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Severance Pay Needed for Afghanistan To Sell Business Facilities

By J.J. Smith,

SHRM Online Global HR Focus

01.03.2006

As Afghanistan prepares to sell government-owned production facilities, it has created severance packages for workers who might lose jobs when a private corporation takes control, said the country’s U.S. ambassador, Said Tayeb Jawad.

The severance packages are necessary to help with the sale of more than 50 state-owned facilities that the Afghan government took control of during the Communist era, Jawad said during a presentation at Afghanistan’s Embassy in Washington, D.C. The presentation was to provide information on the first facilities—ranging from dried fruit, fertilizer and medical supplies production operations to trucking and agricultural services—that the government hopes to auction off starting in early 2007.

Afghanistan’s “Social Safety Net” program is designed especially for state owned enterprise employees who may be laid off once a facility is privatized. The program’s two components are:

• Monetary benefits such as severance payments.

• Non-monetary benefits such as retraining and redeployment services.

Providing “a social safety net for workers” who might be displaced by the sale of the businesses is essential not only for the workers but also to sell the facilities, Jawad said.

Knowing that workers will be taken care of if a company has to let them go is necessary to get businesses interested in buying these properties, a businessman who was at the embassy presentation tells the SHRM Online Global Focus Area.

“If someone bids on one of these assets they would like to know that the workers have been taken care of properly, but they also need to know that it’s a finished business,” said the businessman, who declined to be identified. Companies interested in acquiring these facilities need to be sure that “there aren’t any unknown liabilities and contingencies that they would have to deal with at a later date,” he said.

The severance packages are to help civil servants laid off from state-owned enterprises that are being privatized, said Khaleda Atta, the embassy’s commercial attaché.

Laid-off workers who are skilled will be absorbed back into the labor market and will be considered for employment in the same enterprises at the discretion of the new management, Atta said. The government will do what it can to ensure that there is a smooth transition to the new owners, she said.

However, potential investors who are not Afghani are expressing reservations about bidding on the facilities because foreigners are not allowed to own property in Afghanistan. The government is encouraging foreign investors to partner with Afghani businesspeople and form local companies that—so long as an Afghani is involved—can buy a facility outright. However, if foreign investors do not partner with an Afghani the investors can still bid on the property to lease it for 30 years. In addition, the government is working on increasing the leases for those facilities from 30 years to 99 years.

J.J. Smith is editor/manager of SHRM Online’s Global HR Focus Area.

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