Investing in Afghanistan's Infrastructure
Investing in Afghanistan’s Infrastructure: Because it’s 2015
January 11, 2016
Nathaniel Sukhdeo – Author & Team Leader following AfPak
Keywords: Afghanistan, AfPak, foreign direct investment, transportation, corruption, reform
Afghanistan and Pakistan face a serious crisis right now when it comes to infrastructure investment and the corruption amongst administrators of projects. This being said, Afghanistan as a focus case, has brought light to the process of mitigating such risks associated with investing in the country. President Ghani has focused on revitalizing the sputtered economy by developing a three-year budget (as opposed to the one-year budget that was in place before) and a proper framework for spending. Furthermore, his government has fostered ties with regional neighbors by negotiating trade and transit agreements, including: the Central Asia Regional Economic Cooperation; the Central Asia South Asia (CASA-1000) and the Turkmenistan - Uzbekistan – Tajikistan – Afghanistan - Pakistan (TUTAP) electricity transmission lines; the Turkmenistan –Afghanistan – Pakistan - India (TAPI) gas pipeline; the Heart of Asia - Istanbul Process; and new regional initiatives, such as the Lapis Lazuli Corridor, a shortest trade route linking Afghanistan to Turkey through Turkmenistan, Azerbaijan, and Georgia. There is often concern about Afghanistan’s regional partners, and rightly so, however, Pakistan has been able to overcome its haunted past which includes an extensive lack of accountability. This progress is demonstrated through partnership with major economic stakeholders in the global economy. China has dedicated $330 million towards Afghanistan in investment and has indicated that they want to be the architects of the Wakhan Corridor, a transport link that will connect the two countries and boost bilateral trade and investment.
Now, for the average investor, this may not seem like a key economic indicator of the times, especially because of China’s economic troubles and their recent push to invest in a broad spectrum of developing countries. However, China isn’t the only global economic power that has a vested interest in Afghanistan. The United States, under President Obama, has dedicated $800 million towards pushing Afghanistan’s economic development platform. This may seem like a single-issue approach, however, Ghani has worked to boost the private sector’s investments by streamlining the system for issuing and renewing trade and investment licenses while fully implementing the new anti-money laundering and antiterrorist financing laws. Such actions taken are all simply to counteract corruption in government and stakeholder relations. Afghanistan’s government understands that it needs to take crucial steps forward to expand revenue collection by forging partnerships that produce taxes, rents, and profits, and by overhauling the customs process, revising the tax regime, and bolstering administration to reduce outflows. This is an inherently positive sign for the prospects of Afghanistan, moving into 2016. With the OECD forum being hosted in June 2016, Afghanistan can bring a creative design and vision to the table, which will foster the much-needed development of its economy, and that of the state-based investors.
