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Afghanistan's Bid for Foreign Investment a Tough Sale


More than 20 years of foreign occupation and civil war has left much of Afghanistan in ruins. As part of its rebuilding effort, the Afghan government is trying to lure foreign investment. But as VOA correspondent Gary Thomas reports, Afghanistan is not an easy sale to potential investors.

In 2004, three years after the Taleban regime was toppled, Afghan President Hamid Karzai told a joint meeting of the U.S. Congress the doors to Afghanistan were open to investors.

"To succeed we ask for your continued investment. Afghanistan is open for business, and American companies are most welcome," he said.

Today the Afghan capital Kabul boasts a gleaming shopping mall and one new luxury hotel. Unfortunately, it also has a reinvigorated insurgency inflicting new attacks, a booming drug trade, and what one U.N. official labeled "endemic corruption", any one of which makes potential investors nervous.

Yet Afghanistan continues an aggressive campaign to attract foreign investment. At a recent Afghan trade fair in Washington, Atiq Panjshiri, president of the Afghan-American Chamber of Commerce, said Afghanistan poses potential risks for investors, but also holds great potential rewards.

"The recent surge in the level of violence and security issues, that's a concern of any businessperson anywhere in the world. You have to be concerned. You have to protect your investment. But it should not be a deterrent. Afghanistan has great opportunities for the investor. The government is probably the most friendly in that part of the world for an open market system, and they have a great partnership with the private sector," he said.

The government scored a major business coup when the Coca-Cola Company opened a $25 million state-of-the-art bottling plant in Kabul in September, with President Karzai himself inaugurating the plant. Kedri Ozen, the company's communications manager for Eurasia and the Middle East, said Coke already had distribution and manufacturing facilities across Central Asia, and Afghanistan was what he calls the "missing link" in Coca-Cola's regional network.

Proponents of Afghan investment tend to downplay security concerns and underscore what they say is the stability of a democratic government in Kabul.

Commerce Minister Mohammad Amin Farhang says the media overstates the level of violence.

Karl Inderfurth, former U.S. assistant secretary of state for South Asia, agrees, saying the security problems of the resurgent Taleban are local, not national.

"The central government is certainly doing all it can to attract investment. An agency has been established for precisely that purpose. A great deal of Afghanistan is also stable and secure. The problem areas right now are in the south," he said.

But Barnett Rubin, who was a special U.N. advisor during the 2001 talks that produced an interim government, says the Kabul government is shaky because its inability to provide basic services to much of the population has fuelled resentment.

"I think we saw it last May, when riots took place in Kabul, how unstable the government was. People at the very top of that government were afraid that the government might be overthrown, that there was a danger to the government. They saw how easy it was for a group of rioters to attack the central government," he said.

But what is the business climate in Afghanistan? A recent World Bank study ranked countries around the world on the ease of doing business. Of the 175 countries ranked, Afghanistan came in near the bottom at 162. Melissa Johns, a World Bank investment policy specialist who worked on the study, says they found that while it was relatively easy to start a business in Afghanistan, there was still plenty of red tape bureaucracy and no legal framework to protect investors.

"Afghanistan just frankly doesn't have any legal protections against these matters. Not only are there no disclosure requirements, but the directors can't be held liable for any misdeeds that they do while running the company," she said.

She adds that Afghanistan implemented no real business reforms in the past year.

"This government that has been in place for a couple of years now has been very optimistic and very open to change and improvement. But I was surprised not to have seen any reforms in Afghanistan last year. I hope we find something different for next year's report. I hope that we see that more legislation has been passed, that more steps have been taken to improve the business environment," she said.

Analysts also cite the slow rebuilding of infrastructure, such as roads and electricity, and corruption as impediments to luring more investment to Afghanistan. During a just-completed U.N. fact-finding mission to Afghanistan, delegation head Kenzo Oshima called on the government to do more to fight what he called "endemic corruption" as well as the flourishing illicit drug trade in the country.

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