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Afghanistan Easing Business Laws To Offset High Expat Costs
SHRM Online Global HR Focus Area

By J.J. Smith

November 2006

Afghanistan’s business laws are being amended so multinational corporations can make profits there despite having to pay high salaries to expatriate employees needed to run operations in that country, Afghan business officials told the SHRM Online Global HR Focus Area.
Most of the companies operating in Afghanistan have large numbers of international expatriates working for them, but those firms are finding it difficult to sustain the high costs associated with a large expat workforce, said Suleman Fatimie, vice president of the Afghan Investment Support Agency (AISA).

Because companies have to pay high salaries and benefits to entice expat workers into Afghanistan, the country is changing its commerce laws and regulations so they will support businesses in making profits, Fatimie said.

Afghanistan has new pro-business customs and income tax laws and a new investments law, said Fatimie, who was in Washington, D.C., Oct. 31 at the U.S.-Afghan Business Matchmaking Conference, where he made a presentation on AISA’s Expansion as Investment Promoter and Facilitator.

In addition, Afghanistan’s Ministry of Commerce and Industry has backed several statutes, including a partnerships law, a corporations law, foreign entity recognition provisions, an arbitration commercial law and a bankruptcy law, Fatimie said. The ministry has approved the laws, but the final decision rests with Afghanistan’s Cabinet of Ministers, which is reviewing the proposed laws.

The lack of security has created a shortage of professionals and staff, said Minister of Commerce Mohammad Amin Farhang. The lack of professionals is partly responsible for the need for business law reform, he said, adding that “the new Constitution of Afghanistan says to provide facilities for the private sector to be successful. We are striving to make these facilities available and make the situation easier in order to bring a new economy into Afghanistan.”

The shortage of a professional and vocational workforce has its roots in the Russian occupation of Afghanistan, said Azarakhsh Hafizi, chairman of the Afghan-American Chamber of Commerce. During the Russian occupation, a large number of Afghanistan’s experts left the country or were killed, and the generation that grew up during the war did not receive a proper education, he said.

However, Afghans growing up in foreign countries were able to receive good educations in different areas, and a program is under way to encourage them to return to Afghanistan, Hafizi said. The number of young Afghans trained outside of Afghanistan should reduce the “need of importing manpower from outside the country,” he said.

Within the past two years, over 3 million Afghan refugees living in Pakistan, Iran and India have returned to Afghanistan, Fatimie said. At least 50 percent of the returning Afghans are between the ages of 18 and 30. They have been educated in several languages and are eager to serve the market, he said. The Afghan business community is optimistic that “within two years, the human capacity gap will be filled by people returning to the country,” he said.

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


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