Karzai Lays Down Framework to Facilitate Flow of Private Capital Into Afghanistan

President Hamid Karzai signed a long-awaited investment law Saturday that may finally unclog the flow of much-needed private capital into this war-ravaged nation.

The law takes effect immediately and calls for the establishment of a federal commission to assist foreign and domestic investors, award permits and licenses, and channel money into areas where it is needed most, presidential spokesman Said Fazel Akbar said.

Economists and government officials maintain that private funds are just as essential as foreign aid to finance Afghanistan’s reconstruction and get this country, one of the world’s poorest and most chaotic, back on its feet. More than 20 years of warfare have left its economy and basic services shattered.

Hundreds of investors, including many naturalized Afghan Americans, have come to pitch business projects to local authorities since an uneasy peace settled over the country late last year. Those proposals include tourism, telecommunications and major real estate projects.

But the absence of a legal framework governing investor and property rights has made many potential investors wary of committing to multimillion-dollar deals, according to some who asked not to be named. As a result, very little private money has been committed, and few projects have been started.

A draft of the investment law had been completed for some time. But as recently as 10 days ago, federal officials were saying they would need several more weeks to finish further revisions in a joint effort with a German team of governance advisors. The government reportedly decided to get the law on the books now rather than risk losing projects put forth by increasingly impatient investors.

Karzai’s signature could also signal Afghanistan’s desire to demonstrate that it is making progress in the reconstruction effort.

Officials in the Karzai administration have expressed disappointment that some nations have failed to live up to pledges made in Tokyo in January to provide $1.8 billion in aid for Afghanistan this year. To date, only $660 million has been handed over.

In addition, much of the aid that has been delivered has been diverted from reconstruction into relief efforts as the country struggles to cope with a flood of returning refugees. That influx is expected to total 2 million people this year, two-thirds more than relief agencies expected.

Rep. Peter Hoekstra (R-Mich.), heading an 11-member U.S. legislative delegation that stopped here in the capital Saturday, hailed the investment law as an important step in the Karzai government’s efforts to bolster security and economic development.

To those impatient with the pace of Afghan reconstruction, Hoekstra said: “In America, we are sitting on the shoulders of generations of Americans. Here, they’re starting from scratch.”