VZCZCXRO0257
PP RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #3570/01 3091730
ZNR UUUUU ZZH
P 051730Z NOV 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 2904
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0936
RUCNAFG/AFGHANISTAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 KABUL 003570 
 
AIDAC 
SIPDIS 
 
DEPT FOR SRAP STAFF, SCA/FO, SCA/RA, SCA/A and EEB/CBA 
DEPT PASS AID/ASIA BUREAU 
DEPT PASS USTR FOR DELANEY AND DEANGELIS 
DEPT PASS TDA FOR STEIN AND GREENIP 
DEPT PASS OPIC 
CENTCOM FOR CSTC-A, USFOR-A 
OSD FOR SEDNEY 
TREASURY FOR MHIRSON, ABAUKOL, AWELLER, AND MNUGENT 
COMMERCE FOR HAMROCK-MANN, DEES, AND FONOVICH 
 
E.O.12958: N/A 
TAGS: BEXP ETRD EAID EAGR PGOV AF
SUBJECT: AFGHANISTAN MOVES UP EIGHT PLACES IN THE WORLD BANK'S DOING 
BUSINESS REPORT 
 
REF: (A) Kabul 2056  (B) KABUL 3305 
 
¶1.  Summary:  While still low-ranked as a place to do business, 
Afghanistan did ratchet up - from 168 to 160 - among 183 countries 
ranked by the World Bank in its recent Doing Business Report for 
¶2010.  Moreover, Afghanistan was also the only country in South Asia 
to improve its ranking.  Improvements in three main indicators were 
important to Afghanistan's improved standing - Access to Credit, 
Registering Property, and Starting a Business.  All are focal areas 
for U.S. technical assistance and capacity building.  Access to 
credit registered the most dramatic improvement, up 53 spots from 
180 to 127.  At the same time Afghanistan's performance declined in 
five areas (Trading Across Borders, Paying Taxes, Enforcing 
Contracts, Dealing with Construction Permits, and Employing Workers) 
and the country remained last place in two others (Protecting 
Investors and Closing a Business).  Commerce Minister Shahrani has 
formed a Task Force within his ministry to formulate an action plan 
by the end of December to address these shortcomings.  End Summary. 
 
RECORD LEAP FORWARD IN ACCESS TO CREDIT 
¶2.  The World Bank's 2010 Doing Business Report shows Afghanistan 
jumping fifty-three spots (from 180 to 127) for improving its access 
to credit, mainly by passing laws on secured transactions for 
mortgages and moveable property.  A USAID project provided technical 
assistance that helped Afghans draft the laws and trained the 
Central Bank legal department personnel on their application.  The 
laws broaden the range of assets that can be used as collateral and 
define debts and obligations.  The new laws also enable out-of-court 
enforcement.  Central Bank Governor Fitrat championed passage of the 
legislation and conducted substantial public outreach to educate the 
private sector and legislators on the laws. 
PROGRESS IN REGISTERING PROPERTY 
¶3.  The World Bank Report also notes the Afghan Government 
simplified the property registration process and reduced property 
transfer tax from five to two percent of the property value.  This 
step improved Afghanistan's ranking on property registration by 12 
places (from 176 to 164).  By lowering registration fees, the Afghan 
Government hopes to be able to collect from buyers and sellers who 
would not normally register their transactions.  The Government also 
simplified property registration procedures, cutting the number of 
required steps from over thirty to just three for urban land and to 
four for rural land.  The Ministry of Commerce and Industry expects 
these two reforms to increase compliance levels in Kabul from 20% to 
60% over the next five years, with court revenues from property 
registration fees rising from 117 to 175 million Afghani annually 
(or from $2.3 million to $3.5 million).  Continued USAID technical 
assistance will help to reduce the number of days required, on 
average, to transfer property as well as help support expanding the 
land registration program beyond Kabul. 
 
REFORMS MAKE IT EASIER TO START A BUSINESS 
¶4.  Afghanistan ratcheted up its ranking for starting a business one 
notch, from 24 to 23.  The World Bank noted Afghanistan simplified 
its business start-up process by taking company registration out of 
the commercial courts and establishing a new company registry that 
acts as a one-stop shop.  The reform combines company registration, 
tax registration, publication in the official gazette, and charges a 
flat registration fee. 
FIVE AREAS SLIPPED DESPITE OVERALL IMPROVEMENT 
 
¶5.  Afghanistan's ranking in five areas slipped: Trading Across 
Borders, Paying Taxes, Enforcing Contracts, Dealing with 
Construction Permits, and Employing Workers.  The report stated many 
of these areas are rife with corruption and bureaucratic delays in 
document processing.  One area, Employing Workers, dropped due to 
lack of a sufficient legal framework. 
 
DEAD LAST IN TWO CATEGORIES 
 
¶6.  Afghanistan ranked last among 183 countries in two categories, 
Protecting Investors and Closing a Business.  Investor protection is 
measured on the basis of  transparency of transaction, shareholders' 
ability to sue officers and directors for misconduct, and strength 
of investor protection.  On a scale of one to ten, Afghanistan rated 
zero in transparency, two in terms of shareholders' ability to sue 
for misconduct, and 0.7 in terms of investor protection, again due 
to an insufficient legal framework.  The Closing a Business category 
includes the time and cost required to resolve bankruptcies.  The 
 
KABUL 00003570  002 OF 002 
 
 
lack of available data in this area resulted in Afghanistan's last 
place ranking, but also indicate weaknesses in its existing 
bankruptcy law and administrative process. 
 
COMMENT 
 
¶7.  Minister of Commerce and Industries Wahidullah Shahrani recently 
stressed the importance of raising Afghanistan's ranking in the 
World Bank survey at a November 4 international donors' conference 
on private sector development.  He said he had formed a task force 
within his ministry to formulate an action plan addressing the 
shortcomings identified in the survey.  He wants the plan completed 
by the end of 2009 and then reviewed with international donors.  End 
comment. 
 
EIKENBERRY