Private Investment Law

The Private Investment Law was passed by the Afghan government in 2003 and later amended on December 6, 2006. It established the High Commission on Investment (HCI), which works as the government’s focal point for policy-making on investment and the highest administrative authority with respect to the implementation of this law. To assist HCI in carrying out its duties, the HCI established the Afghanistan Investment Support Agency (AISA), which is a limited liability company as indicated in the private investment law. The president of AISA works as secretary with no voting right. The chairman of the commission is the Minister of Commerce and Industries. Following are the members of High Commission on Investment:

investment

According to Article2 of the Private Investment Law, “the State is committed to maximizing private investment, both domestic and foreign, in the economy. It aims to create a legal regime and administrative structure that will encourage and protect foreign and domestic private investment in the Afghan economy in order to promote technology transfer, improve national prosperity and advance the peoples standard of living”. Article 4 indicates that “all foreign or local citizens may make investments in all sectors of the economy” unless specifically prohibited. Any investment above USD 3 million needs HCI approval. The key elements of the Private Investment Law are briefly discussed next.

 

Key Elements of Private Investment Law

Equality before Law
  • All registered/approved enterprises, domestic and foreign, are treated equally by the law, unless the legislation specifically provides otherwise.
  • National treatment is given to foreign investors when granted a license.
Forms of Entities
  • Enterprises can be one of the following type:
  • Enterprises organized according to Afghan Law;
  • Enterprises organized according to foreign law but approved by Afghan Law to trade/invest in Afghanistan.
  • Approved Forms of Ownership:
  • 100% Private Ownership
  • Joint Ownership of Afghan Government & Private Investor
Expropriation& Compensation
  • he state can expropriate an investment or the assets of registered firms only if it is in the public interest to do so, based on a law permitting such expropriation, and on a non-discriminatory basis.
  • The state shall provide prompt, adequate and effective compensation in conformity with international law and equivalent to the fair market value.
Leasing & Owning Land
  • Foreign investor is not permitted to own land either directly or indirectly, in the absence of other legislation on the subject and applies regardless of the foreign ownership percentage.
  • Leasing land is allowed to register foreign individuals for the business purposes, for up to 50 years.
Dispute Resolution & Arbitration
  • According to the PIL, investor or registered firms may specify the arbitration or other dispute resolution procedure;
  • The place of arbitration may be outside Afghanistan.
  • For dispute resolution the law of a jurisdiction other than Afghanistan may apply
  • For dispute resolution the law of a jurisdiction other than Afghanistan may apply
  • The International Center for Settlement of Investment Disputes (ICSID).
  • OR Arbitration in accordance with UNCITRAL.
Access Funds through Banking System
  • Registered Firms for business operation purpose may
  • Open bank accounts in local & foreign currency
  • Open bank account in foreign currency outside Afghanistan provided that it is in accordance with all legal documentation provisions.
Investment Restriction
  • Article 5 of the Private Investment Law prohibits investment in:
  • Nuclear Energy Development
  • Gambling establishments and like places;
  • The commission must approve investment in certain sectors;
  • Production and sales of arms & explosives;
  • Financial activities other than banking;
  • Insurance;
  • Investment in natural resources and in infrastructure.
Controls on Freedoms of Capital, Profit, Dividend, Interest movements
  • PIL states no significant controls over any type of funds transfer outside Afghanistan, if it has followed all legal procedures and paid all due taxes

  

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