Afghanistan Market Entry

Afghanistan Market Entry

Subchapters:

  • Market entry
  • Forms and conditions of operation on the market
  • Marketing and Communications
  • Issues of intellectual property protection
  • Public procurement market
  • Payment terms, payment ethics and resolution of commercial disputes
  • Visas, fees, specific conditions of travel to the territory
  • Employment of citizens from the Czech Republic
  • Fairs and events

Market entry

Due to the ongoing instability of the political and security situation, entering the Afghan market still appears highly risky. It is expected, in case of positive developments in the coming years, that the mining industry, energy, construction and investment in infrastructure development will be the main investment opportunities contributing to economic growth. In the field of agriculture, expectations are variable depending on natural conditions (drought, floods, earthquakes) and the security situation.

According to cheeroutdoor.com, Afghanistan is facing an energy crisis, as it is not energy self-sufficient, and the transmission system is the target of frequent attacks, leading to the limitation of industrial production and supplies to households, which are left without electricity supplies for several hours almost every day, and which, moreover, increases in price by leaps and bounds. Another factor that prevents the faster development of the Afghan economy in the long term is the almost non-existent transport network. The network of railways and highways is not developed, making it impossible for Afghanistan to be more involved in the system of international and domestic transport.

Due to the historical Czechoslovak footprint, which is perceived very positively by Afghans, the investment climate for Czech investors is generally favorable. The Afghan government has identified priority sectors in which it wants to support foreign investors. These are primarily the sectors of agriculture and its associated areas, construction (with an emphasis on building materials), telecommunications, transport and logistics, the mining industry, energy and water management. In the case of initial investments, it is essential to contact the relevant Chamber of Commerce, which is the most reliable intermediary for local representatives, sales and distribution channels. More information can be found on the ACCI ( Afghanistan Chamber of Commerce and Industries ) website.

In order to start a business in Afghanistan, it is first necessary to obtain a business license issued by the Ministry of Industry and Trade. Some business sectors also need permission from the relevant ministry in addition to the basic license. The price of the license is still derived from the size of the business plan in a certain sector. The necessary documents relate to the business plan and a certain sector and are published on the website of the ACBR (Afghan Central Business Register) business register.

The customs system is established by the Customs Law ensuring revenues to the state budget. This law further defines the scope of powers of the Ministry of Finance, which is the manager of the system and is thus responsible for its legislative aspects, methodology, validity, implementation and validity of all relevant customs regulations. The Afghan government, together with the export agency of Afghanistan and the largest exporters, will introduce the so-called One Stop Shop (OSS) program, which covers all export activities. OSS aims to speed up the acquisition of export documentation, reduce the level of corruption in processing export documentation, increase the volume of Afghan exports, increase employment, support economic growth, reduce transportation costs and save time.

The domestic market is protected by the customs valuation process, whereby the value of a product or service is assigned to determine the basic customs value of imported or exported goods. This is also a basic prerequisite for the compilation of trade statistics, the monitoring of quantitative restrictions, the application of tariff preferences and the collection of revenues for the state budget.

Forms and conditions of operation on the market

All companies doing business in Afghanistan require a so-called AISA license, issued by the Afghan Investment Promotion Authority, with a three-year validity. All submitted documents must be translated into Dari or Pashto. At the same time, all joint-stock companies, limited liability companies and sole proprietors carrying out business activities in the territory of Afghanistan are required to register in the Afghan Register of Companies ACBR (Afghan Central Business Register).

Registration is only required once unless the company makes major changes. The ACBR registration process and fees are the same for both Afghan and foreign companies. However, licensing steps and fees may differ for foreign-owned companies. The following steps are necessary to complete the ACBR registration process:

  1. registration of a business company
  • The company shall submit to ACBR the recommendation of the licensing agency with the following documents: application; a copy of the identity document of the President and Vice President and their photograph; articles of association (incl. names of owners, number of ordinary shares).
  • If there are changes, the company must notify them and submit the current version of the documentation to the ACBR.
  1. payment of registration fees
  • 500 AFN for registration services, ACBR charges a flat fee.
  • 0 AFN per VAT number, allocated free of charge.
  • 3 AFN per letter when the trade specification is published in the official gazette through the Ministry of Justice, valid only for Kabul.
  • 1000 AFN for publication of the company specification in local newspapers through the Directorate of Information, Culture and Tourism, valid for provinces only.
  1. allocation of a tax identification number
  • After successful registration, a so-called TIN (Tax Identification Number) certificate is issued. TIN is a ten-digit number that is issued to all individuals, companies and organizations developing economic activity in Afghanistan, with a one-year validity.
  • Before renewing the validity of the VAT number, it is necessary to pay the Ministry of Finance all obligations (taxes, surcharges, fines, etc.)
  1. publication of data in the official gazette
  • The specifications of all newly registered business entities are maintained by the ACBR and submitted for publication to the Department of Justice (for Kabul) or the Directorate of Information, Culture and Tourism (for the provinces).
  • The text is processed by ACBR representatives. Companies have the option to develop and deliver their own text. Information to be published in the gazette must include the name of the company, the names of the president and vice president; residence; initial capital, type of business activity.

After successful completion of steps 1-4, the business entity is issued a certificate of registration with unlimited validity.

Marketing and communication

As with most Central Asian states, most business transactions will not be concluded without personal presence and contacts in Afghanistan. Advertising and promotional agencies use standard means and forms, such as advertisements in the press, advertising spaces on billboards, spots on television or radio. Considering that most households have a radio receiver in their homes, this method of promotion appears to be effective. Internet marketing is almost non-existent.

Issues of intellectual property protection

Afghanistan has been a member of WIPO (World Intellectual Property Organization) since 2005. In general, however, Afghanistan can be classified as one of the states in which the protection of intellectual property rights is violated to a significant extent. A large number of pirated copies of films, music, software, shoes, branded clothing, etc. are produced and traded here.

The situation in respect of and protection of intellectual property rights and their awareness is very low. The protection of intellectual property in Afghanistan is handled by the Afghanistan Central Business Registry & Intellectual Properties, which is part of the Afghan Ministry of Industry and Trade.

Public procurement market

Public contracts are awarded in the form of tenders and tenders. If the Embassy of the Czech Republic in Kabul learns about the tender in time, it informs the relevant institutions in the Czech Republic at the same time as it is entered into the SINPRO system. It is advisable for the tender participant to have a representative or intermediary in place. Local entities prefer partnerships within so-called joint ventures.

Based on government priorities, research and analysis regarding the need to call for a tender, the following process is underway. First, the councils of all relevant ministries (General Directorate of Public Procurement, General Directorate of Finance and General Directorate of State Administration) comment on the given tender. They will then hand over the summary report to the relevant ministry in charge of the tender. The office of this ministry will provide the details and revised terms of reference to two offices: the Office of Public Affairs and the Secretary General of the Council of Ministers, who will then submit the documentation to the President of Afghanistan.

At this time, the tender is already being dealt with by the Council of Ministers, which approves the entire process. After receiving the approval opinion of the Council of Ministers, all documents are submitted to the Economic Council. The Economic Council is headed by the second vice-president, whose office subsequently analyzes the economic and technical aspects of the tender process. Members of the Economic Commission are reviewing all the details regarding the project. After the approval of the selection procedure, the relevant ministry is subsequently informed, which invites interested parties to submit bids. Usually, the call is published for a period of one month, and in another two to three months the winning entity is announced.

Payment terms, payment ethics and resolution of commercial disputes

The payment conditions and payment morals of Afghans cannot be generalized, they differ from case to case. The general trend is high dollarization of the economy and (especially for orders of smaller volume) payment in cash.

The resolution of business disputes can be both lengthy and may not lead to a legally clear (and enforceable) resolution. The outcome of such a dispute will be influenced mainly by widespread nepotism and corruption, so according to European standards, the success of a Czech entity in such a dispute is extremely unlikely. The Embassy of the Czech Republic in Kabul therefore recommends that the relevant provisions be included in the contracts in advance so that any commercial dispute can be heard before a court outside Afghanistan.

The Afghan Chamber of Commerce and the Afghan Investment Agency may, in some cases, serve as a mediator of the dispute between the parties. According to the OECD scale, the risks for investing in Afghanistan are the highest (value 7). It is necessary to consider above all the security and politically unstable situation, economic and financial backwardness, corruption and cultural differences.

A high level of corruption negatively affects the decision-making of state authorities at all levels. The Afghan market can be divided into two main zones according to economic performance: 1) the center, which is the area of ​​the capital city of Kabul and parts of the districts of the adjacent provinces; and 2) the periphery, which are the remaining provinces. Successful operation on the Afghan market is conditioned by knowledge of local specifics and the interconnectedness of family and ancestral ties.

Visas, fees, specific conditions for traveling to the territory

The Embassy of the Czech Republic in Kabul definitely does not recommend traveling to Afghanistan and its territory. An entry visa that is valid for 30 days. After arriving in Afghanistan, you can apply for a longer visa based on this visa. Travel by country is restricted by locations of military operations or insurgent attacks. Visas are issued by the Afghan embassies in Prague and Islamabad. Contact information:

Embassy of the Islamic Republic of Afghanistan in Prague
Nad Šárkou 1512/63
160 00 Prague 6
phone: +420 233 544 228
e-mail: [email protected]
website: www.prague.mfa.af

Living conditions in Afghan cities and in the countryside cannot be considered standard and acceptable for a long-term stay according to European standards. In particular, high air pollution from exhaust fumes and waste incineration in winter and the absence of a functioning sewage and water supply network can cause serious health complications for people prone to asthma or respiratory diseases in general (pulmonary chlamydia is common).

Hygienic conditions must be considered considerably more difficult. Commonly available water is not potable, it is only useful. Even though vaccinations are not mandatory when traveling to Afghanistan, depending on the place of stay it is better to get more detailed information about the probability of the occurrence of diseases, vaccination against hepatitis A and B, possibly typhoid etc. is recommended.

Money, documents and tickets must be carried with you at all times. It is advisable to have a copy of your travel document with you (passport identification page and visa page). It is necessary to take into account the risk of theft of money or travel documents. It is therefore recommended to exercise maximum caution and contact the Embassy of the Czech Republic in Kabul in case of emergency or uncertainty. Please note that due to the unpredictable security situation, any help is highly risky and difficult to implement. Individual movement at night is not recommended. No region in Afghanistan can be considered safe, and threats of attacks are constantly emerging throughout the territory.

The security situation has been unstable and unpredictable for a long time. The ability of Afghan security forces to ensure the safety of foreign visitors is not guaranteed. Travel in all areas of Afghanistan is dangerous due to ongoing combat operations as well as armed clashes between various political and tribal groups. The risk of foreign nationals being kidnapped, either to murder them or to later demand a ransom, is very high.

In places of pilgrimage such as Mazár-e Sharif, entry is allowed to most mosques. In most cases, it is necessary to leave luggage in a storage room, women must wear a long outer garment covering all body curves and a scarf, a chador (a type of black longer cloak that covers the body) or a burka (a garment that covers the whole body including the face, only leaving a braided grid for eyes). Mosques have separate sections for men and women, entry is only allowed without shoes and photography is usually not allowed.

Employment of citizens from the Czech Republic

The Embassy of the Czech Republic in Kabul requests, in connection with the permanently deteriorated security situation, that those interested in working in Afghanistan carefully consider their work plans and, if possible, not travel to Afghanistan at all. Czech citizens working in Afghanistan are mainly employed by international organizations on the basis of individual employment contracts.

Healthcare in Afghanistan is minimal and its quality varies widely. Therefore, most foreigners seek help from foreign doctors, doctors working for the international community and organizations operating in Afghanistan. The Embassy of the Czech Republic in Kabul is not yet aware of a case where the Czech health insurance company reimbursed a medical procedure performed in Afghanistan.

Fairs and events

The Afghanistan International Trade Fair (AITF) is Afghanistan’s largest trade fair. It was supposed to take place in 2020 (November 8-11, Kabul, Uran Palace), but it was postponed indefinitely. The Afghanistan Chamber of Commerce and Investment (ACCI), private and public sectors participate in its organization.

Manufacturers from the Afghan provinces are participating in the fair, and international participation is expected to include 10 states in the region. AITF is thus the most important opportunity for manufacturers and traders to present their companies and establish business contacts. The fair’s categories include manufacturing, minerals, construction and materials, gastronomy, healthcare, cosmetics, electronics, agriculture, animal husbandry, household goods, textiles, fashion and jewelry, sporting goods, toys, plastics, printing and packaging, books and furniture.

The estimated attendance is 50 thousand people and the number of exhibitors is 200 companies.

Fairs and exhibitions presenting goods made in Afghanistan are often held in Turkey, Tajikistan, Dubai or Singapore for security reasons.

Afghanistan Market Entry