ACCI

CEO Speech at the 20th Joint Coordination Monitoring Board (JCMB) Meeting

Excellencies, ladies and gentlemen, On behalf of the Afghanistan Chamber of Commerce and Industries, I would like to thank the organizers of the JCMB for giving us the opportunity to share the private sector’s views on current investment climate and economic growth.

As you all know, the private sector is facing multiple challenges due to the deteriorating business climate. Nevertheless, we do see a number of positive movements that make the private sector more hopeful and more willing to stay committed to doing business in Afghanistan.
What progress has been made in each topic/sector?

Over the last year, a number of steps have been taken to implement reforms that were prioritized by the private sector such as:

• Improving public-private private dialogue by creating a high-level executive committee on private sector development—PRISEC—which brings together the government, international partners and the private sector to collaborate and coordinate the implementation of business reforms and the World Bank DBIs. We hope the government will continue moving in this direction.

• Streamlining most of the business licensing procedures and operationalizing a one-stop-shop for business licenses.

• Approving an open access policy in principle, which will liberalize the telecom sector if fully implemented.

• Removal of Afghanistan's Banking Sector from the Grey list of Financial Action Task Force(FATF)

• Moreover, expanding regional connectivity by inaugurating the Aqina-Ata Morad railway, enhancing trade and transit relations with the Central Asian neighbors and establishing for the first time an air cargo corridor between Afghanistan and India, which helps the private sector overcome the transit issues and secure better access to regional markets.


What are the challenges to delivery?

Dear colleagues,

Despite the progress mentioned above, the current business condition indicates that the actions taken by the government are not sufficient to make a visible impact. According to the ACCI surveys, the private sector keeps complaining about the following issues:

1. Insecurity is the top issue that hinders business activities. The private sector incurred a loss of around $30 million in damage to property and lost business as a result of the recent explosion in Kabul. Moreover, businesses are forced to spend a lot of money for taking necessary measures against kidnapping.

2. Shrinking business opportunities in high potential industries such as mining, transportation, construction and services (for instance: there has been no new mining contract awarded to the private in the last two years).

3. Weak infrastructure and lack of standardized trade logistics and facilities.

4. Lack of reliable electricity, industrial land and access to affordable finance, which are essential for attracting domestic and foreign investment (example: it has been more than a year that no industrial land has been distributed to the private investors in Kabul).

5. Other two big barriers are corruption and weak rule of law (which mainly impact contract enforcement).

What is the way forward?

Ladies and gentlemen,

Improving the business enabling environment does translate into tangible results. To mobilize private investment in the short term, we propose that the following reforms be implemented as soon as possible:

1. Complete remaining work necessary for the actual implementation of the Fiber Optics Open Access Policy, especially approval of regulations for license structure to build, own and operate fiber optics; ability to auction commercial spectrum and operate international gateways. At SOM 2016, President Ghani pledged to implement this reform and I quote: “To encourage investment in telecommunications, we will begin allowing private firms to build and operate Optical Fiber Cable networks.” The government should deliver this before SOM 2017 because this will liberalize the telecom sector and unleash hundreds of millions of dollars in new private investment.

2. Sign and implement trade and transit agreements with Uzbekistan and Turkmenistan, which helps the private sector to fully benefit from the emerging regional connectivity in railway and roads.

3. Designate and approve a terminal at Kabul airport for air cargo, establish a one-stop-shop for export, streamline the relevant procedures and establish new air cargo corridors to Dubai and Istanbul. We also call on the government to add essential cargo handling facilities and equipment in Aqina and Hairatan to encourage export/import via railway.

4. Expand the one-stop-shop for business licensing to seven commercial hubs and eliminate the requirement for a tax clearance letter to renew business a license. It was also one of the promises that President Ghani made at the SOM 2016.

In conclusion, I would like to thank the government and our international partners for prioritizing implementation of private sector reforms and supporting the economic growth agenda. ACCI appreciates the government’s approach of constructive engagement with the private sector to improve investment climate and stimulate growth, increase investment, create jobs and generate revenue. The government should also promote having a united and proactive private sector that can serve as the engine of economic growth, which our country desperately needs.

Thanks for your attention.