JCMB SUCCESS - PRESIDENT KARZAI ISSUES FOUR COMMERCIAL

UNCLAS SECTION 01 OF 02 KABUL 000243

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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

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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

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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