JCMB SUCCESS - PRESIDENT KARZAI ISSUES FOUR COMMERCIAL

UNCLAS SECTION 01 OF 02 KABUL 000243 SIPDIS STATE FOR SCA/A, SCA/FO (A/S BOUCHER, GASTRIGHT, DEUTSCH) STATE PASS USTDA FOR DSTEIN/SGREENIP STATE PASS OPIC FOR MOSBACHER AND ZAHNISER STATE PASS USTR FOR KLEIN AND GERBER NSC FOR AHARRIMAN USAID/AA/ANE FOR JKUNDER TREASURY FOR ABAUKOL MANILA PASS ADB/ED SIPDIS E.O.12958: N/A TAGS: EINV ECON ETRD EAID PGOV AF SUBJECT: JCMB SUCCESS - PRESIDENT KARZAI ISSUES FOUR COMMERCIAL LAWS BY DECREE REF: 06 KABUL 5238 KABUL 00000243 001.2 OF 002 ¶1. SUMMARY: On January 17, President Karzai signed decrees enacting laws on partnerships, corporations, arbitration, and mediation. The laws went into effect immediately, but are subject to parliamentary ratification. Their enactment results from active USG engagement through the JCMB process to set deadlines for achieving the Afghan National Compact (London Agreement) goal of streamlining investment laws and regulations and of keeping the GOA focused on achieving this critical goal for sustaining economic growth and creating new jobs. These four laws, which set guidelines for opening modern business organizations and establish alternative dispute settlement mechanisms, are important steps to improving the investment climate in Afghanistan and boosting economic growth. The progress to date derives from the Embassy's coordination with UNAMA, donors, and the GOA through the JCMB process. END SUMMARY. ¶2. On January 15, the cabinet approved decree laws on partnerships, corporations, arbitration and mediation. President Karzai signed the decrees on January 17. According to Article 79 of the constitution, the decrees became law immediately because parliament was in recess. The laws on partnership and corporations will be submitted to parliament for ratification after it reconvenes on January 21. Parliament may approve, disapprove, or amend the laws. The laws on arbitration and mediation will be submitted before the end of March. ¶3. These are the first four of ten measures to simplify and harmonize investment-related legislation. The others are laws on contracts, standards, copyrights, patents, trademarks, and agencies. The Contracts Law is the final stages of legal review by the Ministry of Justice, and it is expected to be submitted to parliament before the end of March. The standards law is being edited by the Ministry of Commerce and is scheduled to be submitted in February to the Ministry of Justice for legal review. The final four laws are expected to be submitted to the Justice Ministry by the end of March. All ten laws are scheduled to be enacted by the end of calendar year 2007. USAID's Economic Governance Initiative has been instrumental in the drafting of all ten laws. ¶4. Enactment of these ten laws will be the first major step towards completion of the Afghan National Compact benchmark 8.3 that "All legislation, regulations and procedures related to investment will be simplified and harmonized ..." The progress to date derives from the Embassy's coordination with donors and the GOA through the JCMB process. Post took the lead, using UNAMA's JCMB mantle, to prepare a donor-endorsed white paper that outlined the way forward to enacting and implementing the laws based on agreed deadlines. When the GOA advised in an October Consultative Group meeting that it could not move the laws according to schedule, Acting Econ Counselor and UNAMA Deputy Special Representative Ul-Haq stressed the importance of establishing the commercial legal framework to sustain economic growth and create jobs. Washington agencies responded to reftel by delivering the same message to Commerce Minister Farhang. Post followed up these interventions by editing the draft text of the JCMB semi-annual report to state that the GOA would speed "up the process for reviewing and simplifying laws, and regulations and procedures related to investment." Ambassador and Econ Counselor spoke on this and assured that the November 12 JCMB meeting endorsed this objective. ¶5. The GOA, supported by USAID's Economic Governance Initiative, has begun drafting the regulations and procedures to implement the new and draft laws. According to the JCMB benchmark, they should be implemented by March 2008. In the January 20 meeting of the Consultative Group meeting on Economic Governance, the GOA asked the Consultative Group to recommend that the JCMB endorse an extension of the deadline for achieving this objective. ECON Counselor and UNAMA Deputy Special Representative Alexander strongly recommended that the GOA report its successful progress towards the benchmark in Berlin, but that any reassessment of deadlines should be discussed with a view towards a formal review at the April JCMB meeting in Kabul. ¶6. COMMENT: Progress towards establishing a legal framework that KABUL 00000243 002.2 OF 002 facilitates private sector investment in Afghanistan is critical to sustaining the high rates of economic growth needed to absorb Afghanistan's high numbers of unemployed workers. The JCMB process of coordination through donor white papers, consultative group meetings, and formal JCMB meetings has set realistic deadlines for performance, assisted donors to identify priority tasks, and kept the GOA on course towards this key objective. The enactment of laws on modern business organizations and alternative dispute settlement methodologies are important steps to make the business climate in Afghanistan more attractive to foreign and domestic investors alike. END COMMENT. NEUMANN