The Afghan government, intent on boosting trade and investment in Afghanistan, plans to declare the entire nation a tariff-free zone, ease the rules for those doing business in or with Afghanistan and replace complex investment requirements with simple letter of credit (L/C) backed investments.

The changes in business rules grew from weekly meetings of a special commission of six Afghan ministers, who were charged to develop the country's almost non-existent trade and business base.

L/Cs less draconian

The special commissioners see L/Cs drawn on a recognised bank as a straightforward mechanism for backing foreign and domestic investments in Afghanistan.

This means doing away with the plethora of draconian requirements that currently govern - and deter - investments. These include requiring a full-time office and staff in the country, a US$50,000 deposit as collateral for foreign investors or for Afghan investors, a requirement that their house or half the business be posted as collateral.

Silk Road

The changes would make Afghanistan one of the few countries with zero tariffs on imports and exports and no taxes on either purchases or sales.

Proponents for the changes say they could revive Afghanistan's historic Silk Road location as the manufacturing, transportation and distribution hub for Central and South Asia.

Limited prospects

But with the exception of donor-funded projects and products for military and diplomatic personnel from the US and elsewhere, prospects for business in or with Afghanistan however remain very limited.

The country has few natural resources, a poor educational base, almost no consumer market and limited skilled labour. A predominantly agricultural economy, it is now in its fifth year of a drought. Afghanistan's major exports are hashish and opium.

Barriers

Several economic barriers need to be dismantled for trade and investment to flow freely across the country's borders. Afghanistan has yet to re-establish mechanisms for sending and receiving money transfers from its central bank and it is unable to handle credit card transactions.

On 7 October 2002, Afghanistan will however launch a new currency that aims to end inflation and provide stability for trade.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.