Afghanistan Investment Policy Analysis

Abstract

The article provides a comparative study of Afghanistan’s investment agreements. The aim was to determine Russia’s potential as a state supporting investments in Afghanistan’s economy. The analysis of investors was done on the basis of the Investment Map of the International Trade Center. Data on investment flows are available from the statistical annex to the UNCTAD’s World Investment Report. The structure of Afghanistan’s investment treaties was presented on the UNCTAD website, on the International Investment Agreements Navigator page. Investment agreements of Afghanistan were analyzed according to the following plan: concessions within GATS, regional agreements, agreements with the countries of the West. GATS commitments provide sufficient space for investment in most areas other than the financial sector. The sphere of transport and construction, most developed by foreign investors, is opened to investment. Regional agreements with geographically and culturally close countries include the Agreement on Promotion and Protection of Investment among Member States of the Economic Cooperation Organization and the Agreement on Promotion, Protection and Guarantee of Investments Among Member States of the Organization of the Islamic Conference. They have greater sectoral openness. Investors are offered a range of benefits beyond the commonly used tax incentives. The threats posed by political instability are specifically addressed. Expropriation of investments is complicated by a general ban and the right to challenge it in the court. These provisions create a more favourable climate for investment in Afghanistan by other Islamic states. The treaty between Germany and Afghanistan reflects Germany’s desire to clarify bilateral investment relations, in particular, it lists examples of «less favourable» treatment. Under the Afghanistan-US agreement, it can be judged that the US probably does not expect the Afghan government to protect unilaterally their investments. For this purpose, a special body has been formed with the participation of the US Trade Representative. Another feature of this treaty is the US position expressed in it in the field of protection of workers’ rights. Russia appears to have sufficient GATS commitments and guarantees under the Afghan Private Investment Act to protect its projects. The next phase of cooperation could be an agreement on the promotion and mutual protection of investment, as a model of which the Afghanistan-Germany agreement could be taken. The construction projects in which Russia is most interested are not always interpreted as investments. This depends on whether the construction company’s representation is “permanent” in the host country. One more agreement - to avoid double taxation - could be questioned. However, Afghanistan does not have such agreements with any country.