase too. This competition would bring quality change and create institutionalization, which will benefit producers and consumers too. Afghanistan’s has some expertise in production of certain products (e.g. dry fruits, rugs, carpets and rugs) and the WTO Accession would open the business sector to those items, which would boost the production and further specialization. At that point we could specifically offer our items to any business sector at good costs.

Fourthly, Afghanistan will receive some technical support from WTO, which will improve the capacity of Afghanistan in terms of Trade, its related policies and trade dispute resolutions.

Fifthly, Pakistan will be obliged to comply with international rules while importing anything to Afghanistan. As being a member of WTO Afghanistan will receive preferable treatments form WTO and its Members, which will boost the economy.[9]

Sixthly, after joining WTO Afghanistan would have access to all WTO member markets on a basis of Most Favored Nation (MFN). Meaning that the exports of Afghanistan will be treatment the same way it treats other countries.

Finally, Afghanistan will be able to look for remedy and compensation from WTO dispute settlement system for infringement of worldwide trade rules by its neighbors and trading accomplices. All WTO legitimate agreements are enforceable through the WTO debate settlement system.[10]

WTO and Specific Implications:

Anti-dumping actions

Whenever a company exports an item at a value lower than the value it regularly charges in its home market, it is called dumping the product. Suppositions vary, some legislatures make a move against dumping keeping in mind to guard their residential businesses however the WTO agreement does not condemn it. Its emphasis is on how governments can or cannot respond to dumping, it disciplines anti-dumping activities, and it is called the “anti-dumping Agreement”.

Generally, the WTO Agreement permits the governments to act against dumping acts when there is material harm to the competing domestic industry.

Additionally, for doing that the administration must have the capacity to demonstrate that dumping is occurring, compute the degree of dumping that how much lower the export cost is contrasted with the exporter’s home business sector cost and demonstrate that the dumping is bringing damages or is threatening to do as such.

Article 6 of the General Agreement on Tariffs and trade (GATT) permits nations to make a move against dumping.[11] The Anti-Dumping Agreement clears up and further expands Article 6, and the two work together. They permit nations to act in a way that would ordinarily break the GATT standards of restricting a tax and not differentiating between Trading partners, usually anti-dumping actions implies charging additional import duty on the specific item from the specific exporting nation to convey its value nearer to the “typical value” or to expel the harm to local industry in the importing nation.

There is a wide range of methods for calculating whether a specific item is being dumped vigorously or just lightly. The Agreement narrows down the scope of feasible choices. It gives three techniques to compute an item’s “normal value”. The primary one depends on the cost in the exporter’s household market. When this cannot be utilized, two options are accessible, the cost charged by the exporter in another nation, or an estimation taking into account the combination of the exporter’s production costs, other expenses and normal profit margins. Furthermore, the Agreement likewise indicates how a reasonable examination can be made between the export cost and what might be a normal cost.

Calculation of the degree of dumping on an item is insufficient. Anti dumping measures can apply if only dumping is harming the business in the importing nation. In this manner, a very detailed investigation shall be conducted based on the specified rules.

The procedure on how to start an anti dumping case, how the inquiries are to be directed, and the conditions for guaranteeing that all invested individuals are given a chance to present proof are already set in the rules and Agreement. For example, anti dumping inquiries shall stop in the cases if the margin of the dumping is very small like less than 2% of the export price of the product. Moreover, Anti dumping measures must terminate five years after the date of imposition, unless an assessment demonstrates that closure of the measure would prompt harm.

According to the agreement all member nations must inform the Committee on Anti-Dumping Practices about all preparatory and final anti dumping activities, quickly and in details. They should likewise give an account of all queries twice per year. At the point when contrasts emerge, individuals are urged to counsel each other. They can likewise utilize the WTO’s dispute settlement procedure.[12]

Subsidies and countervailing measures

Countervailing duties (CVDs), which are also known as Anti- subsidy duties, are trade import duties, which are imposed under WTO’s rule to remove the negative impacts of the subsidies. When a foreign country subsidizes its exports, which are harming domestic producers of the importing state and if investigation has been done in this regard then these duties will be imposed.

As indicated by World Trade Organization, a nation can start its own particular inquiry and choose to charge additional duties, if such additional duties are according to the GATT Article VI and the GATT Agreement on Subsidies and Countervailing Measures.[13]

A number of disciplines are alike to Anti-Dumping Agreement. Countervailing duties must be charged after the importing nation has led a detailed inquiry like that required for Anti dumping activity. There are detailed rules and principles for deciding whether an item is being subsidized, criteria for figuring out if imports of subsidized items are harming (“making damage”) to household industry, systems for starting and directing investigations and guidelines on the usage and duration (typically five years) of countervailing measures. The subsidized exporter can likewise consent to raise its export costs as an option to its exports being charged countervailing duty.

The agreement introduces two categories of subsidies: prohibited and actionable.

Prohibited subsidies: it requires the beneficiaries to meet certain export targets, or to utilize domestic products rather than imported products. They are not allowed in light of the fact that they are particularly intended to distort international trade and can hurt other nations’ trade. If the dispute settlement procedure affirms that the subsidy is not allowed then it shall be withdrawn promptly. If they do not do this then the other countries can take some counter measures. If the domestic producers are being hurt by the imports of the subsidized goods then countervailing duty could be imposed.[14]

Actionable subsidies: in this classification the complaining country needs to demonstrate that the subsidy has unpleasantly affected its interests. Generally the subsidy is allowed. The Agreement characterizes three sorts of harm that they can bring. First, a county’s subsidy can hurt a domestic industry in an importing nation. Second, they can hurt rival exporters from another nation when the two are competing in third markets. Finally, domestic subsidies in one state can hurt exporters attempting to compete in the subsidizing country’s domestic market .In the event that the Dispute Settlement Body decides that the subsidy has an adverse impact, the subsidy shall be withdrawn or the adverse impact shall be removed. Once more, if domestic producers are harmed by imports of subsidized items, countervailing obligation can be forced.[15]

Key free trade Agreements

APTTA Agreement

The Afghan Pakistan Transit and Trade Agreement (APTTA) came into power between the Governments of Afghanistan and Pakistan on June 12, 2011. It permits Afghan trucks to convey Afghan items to the colossal markets of India and China and also whatever remains of the world through the seaports of Karachi, Port Qasim and Gwadar. It replaced the 1965 Afghanistan Transit Trade Agreement (ATTA).[16]

After completely implementation of this Agreement the Afghan goods will get to foreign markers easily and less costly.

APTTA Benefits

APTTA empowers the export of Afghan merchandise to foreign markets including access to a portion of the world’s biggest markets, India with 1.1 billion individuals and China at 1.2 billion.
APTTA will expand Afghan exports and diminish delays at borders.
It makes Afghan products more competitive, attractive, and affordable.
APTTA does modernization of business and traditional practices by simplification and standardization of procedures at the borders of the both countries.
Pakistan will have the chance to get access into the markets of Central Asia and Iran.
Basically, APTTA brings down travel costs.
APTTA guarantees freedom of transit between Afghanistan and Pakistan.

Oversight and Dispute Settlement

The Afghanistan Pakistan Transit Trade Coordination Authority (APTTCA) manages the Agreement. It does include members of Government and the private sector from both countries. It usually meets twice a year or more if it’s requested. This Agreement introduces panels to investigate on the dispute. The composition of panel is from representative of both countries and a neutral third country. The panel’s decisions are considered final ones.[17]

Prohibition:

No action taken under this agreement shall risk the harm or destruction of public morals, human, animal, and plant life, national treasures, security of territory and mutually agreed interest of both parties.[18]

ECOTA Agreement

In July 2003, the Economic Cooperation Organization (ECO) made Economic Cooperation Organization Trade Agreement (ECOTA) to encourage intra and inter-regional trade. The main purpose of this Agreement is to remove the Trade Barriers and establish a free Trade area in the ECO region by 2015.[19]

ECO was established in 1985 by Iran, Pakistan, and Turkey. The Economic Cooperation Organization (ECO) is a regional organization to encourage economic, technical, and cultural cooperation among its Member States. Their main focus is to remove trade barriers and to develop a transport infrastructure. [20]

In addition to the three founding members, ECO comprises seven other members namely: Afghanistan, Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.

Out of the 10 Member States in ECO, seven are landlocked countries and Afghanistan is boarded with 5 member states. The total market potential of the ECO region is approximately 420 million consumers. Other than a vast population base, the area also has rich minerals, agricultural resources and a strategic location.[21]

WTO Agreement

The World Trade Organization (WTO) is the prominent worldwide organization for trading. It directs global Trade and more than 150 nations have consented to WTO Trade rules and Agreement.

These guidelines try to lessen the trade barriers among nations so that goods and services can be sent out proficiently and above all economically. Moreover, WTO additionally assists in the process of trade dispute resolution among the states.

Afghanistan’s inclusion into WTO will pave the way for it to universal economy, trade growth, jobs creation and will help Afghans to import goods at a lesser price.

The WTO additionally serves to make worldwide trade regulations more steady, secure, and predictable. All WTO trade principles are consented by governments, decisions are by accord, and member states get to decide on each issue.

Joining WTO will give an opportunity for Afghanistan to be a voice in the universal trade negotiation table and will also permit Afghanistan to reconstruct its traditional role as an active trading country.

Benefits of WTO

It encourages peace and stability among countries since free trade allows more cooperation among traders.
WTO helps countries with less population and less power because its system is based on rules not on power.
The trade disputes are being handled rapidly, farily and positively.[22]

SAFTA Agreement

The Agreement on the South Asian Free Trade Area (SAFTA) is a trade agreement to support trade and economic improvement in South Asia through diminishing taxes for intra-local/regional exports.

The South Asian Free Trade Area contains the eight members from the South Asian Area for Regional Cooperation (SAARC). These are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan.[23]

SAFTA was created in 2006 to lessen taxes for intra- regional trade among SAARC nations. Member states have consented to diminish their tariffs on each other’s products as long as those products have been produced according to the Agreement’s Rules of Origin Provisions.

This agreement also comprises some rulings for dispute resolution, customs cooperation, safeguards against injury to the industry, trade simplification and eligibility for technical support.

The main purpose of SAFTA is to build up a totally fledged South Asian Economic Union like the European Union. This will require a long period of time. At this moment, SAFTA just covers trade in items. There are early talks around a possible agreement on trade services yet details have not yet been agreed among SAARC member countries.

SAFTA wants to improve and increase shared trade and economic cooperation by diminishing barriers to trade, encouraging the fair competition, ensuring reasonable favorable circumstances to all, founding a structure for further regional cooperation for expansion of the mutual interests of the agreement are the purposes behind the Agreement.[24]

Business licensing in Afghanistan through AISA and ACBR

Operating a business legally in Afghanistan requires a business license. This license is awarded through AISA and is to be renewed annually. AISA is mandated to carry out the legal processes (i.e. license) all private businesses and investments in Afghanistan as well as provide investors with assistance and the most up-to-date information on Afghanistan business and investment opportunities. AISA began as an agency that provided licenses to companies wishing to invest in Afghanistan. It has now evolved into a pro-active institution in promoting and attracting investment to Afghanistan. The licensing department within this institution processes investment licenses and facilitates the necessary permits on behalf of investors. Later on, when we discuss and elaborate on each industry particularly, we will talk whether or not they need a license from AISA.

The process and information on getting license from this institution is as follow:

Completion of the Investment Application Form and Application Form for Taxpayer Identification Number
Registration of the Investment Application Form
Provision of guidance on the requirements for submission of a business plan and review of the project documents to ensure it is within the country‘s legal framework
Registration of investment documents in commercial court and announcement of investors‘ business/investment details in a reputable Afghan newspaper
Payment of License Fee and Issuance of Investment License. (Fees are based on the type of business and are commensurate with the amount invested.)

The license issued by the AISA is mandatory for an investor (Afghan or Foreigner), who wants his/her business to be recognized and legally protected and wants to expand its business within the country, but it is not mandatory for small hotel and restaurants.

The first license is to be obtained from ACBR. Under the new Commercial Laws of Afghanistan (2007) individuals and businesses who want to become legal entities in Afghanistan need to register with the Afghanistan Central Business Registry within the Ministry of Commerce & Industry (MoCI).[25] With one low fee the business registration process involves obtaining a tax identification number (TIN), publishing business information in the Official Gazette and getting a referral letter to any licensing agency for a low flat fee in a short period of time. This will certainly help and encourage businesses to enter the formal economy.

Requirements for licensing

AISA License for domestic hotels and restaurants is almost always (about 98% of the time) obtained for those big hotels and restaurants whose investors want to invest a huge amount of money; and want to be recognized not only in Kabul, but also throughout the country. By holding AISA license, those investors can expand their business to any province of Afghanistan. All those hotels and restaurants that have AISA license are registered with the Afghanistan Central Business Registry (ACBR) of the Ministry of Commerce and Industries (MoCI), which then adds the names and details of those hotels and restaurants in the Official Gazette of Afghanistan. The Official

Gazette serves as a patent right for all these hotels and restaurant. No other wither natural or legal person throughout Afghanistan can use their names. Owner of small hotels and restaurants do not bother to get AISA license because they invest a very small amount of money and do not want to expand their business to other parts of the country.

Foreign Investors:

All the investors including foreign investors are required to take license from the Afghanistan Investment Support Agency (AISA). The AISA licensing procedures were established by the private investment law (2003). Registration with AISA can be taken in different legal forms such as sole proprietor, partnership, Limited Liability Company or corporation. The investment license needs to be renewed annually. Fees for the initial license ranges from 50 USD to 5000 USD depending on the type of business and areas of activity. The renewal usually costing around 50 USD of the initial fee.

Investor should notify AISA when there is a change in ownership or capital structure of the company. They should also report their annual update with the AISA within ninety days of the end of the fiscal year. It is very important for foreign investors to understand that while they receive the investment license from AISA, the legal entity, which they register with is not AISA but the Afghanistan central business registry (ACBR) in the ministry of commerce and industry.

Obtaining a tax identification number:

All individuals, families, partnerships, Limited Liability companies and corporations engaged in commercials activities in Afghanistan related to obtaining a Tax identification number or TIN. Those using AISA’s services will receive a TIN as parts of this process as well those registering with the ACBR. All others will need to obtain a TIN directly from the revenue department of the ministry of Finance. [26]

Rules of Origin:

The rules of origin in other agreements that Afghanistan is bound by are SAFTA, APTTA, ECOTA and WTO agreements. These agreements have specific requirements to ensure that goods exported from member are produced, grown or extracted from the member countries. These requirements are called rules of origin. Goods produced in third countries, for example, Iran or Japan cannot be re-packaged and sold to India as Afghan goods. That would give them an unfair advantage by allowing them to take advantage of reduced tariff rates between India and Afghanistan under SAFTA and other agreements.

Chapter six of the customs law of Afghanistan talks about origins of goods. It discusses following topics.

Production of Goods in a country.
Production of Goods in more than one country.
Certificate of Origin.
Preferential Origin.
Return of Goods.

Sanitary and Phyto – Sanitary management roles, functions, and responsibilities:

Three major governmental agencies are involved in sanitary and phyto – sanitary. Firstly plant protection and Quarantine Directorate (PPQD) is involved. Secondly animal health and livestock is involved and thirdly quality control directorate (QCD) is involved.

The main sanitary and phyto – sanitary functions of the agencies involved in the sanitary and phyto–sanitary is to control export and import agriculture commodities in the entry points.

They inspect the goods, they take sample, and they do physical testing. In regard to sanitary and phyto – sanitary risk assessment and border procedures, we have to mention that nothing has been done in this regard. In regard to border procedure, they only do physical observation, and after health certificates are given to importers and exporters.

Initiatives on SPS measures, Current and planned:

Currently we have the following regulations and laws.

National laws and regulations on Sanitary and Phyto – sanitary measures.
PPQD law and regulation is available.
Animal health and Livestock law and regulation are available.

List of new SPS laws and regulations currently being drafted or proposed.

PPQD law and regulation with WTO and SPS requirement (Proposed).
Animal health and Livestock law (Drafted).

Technical barriers to foreign trade in Afghanistan:

The term technical barriers to trade refers to mandatory technical regulations and voluntary standards that define specific characteristics that a product should have, such as its size, shape, design, labeling, marking, packaging, functionality or performance. As Afghanistan is member to world trade organization, it recognizes WTO member’s right to implement measures to achieve legitimate policy objectives, such as the protection of human health and safety, or protection of the environment. The technical barrier to trade agreement of world trade organization strongly encourages members to base their measures on international standards as a means to facilitate trade. Through its transparency provisions, it also aims to create a predictable trading environment.

Before Afghanistan being member of world trade organization, Afghanistan was applying Afghanistan national standards law. But Afghanistan joined world trade organization recently, so Afghanistan should abide by WTO rules and regulations in regard to technical barriers of the WTO.

Rules on telecommunications:

Afghanistan telecommunication service regulation act: this law sets out the general legal framework for telecommunications in Afghanistan. It contains a detailed institutional framework, including the creation of the regulatory telecommunications authority. It includes licensing, competition policy, interconnection, co-location, scarce resources management, universal access, tariffs regulations, penalties and sanctions and dispute resolution.

The Purpose of the Law as stated in Chapter 1, Article 2:

To provide further access to Telecom Services to the public throughout the country;
To promote non-discriminatory entry of Service Providers and Operators to the

Market.

To strengthen telecommunications market in the country in order to promote the

Quantity and quality of telecom services in the country;

To encourage technology that meets the needs of users and competitors and to

Prevent abuse of Significant Market Power by Telecom Service Providers and

Operators.

In addition to above law, there are couples of other laws and policies.

Information communication technology ( ICT ) – policy.

To enable Afghanistan to further benefit from Information and Communication Technologies (ICTs) by becoming part of the global information society while preserving Afghanistan’s cultural heritage. To promote national goals as well as in order to achieve a tolerant and vibrant Afghanistan, Afghanistan will use ICTs to expeditiously improve Government and social services and foster the rebuilding process, increase employment, create a vibrant private sector, reduce poverty and support underprivileged groups.

Afghanistan telecommunication policy.

The Government’s Telecommunications Policy is to enable the rapid growth of affordable communications to all of our people so they may experience the Digital Age, wherever they are and whoever they may be

Telecom and ICT policy.

To rapidly transform telecommunications into a leading engine in Afghanistan’s renewal, the Ministry of Communications (MoC) has defined the following general principles to guide the national Telecommunications and Internet Policy:

Open access policy for the Afghanistan

The purpose of this policy is to create a legal and regulatory framework and environment that nature and accelerates industry, engagement of private investment to the greatest extent possible, to establishment of a level of playing field, and lastly introduction of market liberalization.

Draft of electronic transaction and digital signature law

The objective of this electronic transaction and digital signature is to provide open access and provide a better transparency in the working environment.

Conclusion

Afghanistan government to some extent is trying to make the laws and regulations friendlier for foreign investment. There are more reasons to invest than not to do. Rapid economic growth, international partners supporting economic development, access to regional market, available and motivated work force, and new legal frame work such as new banking, customs law, income tax law, investment law. But there are some obstacles along the way, mainly the security concerns in Afghanistan. The recent insecurities have created more concerns for foreign investors in Afghanistan.

References:

Afghanistan Investment Support Agency, AISA (2015), http://www.aisa.org.af/en.

http://www.aisa.org.af/en.

ACBR, Ministry of commerce and Industry (Oct. 1, 2015), moci.gov.af/.

Moci.gov.af

Afghanistan Customs Law (2005).

Care Program (Sept. 18, 2008), Www.carecprogram.org.

MCIT (Dec. 5, 2002), www.mcit.gov.af/.

MoCI, Ministry of Commerce and Industries

https://www.wto.org/english/news_e/news15_e/acc_afg_17dec15_e.htm

http://moci.gov.af/en/page/8606

Tenth WTO Ministerial Conference in Nairobi