Afghanistan Watch: Doing Business in Afghanistan: the latest World Bank report

February 13, 2007

Doing Business in Afghanistan: the latest World Bank report

Today the World Bank released its annual "Doing Business" report, which compares the world's countries on a variety of variables related to the ease of operating a business. You can download the complete report here or the portion on Afghanistan here.

To summarize the findings:

Afghanistan is among the easiest places to open a business and has favorable tax conditions, but is otherwise mired in difficulties related to registering property, getting credit, protecting investors, enforcing contracts and import/export.
While it is easy to register a business, start up costs (75% of income per capita) can be significantly lowered and many industry-specific barriers should be dispensed with.
Registering property is a major problem, requiring an average of 252 days and 10% of the property value. The complexity of the process discourages formal registration. Moreover, because of 25 years of chaos, most land has no clear title. The result is that businesses can get less credit and are wary of investing. Reforming this system is possible, as Thailand has proven, and must be a priority for Afghanistan and the donor community.
There are no credit registries to provide lenders with information on borrowers, and no working land registry to allow land as collateral. As a result, the formal lending system is hamstrung. A simple credit registry could be established for under $2 million. The government could also pass a collateral law for movable property, which makes up 70% of most small business assets. These steps would go a long way.
Cross-border trade is costly and excruciatingly slow. Legally importing a container requires 88 days, 11 documents, and $2,100--the highest fees in the region. Cutting this red tape would discourage smuggling, reduce corruption, and raise revenues.

For more on this, read the complete report...

For example, here are the eleven(!) easy steps to register property:

1. Submit two signed copies of Circular Form to the Head of Makhzan (judge)
2. The signed Circular Form is then submitted to the Chief of Makhzan
3. Circular Form sent to Imlak (Municipal Land Office) for certification
4. An Imlak committee establishes the value of the land
5. The Circular Form is submitted to the local Tax Collection Office
6. The Circular Form is submitted to the provincial Tax Collection Office
7. Submit the Circular Form to the Human Resource Directorate
8. The completed Circular Form is submitted back to the Primary Court judge
9. Seller pays property taxes at a designated bank
10. Submit the completed Circular Form to the Primary Court
11. The buyer obtains a copy of the deed

Posted by Carl Robichaud on February 13, 2007 at 03:27 PM in By the Numbers, Economics, Investment, Reconstruction | Permalink