Doin Busin ss in Af h nist n 2017 Comp rin Busin ss R ul tion for Dom stic Firms in 5 Af h n Provinc s with 189 Oth r Economi s © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 19 18 17 16 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doin Busin ss in Af h nist n 2017 Comp rin Busin ss R ul tion for Dom stic Firms in 5 Af h n Provinc s with 189 Oth r Economi s Resources on the Doing Business website Doing Business Subnational and regional in Afghanistan 2017 projects http://www.doingbusiness.org/afghanistan Differences in business regulations at the subnational and regional level Current features http://www.doingbusiness.org/subnational News on the Doing Business project http://www.doingbusiness.org Historical data Customized data sets since DB2004 Rankings http://www.doingbusiness.org/custom-query How economies rank—from 1 to 190 http://www.doingbusiness.org/rankings Law library Online collection of business laws and Data regulations relating to business All the data for 190 economies—topic http://www.doingbusiness.org/law-library rankings, indicator values, lists of regulatory procedures and details Entrepreneurship data underlying indicators Data on new business density (number http://www.doingbusiness.org/data of newly registered companies per 1,000 working-age people) for 136 economies Reports http://www.doingbusiness.org/data Access to Doing Business reports as well /exploretopics/entrepreneurship as subnational and regional reports, case studies and customized economy and Distance to frontier regional profiles Data benchmarking 190 economies to http://www.doingbusiness.org/reports the frontier in regulatory practice and a distance to frontier calculator Methodology http://www.doingbusiness.org The methodologies and research papers /data/distance-to-frontier underlying Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good Research practices identified by Doing Business Abstracts of papers on Doing Business have been adopted topics and related policy issues http://www.doingbusiness.org/data http://www.doingbusiness.org/research /good-practice Doing Business reforms Short summaries of DB2017 business regulation reforms and lists of reforms since DB2006 http://www.doingbusiness.org/reforms Contents 1 Overview Doing Business in Afghanistan 2017 is the first report of 12 Report Methodology and Scope the subnational Doing Business series in Afghanistan. It measures business regulations and their enforcement in 5 13 About Doing Business and Doing provinces. The provinces are compared against each other, Business in Afghanistan 2017 and with 189 other economies worldwide. Comparisons with other economies are based on the 22 Starting a Business indicators in Doing Business 2017: Equal Opportunity for 30 Dealing with Construction Permits All, the 14th in a series of annual reports published by 40 Getting Electricity the World Bank Group. The indicators in Doing Business in Afghanistan 2017 are also comparable with more than 49 Registering Property 400 locations from 65 economies benchmarked in other subnational Doing Business studies. All data and reports are available at www.doingbusiness.org/subnational. 60 Data Notes 78 Province Snapshots Doing Business investigates the regulations that enhance business activity and those that constrain it. Regulations 80 Indicator Snapshots affecting four areas of the life of a business are measured 8 1 List of Procedures at the subnational level in Afghanistan: starting a business, 81 Starting a Business dealing with construction permits, getting electricity 84 Dealing with Construction Permits and registering property. These indicators were selected 91 Getting Electricity because they cover areas of local jurisdiction or practice. 94 Registering Property The indicators are used to analyze economic outcomes and 99 Acknowledgments identify what reforms have worked, where and why. The data in Doing Business in Afghanistan 2017 are current as of November 1, 2016. This project was implemented by the Global Indicators Group (Development Economics) of the World Bank Group as a component of the Investment Climate Program in Afghanistan. Doing Business 2017 Overview MAIN FINDINGS ƒƒ Where entrepreneurs in Afghanistan establish their businesses matters for the regulatory hurdles they face. Regulatory quality and efficiency vary across locations in the four areas benchmarked—starting a business, dealing with construction permits, getting electricity and registering property—because of differences in local interpretations of the law and in the efficiency of local agencies responsible for administering regulation. ƒƒ Good practices can be found across Afghanistan in all four areas of regulation. Reform-minded policy makers can make tangible improvements by replicating measures already successfully implemented within the country. ƒƒ By adopting all the good practices found at the subnational level, Afghanistan would move substantially closer to the frontier of regulatory best practices—and jump 11 places in the global ranking of 190 economies on the ease of doing business, moving up from 183 to 172. 2 DOING BUSINESS IN AFGHANISTAN 2017 A t the October 2016 Brussels is only 5.9% of GDP.5 Addressing private Business regulation reforms would help in Conference on Afghanistan sector constraints will be key to achieving creating an environment more conducive the government presented its sustained growth in the long run—along to private sector growth and in attracting five-year strategic plan for achieving with reducing political uncertainty, secu- more foreign direct investment—reforms self-reliance, the National Peace and rity concerns, pervasive corruption and a leading to a well-regulated land market, Development Framework. The 70 coun- shortage of skilled workers. streamlined licensing procedures for tries and 30 international organizations establishing a formal business, and represented at the conference pledged It is not easy to do business in countries efficient and transparent processes development aid of US$3.8 billion a year affected by war and violence. Conflict has a for obtaining construction permits over the next four years. This high level of particularly acute impact on the formal pri- and electricity connections.7 Reforms sustained support indicates confidence vate sector. Human capital is lost as a result of regulatory institutions can improve among the international community in of violence or migration. Infrastructure transparency, professionalism and cus- Afghanistan’s development prospects. and institutions are destroyed. Access to tomer service—all key to strengthening Earlier the same year Afghanistan was finance becomes difficult. Nevertheless, government legitimacy. Higher levels of formally admitted to the World Trade many fragile and conflict-affected states regulatory efficiency and quality are also Organization. The benefits are already have been able to improve their business associated with lower levels of corruption tangible: annual exports have increased environment in a number of regulatory (figure 1.3). to US$570 million, up by US$150 million areas (figure 1.2). Most improvements over since 2013. Good news also comes from the past decade have occurred in the areas the country’s industrial sector, where of business entry, secured transactions and WHAT DOES DOING growth rose from 2.4% in 2014 to 4.1% tax compliance requirements. BUSINESS IN AFGHANISTAN in 2015. Afghanistan also strengthened its 2017 MEASURE? fiscal position through key policy reforms The government of Afghanistan, aware of relating to revenue mobilization and the importance of the investment climate Doing Business studies business regula- expenditure controls.1 to economic development, set private tion from the perspective of small to sector development as one of the priori- medium-size domestic firms. A funda- Despite these encouraging signs, ties in the New National Priority Programs mental premise of Doing Business is that Afghanistan still faces tremendous presented at the Brussels Conference on economic activity benefits from good development challenges. The country’s Afghanistan in October 2016.6 Some rules and institutions. These include rules overall economic growth slowed from an important initiatives to improve the busi- that establish and clarify property rights, average 9.4% a year in 2003–12 to 1.5% in ness regulatory environment are already increase the predictability of economic 2014 and 2% in 2015.2 Its GDP per capita under way (box 1.1). interactions and provide contractual is among the lowest in the world (figure 1.1).3 With a population growth rate esti- mated at 3% a year, along with sluggish FIGURE 1.1  Afghanistan’s GDP growth has slowed, and its GDP per capita remains GDP growth and a deteriorating security among the world’s lowest situation, Afghanistan has seen increases Real GDP growth (%) GDP per capita (US$) in poverty.4 Moreover, while the country 25 800 remains the world’s largest recipient of aid, 700 international assistance has been on the 20 decline since 2012. It is vital that the gov- 600 ernment identify new sources of growth to 15 500 offset the declining donor inflows. 400 10 300 Private sector development is a strategic priority as Afghanistan attempts to move 5 200 out of aid dependency. The Afghan pri- 100 vate sector is still narrow: labor force par- 0 0 ticipation is slightly under 50%, domestic 03 04 05 06 07 08 09 10 11 12 13 14 20 20 20 20 20 20 20 20 20 20 20 20 credit to the private sector stands at 4% of GDP (well below the average for Real GDP growth GDP per capita low-income countries of 28% of GDP), and gross domestic private investment Source: Adapted from World Bank Group, Afghanistan: Systematic Country Diagnostic (Washington, DC: World Bank, 2016). OVERVIEW 3 FIGURE 1.2  Fragile and conflict-affected states have implemented many regulatory reforms over the past decade in areas measured by Doing Business Number of reforms, 2005–16 74 52 42 42 38 27 18 17 17 11 8 Starting a Getting Paying Trading Registering Dealing with Enforcing Protecting Resolving Getting Labor market business credit taxes across property construction contracts minority insolvency electricity regulation borders permits investors Source: Doing Business database. Note: The 34 fragile and conflict-affected states as defined by the World Bank for fiscal 2017 are Afghanistan, Burundi, the Central African Republic, Chad, the Comoros, the Democratic Republic of Congo, Côte d’Ivoire, Djibouti, Eritrea, The Gambia, Guinea-Bissau, Haiti, Iraq, Kiribati, Kosovo, Lebanon, Liberia, Libya, Madagascar, Mali, the Marshall Islands, the Federated States of Micronesia, Myanmar, Papua New Guinea, Sierra Leone, the Solomon Islands, Somalia, South Sudan, Sudan, the Syrian Arab Republic, Togo, West Bank and Gaza, the Republic of Yemen and Zimbabwe. Reforms in getting electricity are counted since 2010. Reforms affecting the labor market regulation indicators are included here but do not affect the ranking on the ease of doing business. An economy can be considered to have only one Doing Business reform per topic and year. partners with core protections against abuse. The objective: transparent regula- FIGURE 1.3  Higher levels of regulatory efficiency and quality are associated with lower levels of corruption tions designed to be efficient, accessible to all and simple to implement. Corruption Perceptions Index score (0–100) 100 Over the past decade Afghanistan has implemented regulatory reforms in five areas measured by Doing Business, most notably in starting a business, where it 75 stands at 42 in the Doing Business 2017 global ranking of 190 economies, and in High income getting credit, where it is at 101 in the Upper middle 50 income ranking.8 Yet more needs to be done. Lower middle Afghanistan performs worse than the income average for fragile and conflict-affected Low income states in 8 of 10 areas measured by Doing 25 Business (figure 1.4). 0 Over the past decade Afghanistan 0 25 50 75 100 has implemented regulatory Distance to frontier score (0–100) reforms in five areas measured by Doing Business—most notably in starting a business, where Sources: Doing Business database; Corruption Perceptions Index 2015, Transparency International, https://www.transparency .org/cpi2015/. it stands at 42 in the Doing Note: The distance to frontier score shows how far an economy is from the best performance achieved by any economy Business 2017 global ranking of on each Doing Business indicator. Higher scores indicate greater regulatory efficiency and quality. The sample includes 165 190 economies. economies covered by both Doing Business and the Corruption Perceptions Index 2015. Relationships are significant at the 1% level after controlling for income per capita. 4 DOING BUSINESS IN AFGHANISTAN 2017 BOX 1.1 Recent initiatives to improve the Afghan business regulatory environment During 2016 Afghan authorities took important steps toward making it easier to do business. One area of focus was the process of starting a business. Before, there were two business licenses: one for import and export activities, issued by the Ministry of Commerce and Industries, and one for nontrading activities, issued by the Afghanistan Investment Support Agency. In practice, many companies had to obtain both licenses in order to operate. A transition to a new licensing system, with a single business license, started in Kabul in late 2016. The changes were progressively rolled out to the provinces beyond the capital. The new license is to be issued for a period of three years. The changes benefit all local companies, but particularly those operat- ing outside Kabul, where both types of licenses had to be renewed yearly under the old system (for more details, see the chapter on starting a business). The new licensing system could potentially make the start-up process faster and easier—though also more expensive. Implementing regulatory changes across different locations presents many challenges. Once the implementation is complete, it will be possible to assess the full impact of the changes. Efforts have also been made to improve the process of obtaining construction permits. Recent changes in this area were focused in Kabul (see figure). A new regulatory framework was introduced, with a modern set of standard operating procedures and of- ficial time limits. A one-stop shop bringing together different municipal offices was set up, along with a web-based service. The initiative also included training for 75 technical staff members at the Kabul municipality and an awareness campaign directed at construction practitioners and other stakeholders. The initiative focused on residential and high-rise commercial construction. The next step could be to make the process more efficient for all types of construction, including smaller commercial buildings such as the one in the Doing Business case study, as well as to reduce the cost of obtaining building permits (for more details, see the chapter on dealing with construction permits). Recent improvements in the construction permitting process in Kabul Regulatory Capacity Public awareness Streamlining Automation framework building campaign • Established a • Connected the • Adopted • Trained 75 technical • Distributed banners one-stop shop one-stop shop regulations staff members and brochures department sections for construction at the Kabul • Streamlined internally permitting municipality • Broadcast video redundant and audio material procedures • Introduced an • Adopted a law on on local media online application illegal settlements channels for building permits • Conducted a social • Linked external media campaign entities involved in construction permitting In the annual Doing Business report com- The objective of the study is to gain which implementation of the common paring 190 economies around the world, a broader understanding of the busi- legal and regulatory framework differs Afghanistan is represented by Kabul, ness regulatory environment across across locations—because of differences its capital and largest business center, Afghanistan as well as to provide in local interpretations of the law and accounting for 11% of the country’s good-practice examples and reform in the resources and efficiency of local population.9 Yet Kabul does not tell the recommendations to help guide policy at agencies responsible for administering full story. Entrepreneurs operating in dif- the national and subnational levels. The regulation. While highly centralized line ferent parts of Afghanistan face different study focuses on indicator sets that mea- ministries hold the direct formal author- local regulatory practices. Doing Business sure the complexity and cost of regula- ity for the delivery of most services in the in Afghanistan 2017, the first subnational tory processes affecting four stages in the provinces, cutting across this system are Doing Business study for the country, life of a small to medium-size domestic the provincial governors, who have little benchmarks four additional provinces: firm—starting a business, dealing with formal responsibility for service delivery Balkh, Herat, Kandahar and Nangarhar, construction permits, getting electricity but wield local power and authority. The where the largest business cities are and registering property. These four indi- report also includes a gender dimension, Mazar-i-Sharif, Herat, Kandahar and cator sets were selected because they with the indicator sets for starting a busi- Jalalabad (figure 1.5). relate to areas of business regulation in ness and registering property expanded OVERVIEW 5 FIGURE 1.4  How does Afghanistan’s performance on Doing Business indicators compare with the average for fragile and conflict- affected states? Global ranking (1–190) New Zealand, United Arab 16 New Zealand New Zealand New Zealand Korea, Rep. New Zealand New Zealand Singapore Emirates, Qatar economies Korea, Rep. Finland Easiest (1) 42 101 122 132 143 149 141 Fragile and conflict- 141 146 affected states 137 147 142 159 159 163 159 Afghanistan 175 183 186 186 180 Most difficult (190) 189 Ease of doing Starting a Dealing with Getting Registering Getting Protecting Paying Trading Enforcing Resolving business business construction electricity property credit minority taxes across contracts insolvency permits investors borders Source: Doing Business database. Note: The figure shows data for the 34 fragile and conflict-affected states as defined by the World Bank for fiscal 2017. For more details, see the note to figure 1.2. to account for gender-differentiated experts from the private sector across the from all levels of government also con- practices. country. The respondents include law- tributed information. The data are current yers, architects, engineers, construction as of November 2016.10 The data for the study are based on companies, professional associations and relevant laws, regulations, decrees and others who regularly carry out or advise fee schedules as well as responses to firms on the procedures required in each WHAT ARE THE FINDINGS? questionnaires from more than 100 local of the benchmarked areas. Public officials Doing Business in Afghanistan 2017 does not measure all aspects of the busi- FIGURE 1.5  Doing Business in Afghanistan benchmarks four provinces in addition to Kabul ness environment that matter to firms or investors—such as macroeconomic stability, the size of the market, the state of the financial system or the quality of ir ¯ Mazar-e Pa m human capital. The indicators focus on ¯ Sharıf areas relevant to small and medium- size enterprises in which provincial and municipal authorities have greater scope for action. The results reveal Herat ¯ KABUL Jalalabad ¯¯¯ substantial variation in business regula- tions and their implementation across Afghanistan. Kabul leads in two of the areas mea- sured, starting a business and getting Kandahar ¯ BENCHMARKED PROVINCE electricity (table 1.1). However, it does SELECTED CITY/TOWN not perform equally well in dealing with PROVINCE BOUNDARIES construction permits and registering IBRD 42788 | MARCH 2017 This map was produced by the Cartography Unit of the World Bank Group. The boundaries, colors, denominations property. With the capital undergoing rapid growth, Kabul faces a massive and any other information shown on this map do not imply, on the part of the World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. volume of applications for building Source: Central Statistics Organization, Afghanistan, http://www.cso.gov.af/en (for population data). permits and property transfers. Some 6 DOING BUSINESS IN AFGHANISTAN 2017 TABLE 1.1 Where is doing business easier in Afghanistan—and where not? Dealing with Starting a business construction permits Getting electricity Registering property Province (City) DTF score Rank DTF score Rank DTF score Rank DTF score Rank Rank Balkh (Mazar-i-Sharif) 86.19 2 38.43 2 44.03 2 36.72 2 1 2 Herat (Herat) 85.94 4 27.62 4 38.95 5 24.17 5 3 Kabul (Kabul) 92.08 1 22.39 5 45.04 1 27.50 4 4 5 Kandahar (Kandahar) 86.19 2 39.29 1 42.36 4 40.31 1 Nangarhar (Jalalabad) 85.94 4 31.71 3 42.94 3 35.60 3 Source: Doing Business database. Note: Rankings for the four areas measured are based on the distance to frontier (DTF) score, which shows how far a province is from the best performance achieved by any economy on each Doing Business indicator. The distance to frontier score is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more information, see the chapter “About Doing Business and Doing Business in Afghanistan 2017” and the data notes. measures have already been taken to is more subnational autonomy, however, reduce backlogs. A one-stop shop for Kabul’s top rankings in starting local agencies in other provinces offer issuing construction permits has been a business and getting electricity examples of good practice in how to established at the Kabul municipality, reflect reforms that were reduce the time, cost and complexity of implemented only in the capital. and a pilot project is being promoted to bureaucratic processes. Rolling these reforms out across make registering property an adminis- Afghanistan would benefit trative process rather than one managed Third, while the five Afghan prov- entrepreneurs in other provinces by the courts. inces have made progress in converging and urban centers. toward global good practices for starting Kandahar ranks first in dealing with con- a business, all of them lag behind most struction permits and registering prop- for registering property Kandahar has a other economies in the areas of dealing erty. Balkh (Mazar-i-Sharif) does not rank distance to frontier score of 40.31, ahead with construction permits, getting elec- first in any area measured, but comes in of Bangladesh (27.58), while the scores tricity and registering property. A com- second in all four. Balkh has benefited for Kabul (27.50) and Herat (24.17) rank parison of distance to frontier scores from relative security in recent years, them as the worst performers in South provides perspective. For starting a allowing the province to develop good Asia. These gaps suggest that there are business, the provinces have an average practices in all the areas under analysis. important lessons that Afghan locations score of 87.27, outperforming the global Balkh also benefits from the highest rate can learn from one another. average (82.28). But in the other three of female economic participation among areas measured, Afghanistan’s average the five provinces.11 Second, Kabul’s top rankings in starting score is at least 23 points lower than the a business and getting electricity reflect global average (figure 1.6). Afghanistan Herat and Nangarhar (Jalalabad), with reforms that were implemented only in should therefore benefit from replicat- the highest poverty rates among the five the capital. Rolling these reforms out ing good practices in other economies provinces, do not perform equally well. across Afghanistan would benefit entre- if it is to move toward international These provinces are the only two with no preneurs in other provinces and urban standards in dealing with construction ranking in the top two positions in any of centers. Kabul’s top rankings in these permits, getting electricity and register- the areas measured. areas also reflect Afghanistan’s highly ing property. centralized administration system (box A granular look at the results leads to 1.2). Entrepreneurs completing some several observations. First, there are types of regulatory processes in other In areas of regulation where important differences in performance provinces need to obtain permission there is more subnational across locations. For dealing with con- from central authorities in the capital— autonomy, local agencies in other struction permits, for example, Kandahar such as for obtaining a new electricity provinces offer examples of has a distance to frontier score of 39.29 connection. This adds to the procedures, good practice in how to reduce the time, cost and complexity of while Kabul has a score of only 22.39—a delays and costs they face in doing busi- bureaucratic processes. difference of almost 17 points. Similarly, ness. In areas of regulation where there OVERVIEW 7 BOX 1.2 The framework of subnational governance in Afghanistan Afghanistan’s public sector is highly centralized. The central administration consists of around 54 government units—including ministries, departments, agencies and independent directorates. Central government ministries and institutions are consid- ered primary budget units. Afghanistan’s 34 provinces, which vary widely in population size, are not designated budget units. Services at the provincial level are delivered by line ministries, agencies and provincial administrations. Provincial offices generally have limited staff and capacity, and there are often overlapping roles and responsibilities, including between provincial governors (appointed by the president of Afghanistan), line ministries and provincial councils (directly elect- ed by citizens). Provincial councils exercise only limited oversight over the provincial governors and provincial line departments. In 2016 the Ministry of Finance prepared a provincial budget policy—now approved by the Cabinet of Ministers—that could greatly enhance the role of provincial line departments and administrations in both planning and budget execution.a Resolving the ambiguity around the overlapping authority of line ministries and provincial governors over provincial line departments would help clarify the subnational governance framework and strengthen the legitimacy and accountability of the public sector. However, efforts to move service delivery toward the provincial level need to take into consideration transparency issues at this level as well as provincial capacity to deliver. The Independent Directorate for Local Governance (IDLG), established by a presidential decree in August 2007, is responsible for the overall system of intergovernmental relations, including provincial, district, village and municipal affairs. Within the IDLG, the General Directorate for Municipal Affairs is responsible for managing municipal affairs. Municipalities are constitutionally recog- nized as local government entities, created to manage urban affairs, and therefore have their own budgets. They are largely self- sustained entities that fund the provision of urban services through local revenue collection. But they face capacity constraints in delivering services to growing urban populations. Mayors are centrally appointed, and budgets centrally approved. The Kabul mu- nicipality has a special legal and political status: it is independent from the IDLG and reports directly to the Office of the President. a. World Bank Group, Afghanistan Country Snapshot, October 2016 (Washington, DC: World Bank Group, 2016). FIGURE 1.6  The five Afghan provinces lag behind the global average in all areas measured except starting a business e ag ver ar aa ah si and hA ,K l ut lkh bu So Ba Ka Starting a business g e e ra ar av rh al nga ob Na Gl t, ge ra e ra g e He av ra ar r sia av e rh ha hA al ul at ga lkh nd a t b r n ou ob Ka He Na Ba Ka S Gl Dealing with construction permits e ag v er ge r i aa ve ra ha s a t ar l hA al e ra ang abu ut ob H N K So Gl Getting electricity r ha lkh n da Ba Ka ge ra e a ve ag ar r ia er rh ha As l av rat b ul n ga lkh nda uth o ba He Ka Na Ba Ka So Gl Registering property 0 10 20 30 40 50 60 70 80 90 100 Distance to frontier score (0–100) Source: Doing Business database. Note: The figure illustrates the distribution of the 190 economies in the Doing Business sample by their distance to frontier score for each indicator set. The higher the concentration of economies with a certain distance to frontier score, the greater the width. The distance to frontier score shows how far an economy is from the best performance achieved by any economy on each Doing Business indicator. The measure is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). 8 DOING BUSINESS IN AFGHANISTAN 2017 on Afghanistan in 2014, Towards Self- process would save time for judges as WAY FORWARD Reliance: Commitments to Reform and well as entrepreneurs. The Cabinet of Renewed Partnership, recognizes the Ministers recently decided that property Publishing comparable data on the ease importance of developing adequate insti- registration should move from the courts of doing business in different locations tutions and service delivery at the local to the Afghanistan Independent Land within a country can help drive regula- level. Stronger local governments would Authority (Arazi) as an administrative tory reform—because it is difficult for enhance efficiency in the provinces and system. A pilot project is due to start local governments to justify regulatory at the same time liberate resources in soon in Herat and Kabul. practices that make doing business in Kabul, where many bureaucratic pro- their city or province more burdensome cesses are centralized. Steps have also been taken toward than in neighboring locations. Moreover, reviewing the legislative framework for sharing the same national legal and Except in Kabul, the role of the munici- getting electricity. Parliament approved regulatory framework makes it easier to pality in approving building permits, for the Electrical Energy Services Regulating adopt the good practices of other loca- example, overlaps with that of the pro- Law in January 2016. But the law does not tions. Even small administrative improve- vincial branch of the Ministry of Urban address all legislative gaps. For example, ments, requiring no major regulatory Development. Similarly, to obtain an it does not establish an independent changes, can make a big difference in the electricity connection, entrepreneurs out- regulator. life of a small or medium-size firm. This side Kabul need to interact with both the study identifies specific opportunities utility’s headquarters and its local office. To have a positive effect on the business in each area (table 1.2), as well as local Balkh (Mazar-i-Sharif) and Nangarhar climate, enforcement and implementa- and global good practices.12 In addition, (Jalalabad) show how improving internal tion are as crucial as good laws. Effective some cross-cutting issues emerge, such processes at the utility can save time in implementation starts with the drafting of as the limited authority of institutions at issuing approvals and allow applicants to the regulatory framework, which should the subnational level, the often outdated obtain permission for a new connection be based on wide consultation with pub- legislative frameworks and the lack of without traveling to the capital. lic and private stakeholders. Legislative transparency. amendments should be clearly commu- nicated to local implementing agencies, Cross-cutting issues To improve safety in the to the business and legal communities A first critical need is to strengthen the construction industry, the Kabul and to the general public. To ensure that legitimacy, accountability and capacity of municipality recently adopted a the changes are understood and put into the public sector at the subnational level. regulation specifying the rules practice, the text of the new law should Overlapping institutional mandates and and requirements for getting final be accompanied by guidelines on how to approval for a newly constructed interpret it. unclear roles and responsibilities need to building. Local initiatives like be clarified, and the ambiguity around the this one could converge into a overlapping authority of line ministries Providing accessible, user-friendly infor- national construction law. and provincial governors resolved. To mation on regulations and procedures reduce the regulatory burden for com- is important in all areas of business panies will require building subnational Another cross-cutting issue is the need to regulation. Where applicants lack such capacity to deliver business regulation update legislative frameworks. Building information, they have greater difficulty services and coordinating the different regulations, for example, are outdated holding government bodies accountable, levels of government and institutions. and fragmented, creating serious public a situation fostering informality and This would also facilitate the implemen- safety risks. To improve safety in the con- corruption. Afghanistan has among the tation of reforms beyond the capital. struction industry, the Kabul municipality lowest performance globally on the Doing A document presented by the Afghan recently adopted a regulation introducing Business measure of the accessibility and government at the London Conference occupancy certificates that specifies the transparency of building regulations. For rules and requirements for getting final example, entrepreneurs lack prior knowl- approval from the municipality for a edge of the necessary fees, documents Stronger local governments newly constructed building. Local initia- and administrative steps for obtaining would enhance efficiency in tives like this one could converge into a a building permit. But Kabul recently the provinces and at the same national construction law. took notable steps toward improving time liberate resources in public access to information for building Kabul, where many bureaucratic Property registration happens through permit applications. It developed process processes are centralized. the courts; making it an administrative guidelines, checklists and standardized OVERVIEW 9 TABLE 1.2  Suggested regulatory reforms to improve the ease of doing business in Afghanistan Suggested reforms Relevant agencies and other stakeholders Starting a business Recommendations at the national level National §§ Streamline the start-up process by eliminating outdated requirements §§ Afghanistan Central Business Registry and §§ Continue simplifying licensing requirements for local businesses Intellectual Property (ACBRIP) §§ Undertake a legal review of gender-based discriminatory laws §§ Ministry of Commerce and Industries §§ Ministry of Finance Recommendations at the subnational level §§ Take stock of the experience with Kabul’s one-stop shop to improve efficiency Subnational §§ Implement reforms beyond the capital city §§ Provincial offices of ACBRIP Dealing with construction permits Recommendations at the national level National §§ Adopt simple fee schedules based on objective criteria for issuing building permits §§ Independent Directorate for Local Governance §§ Overhaul the system for inspections during construction §§ Ministry of Urban Development §§ Introduce stricter standards for the professionals involved in the permitting process Subnational Recommendations at the subnational level §§ Department of Urban Development §§ Modernize and clarify the legislative framework, following the reform process started by the Kabul §§ Municipal building office municipality Others §§ Merge the functions of municipalities and Departments of Urban Development, as in Kabul §§ Professional associations (architects and §§ Make the permitting process more transparent, following the reform process started by the Kabul engineers) municipality §§ Private water and sanitation companies §§ Reduce the cost of the process in Kabul Getting electricity Recommendations at the national level National §§ Reduce the up-front cost of obtaining a new connection §§ Da Afghanistan Breshna Sherkat (DABS) §§ Improve the transparency of connection requirements and consumption tariffs §§ Ministry of Energy and Water §§ Introduce independent regulatory oversight to monitor utility reliability Subnational Recommendations at the subnational level §§ Regional offices of DABS §§ Improve coordination between DABS headquarters and regional offices, as in Balkh and Nangarhar Others §§ Transfer the authority to issue approvals for new transformers to DABS regional offices §§ Authorized electrical installation companies §§ Professional associations (engineers) Registering property Recommendations at the national level National §§ Make standardized forms and fee schedules available at primary courts §§ Ministry of Justice §§ Digitize land-related records and processes §§ Afghanistan Independent Land Authority (Arazi) §§ Improve tenure security and dispute resolution mechanisms for land Subnational §§ Replace the property valuation process with a standardized schedule of property values §§ Primary courts §§ Streamline internal processes §§ Makhzan (appeals court archives) §§ Consolidate postregistration procedures §§ Mustofiat (Ministry of Finance’s provincial revenue §§ Make transparency of information a priority department) Recommendations at the subnational level §§ Milkiat-ha (municipal property office) §§ Make property registration an administrative process, as in the pilot project announced for Herat and Kabul Note: For a detailed explanation of each recommendation, see the section “What can be improved?” in each topic chapter. For details on the time and cost associated with each procedure in the four areas measured, see the corresponding list of procedures. 10 DOING BUSINESS IN AFGHANISTAN 2017 forms and made them available at the replicate the good practices identified. If For the four areas measured, Afghanistan’s municipality and online. It also carried the country were to adopt all the good current distance to frontier score as record- out a broad communication campaign practices documented across the five ed by Doing Business 2017 averages 46.75. to familiarize industry professionals with provinces, its overall performance would Adopting all the good practices found at the regulation. This initiative can serve as improve (figure 1.7). Take the example the subnational level would increase that an example of good practice that could be of registering property. A hypothetical average by 10 points, to 56.89—and the replicated in other provinces. location where the process takes 9 pro- country would jump 11 places in the global cedures (as in Kabul) and 75 days (as in ranking on the overall ease of doing busi- Similar efforts could make it easier to Kandahar), and that has a score of 6 on ness, from 183 to 172. Afghanistan would obtain useful information on property the quality of land administration index no longer be the lowest-ranked economy registration and the electricity connection (as in Balkh), would stand at 157 in the in South Asia.14 process. Land-related information should global ranking—almost 30 places higher be made publicly available, including infor- than Afghanistan’s current ranking (186) Promoting peer-to-peer learning would mation on fees, procedures and property and 12 places higher than Pakistan’s provide opportunities for national, pro- transactions. Electricity utilities should (169). For dealing with construction vincial and municipal policy makers to clearly explain to customers exactly what permits, a location where the process share their good practices in some areas is needed to obtain a new connection takes 96 days and costs 28.4% of the while learning from others about what in terms of procedures, time and cost. warehouse value (as in Kandahar), has worked better elsewhere in other Information on consumption tariffs should and requires 13 procedures and rates areas. The results would benefit all. also be made easily accessible. a score of 2.5 on the building quality control index (as in Kabul), would have Designing and implementing a reform Local and global good practices a distance to frontier score of 41.12. plan to improve the business climate Policy makers in Afghanistan could start That’s nearly 20 points higher than in a country can be a challenging by taking advantage of the findings of Afghanistan’s current score (22.39), task—because it requires the participa- this subnational study—to understand now the lowest globally—and higher tion of multiple government agencies the sources of local variations and than India’s (32.83).13 as well as coordination efforts and FIGURE 1.7  How much would Afghanistan improve its global ranking by adopting all the good practices found at the subnational level? Afghanistan (Kabul) Best of Afghanistan Doing Business 2017 rank Potential rank Starting a business 42 42 Starting a business 3.5 procedures, 7.5 days, 19.9% of income per capita 3.5 procedures, 7.5 days, 19.9% of income per capita Getting electricity 6 procedures, 94 days, 1,957.3% of income per capita, Getting electricity Overall ease of doing business ranking score of 0 on the reliability of supply and transparency 6 procedures, 114 days, 2,274.7% of income per capita, 157 of tariffs index score of 0 on the reliability of supply and transparency 159 157 Registering property of tariffs index 9 procedures, 75 days, 5% of property value, score of 6 on 172 the quality of land administration index Registering property 9 procedures, 250 days, 5% of property value, score of 3 on 183 183 Dealing with construction permits the quality of land administration index 186 13 procedures, 96 days, 28.4% of warehouse value, score of 186 2.5 on the building quality control index Dealing with construction permits 13 procedures, 356 days, 82.7% of warehouse value, score of 2.5 on the building quality control index Source: Doing Business database. Note: For starting a business, the figure shows procedures and time as the average for men and women. OVERVIEW 11 technical capacity. But the government economies (Eritrea, Libya, Somalia and the NOTES Syrian Arab Republic). of Afghanistan has started to make 14. If all good practices were adopted, important strides in this direction. The 1. Domestic revenues reached 10.2% of GDP in Afghanistan would rank ahead of Bangladesh, implementation of reforms making it currently at 176 in the global ranking. 2015 (up from 8.7% in 2014) and were 30% 15. On average across economies, a difference easier to start a business put the country higher in the first eight months of 2016 than of 1 percentage point in regulatory quality for the same period in 2015. World Bank, among the top-performing economies Afghanistan Development Update, October 2016 as measured by the Doing Business distance on the ease of starting a business since to frontier score is associated with a (Washington, DC: World Bank, 2016). difference in annual foreign direct investment 2010. This successful experience could 2. World Bank Group, Afghanistan Country inflows of US$250–500 million, according Snapshot, October 2016 (Washington, DC: be replicated to expand the reform efforts World Bank Group, 2016). to John Anderson and Adrian Gonzalez, to other areas. “Does Doing Business Matter for Foreign 3. World Bank Group Data, http:/ /data Direct Investment?” in World Bank, Doing .worldbank.org/indicator. Business 2013: Smarter Regulations for Small 4. The poverty rate increased from 36% in Governments that succeed in sustain- 2011–12 to 39% in 2013–14. World Bank and Medium-Size Enterprises (World Bank: ing regulatory reform programs take a Washington, DC, 2012). Findings on a Group, Afghanistan Country Snapshot, October smaller informal sector are from Simeon comprehensive approach that targets 2016 (Washington, DC: World Bank Group, Djankov, Caralee McLiesh and Rita Ramalho, 2016). multiple areas of regulation. Afghanistan 5. World Bank Group, Country Partnership “Regulation and Growth,” Economics Letters 92, could benefit from the experience of no. 3 (2006): 395–401. Framework for Islamic Republic of Afghanistan committed reformers around the world. for the Period FY17 to FY20 (Washington, DC: World Bank, 2016). Rwanda, for example, undertook a review 6. See Islamic Republic of Afghanistan, of internal processes, prioritized areas Afghanistan National Peace and Development for reform and set up a regulatory reform Framework (ANPDF), 2017 to 2021 (Kabul, 2016). committee to ensure coordination of 7. Foreign direct investment remains low in implementation efforts across agencies Afghanistan. Inflows steadily increased and to regularly monitor progress. Similar between 2001 and 2005, reaching US$271 million. With the deterioration in national committees have been established at the security, inflows have decreased and interministerial and even municipal level been more erratic since 2006, standing at in a wide range of economies—includ- US$54 million in 2014, according to the United Nations Conference on Trade and ing Colombia, India, Indonesia, Mexico, Development (UNCTAD). Nigeria, Pakistan and Poland. 8. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). Business regulation reforms can have 9. Population data are from the Central Statistics large payoffs. Higher rankings on the Organization, Afghanistan, http:/ /www.cso ease of doing business are associated .gov.af/en/page/demography-and-socile -statistics/demograph-statistics/3897111. with more growth, more jobs, a smaller Doing Business 2017 covers 11 indicator sets informal sector and greater foreign direct and 190 economies. Most indicator sets refer investment.15 These reforms also expand to a case scenario in the largest business city of each economy, though for 11 economies the reach of regulation by bringing firms with a population of more than 100 million and employees into the formal sector. (Bangladesh, Brazil, China, India, Indonesia, There, workers can have health insurance Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) Doing and pension benefits. Businesses pay Business also collected data for the second taxes. Products are subject to quality largest business city. standards. In addition, formal firms have 10. Data for Kabul are as of June 2016. For more details, see the chapter “About Doing Business greater access to bank credit to fund and Doing Business in Afghanistan 2017,” the expansion—and greater access to courts data notes and the list of contributors in the to resolve disputes. Business regulation acknowledgments. 11. World Bank Group, Afghanistan Provincial reforms that reduce informality and Briefs, December 2016 (Washington, DC: World enforce property rights benefit the most Bank Group, 2016). vulnerable groups, including women, who 12. All reform recommendations are detailed in the “What can be improved?” section of each make up a large share of the informal topic chapter. sector. 13. While Afghanistan’s distance to frontier score for dealing with construction permits (22.39) is the lowest globally, the country’s ranking in this area is 186 among 190 economies because four are considered to be no-practice Doing 12 Business in Afghanistan DOING BUSINESS IN AFGHANISTAN 2017 AT A G L ANCE REPORT METHODOLOGY AND SCOPE The first subnational report of the Doing Business series in Afghanistan Full report: www.doingbusiness.org/afghanistan D oing Business in Afghanistan 2017 focuses on business regulations and their enforcement in four Doing This report contains provincial data current as of November 2016 and includes comparisons with Kabul and Doing Business measures aspects of regulation that enable or hinder entrepreneurs in starting, operating or Business areas. It goes beyond Kabul other economies based on data from expanding a business—and provides to benchmark four additional Afghan Doing Business 2017: Equal Opportunity recommendations and good practices for provinces—Balkh (Mazar-i-Sharif ), for All. improving the business environment. Herat (Herat), Kandahar (Kandahar) and Nangarhar (Jalalabad). Four Doing Business indicator sets covering areas of local jurisdiction or practice Starting a business Getting electricity Records the procedures, time, cost and paid-in Records the procedures, time and cost required minimum capital required for a small or medium- for a business to obtain a permanent commercial size domestic limited liability company to formally electricity connection for a standardized operate; includes a gender dimension to account warehouse; assesses the reliability of the electricity for any gender discriminatory practices. supply and the transparency of tariffs. Dealing with construction permits Registering property Records the procedures, time and cost required Records the procedures, time and cost required for a small or medium-size domestic business to to transfer a property title from one domestic firm obtain the approvals needed to build a commercial to another so that the buyer can use the property warehouse and connect it to water and sewerage; to expand its business, use it as collateral or, if assesses the quality control and safety mechanisms necessary, sell it; assesses the quality of the land in the construction permitting system. administration system; includes a gender dimension to account for any gender discriminatory practices. Four provinces beyond Kabul: BALKH HERAT KANDAHAR NANGARHAR Advantages and limitations of the Doing Business methodology Focus on the law Reliance on expert respondents Doing Business does not cover: Makes the indicators “actionable” because Reflects knowledge of those with most ✗ Security the law is what policy makers can experience, but allows less ability to ✗ Market size change, but allows less ability to reflect capture variation in experiences among ✗ Macroeconomic stability the degree of compliance with the law. entrepreneurs. ✗ State of the financial system ✗ Prevalence of bribery and corruption Use of standardized case scenarios Focus on domestic and formal sector ✗ Level of training and skills of the Enables comparability across locations, Keeps attention on the formal sector, where labor force but reduces the scope of the data. firms are most productive, but does not reflect the informal sector or foreign firms. A collaboration between the World Bank Group Global Indicators Group, th International Finance Corporation and World Bank country offices. Funded by the U.S. Agency for International Development (USAID). About Doing Business and Doing Business in Afghanistan 2017 ƒƒ Doing Business measures aspects of business regulation affecting domestic small and medium-size firms in 11 areas across 190 economies. Doing Business in Afghanistan 2017 covers 4 of these areas: starting a business, dealing with construction permits, getting electricity and registering property. ƒƒ Doing Business and Doing Business in Afghanistan 2017 do not capture other aspects of the business environment, such as security, market size, macroeconomic stability and the prevalence of bribery and corruption. ƒƒ The Doing Business methodology is based on standardized case scenarios in the largest business city of each economy. Subnational Doing Business studies expand the Doing Business analysis beyond this largest business city to measure variations in regulations or in the implementation of national laws across locations within an economy or a region. Doing Business in Afghanistan 2017 relies on the following main sources of information: the relevant laws and regulations, private sector respondents, government officials, court officials and World Bank Group staff. ƒƒ Doing Business includes a gender dimension in 4 of the 11 indicator sets. Starting a business, registering property and enforcing contracts present a gender dimension for the first time in the Doing Business 2017 report. Labor market regulation already captured gender-disaggregated data in the Doing Business 2016 report. 14 DOING BUSINESS IN AFGHANISTAN 2017 T he foundation of Doing Business is quantitative indicators on the regulations ease of doing business, it does present the notion that economic activity, that apply to firms at different stages the data for these indicators. particularly private sector devel- of their life cycle. The results for each opment, benefits from clear and coherent economy can be compared with those for The subnational Doing Business stud- rules: rules that set out and clarify prop- 189 other economies and over time. ies expand the Doing Business analysis erty rights and facilitate the resolution beyond the largest business city of an of disputes, and rules that enhance the economy. They measure variation in predictability of economic interactions FACTORS MEASURED BY regulations or in the implementation of and provide contractual partners with DOING BUSINESS AND DOING national laws across locations within an essential protections against arbitrari- BUSINESS IN AFGHANISTAN economy or a region. Projects are under- ness and abuse. Such rules are much 2017 taken at the request of governments. more effective in shaping the incentives of economic agents in ways that promote Doing Business captures several impor- Data collected by subnational studies growth and development where they are tant dimensions of the regulatory over the past three years show that there reasonably efficient in design, are trans- environment as it applies to local firms. can be substantial variation within an parent and accessible to those for whom It provides quantitative indicators on economy (figure 2.1). In Mexico in 2016, they are intended and can be imple- regulation for starting a business, deal- for example, registering a property trans- mented at a reasonable cost. The quality ing with construction permits, getting fer took as few as 9 days in Puebla and of the rules also has a crucial bearing on electricity, registering property, getting as many as 78 in Oaxaca. Indeed, within how societies distribute the benefits and credit, protecting minority investors, pay- the same economy one can find locations finance the costs of development strate- ing taxes, trading across borders, enforc- that perform as well as economies rank- gies and policies. ing contracts and resolving insolvency ing in the top 20 on the ease of register- (table 2.1). Doing Business also measures ing property and locations that perform Good rules are a key to social inclusion. features of labor market regulation. as poorly as economies ranking in the Enabling growth—and ensuring that all Although the Doing Business 2017 report bottom 40 on that indicator. people, regardless of income level, can does not present rankings of economies participate in its benefits—requires an on the labor market regulation indicators While subnational Doing Business stud- environment where new entrants with or include the topic in the aggregate dis- ies generate disaggregated data on drive and good ideas can get started tance to frontier score or ranking on the business regulation, they go beyond a in business and where good firms can invest and expand. The role of govern- ment policy in the daily operations of TABLE 2.1 What Doing Business measures—11 areas of business regulation domestic small and medium-size firms is Indicator set What is measured a central focus of the Doing Business data. Starting a business Procedures, time, cost and paid-in minimum capital to start a The objective is to encourage regulation limited liability company that is designed to be efficient, acces- Dealing with construction permits Procedures, time and cost to complete all formalities to build a sible to all and simple to implement. warehouse and the quality control and safety mechanisms in the construction permitting system Onerous regulation diverts the energies Getting electricity Procedures, time and cost to get connected to the electrical grid, of entrepreneurs away from developing the reliability of the electricity supply and the transparency of tariffs their businesses. But regulation that is Registering property Procedures, time and cost to transfer a property and the quality of efficient, transparent and implemented in the land administration system a simple way facilitates business expan- Getting credit Movable collateral laws and credit information systems sion and innovation, and makes it easier Protecting minority investors Minority shareholders’ rights in related-party transactions and in for aspiring entrepreneurs to compete on corporate governance an equal footing. Paying taxes Payments, time and total tax rate for a firm to comply with all tax regulations as well as post-filing processes Doing Business measures aspects of Trading across borders Time and cost to export the product of comparative advantage and business regulation for domestic firms import auto parts through an objective lens. The focus of Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes the project is on small and medium-size companies in the largest business city Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency of an economy. Based on standardized Labor market regulation Flexibility in employment regulation and aspects of job quality case studies, Doing Business presents ABOUT DOING BUSINESS 15 FIGURE 2.1  Different locations, different regulatory processes, same economy Time to register property (days) 80 Oaxaca (78) Isiolo (73) 60 58 Wroclaw (51) Mangaung (52) Mombasa (41) 40 33 32 26 Johannesburg Melilla (26) Bialystok (23) 20 (18) 17 Madrid Puebla (12.5) (9) 0 Kenya Mexico Poland South Africa Spain Least time Most time Average time Source: Subnational Doing Business database. Note: The average time shown for each economy is based on all locations covered by the data: 11 cities in Kenya in 2016, 32 states in Mexico in 2016, 18 cities in Poland in 2015, 9 cities in South Africa in 2015 and 19 cities in Spain in 2015. data collection exercise. They have been including Colombia, the Arab Republic particularly data from the World Bank shown to be strong motivators for regula- of Egypt, Italy, the Philippines and Enterprise Surveys.1 These surveys provide tory reform at the local level: Serbia. Seventeen economies—including data highlighting the main obstacles to Indonesia, Kenya, Mexico, Nigeria, the business activity as reported by entrepre- ƒƒ Results can be benchmarked both Philippines and the Russian Federation— neurs in more than 130,000 firms in 139 locally and globally because the data have undertaken two or more rounds of economies. Access to finance and access produced are comparable across subnational data collection to measure to electricity, for example, are among the locations within the economy and progress over time. Last year a subna- factors identified by the surveys as impor- internationally. Comparing locations tional study was completed in Kenya tant to businesses—inspiring the design within the same economy—which and Mexico and last year a subnational of the Doing Business indicators on getting share the same legal and regulatory study was completed in the United Arab credit and getting electricity. framework—can be revealing: local Emirates. Ongoing studies include those officials struggle to explain why doing in Colombia (32 cities), three European The design of the Doing Business indica- business is more challenging in their Union member states (22 cities in tors has also been informed by theoretical jurisdiction than in a neighboring one. Bulgaria, Hungary and Romania) and insights gleaned from extensive research Kazakhstan (8 cities). and the literature on the role of institu- ƒƒ Highlighting good practices that exist tions in enabling economic development. in some locations but not others with- Doing Business in Afghanistan 2017 is In addition, the background papers devel- in an economy helps policy makers the first report of the subnational Doing oping the methodology for each of the recognize the potential for replicating Business series in Afghanistan. This first Doing Business indicator sets have estab- these good practices. This can yield edition of Doing Business in Afghanistan lished the importance of the rules and discussions about regulatory reform covers four provinces—Balkh (Mazar- regulations that Doing Business focuses across different levels of government, i-Sharif), Herat (Herat), Kandahar on for such economic outcomes as trade providing opportunities for local gov- (Kandahar) and Nangarhar (Jalalabad)— volumes, foreign direct investment, mar- ernments and agencies to learn from in addition to Kabul. ket capitalization in stock exchanges and one another and resulting in local private credit as a percentage of GDP.2 ownership and capacity building. How the indicators are selected The choice of the 11 sets of Doing Some Doing Business indicators give a Since 2005 subnational reports have Business indicators has been guided by higher score for more regulation and covered 438 locations in 65 economies, economic research and firm-level data, better-functioning institutions (such as 16 DOING BUSINESS IN AFGHANISTAN 2017 courts or credit bureaus). Higher scores “frontier,” which represents the best per- the business regulatory environment. The are given for stricter disclosure require- formance observed on each of the indica- distance to frontier scores and rankings of ments for related-party transactions, tors across all economies in the Doing each economy vary, often considerably, for example, in the area of protecting Business sample since 2005 or the third across topics, indicating that a strong minority investors. Higher scores are year in which data were collected for the performance by an economy in one area also given for a simplified way of apply- indicator. The frontier is set at the highest of regulation can coexist with weak per- ing regulation that keeps compliance possible value for indicators calculated as formance in another. One way to assess costs for firms low—such as by easing scores, such as the strength of legal rights the variability of an economy’s regulatory the burden of business start-up formali- index or the quality of land administration performance is to look at its distance to ties with a one-stop shop or through a index. This underscores the gap between frontier scores across topics. Morocco, single online portal. Finally, Doing Business a particular economy’s performance and for example, has an overall distance to scores reward economies that apply a the best performance at any point in frontier score of 67.50, meaning that it risk-based approach to regulation as a time and helps in assessing the absolute is two-thirds of the way from the worst way to address social and environmental change in the economy’s regulatory envi- to the best performance. Its distance to concerns—such as by imposing a greater ronment over time as measured by Doing frontier score is 92.34 for starting a busi- regulatory burden on activities that pose Business. The distance to frontier score is ness, 83.51 for paying taxes and 81.12 for a high risk to the population and a lesser first computed for each topic and then trading across borders. At the same time, one on lower-risk activities. Thus the averaged across all topics to compute it has a distance to frontier score of 33.89 economies that rank highest on the ease the aggregate distance to frontier score. for resolving insolvency, 45 for getting of doing business are not those where The ranking on the ease of doing business credit and 53.33 for protecting minority there is no regulation—but those where complements the distance to frontier investors. governments have managed to create score by providing information about rules that facilitate interactions in the an economy’s performance in business Calculation of the distance to marketplace without needlessly hinder- regulation relative to the performance of frontier score ing the development of the private sector. other economies as measured by Doing Calculating the distance to frontier Business. score for each economy involves two The areas measured in Doing Business main steps. In the first step individual in Afghanistan 2017 were selected in Doing Business in Afghanistan 2017 component indicators are normalized collaboration with the government of includes rankings of the five provinces to a common unit where each of the 36 Afghanistan, on the basis of their rel- surveyed on four topics: starting a busi- component indicators y (except for the evance to the country context and ability ness, dealing with construction permits, total tax rate) is rescaled using the linear to show variation across the provinces getting electricity and registering prop- transformation (worst − y)/(worst − covered. The benchmarked provinces erty. The rankings presented are based frontier). In this formulation the frontier are those that meet minimum standards on the distance to frontier score. The represents the best performance on the for measurement—sufficient economic distance to frontier score captures the indicator across all economies since activity within the locale, population size gap between a city’s performance and 2005 or the third year in which data for and demographic difference from the rest a measure of best practices across the the indicator were collected. Both the best of the sample—and showed the greatest areas covered by the report. For starting a performance and the worst performance interest in participating in the subnational business, for example, New Zealand has are established every five years based Doing Business study. both the smallest number of procedures on the Doing Business data for the year in required (one) and the shortest time which they are established, and remain The distance to frontier and to fulfill them (0.5 days). Slovenia has at that level for the five years regardless ease of doing business ranking the lowest cost (0.0), and Australia, of any changes in data in interim years. To provide different perspectives on Colombia and 111 other economies have Thus an economy may set the frontier for the data, Doing Business presents data no paid-in minimum capital requirement an indicator even though it is no longer at both for individual indicators and for (table 2.2). the frontier in a subsequent year. two aggregate measures: the distance to frontier score and the ease of doing Doing Business uses a simple averaging In the same formulation, to mitigate the business ranking. The distance to frontier approach for weighting component effects of extreme outliers in the distri- score aids in assessing the absolute level indicators, calculating rankings and butions of the rescaled data for most of regulatory performance and how it determining the distance to frontier component indicators (very few econo- improves over time. This measure shows score.3 Each topic covered by Doing mies need 700 days to complete the the distance of each economy to the Business relates to a different aspect of procedures to start a business, but many ABOUT DOING BUSINESS 17 TABLE 2.2  What is the frontier in regulatory practice in the areas measured by Doing Business in Afghanistan 2017? Topic and indicator Who set the frontier Frontier Worst performance Starting a business Procedures (number) New Zealand 1 18a Time (days) New Zealand 0.5 100b Cost (% of income per capita) Slovenia 0.0 200.0b Minimum capital (% of income per capita) Australia; Colombiac 0.0 400.0b Dealing with construction permits Procedures (number) No economy was at the frontier as of 5 30a June 1, 2016. Time (days) Singapore 26 373b Cost (% of warehouse value) No economy was at the frontier as of 0.0 20.0b June 1, 2016. Building quality control index (0–15) Luxembourg; New Zealand 15 0d Getting electricity Procedures (number) Germany; Republic of Koreae 3 9a Time (days) Republic of Korea; St. Kitts and Nevis 18 248b Cost (% of income per capita) Japan 0.0 8,100.0b Reliability of supply and transparency of tariffs index (0–8) Belgium; Ireland; Malaysia f 8 0d Registering property Procedures (number) Georgia; Norway; Portugal; Sweden 1 13a Time (days) Georgia; New Zealand; Portugal 1 210b Cost (% of property value) Saudi Arabia 0.0 15.0b Quality of land administration index (0–30) No economy has attained the frontier yet. 30 0d Source: Doing Business database. a. Worst performance is defined as the 99th percentile among all economies in the Doing Business sample. b. Worst performance is defined as the 95th percentile among all economies in the Doing Business sample. c. Another 111 economies also have a paid-in minimum capital requirement of 0. d. Worst performance is the worst value recorded. e. In 14 other economies it also takes only three procedures to get an electricity connection. f. Another 23 economies also have a score of 8 on the reliability of supply and transparency of tariffs index. need nine days), the worst performance with construction permits, getting elec- business ranking calculations are based is calculated after the removal of outliers. tricity and registering property. More on two decimals. The definition of outliers is based on the complex aggregation methods—such as distribution for each component indica- principal components and unobserved tor. To simplify the process two rules components—yield a ranking nearly FACTORS NOT MEASURED were defined: the 95th percentile is used identical to the simple average used BY DOING BUSINESS for the indicators with the most dispersed by Doing Business.4 Thus Doing Business AND DOING BUSINESS IN distributions (including minimum capital uses the simplest method: weighting all AFGHANISTAN 2017 and the time and cost indicators), and topics equally and, within each topic, the 99th percentile is used for number of giving equal weight to each of the topic Many important policy areas are not procedures (figure 2.2). components. covered by Doing Business; even within the areas it covers its scope is narrow In the second step, for each economy the A province’s distance to frontier score is (table 2.3). Doing Business does not scores obtained for individual indicators indicated on a scale from 0 to 100, where measure the full range of factors, policies are aggregated through simple averaging 0 represents the worst performance and and institutions that affect the quality for each topic for which performance is 100 the frontier. All distance to frontier of an economy’s business environment measured and ranked; for the provinces calculations are based on a maximum of or its national competitiveness. It does in Doing Business in Afghanistan 2017, this five decimals. However, indicator rank- not, for example, capture aspects of is done for starting a business, dealing ing calculations and the ease of doing macroeconomic stability, development 18 DOING BUSINESS IN AFGHANISTAN 2017 FIGURE 2.2 How are distance to frontier scores calculated for indicators? An example competitiveness (except to the extent that the trading across borders indicators A time-and-motion topic: dealing with construction permits indirectly measure the quality of ports Distance to frontier score for procedures and border connections). Similar to the 100 Regulatory frontier indicators on trading across borders, all aspects of commercial legislation are not Best performance (frontier): covered by those on starting a business 5 procedures 80 or protecting minority investors. And while Doing Business measures only a few aspects within each area that it covers, 60 business regulation reforms should not focus only on these aspects, because those that it does not measure are also 40 important. Worst performance Doing Business does not attempt to quan- 20 (99th percentile): tify all costs and benefits of a particular 30 procedures law or regulation to society as a whole. 0 The paying taxes indicators measure the 5 10 15 20 25 30 35 total tax rate, which, in isolation, is a cost Procedures (number) to businesses. However, the indicators do not measure—nor are they intended Source: Doing Business database. A legal topic: protecting minority investors to measure—the benefits of the social Distance to frontier score and economic programs funded with for extent of disclosure index of the financial size, system, market the indicators, for example, but these indica- tax revenues. Measuring the quality and 100 Regulatory frontier quality of the labor force or the incidence tors do not measure the cost of tariffs or efficiency of business regulation provides of bribery and corruption. of international transport. Doing Business only one input into the debate on the reg- provides a narrow perspective on the ulatory burden associated with achieving 80 The focus is deliberately narrow even infrastructure challenges that firms face, regulatory objectives, which can differ within the relatively small set of indica- particularly in the developing world, across economies. Doing Business pro- tors included 60 in Doing Business . The time through these indicators. It does not vides a starting point for this discussion and cost required for the logistical pro- address the extent Best to which inadequate performance and should be used in conjunction with (frontier): cess of exporting and importing goods roads, rail, ports and 10 points communications other data sources. is captured 40 in the trading across borders may add to firms’ costs and undermine TABLE 2.3 What Doing Business does not cover ADVANTAGES AND 20 LIMITATIONS OF THE Examples of areas not covered Worst performance: METHODOLOGY Macroeconomic stability 0 points 0 The Doing Business methodology is 2 system Development of the1financial 3 4 5 6 7 8 9 10 Extent of disclosure index (0–10) designed to be an easily replicable way to Quality of the labor force benchmark specific aspects of business Incidence of bribery and corruption regulation. Its advantages and limitations Market size should be understood when using the data (table 2.4). Lack of security Examples of aspects not included within the areas covered Ensuring comparability of the data across In paying taxes, personal income tax rates a global set of economies is a central In getting credit, the monetary policy stance and the associated ease or tightness consideration for the Doing Business of credit conditions for firms indicators, which are developed around In trading across borders, export or import tariffs and subsidies standardized case scenarios with specific assumptions. One such assumption is the In resolving insolvency, personal bankruptcy rules location of a standardized business—the ABOUT DOING BUSINESS 19 TABLE 2.4 Advantages and limitations of the Doing Business methodology slowly, have poorer access to credit and employ fewer workers—and these work- Feature Advantages Limitations ers remain outside the protections of Use of standardized Makes data comparable across Reduces scope of data; only regulatory labor law and, more generally, other legal case scenarios economies and methodology reforms in areas measured can be transparent, using case scenarios that systematically tracked; the case protections embedded in the law.6 Firms are common globally scenarios may not be the most in the informal sector are also less likely common in a particular economy to pay taxes. Doing Business measures Focus on largest Makes data collection manageable Reduces representativeness of data business city a (cost-effective) and data comparable for an economy if there are significant one set of factors that help explain the differences across locations occurrence of informality and give policy Focus on domestic and Keeps attention on formal sector— Unable to reflect reality for informal makers insights into potential areas of formal sector where regulations are relevant and sector—important where that is regulatory reform. firms are most productive large—or for foreign firms facing a different set of constraints Reliance on expert Ensures that data reflect knowledge Indicators less able to capture variation respondents of those with most experience in in experiences among entrepreneurs DATA COLLECTION IN conducting types of transactions measured PRACTICE Focus on the law Makes indicators “actionable”— Where systematic compliance with the because the law is what policy makers law is lacking, regulatory changes will Doing Business data are based on a can change not achieve full results desired detailed reading of domestic laws and Source: Doing Business database. regulations as well as administrative a. Subnational Doing Business studies go beyond the largest business city within a country or region. requirements. The Doing Business 2017 report covers 190 economies—includ- subject of the Doing Business case are the most prevalent business form ing some of the smallest and poorest study—in the largest business city of the (for firms with more than one owner) economies, for which little or no data are economy. The reality is that business reg- in many economies around the world. available from other sources. The data ulations and their enforcement may differ Second, this choice reflects the focus of are collected through several rounds of within a country, particularly in federal Doing Business on expanding opportuni- communication with expert respondents states and large economies. But gather- ties for entrepreneurship: investors are (both private sector practitioners and ing data for every relevant jurisdiction in encouraged to venture into business government officials), through responses each of the 190 economies covered by when potential losses are limited to their to questionnaires, conference calls, writ- Doing Business is infeasible. Nevertheless, capital participation. ten correspondence and visits by the where policy makers are interested in team. Doing Business relies on four main generating data at the local level, beyond Another assumption underlying the sources of information: the relevant laws the largest business city, Doing Business Doing Business indicators is that entre- and regulations, Doing Business respon- has complemented its global indicators preneurs have knowledge of and comply dents, the governments of the economies with subnational studies. Coverage was with applicable regulations. In practice, covered and the World Bank Group extended to the second largest business entrepreneurs may not know what needs regional staff. For a detailed explanation city in economies with a population of to be done or how to comply and may of the Doing Business methodology, see more than 100 million (as of 2013) in lose considerable time trying to find out. the data notes. Doing Business 2015. Alternatively, they may deliberately avoid compliance altogether—by not regis- Relevant laws and regulations Doing Business recognizes the limitations tering for social security, for example. Indicators presented in Doing Business of the standardized case scenarios and Where regulation is particularly onerous, in Afghanistan 2017 are based on laws assumptions. But while such assump- firms may opt for bribery and other infor- and regulations. Besides participating in tions come at the expense of generality, mal arrangements intended to bypass interviews or filling out written question- they also help to ensure the comparabil- the rules—an aspect that helps explain naires, respondents provided references ity of data. Some Doing Business topics differences between the de jure data pro- to the relevant laws, regulations and fee are complex, and so it is important that vided by Doing Business and the de facto schedules, which were collected and ana- the standardized cases are defined care- insights offered by World Bank Enterprise lyzed by the Doing Business in Afghanistan fully. For example, the standardized case Surveys.5 Levels of informality tend to 2017 team. scenario usually involves a limited liabil- be higher in economies with particularly ity company or its legal equivalent. There burdensome regulation. Compared with For the rest of the data, the team conduct- are two reasons for this assumption. their formal sector counterparts, firms in ed extensive consultations with multiple First, private, limited liability companies the informal sector typically grow more contributors to minimize measurement 20 DOING BUSINESS IN AFGHANISTAN 2017 error. For some indicators—for example, estimate of time. The time estimates for indicator sets are included in Doing those on dealing with construction each step are provided by practitioners Business in Afghanistan 2017. permits—the time component and part who have significant and routine experi- of the cost component (where fee sched- ence in the transaction. Doing Business has traditionally assumed ules are lacking) are based on actual that the entrepreneurs or workers dis- practice rather than the law on the books. There are two main reasons that Doing cussed in the case studies were men. This This introduces a degree of judgment Business does not survey firms. The first was incomplete in not correctly reflecting by respondents on what actual practice relates to the frequency with which firms the Doing Business processes as applied looks like. When respondents disagree, engage in the transactions captured by to women—which in some economies the time indicators reported by Doing the indicators, which is generally low. The may be different from those applied to Business in Afghanistan 2017 represent the second reason is that the Doing Business men. The Doing Business 2017 report median values of several responses given questionnaires mostly gather legal infor- began to measure the starting a business under the assumptions of the standard- mation, which firms are unlikely to be process for two case scenarios: one in ized case. fully familiar with. For example, few firms which all entrepreneurs are men and one will know about all the many legal proce- in which all entrepreneurs are women. In Doing Business in Afghanistan dures involved in resolving a commercial economies where the processes are more 2017 respondents dispute through the courts, even if they onerous if the entrepreneur is a woman, More than 100 professionals par- have gone through the process them- Doing Business now counts the extra pro- ticipated in the study, providing the selves. But a litigation lawyer should have cedures applied to the roughly half of the data that inform the four sets of Doing little difficulty in providing the requested population that is female (for example, Business indicators included. The sub- information on all the processes. obtaining a husband’s consent or fulfilling national Doing Business website and the gender-specific requirements for opening acknowledgments section of this report Governments and World Bank a personal bank account when starting a list the names and credentials of those Group staff business). Within the registering property respondents wishing to be acknowl- After analyzing laws and regulations indicators, a gender component has been edged. Respondents are professionals and conducting follow-up interviews added to the quality of land administra- who routinely administer or advise on the with Doing Business in Afghanistan 2017 tion index. This component measures legal and regulatory requirements in the respondents, the subnational Doing women’s ability to use, own and transfer specific areas covered by Doing Business Business team shared preliminary find- property according to the law. Finally, in Afghanistan 2017, selected on the basis ings of the report with governments and within the enforcing contracts indicator of their expertise in these areas. Because public agencies operating at the national set, economies are scored on having of the focus on legal and regulatory and local levels. Through this process, equal evidentiary weight of women’s and arrangements, most of the respondents government authorities had the oppor- men’s testimony in court. The labor mar- are legal professionals, such as lawyers. tunity to comment on the preliminary ket regulation indicators have included Architects, engineers, physical planners, data, in meetings with World Bank Group data on gender components for the past contractors and other professionals staff as well as in writing. Having public two years. These data include whether answer the questionnaires related to officials discuss and comment on the nonpregnant and nonnursing women dealing with construction permits. Local preliminary results has proven to be an can work the same night hours as men; government officials, representatives of important activity, not only to improve whether the law mandates equal remu- national agencies and court officials also the quality of the report, but also to neration for work of equal value; whether provided information that is incorporated enhance the dialogue between the local the law mandates nondiscrimination into the indicators. governments and the World Bank Group based on gender in hiring; whether the at the subnational level. law mandates paid or unpaid maternity The Doing Business in Afghanistan 2017 leave; the minimum length of paid mater- approach was to work with legal prac- nity leave; and whether employees on titioners and other professionals who ADDING A GENDER maternity leave receive 100% of wages. regularly undertake the transactions COMPONENT involved. Following the standard method- ological approach for time-and-motion The Doing Business 2017 report presents studies, Doing Business breaks down each a gender dimension in four of the indica- process or transaction, such as start- tor sets: starting a business, registering ing a business or registering a building, property, enforcing contracts and labor into separate steps to ensure a better market regulation. The first two of these ABOUT DOING BUSINESS 21 NOTES 1. Data from the World Bank Enterprise Surveys and Doing Business complement each other as two sides of the same coin. They both provide useful information on the business environment of an economy, but in significantly different ways. The scope of Doing Business is narrower than the Enterprise Surveys. However, by focusing on actionable indicators related to business regulation, Doing Business provides a clear roadmap for governments to improve. Doing Business uses standardized case scenarios while the Enterprise Surveys use representative samples. For more on the Enterprise Surveys and the differences between the Enterprise Surveys and Doing Business, see the website at http://www.enterprisesurveys.org. 2. These papers are available on the Doing Business website at http:/ /www.doingbusiness. org/methodology. 3. For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. In this way each point included in these indexes has the same value independent of the component it belongs to. Indicators for all other topics are assigned equal weights. 4. See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to Do It” (World Bank, Washington, DC, 2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5. Mary Hallward-Driemeier and Lant Pritchett, “How Business Is Done in the Developing World: Deals versus Rules,” Journal of Economic Perspectives 29, no. 3 (2015): 121–40. 6. Friedrich Schneider, “The Informal Sector in 145 Countries” (Department of Economics, University Linz, Linz, 2005). See also Rafael La Porta and Andrei Shleifer, “The Unofficial Economy and Economic Development,” Tuck School of Business Working Paper 2009-57 (Dartmouth College, Hanover, NH, 2008), available at Social Science Research Network (SSRN), http:/ /ssrn.com/abstract=1304760. Starting a Business MAIN FINDINGS ƒƒ Afghanistan has made important strides since 2008 in simplifying the start-up process. Today the country ranks among the top 50 economies worldwide on the ease of starting a business. ƒƒ Recent changes aimed at abolishing dual licensing requirements for local businesses have the potential to make the start-up process more efficient across the country—though also more costly. ƒƒ Among the five provinces benchmarked, starting a business is easier in Kabul than in the other four. The main reason is that one-stop shops for business registration have not yet spread beyond the capital. ƒƒ In these four provinces the lack of a one-stop shop means that starting a business requires twice as many procedures. But the process still takes the same amount of time as in Kabul and less than in Karachi, Pakistan, or in Mumbai, India. STARTING A BUSINESS 23 A fghanistan has seen a remark- are being implemented as this report In economies where the barriers to able transformation in the goes to press. If they are successful, starting a formal business are low, job past few years. After more starting a business could become faster creation and productivity tend to be than two decades of war the country and easier, though also more expensive. higher—because entrepreneurs can more has entered a period of economic and Once the changes are implemented, easily exit obsolete sectors and reallocate political reconstruction. Along with this their biggest impact will be felt outside scarce capital to productive sectors offer- has come a recognition of the impor- Kabul (box 3.1). ing higher employment and returns. An tance of sound laws and institutional efficient start-up process also frees up frameworks in promoting private sector resources that would otherwise go to participation in the reconstruction pro- WHY DOES FORMAL completing costly procedures—helping cess.1 With support from development BUSINESS REGISTRATION new businesses to grow faster. partners, the government continues MATTER? to work on implementing regulatory and institutional structures aimed at Formal registration of businesses has HOW DOES STARTING fostering new business creation and many benefits for entrepreneurs and the A BUSINESS WORK IN encouraging informal businesses to join local economy. It offers legal protections AFGHANISTAN? the formal economy. not available in the informal sector. It provides legal recognition of limited In all five locations analyzed, entre- Much has changed for local entre- liability ventures allowing entrepreneurs preneurs starting a business face few preneurs. Business registration was to pool their resources, distribute their preregistration procedures. Companies moved out of commercial courts, and risks and limit their legal liability only can be incorporated through private an electronic central business registry to the extent of capital invested. It also documents drafted by their sharehold- was established in 2008 that facilitated increases access to formal services such ers, with no involvement of private the issuance and renewal of operating as courts and banks. This reduces the lawyers or public notaries. In addition, licenses for businesses. In late 2016 the potential for harassment and bribery new investors can rely on standardized Ministry of Commerce and Industries that comes with operating a business in forms, deeds and articles of association. launched further reforms. These reforms the informal sector. Moreover, Afghanistan has no paid-in WHAT DOES STARTING A BUSINESS MEASURE? Doing Business measures the What are the time, cost, paid-in minimum capital and number of procedures to get a number of procedures as well as local limited liability company up and running? the time, cost and paid-in mini- mum capital required for a small Cost (% of income per capita) to medium-size limited liability company to start up and formally Formal operation operate (see figure). To make the data comparable across locations, Paid-in $ minimum Number of Doing Business uses a standard- capital procedures ized limited liability company that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages Entrepreneur Time in general industrial or commercial Preregistration Registration, Postregistration (days) activities and employs between incorporation 10 and 50 people within the first Note: Preregistration procedures include verifying or reserving a company name and having necessary documents month of operations. It considers notarized. Postregistration procedures include registering for social security and obtaining a company seal. two case scenarios: one in which the local limited liability company is owned by five married women and another in which it is owned by five married men (for more information, see the data notes). 24 DOING BUSINESS IN AFGHANISTAN 2017 BOX 3.1 The government is taking an important step forward by abolishing the dual licensing system for businesses The Afghanistan Investment Support Agency (AISA), created by the government in 2003, has been responsible for issuing and renewing investment licenses, required for all domestic and foreign companies doing business in the country. In parallel, the Ministry of Commerce and Industries (MoCI) has issued trade licenses for those considered to be foreign traders. On September 28, 2016, however, MoCI announced reforms aimed at streamlining business licensing in Afghanistan by abol- ishing the dual licensing requirements for domestic businesses. The investment license issued by AISA and the trade license issued by MoCI are being replaced with a single business license administered by the Afghanistan Central Business Registry and Intellectual Property (ACBRIP) general directorate. The new license is to be issued for a period of three years. The changes benefit all local companies, but they particularly benefit those operating outside Kabul, where the trade and investment licenses both had to be renewed yearly under the old system. The cost of the new license is to be a lump sum of AFN 30,000 (US$503)— significantly higher than the cost of the investment license. AISA’s licensing operations were merged into ACBRIP between October 1 and December 31, 2016, first in Kabul and then progressively in the other provinces.a In Kabul, where there is a one-stop shop for business registration, the changes have the potential to reduce the time required to start a business because there are now fewer agencies in the back office. But the impact could be even more significant in the other provinces: if the changes are implemented efficiently, they would allow an entrepreneur to get the license and register the new company in a single visit to the local ACBRIP branch, cutting the number of interactions by three. a. The data presented in this chapter reflect business start-up processes before the start of this transition. minimum capital requirement. Because Only then can she proceed to register the registration takes place at a one-stop of particular legal provisions applying company (box 3.2). shop, where the business and tax to only one gender, however, a married registrations were merged into a single woman starting a business faces more The registration stage consists of three step.2 This reform put Afghanistan (as hurdles than her male counterpart. For steps: obtaining a license, registering represented by Kabul) among the top 50 her, the process starts with obtaining her the company with the tax authority and economies worldwide and first in South husband’s permission to leave the house. paying the corresponding fees. In Kabul Asia on the ease of starting a business. BOX 3.2 Women in Afghanistan comply with additional requirements for starting a business In 155 economies around the world, women do not have the same legal rights and supportive environment vital for promoting entrepreneurship that men do. Evidence shows that economies where female entrepreneurs face more gender-related obstacles to engaging in economic activities tend to perform worse on important economic and social indicators. Globally, if all women were excluded from the labor force, income per capita would be reduced by almost 40%. In South Asia gender gaps in entrepre- neurship and labor force participation lead to an estimated income loss of 19%.a In 2016 Doing Business added gender-related measures to account for gender-related differences in doing business. For start- ing a business, Doing Business now explores whether a woman must obtain permission to leave the house; whether there are gender-specific identification procedures; and whether a married woman must obtain her husband’s permission to start a busi- ness. Twenty-three economies have laws in place imposing one or more of these additional hurdles on women,b and for these economies Doing Business now records additional procedures, time or cost. Afghanistan is among this group, with one such hurdle (see figure). In Afghanistan, by law, if a married woman leaves the house without her husband’s permission, the husband can withdraw his financial support.c Such laws undermine women’s bargaining power within the household and can hamper their ability to pursue a business venture.d a. David Cuberes and Marc Teignier, “Aggregate Costs of Gender Gaps in the Labor Market: A Quantitative Estimate,” UB Economics Working Paper E14/308 (Universitat de Barcelona, 2014). b. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). c. 1977 Afghanistan Civil Law, article 122 (1). Available at http://www.wipo.int/edocs/lexdocs/laws/fa/af/af007fa.pdf. d. Even where business regulations as analyzed by Doing Business are gender blind, social norms and weak implementation of laws may limit economic opportunities for women. (continued) STARTING A BUSINESS 25 BOX 3.2 Women in Afghanistan comply with additional requirements for starting a business (continued) How can governments improve women’s Gender-related differences in law add a procedure for women starting a access to entrepreneurial and employ- business in Afghanistan ment activities? Answering that question Procedures (number) requires understanding many factors— from access to education and health care, Kabul (Kabul) to social and cultural norms, and many things beyond. One important factor is Balkh (Mazar-i-Sharif) how laws, regulations and institutions dif- Herat (Herat) ferentiate between women and men. Kandahar (Kandahar) The Afghan government is undertaking important initiatives to enhance gen- Nangarhar (Jalalabad) der inclusion. These include programs focusing on women’s empowerment. 0 1 2 3 4 5 6 7 8 9 For example, the Women’s Economic Men Women Empowerment National Priority Program is aimed at removing legal barriers to Time (days) women’s economic participation as well Balkh (Mazar-i-Sharif) as providing technical and financial sup- port to women-owned businesses.e The Kabul (Kabul) hope is that the government will combine such initiatives with continual awareness- Kandahar (Kandahar) raising on women’s rights as well as en- courage greater female participation in Herat (Herat) legal and political decision making.f Also needed is systematic collection of gender- Nangarhar (Jalalabad) disaggregated data providing useful in- sights about the types of economic activi- 0 1 2 3 4 5 6 7 8 9 10 ties that women engage in, the challenges Men Women they face and how to address them—data that can support informed decision mak- ing on issues affecting women’s economic Source: Doing Business database. participation. e. Gender inclusion is among the government’s policy priorities as presented at the Brussels Conference on Afghanistan in October 2016. See Islamic Republic of Afghanistan, Afghanistan National Peace and Development Framework (ANPDF), 2017 to 2021 (Kabul, 2016). f. Female representation in the Afghan Parliament is growing. At 27.7%, Afghanistan’s share of female parliamentarians is the second highest in South Asia after Nepal’s. “Women in National Parliaments,” Inter-Parliamentary Union, January 1, 2017, http://www.ipu.org/wmn-e/classif.htm. Because the one-stop shop was imple- more than twice as many procedures as mented only in Kabul, entrepreneurs in in the capital—seven for men and eight A one-stop shop in Kabul has Balkh, Herat, Kandahar and Nangarhar for women (table 3.1). helped reduce the number of procedures for starting a have had to continue to visit the local business. But it has not yet offices of three different agencies, one at a Yet while the one-stop shop in Kabul spread to other provinces. time, to complete all the necessary appli- significantly reduced the number of cations—the Afghanistan Investment procedures to start a business, it did Support Agency (AISA), the Afghanistan not lead to a corresponding drop in the number of procedures required outside Central Business Registry and Intellectual time required. This suggests that the Kabul, starting a business takes no more Property (ACBRIP) general directorate back-office processes were not reengi- time in Balkh and Kandahar (seven days and the Ministry of Finance. This is why neered to deliver more efficient business for men and eight for women) and just starting a business outside Kabul takes registration. Indeed, despite the higher one day more in Herat and Nangarhar. 26 DOING BUSINESS IN AFGHANISTAN 2017 TABLE 3.1  Where is it easy to start a business in Afghanistan—and where not? Afghanistan has made progress Distance Procedures Time Cost in improving the efficiency of the to frontier (number) (days) (% of business start-up process. Yet the Province score income per (City) Rank (0–100) Men Women Men Women capita) cost remains high by regional comparison. Kabul 1 92.08 3 4 7 8 19.9 (Kabul) Balkh 2 86.19 7 8 7 8 19.9 (Mazar-i-Sharif) combining fees for registration, licensing and publication, remains prohibitively Kandahar 2 86.19 7 8 7 8 19.9 (Kandahar) high compared with the cost in other Herat 4 85.94 7 8 8 9 19.9 economies—at AFN 7,484 (US$125), (Herat) or 19.9% of income per capita (figure Nangarhar 4 85.94 7 8 8 9 19.9 3.1). The lump-sum fee of AFN 30,000 (Jalalabad) (US$503) for the new business license Source: Doing Business database. introduced in the last quarter of 2016 Note: Rankings are based on the average distance to frontier score for procedures for men and women, time for men and women, cost and paid-in minimum capital associated with starting a business. (Afghanistan has no will substantially increase the overall paid-in minimum capital requirement.) The distance to frontier score is normalized to range from 0 to 100, with 100 cost (see box 3.1). However, businesses representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in Afghanistan 2017.” will be able to operate for three years before having to renew this license. In all five provinces the process is more The cost of starting a business in efficient than in Karachi, Pakistan, where Afghanistan dropped from more than Despite the government’s continuing starting a business takes 12 procedures 70% of income per capita in 2005 to efforts to reduce regulatory barriers to and 18 days for both men and women, less than 20% in 2016 thanks to the business entry, the rate at which new for- and in Mumbai, India, where it takes 14 introduction of a flat registration fee mal businesses are established remains procedures and 26 days. that applies nationally. Yet the total cost, low (box 3.3). FIGURE 3.1  Starting a business in Afghanistan is comparatively efficient but costly Procedures Time Cost (number) (days) (% of income per capita) 0 0 1 Azerbaijan 2 OECD high-income 3 Azerbaijan 2 Azerbaijan average 4 Bhutan 3 Kabul 6 Maldives 6 OECD high-income 4 Balkh, average 8 Kabul, OECD high-income Kandahar 9 5 average Sri Lanka 10 Maldives 6 Herat, Nangarhar Sri Lanka 12 Balkh, 12 Nepal, Sri Lanka 7 Maldives Pakistan (Karachi) Herat, Kandahar, South Asia average 8.1 8.2 Bhutan 14 8 Nangarhar 15 South Asia average 15.4 15.6 Bhutan Bangladesh (Dhaka) Bangladesh (Dhaka) 9 16 India (Mumbai) South Asia average Nepal 18 10 18 Pakistan (Karachi) All 5 Afghan 11 Bangladesh (Dhaka) 20 21 provinces Pakistan (Karachi) 12 22 24 13 24 India (Mumbai) 14 Nepal India (Mumbai) 26 27 MEN WOMEN Source: Doing Business database. STARTING A BUSINESS 27 BOX 3.3 Why is formal business start-up low in Afghanistan? Evidence suggests that an efficient process for starting a business may An efficient start-up process is associated with a higher density of new businesses contribute to a higher number of Log of new business density new business start-ups. Indeed, 4 Hong Kong SAR, China the figure here shows that the clos- High density, low efficiency High density, high efficiency New Zealand er an economy is to best practices for starting a business—as reflect- 2 ed in a higher distance to frontier Brazil score—the higher the number of new businesses registered relative to the working-age population. 0 Azerbaijan Most economies with a high dis- tance to frontier score for start- ing a business are clustered in –2 Afghanistan the upper-right-hand quadrant of Congo, the figure, showing that they also Dem. Rep. Pakistan have high new business density. Low density, low efficiency Low density, high efficiency –4 Afghanistan is the only economy 20 40 60 80 100 with a distance to frontier score of Distance to frontier score for starting a business (0-100) 90 or above that falls in the lower- right-hand quadrant, showing that Sources: Doing Business database; Entrepreneurship Database, World Bank Group, http://www.doingbusiness.org it has low new business density. /data/exploretopics/entrepreneurship. Note: New business density is the number of newly registered businesses per 100,000 working-age adults (ages Indeed, Afghanistan’s new busi- 15–64). Data for new business density and the distance to frontier score for starting a business are for 2012 and ness density falls far short of what 2014. The figure plots the relationship between these indicators for 109 economies. would be expected given its high distance to frontier score. As measured by this score, its average performance in the ease of starting a business is comparable to that of OECD high-income economies like Germany or Poland. Yet in 2012, the latest year for which comparable data are avail- able, Afghanistan had only 15 newly registered businesses per 100,000 working-age adults. Other economies in South Asia with less efficient start-up processes had far higher numbers, such as Sri Lanka (51) and Nepal (69).a An efficient start-up process is no guarantee of a high density of new businesses. While regulatory entry barriers in Afghanistan are low, entrepreneurs may face other challenges to running a local business. Lack of basic infrastructure such as grid power could be one of them. Only 43% of the Afghan population is connected to the national grid, far lower than the regional average for South Asia of 78%.b The country’s total energy demand is estimated at around 2,500 megawatts, while its power system is capable of servicing a peak demand of only 750 megawatts.c Businesses report 11.5 electricity outages per month on average, with a typical outage lasting 2.6 hours.d Many supplement power from the national grid with expensive but dependable alterna- tives such as private generators. Conflict and security conditions can also deter entrepreneurs. Decades of conflict and international migration have left a sub- stantial gap in Afghanistan’s human capital development. In 2011 only one in three Afghan adults was considered literate.e The shortage of skilled labor makes it difficult for new enterprises to find qualified staff. Hiring women can be particularly challeng- ing, because they often need their family’s permission to take on certain jobs or even to leave their home. Security risks may discourage new investments because firms must absorb the additional cost of operating in a fragile and politically uncertain environment. In a 2014 survey of manufacturing firms in Afghanistan, 30% reported paying for personal security while 17% re- ported experiencing losses due to theft and vandalism.f These structural challenges may discourage entrepreneurs from starting a business in the first place. a. Entrepreneurship Database, World Bank Group, http://www.doingbusiness.org/data/exploretopics/entrepreneurship. b. World Bank, World Development Indicators 2011 (Washington, DC: World Bank, 2011). c. Asian Development Bank, “Energy Supply Improvement Investment Program: Report and Recommendation of the President,” November 2015, https://www.adb.org/projects/documents/afg-energy-supply-improvement-investment-program-rrp. d. Enterprise Survey database, World Bank, http://www.enterprisesurveys.org. e. World Bank, World Development Indicators 2011 (Washington, DC: World Bank, 2011). f. Enterprise Survey database, World Bank, http://www.enterprisesurveys.org. 28 DOING BUSINESS IN AFGHANISTAN 2017 agencies as well as the need for the tax authority to allow the business WHAT CAN BE IMPROVED? resources to improve efficiency. This and tax registrations to be completed step would be particularly useful if under one roof. Implementing a single, The Afghan government has made tan- the one-stop shops process a growing unified form that consolidates the infor- gible progress in improving the ease of number of transactions, which seems mation requirements of the two entities starting a business. Alongside its ongoing likely as the licensing functions of AISA could support this step—and save entre- initiatives, attention to other issues could and the Ministry of Commerce and preneurs time by eliminating the need to add to the gains. Industries are merged and absorbed prepare and then sequentially submit (see box 3.1). separate letters of presentation to the Streamline the start-up process different agencies. by eliminating outdated Implement reforms beyond the requirements capital city Continue simplifying licensing Business or commercial registries are The provinces outside Kabul may lack requirements for local repositories of the inventory of com- local one-stop shops or an integrated businesses panies entering and exiting the market. online platform for business registration, Even after the Afghan government com- Registration not only gives publicity to but local agencies do have full compe- pletes the unification of the investment the incorporation of new companies but tence to process registrations and issue and trade licenses, there may be 20 or also makes it opposable to third parties. documents. For local entrepreneurs, this more types of industry-related licenses, As business registries enhance their is more advantageous than the situation each with its own list of requirements.3 technical capabilities and databases, in economies such as Kenya and most A step further would be to review the physical publication of a notice of incor- countries in Central America, where they range of licenses and permits issued poration in an official gazette or news- need to travel to the capital to register by different government agencies to paper becomes a redundant formality. their business. identify those required for nonhazardous A wide variety of countries provide free business activities, those established for online publication of these notices. Yet there is room for improvement. revenue purposes and those that could In Afghanistan the business registry Completing registration processes be replaced with merely a registration. could consider regularly publicizing the in the provinces outside Kabul still Even licenses or clearances from the incorporation of new companies, sav- requires multiple interactions and visits municipalities could be replaced with a ing entrepreneurs the cost of physical to local offices. Fewer resources and registration or a notice provided by the publication. Amending the publication different criteria than in the capital may business registry if their sole purpose is requirements is among the ongoing result in additional hurdles for local tax collection.4 initiatives to modernize business regis- entrepreneurs. tration in the country. Undertake a legal review of gender-based discriminatory Take stock of the experience Ongoing improvements in laws business registration have the with Kabul’s one-stop shop to Unequal legal status is among the main potential to bring practices in improve efficiency challenges confronting women around other provinces into line with While setting up the one-stop shop in the world.5 Evidence suggests that in those in Kabul, though at a Kabul, at AISA, streamlined the pro- economies where women face greater higher cost. cedures for starting a business in the restrictions, there is less female partici- capital, it did not reduce the number of pation in firm ownership and manage- days required. Some economies with a While provincial officials could quickly ment responsibilities (figure 3.2). Legal well-functioning one-stop shop—such confirm the availability of a company provisions like those requiring women as Armenia, Burundi and Kosovo, all name and the good standing of com- to seek permission from their husband among the top 20 economies on the pany owners by e-mailing AISA’s head- to leave the house, or restricting their ease of starting a business—continued quarters in Kabul, building a unified ability to travel, undermine women’s reforming their start-up process over database or giving local officers access personal capacity to make decisions on time, making it even more efficient. to the central databases could eliminate their own and to participate in economic As plans proceed for establishing new the need to rely on a timely response activities. Removing legal and adminis- one-stop shops within the ACBRIP, the from the capital. As the country moves trative barriers for women would likely responsible officials could map inter- forward with an integrated registration help increase female participation in nal processes to reassess the flow of and licensing system, local offices of the the labor market and in entrepreneurial information between the participating business registry could coordinate with activities. STARTING A BUSINESS 29 FIGURE 3.2  Unequal legal status for women is associated with less female NOTES participation in firm ownership 1. U.S. Agency for International Development, Firms with female participation in ownership (%) “Afghanistan Economic Growth and Private Sector Strengthening (EGPSS) Project,” 80 Completion Report by Deloitte Consulting (Washington, DC, 2010), http:/ /pdf.usaid.gov /pdf_docs/Pdacs874.pdf. 2. World Bank, Doing Business 2010: Reforming 60 through Difficult Times (Washington, DC: World Bank, 2009). 3. Sayed Zubair Badakhsh, “How to Start a Business in Afghanistan” (Afghanistan 40 Chamber of Commerce and Industries, Kabul, 2010), http:/ /www.acci.org.af/media /How%20to%20Start%20a%20 20 Business%20in%20Afghanistan.pdf. 4. Sanjar Ibrahimov and Bobir Taymetov, “‘To Permit or Not to Permit’— Tools for Reforming Permits and Licensing Systems,” IFC 0 SmartLessons series (International Finance –0.4 –0.3 –0.2 –0.1 0 Corporation, Washington, DC, 2007). 5. Sevi Simavi, Clare Manuel and Mark Gender difference in distance to frontier score Blackden, Gender Dimensions of Investment Climate Reform: A Guide for Policy Makers and Sources: Doing Business database; Enterprise Survey database, World Bank, http://www.enterprisesurveys.org. Practitioners (Washington, DC: World Bank, Note: The gender difference in the distance to frontier score shows, for each economy, the effect on its distance to 2010). frontier score due to the addition of gender components in 3 of 10 Doing Business indicator sets (starting a business, registering property and enforcing contracts). The relationship between this measure and the percentage of firms with female participation in ownership is significant at the 1% level after controlling for income per capita. Dealing with Construction Permits MAIN FINDINGS ƒƒ On average in the five Afghan provinces surveyed, completing the construction permitting process for a simple warehouse takes five weeks less than the regional average for South Asia—but it costs more than twice as much as a share of the value of the warehouse. ƒƒ Among the five provinces, Kandahar has the fastest and least costly process, requiring around three months and 28.4% of the value of the warehouse. In Kabul it takes almost nine months longer and costs three times as much. ƒƒ Among the main constraints to greater efficiency and quality in construction permitting in Afghanistan are fragmented and outdated regulations and poor transparency. This situation sustains the alarming rates of illegal construction in the country. DEALING WITH CONSTRUCTION PERMITS 31 A fghanistan has one of the world’s help protect the public from unsafe build- municipal staff have received training most rapid population growth ings. Well-functioning systems of tailored to local needs.5 Expanding these rates. According to World Bank building permitting and inspection also initiatives and extending them to other estimates, the population is projected fulfill a wide range of other public policy Afghan provinces would boost invest- to expand from the current 32 million objectives—such as long-term land plan- ment in construction and infrastructure. to nearly 44 million by 2030.1 The share ning, environmental protection, water living in urban centers is expected to conservation and energy efficiency, almost double by 2050, increasing from accessibility for persons with disabilities, HOW DOES CONSTRUCTION 26% to more than 45%. But this process and preservation of historical assets and PERMITTING WORK IN of urbanization remains uncontrolled national heritage. AFGHANISTAN? and unregulated. More than 70% of residential buildings in Kabul are informal These systems can also support invest- Afghanistan lacks a comprehensive constructions built outside the areas ment in the construction sector and thus building code that sets the standards for approved by the master plan and without promote job growth. A recent study from construction.6 However, several national proper quality controls. This increases the International Labour Organization and local laws affect the construction their vulnerability to natural disasters. estimates that in emerging market permitting process. The Municipality In 2015, according to United Nations economies, an investment of US$1 mil- Law of 2000 establishes the roles and estimates, almost 39,000 houses in lion in the construction sector creates responsibilities of the parties involved Afghanistan were damaged or destroyed more than 150 new jobs.3 In Afghanistan in approving and implementing urban by natural disasters, affecting more than today the construction sector employs master plans. Other aspects of urban 280,000 people.2 9.4% of the labor force and contributes planning are partially regulated by around 9% of GDP.4 Given the country’s the Expropriation Law (2000), the massive shortage of housing and urban Regulations on Urban Settlement Afghanistan lacks a infrastructure, the sector has powerful Projects (1979) and the Regulation on comprehensive building code potential for expansion. In recent years the Implementation of the Master Plan that sets the standards for efforts have been made to increase the (1990).7 In addition, municipal decrees construction. efficiency and transparency of construc- dating to the 1970s and 1980s regulate tion permitting—especially in Kabul, various aspects of urban planning in Sound regulation and robust control where the municipal regulatory frame- each city. These result in substantial mechanisms in the construction sector work has been reviewed and updated and variation across Afghanistan in the time, WHAT DOES DEALING WITH CONSTRUCTION PERMITS MEASURE? To measure the ease of dealing with construction permits, Doing Business Dealing with construction permits: measuring the records the procedures, time and cost required for a small or medium- efficiency and quality of building regulation size business to obtain the approvals needed to build a simple commer- cial warehouse and connect it to water and sewerage. This includes all Rankings are based on distance to frontier scores for four indicators the inspections and certificates needed before, during and after con- struction of the warehouse. To make the data comparable across 190 Days to comply with Cost to comply with formalities to build a formalities, as % of economies, it is assumed that the warehouse is in the periurban area of warehouse warehouse value the analyzed business city, that it is not in a special economic or indus- trial zone, and that it will be used for the general storage of nonhazard- ous materials, such as books. In addition, in 2015 Doing Business intro- 25% 25% Time Cost duced the building quality control index, which measures the underlying 25% 25% quality of construction regulations and controls. The index accounts for Procedures Building quality one-fourth of the distance to frontier score for dealing with construction control permits (see figure). index Steps to comply with Quality of building formalities; completed when regulation and its final document is received implementation 32 DOING BUSINESS IN AFGHANISTAN 2017 cost and number of procedures required water and sewerage is easier in Kandahar, visit the land plot to sketch a simple map to deal with construction permits. and more difficult in Kabul (table 4.1). In of its boundaries, and the map is then Kandahar the process takes 14 proce- checked against the master plan by the On average in the five Afghan provinces dures and 96 days and costs 28.4% of municipality’s technical section. The head benchmarked, the construction permit- the warehouse value. In Kabul it takes of the municipality then adds his signature ting process takes 17 procedures and almost nine months longer and is three to the application package, which at this 159.4 days and costs the equivalent of times as expensive (82.7% of the ware- point consists of the application letter and 41.9% of the warehouse value—less house value). the sketch of the land plot. time than the average for South Asia (196.4 days) but a remarkably higher In all provinces except Kabul, the devel- cost than the regional average (16.7% of Depending on the province, five oper needs to submit the application to seven procedures must be the warehouse value) (figure 4.1). All the package and the architectural drawings completed before construction provinces except Kabul receive a score of for the new building to the Department of can even begin. 2 (of a possible 15) on the building quality Urban Development, the local branch of control index, among the lowest scores the Ministry of Urban Development. The globally and far lower than the South Depending on the province, five to seven applicant pays the corresponding fee, and Asian average of 8.7. Kabul receives a procedures must be completed before the Department of Urban Development slightly higher score (2.5), reflecting the construction can even begin. First the reviews the project. The application is availability of information on building developer submits an application letter for then returned once again to the munici- regulations in the capital city (box 4.1). the building permit to the municipality. The pality for a final decision on the building municipality reviews the application and permit approval. To obtain the building Complying with the formalities required checks the land title against its property permit, the applicant needs to also pay to build a warehouse and connect it to archives. After that, municipal inspectors a fee to the municipality. In Kabul the FIGURE 4.1  The cost of dealing with construction permits in Afghanistan is more than twice the South Asian average EFFICIENCY OF CONSTRUCTION BUILDING QUALITY PERMITTING CONTROL Procedures Time Cost Index (number) (days) (% of warehouse value) (0–15) 0 6 economies 0 (global best)** Luxembourg, 1 New Zealand 15 2 Korea, Rep. 30 Sri Lanka (South (global best) (global best) Asia best) 5 14 3 4 60 13 5 10 Nepal 90 Kandahar Buthan 6 (South Asia best) Nepal 12 Nangarhar (South Asia 4 economies 7 best) (global best)* 120 Balkh 15 11 8 Herat South Asia 9 average 10 150 Maldives, Nepal 10 Afghanistan 20 (South Asia best) 9 11 average 180 12 South Asia South Asia 25 average 8 13 Kabul average 210 India 7 14 Balkh, 15 Kandahar 30 Kandahar 240 6 South Asia average 16 Sri Lanka Afghanistan 17 Balkh 5 Bangladesh 270 35 average Herat 18 4 Nangarhar 19 300 20 40 3 21 Nangarhar 330 Afghanistan Kabul average 2 Balkh, Herat, 22 45 Kandahar, 23 Herat 360 Kabul (South 1 Nangarhar Asia worst) India Kabul (South Asia worst) 35 390 85 0 (South Asia worst) (South Asia worst) Source: Doing Business database. * These are Denmark, Georgia, the Marshall Islands and Sweden. ** These are Dominica, Mongolia, the Slovak Republic, St. Vincent and the Grenadines, Thailand, and Trinidad and Tobago. DEALING WITH CONSTRUCTION PERMITS 33 BOX 4.1 The building quality control index—going beyond efficiency The building quality control index assesses the quality of construction regulations and controls in six main areas (for a possible 15 points): quality of building regulations (2 points); quality control before (1 point), during (3 points) and after construction (3 points); liability and insurance regimes (2 points); and professional certifications (4 points). Kabul receives a score of 2.5 on the building quality control index, while the other four provinces receive a score of only 2 (see table). For the quality of building regulations, Afghan provinces receive among the lowest scores globally on the building quality scoring depends on whether regula- control index tions are easily accessible and how clearly the requirements and fees for Four Afghan provinces a obtaining a building permit are speci- Pakistan (Karachi) Pakistan (Lahore) fied. In Kabul some of the required India (Mumbai) Kyrgyz Republic Kabul (Kabul) steps and regulations are available to India (Delhi) Sri Lanka the public through the Kabul munici- Bhutan Oman pality (0.5 points). In the other four provinces no information on construc- Building quality tion regulations is publicly available 2 2.5 5.5 10.5 11 11 11 12 12 12.5 control index (0–15) (0 points). Globally, less than 10% of Quality of building economies receive a score of 0 on this 0 0.5 1.5 1.5 2 2 2 2 2 2 regulations (0–2) component Quality control 1 1 0 1 1 1 1 1 1 1 before construction (0–1) For quality control before construc- Quality control tion, Afghan municipalities and local 0 0 1 2 2 2 2 2 2 1 during construction (0–3) branches of the Ministry of Urban Quality control Development are staffed with li- 0 0 3 3 3 3 2 3 3 3 after construction (0–3) censed engineers who verify that the Liability and insurance building plans are in compliance with 1 1 0 1 0 0 0 0 0 1.5 regimes (0–2) the building regulations and actively Professional participate on the committees re- 0 0 0 2 3 3 4 4 4 4 certifications (0–4) sponsible for approving the plans (1 Maximum points obtained point). Areas with a difference between Kabul and the other four Afghan provinces The legal requirements for inspections Source: Doing Business database. during construction are not clearly a. Balkh (Mazar-i-Sharif), Herat (Herat), Kandahar (Kandahar) and Nangarhar (Jalalabad).specified in Afghanistan.a While in practice most municipalities inspect important construction projects, these inspections are neither legally mandated nor consistently applied in all cases (0 points). Final inspections after construction are neither legally mandated nor commonly carried out in practice (0 points). In contrast, final inspections are mandatory in all other South Asian economies except Maldives—and in most economies globally. Structural defects in a building are often discovered only after it has been occupied. In most economies liability is shared be- tween the contractor and the architect, and in some economies insurance is mandatory. The civil code of Afghanistan specifies the liability requirements for structural defects (1 point). But there is no legal obligation to obtain an insurance policy to cover possible defects (0 points). Among South Asian economies, only Pakistan (Karachi) has both the liability and insurance regimes in place for covering possible structural flaws. It is important that professionals involved in the permitting process have the necessary technical qualifications. Afghanistan lacks formal regulations specifying the qualification requirements for the technical professionals who review the drawings (0 points) or supervise the construction on site (0 points). All other South Asian economies except Sri Lanka have at least the minimum qualification requirements in place for these professionals. Globally, around 75% of economies require some level of professional certification. a. Article 35 of the Municipality Law of 2000 specifies that the duties of the agency responsible for implementing the master plan include “monitoring of the construction site according to the master plan.” Article 40 of the same law suggests that supervision of the project by the designer and technical control of the project “should be considered during construction.” These are the only legal provisions at the national level that regulate the quality control processes during construction. 34 DOING BUSINESS IN AFGHANISTAN 2017 TABLE 4.1  Where is dealing with construction permits easy in Afghanistan—and by the sketch of the land plot and the where not? architectural drawings. Distance to frontier Cost Building quality During the construction phase sev- Province score Procedures Time (% of ware- control index eral inspections take place. For a seven- (City) Rank (0–100) (number) (days) house value) (0–15) month project the number of inspections Kandahar 1 39.29 14 96 28.4 2 ranges from 6 in Kabul and 7 in Balkh and (Kandahar) Kandahar to 14 in Herat and Nangarhar Balkh 2 38.43 14 108 31.8 2 (Mazar-i-Sharif) (figure 4.2). These inspections generally Nangarhar 3 31.71 21 104 34.3 2 are not conducted at specified stages of (Jalalabad) construction. Instead, they happen Herat 4 27.62 23 133 32.1 2 randomly, depending on the availability (Herat) of inspectors, the volume of construc- Kabul 5 22.39 13 356 82.7 2.5 tion projects under way and priorities in (Kabul) allocating resources. Source: Doing Business database. Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated with dealing with construction permits as well as for the building quality control index. The distance to frontier score is In Herat the municipality has increased normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the the frequency and coverage of inspec- better). For more details, see the chapter “About Doing Business and Doing Business in Afghanistan 2017.” tions since 2015 in an effort to enhance the quality of construction supervision. project is reviewed only by the munici- In Herat the municipality conducts In Jalalabad (the provincial capital of pality because the Kabul municipality, as two additional inspections before con- Nangarhar) the municipality typically part of the central government’s organi- struction starts: one to calculate the inspects only about 70% of projects zational structure, has a different status. building permit fee, and one to check every two weeks. Other municipalities, In the other provinces the Department the boundaries of the land plot before such as Kandahar and Mazar-i-Sharif of Urban Development is the authority the beginning of the excavation works. (the provincial capital of Balkh), conduct through which the central government In all other provinces the municipal- less frequent inspections but inspect participates in the permitting process.8 ity relies on the information provided more construction projects. In most FIGURE 4.2  Up to two-thirds of all procedures for dealing with construction permits in Afghan provinces are random inspections during construction Inspection Maldives 10 Nepal 10 Kabul 13 Sri Lanka 13 Balkh 14 Bangladesh (Dhaka) 14 Kandahar 14 Bangladesh (Chittagong) 15 Pakistan 15 South Asia average 16.4 Afghanistan average 17 Bhutan 21 Nangarhar 21 Herat 23 India (Delhi) 29 India (Mumbai) 42 0 5 10 15 20 25 30 35 40 45 Procedures Before construction During construction After construction Connection to utilities Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 35 provinces the municipality is the main it takes 110.3 days on average. Complying Nangarhar (Jalalabad). The length of the inspection authority. But in Kandahar with all requirements takes the least time delay depends on the efficiency of the the Department of Urban Planning is in Kandahar, 96 days—and in Nangarhar finance department that calculates the also involved, and in Kabul the police (Jalalabad), 104. Among economies fees payable, and on the availability of department is. Once the construction is in South Asia, only Nepal has a faster engineers to review the drawings. completed, developers are not required process (86 days). In Herat the process to obtain a formal validation of the quality takes 133 days because the municipality Obtaining the building permit in Kabul of construction before occupancy, and no needs three weeks for the preliminary takes 300 days. In contrast, it can be done final inspection takes place to verify that review of the application; in Nangarhar within two months in all the other prov- the building conforms with the approved (Jalalabad) the municipality needs less inces (figure 4.3). This wide gap is due to plans. than one. Lack of inspectors explains the differences in the size, growth rates and delay in Herat. urbanization patterns of the provincial capitals.9 While Kabul is a major destina- Inspections during construction Obtaining all preapprovals—those tion for returning migrants as well as for generally are not conducted at required before the developer can obtain the rapidly urbanizing rural population, specified stages. Instead, they a building permit—can take nearly population growth in the other provincial happen randomly, depending on half the total time needed to deal with capitals is more moderate. The majority the availability of inspectors, the construction permits, as in Herat. In the of available land plots in Kabul fall outside volume of construction projects provincial capitals other than Kabul the the existing master plan, which dates to under way and priorities in allocating resources. most time-consuming procedure before 1978. The municipality therefore has to the building permit request is processed make time-consuming, ad hoc revisions is verification of the architectural plans of urban planning and zoning rules for Dealing with construction permits and the technical drawings and calcula- new construction projects.10 takes nearly a year in Kabul, where the tion of the fee to obtain the preliminary high level of construction activity and approval from the Department of In all provinces the lack of water a shortage of municipal staff have led Urban Development. This takes 20 and sewerage infrastructure greatly to a chronic backlog of building permit days in Balkh (Mazar-i-Sharif) and 25 increases the time required to complete applications. In the other four provinces in Kandahar, but 30 days in Herat and a new construction. Builders need to dig FIGURE 4.3  Obtaining a building permit takes far longer in Kabul than in the other Afghan provinces Total time 55 (days) 96 Kandahar (Kandahar) 25 30 40 104 Nangarhar (Jalalabad) 30 10 50 Balkh (Mazar-i-Sharif) 20 30 108 48 Herat (Herat) 30 18 133 300 Kabul (Kabul) 356 0 50 100 150 200 250 300 350 Time to deal with construction permits (days) Apply for a building permit Obtain the sketch Obtain approval from DoUD Obtain building permit Other procedures Source: Doing Business database. Note: Obtaining the building permit involves only one procedure in Kabul, where there is no separate approval from the Department of Urban Development (DoUD), but two procedures in the other locations shown. 36 DOING BUSINESS IN AFGHANISTAN 2017 a well and build a septic tank, efforts represents up to 94% of the total (figure To eliminate legislative gaps that together take more than a month on 4.4). In four of the provinces the cost and clarify ambiguities, the average (33.3 days). ranges from AFN 480,000 (US$8,000) fragmented regulations on to AFN 600,000 (US$10,000).11 In urban planning and construction The cost of dealing with construction Kabul, where labor costs are substan- permitting need to be permits ranges from 28.4% of the tially higher, putting in a well and septic consolidated into a single, consistent framework that is easy warehouse value in Kandahar to 82.7% tank requires about AFN 1,200,000 to understand. in Kabul. This cost consists of three com- (US$20,000). ponents: the fee paid to the Department of Urban Development for reviewing permitting need to be consolidated the drawings, the fee for obtaining the WHAT CAN BE IMPROVED? into a single, consistent framework that building permit from the local municipal- is easy to understand. The law needs ity, and the cost of digging a well and Good practices both within Afghanistan to delineate the responsibilities of building a septic tank. The Department of and in other economies around the world the national and municipal agencies Urban Development charges around AFN point to potential ways to improve con- participating in construction permitting 15,836 (US$265) for a two-story ware- struction permitting in the country. and supervision. Municipal decrees house like the one in the Doing Business on urban planning and construction case study; this fee, established by the Modernize, consolidate and permitting need to be reconciled with Ministry of Urban Development’s official clarify the legislative framework the national regulatory framework and fee schedule, applies equally to all prov- Afghanistan lacks a clear and compre- updated to reflect modern technologies inces. In contrast, the building permit hensive legislative framework for regu- in urban planning, construction and fee is determined by each municipality lating urban planning and construction land administration. To ensure effective and varies greatly among provinces. In activities, and existing regulations in this implementation, the drafting of the Herat the fee is AFN 21,135 (US$354), area are outdated and not accessible to regulatory framework should be based while in Balkh (Mazar-i-Sharif) it is the public. This situation sustains the on wide consultation with the public three and a half times as much. In Kabul alarming rates of illegal construction in and private stakeholders involved in the building planners estimate the total cost Afghanistan and creates serious public permitting process. Also essential is a for a building permit at AFN 358,084 safety risks given the country’s high level clear communication strategy for dis- (US$6,000). of seismic activity. seminating the new guidelines. Construction companies in Afghanistan To eliminate legislative gaps and clarify Afghanistan could look to interna- incur a high cost for drilling a well and ambiguities, the fragmented regulations tional good practices. For example, in building a septic tank; indeed, this cost on urban planning and construction September 2012 Azerbaijan consolidated FIGURE 4.4  Across Afghan provinces, most of the cost of dealing with construction permits comes from digging a well and building a septic tank Kandahar (Kandahar) 89% Balkh (Mazar-i-Sharif) 85% Herat (Herat) 94% Nangarhar (Jalalabad) 93% Kabul (Kabul) 77% 0 5 10 15 20 25 Cost to deal with construction permits (US$ thousands) Preliminary approval (Department of Urban Development) Building permit (municipality) Utilities Source: Doing Business database. DEALING WITH CONSTRUCTION PERMITS 37 different pieces of construction and the municipality and the Department and in local newspapers along with urban planning legislation into a single of Urban Development. The other prov- detailed information about the projects.14 law addressing the entire scope of urban inces should follow suit. planning and construction permitting— Kabul has recently taken notable steps to the Urban Planning and Construction Make the permitting process improve public access to information for Code. Mongolia followed an incremental more transparent building permit applications. It developed approach. The government adopted Afghanistan has one of the lowest rank- process guidelines, checklists and stan- intermediate legislation in 2012 focused ings globally on the Doing Business mea- dardized forms and made them available mostly on construction permitting sure of the accessibility and transparency at the municipality and online. It also car- (Cabinet Resolution 151) while laying of building regulations. Entrepreneurs lack ried out a broad communication campaign out a longer-term strategy for the subse- prior knowledge of the necessary fees, to familiarize industry professionals with quent development of a comprehensive documents and administrative steps for the regulation. This initiative can serve as building code. obtaining a building permit. Because of an example of good practice that could be the lack of transparency, a high degree replicated in other Afghan provinces.15 Afghanistan could adopt a multistage of discretion is involved in approving or reform strategy. It could start with the rejecting building permit applications. Adopt simple fee schedules critical operational aspects—such as This kind of situation—where applicants based on objective criteria for consolidating, modernizing and stan- lack the information needed to hold issuing building permits dardizing the construction permitting government bodies accountable—fosters Fee schedules for the permitting process and supervision regimes—then move informality and corruption. are not publicly available in Afghanistan, on to higher-order reforms aimed at and the assessment of fees leads to creating a comprehensive urban planning administrative backlogs. The municipal- framework. The new regulations could To improve transparency, ity’s finance department calculates the first be made mandatory for public sector guidelines should be published fee for a building permit based on the construction, supported by large-scale for the entire construction municipal fee schedule. The Department training and dissemination efforts to permitting process, along with of Urban Development’s revenue depart- build a critical mass of expertise among checklists of required documents ment calculates the fee for reviewing the engineers and inspectors. Afterward, the and clearly defined fee schedules. architectural plans based on the national new regulations could be extended to all fee schedule of the Ministry of Urban construction. Development. Together, the two agencies To improve transparency, guidelines take at least a week to calculate these Increase interagency should be published for the entire con- fees for a project. coordination and streamline struction permitting process, along with redundancies checklists of required documents and A simple, transparent and clearly speci- In provinces outside Kabul there are clearly defined fee schedules. This infor- fied fee schedule could both save time for overlapping responsibilities for pre- mation could be made publicly available developers and increase the predictabil- liminary approvals: the Department of through board notices at the municipali- ity of their costs. One way to simplify fee Urban Development is broadly respon- ties as well as through printed brochures schedules is to develop criteria for catego- sible for verifying the compliance of a or official websites.12 In New Zealand the rizing buildings by their level of complexity proposed building with the zoning rules, authorities make this information available and then apply different fees for each level, while the municipality’s role is to check online, providing a detailed description of consistent with the amounts needed to compliance with the master plan. The the permitting process as well as a check- recover costs. A common good practice Kabul municipality has integrated both list of required documents, fee schedules, is to charge small, fixed fees for simpler these functions within its structure, so professional contacts and appeal options.13 projects presenting no risk to public health developers have no need to interact and safety.16 Afghanistan could also look separately with the Department of The transparency of the approval process to the example of Canada, which has Urban Development to obtain a building for building permits could be increased developed user-friendly fee schedules permit. Institutionalizing this practice in by publicizing the decisions on applica- based on the size of the construction and all other provinces would save time for tions along with the justification for those the type of building (residential, com- developers and eliminate the duplication decisions. This would allow some public mercial, industrial).17 Some countries, of efforts. Herat is already moving in this oversight and increase accountability. In including Georgia and Pakistan, apply a direction: plans for complex projects are Sweden the decisions on building permits simpler formula based only on the number now reviewed by a joint commission of are published on municipalities’ websites of square meters of the building. 38 DOING BUSINESS IN AFGHANISTAN 2017 Overhaul the system for Properly regulated third-party or in-house inspections during construction NOTES inspection mechanisms might provide In Afghanistan municipal authorities a balanced approach for imposing such 1. World Bank Group Data: Population Estimates routinely conduct frequent, unannounced requirements. In the former Yugoslav and Projections, http:/ /datatopics.worldbank inspections during construction, though Republic of Macedonia lower-risk build- .org/hnp/popestimates. 2. United Nations Office for the Coordination of these are not mandatory under the ings can be commissioned on the basis Humanitarian Affairs (OCHA), Afghanistan: law. Among economies reforming their of a final inspection report prepared by Overview of Natural Disasters in 2015 (New inspection systems, there has been a a licensed supervisory engineer, with no York: OCHA, 2016), https:/ /www .humanitarianresponse.info/en/system/files growing policy trend toward conducting involvement of the construction control /documents/files/afg_naturaldisasters2015_ inspections at key stages of the construc- authorities.20 jan_dec_ocha_raf_a3_201603mar24_0.pdf. tion process. This approach ensures prop- 3. Christoph Ernst and Marianela Sarabia, The Role of Construction as an Employment er supervision of the critical milestones The Kabul municipality recently adopted Provider: A World-Wide Input-Output Analysis, of construction while also regulating the a regulation on the issuance of occupancy Employment Working Paper 186 (Geneva: frequency and thoroughness of inspec- certificates that specifies the rules and International Labour Organization, 2015). 4. Afghanistan, Ministry of Economy, Afghanistan: tions and enhancing the transparency and requirements for validating a newly con- Provincial Briefs (Kabul: World Bank Group, consistency of the process. New Zealand, structed building with the municipality.21 2014), http:/ /www.worldbank.org/en which has the top ranking on the ease If successfully enforced, this regulation /country/afghanistan/publication/afghanistan -provincial-briefs; data on breakdown of GDP of dealing with construction permits in could play a crucial role in improving from National Accounts Main Aggregates, Doing Business 2017, mandates a mini- compliance across all stages of construc- United Nations Statistics Division, http:/ / mum of seven phased inspections during tion, from the verification of project plans unstats.un.org/unsd/snaama/dnllist.asp. 5. These initiatives were part of the Kabul construction for residential buildings.18 through quality control during and after Municipality Construction Permit Reform construction. The other provinces should Project, developed by the International Afghanistan could adopt mandatory follow suit. Finance Corporation (IFC) of the World Bank Group together with the government phased inspections as an important ini- of Afghanistan and the Kabul municipality tial step toward a more comprehensive Introduce stricter standards for in 2013 and 2014. Documents developed framework for quality control during con- the professionals involved in the by the project and approved by the Kabul Municipality Administration Council include struction. The exact phases and number permitting process laws and regulations on the legalization of of inspections could be determined on the The professionals who review drawings unplanned settlements in accordance with basis of local conditions, such as the level or supervise construction sites need a the Kabul city master plan, on construction inspection and monitoring and on the issuance of seismic activity and the prevalence of technical background in architecture of construction permits based on risk factors. low-rise structures. Construction mile- or engineering to evaluate whether the The project also helped streamline the stones for inspections generally include construction meets safety standards. permitting process for residential and high-rise commercial buildings through the introduction at least the completion of the foundation Among the 190 economies benchmarked of a dedicated one-stop shop and a web-based works, the structural frame, the floors and by Doing Business, 73 require these pro- automated system. roof, the plumbing works and the electri- fessionals to have a university degree in 6. In 2014 the Afghanistan Investment Climate Facility Organization (Harakat) drafted a set cal works.19 engineering, construction or construc- of national building standards that included an tion management. In Afghanistan today, urban development code, an architecture code, Introduce measures of quality however, the building departments of a structural code and a highway and bridge code. These standards have been accepted control before a new building municipalities lack qualified profession- by the Afghan National Standards Authority can be occupied als. The country could align itself with (ANSA) but are not yet enforced. In Afghanistan today, new buildings do not international best practice by improving 7. U.S. Agency for International Development (USAID), Land Reform in Afghanistan (LARA): undergo a final inspection before occu- professional standards in the build- Designing a Legal Framework for Urban Planning pancy. So buildings with poor-quality con- ing sector. With the support of central in Afghanistan—Guidance Report (Washington, struction may be commissioned for use, authorities, the municipalities could DC: USAID, 2012). 8. For commercial buildings of more than two resulting in serious public safety hazards. consider strengthening local capacity by and a half stories, the provincial Departments This issue could be addressed by intro- hiring and training qualified engineers of Urban Development do not have the ducing mechanisms for final verification to carry out plan reviews and building authority to approve the drawings, so the applicant’s documents are referred to the of compliance with building regulations. inspections. Staffing plans could be Ministry of Urban Development in Kabul for If properly enforced, a requirement that developed incrementally, consistent with further processing. completed structures undergo a techni- funding and training resources. 9. The estimated population of Afghanistan’s five largest provincial capitals as of 2015 is as cal examination before being approved follows: Kabul (3,564,855); Herat (673,425); for occupancy could increase the overall Mazar-i-Sharif (582,113); Kandahar (464,265); safety and quality of construction. and Jalalabad (296,895). Government of the DEALING WITH CONSTRUCTION PERMITS 39 Islamic Republic of Afghanistan (GoIRA), The State of Afghan Cities (Kabul: GoIRA, 2015), http:/ /unhabitat.org/books/soac2015/. 10. Japan International Cooperation Agency, “Draft Kabul City Master Plan,” consultant report prepared by RECS International and Yachiyo Engineering (Tokyo, 2011), http:/ / open_jicareport.jica.go.jp/pdf/12058566_01 .pdf; in-depth interviews with representatives of the Kabul municipality and with external consultants responsible for drafting urban planning reforms for the municipality. 11. The cost estimates were originally collected in U.S. dollars (US$8,000–10,000). The estimates were converted at 59.7 Afghani per dollar, and the resulting numbers were rounded. 12. All five provincial capitals have websites: Herat, http:/ /herat-m.gov.af/fa; Jalalabad, http:/ /jalalabad-m.gov.af/en; Kabul, http:/ / km.gov.af/en; Kandahar, http:/ /kandahar-m .gov.af/en; and Mazar-i-Sharif, http:/ /mazar-m .gov.af/en. 13. Auckland Council, “How to Apply for a Building Consent” (Auckland, New Zealand, 2016), http:/ /www.aucklandcouncil .govt.nz/EN/ratesbuildingproperty /consents/Consent%20documents /ac1802applyingforbuildingconsent.pdf. 14. “Guide for Applying for a Building Permit,” Swedish National Board of Housing, Building and Planning, accessed September 15, 2016, http:/ /www.boverket.se/en/start-in-english /about-boverket/easy-to-read/when-you -want-to-build/applying-for-a-building -permit/guide-for-applying-for-a-building -permit/. 15. The initiative was carried out as part of the IFC’s Kabul Municipality Construction Permit Reform Project, which included a public awareness campaign on the construction permitting process. 16. Thomas Moullier, Building Regulation for Resilience: Managing Risks for Safer Cities, World Bank Report ACS15966 (Washington, DC: World Bank Group, 2015). 17. “Toronto Building Fee Schedule,” City of Toronto, accessed September 15, 2016, http:/ / www1.toronto.ca/wps/portal/contentonly?vgn extoid=6d3ea41deefc0410VgnVCM10000071 d60f89RCRD&vgnextchannel=6c661ba53b45 0410VgnVCM10000071d60f89RCRD#FAQ3. 18. Thomas Moullier, Building Regulation for Resilience: Managing Risks for Safer Cities, World Bank Report ACS15966 (Washington, DC: World Bank Group, 2015). Additional inspections might be required depending on the risk category of the building. 19. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). 20. World Bank, Doing Business 2017: Equal Opportunity for All (Washington, DC: World Bank, 2016). 21. The initiative was carried out as part of the IFC’s Kabul Municipality Construction Permit Reform Project. Getting Electricity MAIN FINDINGS ƒƒ On average in the five Afghan provinces surveyed, getting an electricity connection takes three weeks less than the regional average for South Asia. But it costs almost 70% more as a share of income per capita. One substantial expense is the substation distribution transformer, which because of insufficient capacity needs to be purchased and installed in the vast majority of cases. ƒƒ Among the five Afghan provinces, it is easiest to obtain an electricity connection in Kabul, where the headquarters of the state distribution utility are located. ƒƒ While all five Afghan provinces receive a score of 0 on a Doing Business measure of the reliability of electricity supply, power shortages are particularly severe in the South, which lacks connectivity with the rest of the country and with potential exporting states. GETTING ELECTRICITY 41 A bout two-thirds of the Afghan of conflict. It is impossible to operate a The process of obtaining a new population have no access to the factory, run a shop, grow crops or deliver electricity connection for a electricity grid.1 Even where grid goods to consumers without using some business is fairly standardized power is available, the energy supply is form of energy. Self-supply is often pro- across Afghanistan. unreliable, with customers experiencing hibitively expensive, especially for small frequent and long-lasting outages. Many firms.4 Improving efficiency and quality structures remain without electric- in the process of obtaining a connection Afghanistan (figure 5.1). This process, as ity or have to rely on expensive diesel is also important in Afghanistan. Indeed, regulated by the 2016 Electrical Energy generators. Small firms identify lack of as represented by Kabul, Afghanistan Services Regulating Law, starts with the electricity as the third biggest obstacle in stands at 159 in the Doing Business rank- customer submitting an application to the business environment, after political ing of 190 economies on the ease of DABS.6 The application must include instability and corruption.2 Shortages getting electricity.5 information on the property and on the are particularly severe in the South. type of activity requiring power. DABS Herat and other provinces in the West, sends inspectors to visit the site in order and Kabul and others in the Northeast, HOW DOES GETTING to verify the feasibility of the new con- benefit from transmission-line connec- ELECTRICITY WORK IN nection and assess whether the power tions with neighboring countries—the AFGHANISTAN? station has sufficient capacity. In the Islamic Republic of Iran, Turkmenistan, large majority of cases sufficient capacity Uzbekistan and Tajikistan. But there are no Electricity is provided by Da Afghanistan is not available, and a new distribution connections extending to Afghanistan’s Breshna Sherkat (DABS), a state-owned transformer needs to be installed. southern provinces, most of which distribution utility. DABS was created in remain unserved or underserved.3 2008 to manage, operate and maintain Based on the results of the inspection, the national power system. The process DABS approves the application and Improving access to electricity is key to of obtaining a new electricity connection provides the customer with a list of the boosting an economy weakened by years for a business is fairly standardized across materials to be purchased, including the WHAT DOES GETTING ELECTRICITY MEASURE? Doing Business records all procedures required for a business to obtain a perma- Getting electricity: measuring efficiency, nent electricity connection and supply for a standardized warehouse. These pro- reliability and transparency cedures include applications and contracts with electricity utilities, all necessary inspections and clearances from the distribution utility and other agencies, and Rankings are based on distance to frontier scores for four indicators the external and final connection works. To make the data comparable across locations, several assumptions about the warehouse and the electricity connec- Days to obtain Cost to obtain a an electricity connection, as % of tion are used. The location of the warehouse is assumed to be within city limits, connection income per capita the subscribed capacity of the connection 140 kilovolt-amperes (kVA), and the length of the connection 150 meters. 25% 25% Time Cost Doing Business also measures how reliable the supply of energy is and how trans- 25% 25% parent the consumption tariffs are. Its reliability of supply and transparency of tar- Procedures Reliability of supply and iffs index encompasses quantitative data on the duration and frequency of power transparency of tariffs outages as well as qualitative information on several aspects: the mechanisms put in place by the utility for monitoring power outages and restoring power sup- Steps to file a connection Power outages ply, the reporting relationship between the utility and the regulator for power out- application, prepare and regulatory a design, complete mechanisms in ages, the transparency and accessibility of tariffs and whether the utility faces a works, obtain approvals, place to monitor financial deterrent aimed at limiting outages. The index accounts for one-fourth of go through inspections, and reduce them; install a meter and transparency of the distance to frontier score for getting electricity (see figure). In addition, Doing sign a supply tariffs contract Business records the price of electricity in each location covered.a a. While Doing Business records the price of electricity, it does not include these data when calculating the distance to frontier score or the ranking on the ease of getting electricity. 42 DOING BUSINESS IN AFGHANISTAN 2017 FIGURE 5.1  The main steps to obtain an electricity connection in Afghanistan a new electricity connection takes 6.8 procedures and 112.2 days on average, and PROCEDURE AGENCY costs 2,028.7% of income per capita. In South Asia on average, the process takes § Submit an application and receive an inspection to Da Afghanistan Breshna Sherkat (DABS) three weeks more but requires fewer verify the feasibility of the connection procedures (5.7) and costs 40% less as a § Receive the approval for the new connection and DABS a list of materials to be purchased share of income per capita (1,207.8%).7 In § Purchase the transformer and other materials Customer’s contractor Bhutan, which has the highest ranking in South Asia on the ease of getting electric- § Obtain clearance of the purchased materials by DABS the utility’s inspectors ity, the process takes 4 procedures and § Carry out the external works Customer’s contractor or DABS 61 days, and costs 525.4% of income per § Purchase and install the meter Customer’s contractor or DABS capita (figure 5.2).8 All five Afghan prov- § Receive the final inspection and start the electricity flow DABS inces receive a score of 0 on the reliability of supply and transparency of tariffs index Source: Doing Business database. (box 5.1). transformer. Once purchased, the materi- and DABS visits the site to make a final Among the five Afghan provinces sur- als are checked and approved by DABS. inspection. The meter is locked, and the veyed, it is easiest to obtain an electric- After they are approved, the customer’s customer receives written permission to ity connection in Kabul, most difficult in contractor can install the transformer. use electricity. Herat (table 5.1). In Kabul the process Alternatively, the connection works can takes six procedures, while in the other be done by DABS. At this point the cus- Across the five Afghan provinces sur- four provinces it takes seven. The reason tomer needs to buy and install a meter, veyed, the process for a business to obtain for this difference is that requests for FIGURE 5.2  The connection process in Afghanistan is faster but costlier than the South Asian average EFFICIENCY OF RELIABILITY OF SUPPLY AND GETTING ELECTRICITY TRANSPARENCY OF TARIFFS Procedures Time Cost Index (number) (days) (% of income per capita) (0–8) 0 0 Japan (global best) 1 26 economies Korea, Rep.; St. Kitts 20 India (global best)** 8 and Nevis (global best) 300 (South Asia best) 2 40 India 600 7 India (South Asia best) (South Asia best) 60 16 economies 3 (global best)* 900 6 80 Bhutan 4 (South Asia best) 1,200 Bhutan, 100 Balkh South Asia 5 average Sri Lanka India Afghanistan Nangarhar Pakistan 5 average 120 Kandahar 1,500 South Asia average Kabul 4 6 Kabul South Asia 140 average Herat Pakistan 1,800 Balkh, 3 Afghanistan 160 Nangarhar average 7 Balkh, Herat, Afghanistan Kandahar, average 2,100 Kandahar Nangarhar Herat South Asia 2 180 average 8 Pakistan Kabul 2,400 Bangladesh 1 9 (South Asia worst) 2,700 420 Bangladesh 0 All 5 Afghan 10 Bangladesh provinces (South Asia worst) 440 (South Asia worst) 3,000 Source: Doing Business database. * These are the Comoros; Germany; Hong Kong SAR, China; Kenya; the Republic of Korea; the former Yugoslav Republic of Macedonia; the Federated States of Micronesia; the Russian Federation; San Marino; St. Vincent and the Grenadines; Sweden; Switzerland; Taiwan, China; Timor-Leste; Togo; and the United Arab Emirates. ** These are Belarus; Belgium; Cyprus; the Czech Republic; Estonia; Finland; France; Germany; Hong Kong SAR, China; Ireland; Japan; the Republic of Korea; Lithuania; Malaysia; the Netherlands; Norway; Portugal; the Russian Federation; the Slovak Republic; Slovenia; Spain; Sweden; Taiwan, China; the United Arab Emirates; the United Kingdom; and Uzbekistan. GETTING ELECTRICITY 43 TABLE 5.1  Where is it easy to get an electricity connection in Afghanistan—and approving office of DABS to discuss their where not? project. Distance Cost Reliability of supply to frontier (% of and transparency of Obtaining a new connection takes the Province score Procedures Time income per tariffs index least time in Balkh: 94 days. The same pro- (City) Rank (0–100) (number) (days) capita) (0–8) cess takes the most time in Herat: a month Kabul 1 45.04 6 114 2,274.7 0 and a half more, at 140 days—exceeding (Kabul) the South Asian average of 136.4 days. Balkh 2 44.03 7 94 1,957.3 0 (Mazar-i-Sharif) Indeed, across South Asia, the process Nangarhar 3 42.94 7 104 1,957.3 0 takes longer only in Pakistan (180.7 days) (Jalalabad) and in Bangladesh (428.9 days). Kandahar 4 42.36 7 109 1,970.6 0 (Kandahar) The five Afghan provinces also vary in the Herat 5 38.95 7 140 1,983.9 0 amount of time required for different steps (Herat) in the process. Delivery of the site inspec- Source: Doing Business database. tion following the request for a new con- Note: Rankings are based on the average distance to frontier score for procedures, time and cost associated with getting electricity as well as for the reliability of supply and transparency of tariffs index. The distance to frontier score nection takes the least time in Balkh and is normalized to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the Nangarhar: only 10 days. In Kandahar it better). For more details, see the chapter “About Doing Business and Doing Business in Afghanistan 2017.” takes two weeks, in Kabul three weeks and in Herat one month. The long wait time Obtaining an electricity How the technical details are submitted in Herat is due to the limited amount of connection takes six procedures in to DABS headquarters in Kabul varies power available, which leads to additional Kabul but seven in the other four from province to province. In Balkh and scrutiny of requests for a new connection. provinces—because requests for Nangarhar the request for a new con- For Kabul, with the second longest wait new connections from anywhere nection is usually submitted to the local time for site inspections, the reason is in the country must be approved DABS office, which then forwards it to linked to the rapid population growth in the by the state distribution utility’s Kabul. In Kandahar investors typically capital city;9 the fast growth means a large headquarters in the city of Kabul. mail their request for a new connection number of requests for new connections. to Kabul, then travel to Kabul to collect new connections from anywhere in the the approval and discuss the conditions country must be approved by the central in person. In Herat most applicants Entrepreneurs in Herat have to headquarters of DABS in the city of travel to the capital both to submit the wait six more weeks than those Kabul. The utility’s local provincial offices application and to collect the approval. in Balkh for a new connection. are responsible for performing the site New connections have been severely Excess demand, limited power and lack of resources are all inspection and preparing the technical restricted in Herat since 2012 because factors in the large variation in details on the basis of which its head- of a shortage of capacity, so most appli- time among provinces. quarters in Kabul grants the approval. cants prefer to meet in person with the BOX 5.1 The reliability of supply and transparency of tariffs index—going beyond efficiency Introduced by Doing Business in 2015, the reliability of supply and transparency of tariffs index measures the quality of service provided by utilities as it relates to stability in distribution and clarity of information provided on consumption costs. The scoring is based on six main components, for a possible 8 points: reliability of supply (3 points), mechanisms for monitoring outages (1 point), mechanisms for restoring service (1 point), regulatory monitoring (1 point), financial deterrents aimed at limiting outages (1 point) and transparency of consumption tariffs (1 point). Doing Business uses the system average interruption duration index (SAIDI) and the system average interruption frequency index (SAIFI) to measure the duration and frequency of power outages. SAIDI is the average total duration of outages over the course of a year per customer served, while SAIFI is the average number of service interruptions experienced by a customer in a year. An economy is eligible to obtain a score on the reliability of supply and transparency of tariffs index if the utility collects SAIDI and SAIFI data and if the SAIDI value is below a threshold of 100 hours and the SAIFI value below a threshold of 100 outages. An economy receives a score of 0 on the overall index if it does not compute SAIDI and SAIFI, even if the economy scores points on any other component. Afghan provinces do not record SAIDI and SAIFI and so receive a score of 0 on the overall index (see table). (continued) 44 DOING BUSINESS IN AFGHANISTAN 2017 BOX 5.1 The reliability of supply and transparency of tariffs index—going beyond efficiency (continued) For monitoring outages, 1 point is assigned if the utility uses automated tools such as the supervisory control and data acquisi- tion (SCADA) system. Similarly, for restoring service 1 point is again assigned for the use of automated tools. The provinces of Herat, Kandahar and Nangarhar do not use automated tools, while Balkh and Kabul use SCADA, though only at the level of transmission, not distribution.a For regulatory monitoring, the scoring depends on whether an economy has an independent regulator that monitors power out- ages and requires the utility to report on reliability of supply. Afghanistan’s Electrical Energy Services Regulating Law assigns the role of regulator to the Ministry of Electricity and Water. But this ministry owns 35% of DABS and therefore does not qualify as independent. Doing Business assigns 1 point if the utility compensates customers when outages exceed a certain cap or if the utility is fined by the regulator when this happens. Afghan regulation does not require such measures. Finally, 1 point is assigned if electricity tariffs are available online and customers are notified of a change in tariff a full billing cycle (one month) ahead of time. All DABS offices notify customers of tariff changes ahead of time, but none of the five provinces have the tariffs available online, so all receive a score of 0 on this component. These results pinpoint possible areas of improvement in Afghanistan. For lessons of experience, it could look to the example of neighboring countries with high scores on the reliability of supply and transparency of tariffs index—such as Uzbekistan (8) or India (7)—or to other developing economies that have put in place reliable and transparent systems, such as Guatemala or Indonesia. All Afghan provinces receive a score of 0 on the reliability of supply and transparency of tariffs index Guatemala India Herat, Uzbekistan (Guatemala (Mumbai, Indonesia Balkh Kandahar, (Tashkent) City) Delhi) (Jakarta) and Kabul Nangarhar Reliability of supply and transparency of tariffs index (0–8) 8 7 7 6 0 0 Total duration and frequency of outages per customer a year (0–3) 3 2 2 2 0 0 System average interruption duration index (SAIDI) 0.33 3.68 1.72 2.61 — — System average interruption frequency index (SAIFI) 0.1 2.62 3.26 1.72 — — Mechanisms for monitoring outages (0–1) 1 1 1 1 1 0 Does the distribution utility use automated tools to monitor outages? Yes Yes Yes Yes Yes No Mechanisms for restoring service (0–1) 1 1 1 1 1 0 Does the distribution utility use automated tools to restore service? Yes Yes Yes Yes Yes No Regulatory monitoring (0–1) 1 1 1 1 0 0 Does a regulator—that is, an entity separate from the utility—monitor Yes Yes Yes Yes No No the utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0–1) 1 1 1 1 0 0 Does the utility either pay compensation to customers or face fines by the Yes Yes Yes Yes No No regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0–1) 1 1 1 0 0 0 Are effective tariffs available online? Yes Yes Yes Yes No No Are customers notified of a change in tariff ahead of the billing cycle? Yes Yes Yes No Yes Yes Source: Doing Business database. Note: If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. In Balkh and Kabul the automated tools for monitoring and restoring service are used only at the level of transmission, not distribution. — = not available. a. While data on outages are recorded at every substation in Afghanistan, these data are not publicly available. Anecdotal evidence suggests that in Herat, for example, there are at least two outages a day, totaling 3.0–4.5 hours. In Nangarhar the power is off at least 4 hours a day. The situation is even more critical in Kandahar, where electricity is available only 4 hours a day on average. Where electricity supply is unreliable, firms have to invest in costly back-up solutions. Many rely on diesel generators, incurring high capital costs as well as high costs for electricity (averaging around 25–30 US$ cents per kilowatt-hour). Beyond these costs, firms using diesel generators must invest in fuel storage facilities, fuel procurement arrangements and protection against fuel theft. GETTING ELECTRICITY 45 Herat is also the province with the lon- case study the fee is AFN 84,000 (AFN FIGURE 5.3  Connection works make up gest wait for approval of a new connec- 600 per kilovolt-ampere), equivalent to more than 80% of the total average cost tion, because of a shortage of inspectors US$1,407, plus an application fee of AFN of getting electricity in Afghanistan to prepare the technical details needed to 100 (US$2). In addition, entrepreneurs Cost to buy and Cost of traveling Connection review the request. While obtaining this in Herat have to bear the cost of at least install the meter to Kabul fees approval takes two weeks in the other two round trips to the city of Kabul, one 7% 1% 11% four provinces, in Herat it requires one to submit the application and one to month, and the customer needs to travel collect the approval. Similarly, applicants again to Kabul to collect the approval. in Kandahar have to travel to the capital at least once, to obtain the approval.11 Customers can choose to have either a Applicants in Balkh and Nangarhar, ben- private contractor or DABS perform the efiting from smoother communication connection works. The two options have between the local provincial offices of the same cost, but DABS technicians can DABS and its headquarters, typically do Connection works save some time because of their knowl- not need to travel to the capital. (labor and materials) edge of the grid, the access points and the 81% previously prepared technical details.10 In Because of insufficient capacity, Balkh, where the connection works are a substation distribution typically carried out by DABS, this proce- transformer needs to be dure takes 50 days. But in the other four Source: Doing Business database. purchased and installed in the provinces, relying on DABS would mean a vast majority of cases. This delay in the start of the works because of accounts for a substantial share of capita) and the Islamic Republic of Iran lack of resources (as in Herat) or excess the cost of obtaining an electricity (828.6%). The higher cost in Afghanistan demand (as in Kabul), so investors prefer connection in Afghanistan. is due mainly to the need to import the to hire a private contractor, and the pro- transformers and related materials for cedure takes two months. the connection from abroad—typically The connection fees do not cover the from the Islamic Republic of Iran, Turkey The rest of the process follows the same labor and materials to build the con- or China. time frame in all provinces. It takes two nection. These are the most substantial weeks to get approval of the transformer expenses, accounting for 81% of the total and the other purchased materials. Two cost (figure 5.3). In Kabul an amount of A fragmented supply system leads weeks are also required to obtain the AFN 716,169 (US$12,000) is needed to to variations in consumption meter—whether from DABS (as in Balkh, purchase the transformer and all the nec- tariffs. They are lower in provinces with a balance of self-generated Kabul, Kandahar and Nangarhar) or on essary materials, including the switch- and imported power, such as the private market (as in Herat, where board, the dry switches, fuses, lightning Kabul—and highest in Balkh, DABS does not have meters available)— arresters, steel cables and pillars for which imports all its electricity, as well as permission to install it. Finally, overhead connections.12 Outside Kabul and in Kandahar, which has to rely it takes five days to install the meter, the cost is slightly lower, at AFN 596,807 entirely on self-generated energy. verify the new connection and start the (US$10,000), mainly because of lower electricity flow. labor costs. Finally, in all provinces the customer purchases a meter and related In addition to the up-front cost paid by The cost to get an electricity connection materials and pays for installation of the a small or medium-size business to get in Afghanistan has three components: meter—costs adding up to another AFN a connection, the monthly consumption the connection fees to be paid to DABS; 55,000 (US$922).13 fees also need to be analyzed. The struc- the material and labor costs to build the ture of the Afghan supply system, which connection; and the cost of the meter. Overall, the cost to obtain a connection is composed of different isolated net- The connection fees are established ranges from 1,957.3% of income per cap- works, leads to variations in consumption and collected by DABS at its central ita in Balkh and Nangarhar to 2,274.7% tariffs across provinces (box 5.2). Local headquarters and apply equally to all of income per capita in Kabul. In South DABS offices establish their tariffs in provinces. These fees depend on the Asia, only Bangladesh has a higher cost coordination with DABS headquarters, power demand, on the voltage and on (2,860.9% of income per capita). The and there is no standard price for all loca- the type of connection (residential or cost is lower in such neighboring coun- tions. For a commercial warehouse like nonresidential). For the Doing Business tries as Tajikistan (742.5% of income per the one in the Doing Business case study, 46 DOING BUSINESS IN AFGHANISTAN 2017 BOX 5.2 Structure of the Afghan supply system The Afghan electricity distribution system is formed by more than 10 isolated networks of different sizes and technical layouts. Each of the networks is supplied by separate power systems, with distinct synchronizations and voltages. These differences and the physical distance between the networks inhibit interconnections among grids, limit country-wide distribution and make the load dispatching inflexible. According to conservative estimates, national demand was around 1,500 megawatts in 2015 while the system is capable of serving a peak demand of only 750 megawatts. An estimated 24% of electricity is lost in transmission and distribution.a Nearly 80% of all grid consumption is imported while domestic power generation capacities remain stagnant. As a result, tariffs are influenced by changes in energy prices in the exporting economies. The provinces of Balkh, Kabul and Nangarhar import power from Tajikistan and Uzbekistan. Herat imports from Turkmenistan and the Islamic Republic of Iran. Balkh, which imports 100% of its electricity, has consumption tariffs driven by price fluctuations in the exporting countries. Kandahar imports no electricity because its grid is not connected to potential exporting countries, and has to rely entirely on self-generated energy. Of the national domestic power generation, 50% is hydropower while the rest is based on fossil fuel (mainly diesel), which is more expensive. Kandahar has the highest ratio of diesel power. Provinces with a balance of self-generated and imported power, such as Kabul, have more room for strategic adjustment of their tariff policies. a. Asian Development Bank, “Energy Supply Improvement Investment Program: Report and Recommendation of the President,” November 2015, https://www.adb.org/projects/documents/afg-energy-supply-improvement-investment-program-rrp. firms in the provinces of Herat, Kabul, Thailand. This initial investment could be In the long run, all applicants should be Kandahar and Nangarhar pay AFN 10 per recovered through transparent consump- allowed to obtain project authorization kilowatt-hour.14 This leads to a monthly tion tariffs charged to all customers that directly from the provincial offices. This consumption cost (including administra- connect to the new transformer. would speed up the process outside the tive costs) of 715% of income per capita. capital. It would also benefit Kabul, by Balkh has the highest consumption cost Improve coordination between allowing DABS headquarters to direct (AFN 13.5 per kilowatt-hour, or 965.2% DABS headquarters and more of its resources to dealing with con- of income per capita per month).15 provincial offices nection requests in the capital. Today all applications for new connec- tions are managed by DABS headquarters Improve the transparency of WHAT CAN BE IMPROVED? in Kabul. This imposes an additional bur- connection requirements and den on entrepreneurs in other provinces, consumption tariffs This chapter’s review of the process of who often need to travel to the capital Utilities should clearly explain to custom- getting a new electricity connection in to submit their application, discuss their ers exactly what is required to obtain a Afghanistan points to several areas of project and collect the approval. However, new electricity connection in terms of possible improvement. this trip is not necessary for applicants procedures, time and cost. They should in Balkh and Nangarhar, thanks to the post easily accessible information about Reduce the up-front cost of smoother communication between the the application process in their customer obtaining a new connection utility’s local offices in these provinces service offices and on municipal web- The type of connection works varies and its headquarters. Other provinces sites. Connection costs should also be depending on network capacity. If capac- should follow suit: investors in Herat and transparent and easily accessible. ity is constrained, as is frequently the case Kandahar should also be able to obtain an across Afghanistan, more complicated electricity connection without traveling Also important is ensuring that consump- connection works may be necessary. The to Kabul. tion tariffs—and any changes to these resulting capital investments are covered tariffs—are transparently communicated by the new customer. This obligation to customers. People and businesses substantially raises the total connection Allowing all applicants to obtain need this information so that they can project authorization directly cost. Covering the cost for a new trans- plan their expenses, better understand from the provincial offices would former represents a financial obstacle for the utility billing system and contest the speed up the process outside the most small and medium-size enterprises. charges when needed. The private sector capital—and would also benefit The distribution utility could contribute to Kabul. takes into account the cost of electric- the initial capital investment, as is done in ity when making investment decisions, GETTING ELECTRICITY 47 including on energy efficiency measures metering).18 According to Doing Business NOTES aimed at curbing costs in business opera- data, Pakistan’s two largest cities tions. Tariffs and tariff changes can be (Karachi and Lahore) were among those 1. In 2013/14 the share of the population with communicated to consumers online, experiencing the most outages globally in access to electricity from the grid was 30%, through printed media (such as bro- 2015. according to data from Afghanistan’s National Risk and Vulnerability Assessment. While the chures in the utility’s office) or through access rate is around 89% in major Afghan public hearings. Introduce independent cities, it is only 11% in rural areas. Several of regulatory oversight to monitor the mountainous provinces have no organized electricity supply at all. Improve the reliability of utility reliability 2. According to 2014 data from the Enterprise electricity supply Energy regulators typically supervise Survey database, World Bank, http:/ /www To improve the reliability of its network, electricity prices and ensure consumer .enterprisesurveys.org/. Small firms are defined as businesses with 1–19 employees. Afghanistan could look to the example protection. In addition, to ensure the 3. The North East Power System (NEPS), the of Indonesia. That country has achieved reliability of supply, a regulator may set largest network in the country, serves an area a high rate of electrification, increasing performance objectives for utilities as extending from the northern provinces of Balkh and Kunduz as far south as Kabul. The the share of its population with access well as impose financial deterrents aimed South Electrical Power System (SEPS) serves to electricity from 67% in 1990 to 96% at reducing the frequency and duration Helmand and Kandahar Provinces. in 2012.16 Moreover, SAIFI data suggest of outages. In Bolivia, for example, cus- 4. Atsushi Iimi, “Effects of Improving Infrastructure Quality on Business Costs: that a typical business in Jakarta suffered tomers receive discounts on their bills Evidence from Firm-Level Data,” Policy only two outages in 2015. In the 1990s if the quality of supply fails to meet the Research Working Paper 4581 (World Bank, all generation, transmission and distribu- standards set by the regulator. In Turkey Washington, DC, 2008). 5. World Bank, Doing Business 2017: Equal tion in Indonesia were handled by the the regulator may fine the utility if out- Opportunity for All (Washington, DC: World state-owned utility, Perusahaan Listrik ages occur without prior notification to Bank, 2016). Negara (PLN). But in 1999 the electric- affected customers. Doing Business data 6. Legislative Decree of the President of the Islamic Republic of Afghanistan about ity generation market was opened to the suggest that financial deterrents to limit Endorsement of the Regulating Law of private sector. That led to the entrance of outages matter: among low- and lower- Electrical Energy Services, no. 67, August new actors and to substantial growth in middle-income economies, those using 30, 2015. The Electrical Energy Services Regulating Law was approved by Parliament in installed generation capacity. By the end financial deterrents had 53 power cuts January 2016. of 2014 independent power producers on average in 2015, while those not using 7. The South Asian region as covered by Doing and private utilities accounted for about them had three times as many. Business comprises Afghanistan (Kabul), Bangladesh (Dhaka and Chittagong), Bhutan 30% of Indonesia’s installed generation (Thimphu), India (Mumbai and Delhi), capacity. In parallel with the partial lib- A regulator can also help standardize the Maldives (Malé), Nepal (Kathmandu), eralization of the sector, the Indonesian electric equipment and interfaces used Pakistan (Karachi and Lahore) and Sri Lanka (Colombo). government also implemented ambitious for connections. In Afghanistan today, 8. Bhutan stands at 54 in the Doing Business infrastructure investment plans to meet these are approved at the discretion of global ranking of 190 economies on the ease rising electricity demand.17 local DABS offices. Another important of getting electricity. 9. World Bank Group Data: Population Estimates regulatory function in Afghanistan would and Projections, http:/ /datatopics.worldbank Afghanistan’s 2016 Electrical Energy be to enforce technical standards, to .org/hnp/popestimates. Services Regulating Law moves in the ensure that new installations are suit- 10. When the connection works are performed by DABS, the customer pays 10% of the total direction of restructuring the power able for future interconnections with the amount spent to purchase the materials for sector by allowing a private sector pres- national grid. the connection to the utility. ence in generation. Implementation 11. For purposes of the ranking, each round trip to the capital from Herat or Kandahar is needs to be managed carefully. While The Electrical Energy Services Regulating estimated to cost AFN 5,000 (US$84). liberalization brought positive outcomes Law establishes an electricity regulatory 12. The large majority of electricity connections in Indonesia, it has not always done so department within the Ministry of Energy across Afghanistan are overhead connections. 13. The customer also pays an amount elsewhere. In Pakistan, for example, utili- and Water. But this measure goes only corresponding to 1% of the connection fee in ties’ financial stability, and therefore the partway. Because the ministry is one order to start the flow. reliability of supply, were compromised of the shareholders of DABS, the newly 14. Doing Business calculates the consumption fees based on the following assumptions: the by the lack of an overarching regulatory established regulator is not independent. warehouse operates 30 days a month from framework guaranteeing tariffs at a cost- The next step should be to move the 9:00 a.m. to 5:00 p.m. (eight hours a day), recovery level and by the high volume regulator to an autonomous authority. with equipment utilized at 80% of capacity on average. For simplicity, it is assumed that there of commercial losses stemming from are no electricity cuts. The monthly energy nonpayment (due to electricity theft, consumption is 26,880 kilowatt-hours (kWh). unregistered consumption or improper Hourly consumption is 112 kWh. If multiple 48 DOING BUSINESS IN AFGHANISTAN 2017 electricity suppliers exist, the warehouse is served by the cheapest supplier. Tariffs effective in March of the current year are used for calculation of the price of electricity for the warehouse. Although March has 31 days, for calculation purposes only 30 days are used. 15. Consumption tariffs are as of March 2016. In all provinces, registered industrial firms benefit from lower consumption fees (AFN 6 per kilowatt-hour). 16. Sustainable Energy for All (SE4ALL) database, World Bank, http:/ /data.worldbank.org/data -catalog/sustainable-energy-for-all. 17. Jean Arlet, Diane Davoine, Tigran Parvanyan, Jayashree Srinivasan and Erick Tjong, “Getting Electricity: Factors Affecting the Reliability of Electricity Supply,” in World Bank, Doing Business 2017: Equal Opportunity for All (World Bank: Washington, DC, 2016). 18. Privatization in Pakistan’s electricity sector began in 1994. Private power producers now provide about 30% of generation capacity. The distribution sector is operated by 10 state- owned regional utilities and a private company, K-Electric, which serves Karachi. Almost all the utilities face the same set of challenges: shortfalls in electricity supply, chronic transmission and distribution losses, and insufficient exploitation of existing capacity. The electricity regulator (the National Electric Power Regulatory Authority, or NEPRA) was established in 1998 as an autonomous body with no government administrative control. But while NEPRA has jurisdiction over tariffs, all decisions need to be approved by the state. Successive governments have set end-user tariffs below the cost of supply, covering the difference through extensive government subsidies paid to the utility. Delays in disbursing these subsidies have at times strained the finances of generation companies, undermining investments and the upkeep of the distribution network. Registering Property MAIN FINDINGS ƒƒ Faced with the challenge of having less than 30% of urban land formally registered, Afghanistan remains one of the most difficult places globally to transfer land. ƒƒ There is potential to do better. Data show that transferring property takes only 2.5 months in Kandahar, compared with more than 8 months in Kabul. ƒƒ Procedural complexity, low levels of transparency and lack of adequate record-keeping infrastructure are some of the major obstacles to improving the reliability of the land administration system. 50 DOING BUSINESS IN AFGHANISTAN 2017 L and and natural resources are prevalence of customary claims and an up-to-date information on property is the main source of livelihood in outdated cadastre covering only around a essential to correctly assess and collect Afghanistan. In rural areas, home to third of total land.3 tax revenues.5 Such information is also more than 85% of the population, agricul- critical in mapping out the needs in dif- ture employs 80% of the workforce—and ferent locations.6 Along with cadastres In Afghanistan less than 30% of nationally the sector accounts for around and survey maps, the information in land land in urban areas is formally 40% of GDP.1 But access to land is a major registries can help in planning the expan- registered. constraint for both private and public sion of urban areas, strategically provid- investment in Afghanistan. Less than 30% ing services and infrastructure in the of land in urban areas is formally regis- With real property (land and buildings) areas where they are most needed, and tered, and the share is estimated to be accounting for between half and three- mitigating the effects of environmental even lower in rural areas.2 When handling quarters of the wealth in most countries, risks on urban populations. land matters, most Afghans continue to having an up-to-date land information rely on customary law and local dispute system matters.4 Research suggests that resolution mechanisms. Meanwhile, property owners with secure owner- HOW DOES REGISTERING the land information system is beset by ship are more likely to invest in private PROPERTY WORK IN issues giving rise to conflicts and disputes enterprises. Land registries, together AFGHANISTAN? that hamper economic development. with cadastres that identify the location These include paper-based processes, of property, are tools used around the Like most other economies in South Asia, the limited number of court-registered world to map, prove and secure property Afghanistan has a deeds registration deeds, overlapping claims to parcels, the rights. For governments, having reliable, system—a public repository of claims WHAT DOES REGISTERING PROPERTY MEASURE? Doing Business records the full sequence of procedures necessary for a business (the buyer) to purchase a property from another business (the seller) and to transfer the property title to the buyer’s name so that the buyer can use the property for expand- ing its business, use the property as collateral in taking new loans or, if necessary, sell the property to another business. It also measures the time and cost to complete each of these procedures. In addition, Doing Business measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution and equal access to property rights (see figure). Registering property: measuring the efficiency and quality of the land administration system Rankings are based on distance to frontier scores for four indicators Days to transfer Cost to transfer Measures whether the land registry and mapping system property between two property, as % of Reliability (cadastre) have adequate infrastructure to guarantee high local companies property value standards and reduce risk of errors Time Cost Transparency Measures whether and how the land administration system makes 25% 25% land-related information publicly available 25% 25% Procedures Quality of land administration Measures the extent to which the land registry and mapping index Coverage system (cadastre) provide complete geographic coverage of privately held land parcels Steps to transfer property so that it can be sold or used Measures the accessibility of conflict resolution mechanisms and Dispute the extent of liability for entities or agents recording land as collateral resolution transactions Equal access Measures the ownership rights of unmarried men and unmarried to property rights women as well as of married men and married women REGISTERING PROPERTY 51 to land with documents evidencing deeds. The records offices of appeals 155 days and costs 5% of the property transactions.7 In recent decades several courts (Makhzans) store the deeds for value. Indeed, Afghanistan lags behind legislative and constitutional changes immovable properties along with other the South Asian average on three of relating to land administration have been types of documents, in archives known the four registering property indicators introduced, but none has had a direct as kundas.9 Municipalities also play an (figure 6.1). Transferring a property takes impact on the efficiency of property important part in the property registra- four more procedures and 1.5 months transfers. The Afghanistan Independent tion process, including determining the longer in Afghanistan than the average Land Authority (Arazi), created in 2010, value of the property. in South Asia. Afghanistan also lags far is the national agency governing land behind the regional average in the score administration. Its mandate centers on on the quality of land administration leasing state land to private investors.8 The cost to transfer a property index (box 6.1). Nonetheless, the cost of in Afghanistan is on par with the transferring a property in Afghanistan is global average. But the process While property registration is an on par with the global average (5.4% of takes four more procedures administrative process in most coun- the property value) and lower than the and 1.5 more months than the tries, in Afghanistan the judiciary plays South Asian average (6.9%). average in South Asia. a major role, because only the courts have the authority to issue formal title Among the five provinces, property reg- documents. Court-recorded deeds give The process of transferring a commercial istration is fastest in Kandahar: it takes 11 public notice of property transactions property in Afghanistan, as measured by procedures and about 2.5 months (table and priority over unregistered or sub- Doing Business, is among the most cum- 6.1). Registering property is most difficult sequent deeds. Primary court judges bersome globally.10 On average across in Herat, which has the second largest deal with property transfer applica- the five provinces surveyed, registering a population: there it takes 11 procedures tions and prepare and finalize legal property transfer takes 11 procedures and and nearly 8 months. FIGURE 6.1  Registering a property in Afghanistan takes almost twice as many procedures as the average for South Asia EFFICIENCY OF PROPERTY QUALITY OF LAND REGISTRATION ADMINISTRATION Procedures Time Cost Index (number) (days) (% of property value) (0–30) 0 5 economies 0 3 economies (global best)*** Singapore 30 4 economies 1 (global best)** (global best) (global best)* Kyrgyz Republic Kyrgyz Republic 30 1 2 27 Iran, Islamic Rep. 60 Kyrgyz Republic Kyrgyz Republic 3 India, Tajikistan 24 2 4 Kandahar 90 21 Tajikistan 3 Nangarhar 5 South Asia average 120 Balkh 18 Tajikistan 6 4 South Asia Iran, Islamic Rep. average 150 15 7 Afghanistan India; Iran, Pakistan Islamic Rep. average 5 All 5 Afghan 8 Pakistan 12 Pakistan 180 provinces 9 Kabul Iran, Islamic Rep. 9 6 Tajikistan 210 South Asia 10 average Balkh 6 Balkh, South Asia 7 India, Pakistan Herat, Afghanistan 11 Herat, 240 Herat average average Afghanistan Kandahar, Kandahar average 3 Nangarhar Kabul 12 Nangarhar 270 India Kabul 8 0 Source: Doing Business database. * These are Georgia, Norway, Portugal and Sweden. ** These are Georgia, New Zealand and Portugal. *** These are Belarus, Georgia, Kiribati, Saudi Arabia and the Slovak Republic. 52 DOING BUSINESS IN AFGHANISTAN 2017 BOX 6.1 The quality of land administration index—going beyond efficiency Good land administration is not just efficient. It ensures property owners a secure title, backed by a reliable land administration system. The quality of such a system, as measured by Doing Business, depends on four main factors, each scored for the quality of land admin- istration index: reliability of infrastructure (8 points); transparency and public availability of records (6 points); geographic coverage of the registry and mapping agency (8 points); and accessibility of conflict resolution mechanisms for land-related disputes (8 points) (see figure). A reliable land administration system provides clear information on prop- Afghanistan lags behind on three of four components of the quality of land erty ownership and prevents fraudulent administration index transactions.a Adequate infrastructure Reliability for keeping property records is key to en- (0–8) suring reliability. Afghanistan receives a Be st score of 0 on this component because its glo ba system relies on paper-based documents, lp er lacks an electronic database to check for fo rm encumbrances or record property bound- er (S ing aries and lacks a connection between ap or registry and cadastral databases.b e) 4 other Sou th A sia Transparency—whether and how the provinces land administration system makes land- Dispute resolution Transparency (0–8) Balkh (0–6) related information (such as fee sched- ules, time limits and statistics) publicly available—reduces procedural complex- ity for clients and minimizes opportuni- ties for bribery. Afghanistan receives a score of 0 because records are not pub- licly available, nor are the applicable fees, requirements or checklist of documents to be submitted. Moreover, there are Reliability Coverage no time-limit commitments, no specific Transparency Afghanistan (0–8) mechanism for filing complaints and no Coverage average publicly available statistics tracking prop- Dispute resolution erty transactions. Source: Doing Business database. Where land registries do not provide complete geographic coverage, compa- nies and individuals cannot be sure whether the areas not covered are relevant to their interests.c Globally, only 27% of economies have a registry with full coverage of private land—and only 34% a cadastre with complete coverage. Afghanistan has not achieved full cover- age, so receives a score of 0. It is estimated that only a third of its land has been surveyed, with a higher share in urban areas.d Geographic conditions, inadequate technology and lack of a stable government are among the main challenges. Accuracy of information in land registries and property transactions helps avoid potential disputes. In Afghanistan all property transac- tions need to be registered to make them opposable to third parties (1.5 points) and the system is subject to guarantee (0.5 points), as in 148 other economies. Responsibility for verifying the legality of the documents and the identities of the parties falls to the courts (1 point). When land-related disputes do arise, they are handled by district primary courts, with delays varying by location. Resolution of a land dispute in the courts in Balkh is fast, taking less than one year (3 points). By contrast, it takes more than a year in Herat, Kandahar and Nangarhar (1 point) and more than three years in Kabul (0 points). In 2016 Doing Business added a gender component to the quality of land administration index, differentiating ownership rights—the ability to manage, control, administer, access, encumber, receive, dispose of and transfer property—for men and women. Scoring for this new component assesses whether there is differential treatment of men and women in the law, considering the default marital property regime. The index ranges from −2 to 0, with higher values indicating greater inclusiveness of property rights. Afghanistan receives a score of 0, indicating equal property rights for men and women in what is measured here. a. UN-Habitat, Tools to Support Transparency in Land Administration (Nairobi: UN-Habitat, 2013). b. The U.S. Agency for International Development’s Land Titling and Economic Restructuring in Afghanistan (LTERA) Program and the Afghan NGO Harakat have started scanning title deeds in Kabul and some other provinces, but the vast majority of deeds are still held in paper form. c. Klaus Deininger, Harris Selod and Anthony Burns, The Land Governance Assessment Framework: Identifying and Monitoring Good Practice in the Land Sector (Washington, DC: World Bank, 2012). d. Some land was registered in the 1970s, but registration then stopped for decades. Arazi is now registering an estimated 20,000 jeribs (40 million square meters) of land a year. REGISTERING PROPERTY 53 TABLE 6.1  Where is it easy to register property in Afghanistan—and where not? (3). The forms are then circulated to two other municipal offices (the engineering Distance Quality of land to frontier Cost administration team and Amlak committee) to obtain an Province score Procedures Time (% of property index assessment of the property value—by the (City) Rank (0–100) (number) (days) value) (0–30) applicant in person or, in Kabul, by mes- Kandahar 1 40.31 11 75 5 4.0 senger (4 and 5).12 (Kandahar) Balkh 2 36.72 11 119 5 6.0 (Mazar-i-Sharif) The next step is for the applicant to take the circular forms to the tax collection office of Nangarhar 3 35.60 12 97 5 4.0 (Jalalabad) the Ministry of Finance’s local provincial Kabul 4 27.50 9 250 5 3.0 revenue department (Mustofiat) for certifi- (Kabul) cation of property transfer taxes owed (6). Herat 5 24.17 11 236 5 4.0 The circular forms are also submitted to the (Herat) Mustofiat’s human resources directorate to Source: Doing Business database. have the signatures of the local Mustofiat Note: Rankings are based on the average distance to frontier score for the procedures, time and cost associated with registering property as well as for the quality of land administration index. The distance to frontier score is normalized staff certified and avoid forgery (7). to range from 0 to 100, with 100 representing the frontier of best practices (the higher the score, the better). For more details, see the chapter “About Doing Business and Doing Business in Afghanistan 2017.” Back in court, the primary court judge reviews the completed circular forms and Registering a property also requires 11 pro- initiate a deed search at the Makhzan, the the clerk the taxes owed (8), which are cedures in Balkh, while it takes 9 in Kabul appeals court archives (2). The Makhzan then paid at a bank (9). After that, the and 12 in Nangarhar. But the process an keeper searches for the deed using details primary court judge signs the new deed entrepreneur has to go through is similar provided by the applicant, including the (10). The konda (stub copy) is maintained across all five provinces (figure 6.2). The reference number and pictures of the in the primary court until the end of the entrepreneur begins by filing an applica- property, and ensures that the informa- financial year, when the full record book tion and obtaining two circular forms (one tion on the circular forms matches the is passed on to the Makhzan for storage. for the sale of the land, one for the sale records before passing the documents of the building) from the district primary on to the chief of the Makhzan. Next, the Finally, the applicant takes the new court where the property is located (pro- applicant submits the circular forms to deed to the municipality to apply for a cedure 1).11 The judge of the primary court the municipality’s property office (Milkiat- title transfer (11). In Nangarhar it is also signs the application and circular forms to ha) to obtain confirmation of ownership common for applicants to submit the FIGURE 6.2  The procedural requirements to transfer property are similar across Afghanistan, though implementation varies PROCEDURE AGENCY Preregistration § Obtain and submit the application form and circular forms Primary court § Submit the circular forms to initiate the search of registered deeds Makhzan (appeals court archives) § Submit the circular forms to the Milkiat-ha (property office) Municipality § Submit the circular forms to the engineering team Municipality One procedure in Kabul § Submit the circular forms to the Amlak committee Municipality § Submit the circular forms to the tax collection office Mustofiat (Ministry of Finance's provincial revenue department) § Submit the circular forms to the human resources directorate for certification of signatures Mustofiat § Submit the completed circular forms Primary court § Pay property transfer taxes (seller) Commercial bank Registration § Submit the completed circular forms with payment receipts Primary court Postregistration § Submit application for title transfer Municipality § Submit the new deed for signature Governor’s office Only in Nangarhar Source: Doing Business database. 54 DOING BUSINESS IN AFGHANISTAN 2017 new deed to the office of the governor for FIGURE 6.3  Transfer of title at the municipality takes the most time everywhere, but signature. This adds one procedure and much more in some provinces than others two days. Time to register property (days) The time needed to transfer property varies substantially across provinces, ranging from Days for transfer of title 2.5 months in Kandahar to more at the municipality than three times that in Kabul. 183 The time needed to transfer property var- 150 ies substantially across provinces, rang- 90 100.6 ing from 2.5 months in Kandahar to more 50 30 than three times that in Kabul. The time for the title deed search at the Makhzan Kandahar Nangarhar Balkh Afghanistan Herat Kabul (Kandahar) (Jalalabad) (Mazar-i-Sharif) average (Herat) (Kabul) ranges from 5 to 8 days, depending on the efficiency of the court and the condition Source: Doing Business database. of the records.13 The total time needed for getting the circular forms approved by the municipality’s three offices (the The biggest bottleneck occurs when the FIGURE 6.4  Court fees account for the Milkiat-ha, engineering team and Amlak applicant requests the title transfer at largest share of property transfer costs committee) is 7 days in Balkh and 8 the municipality, which means having in Herat, Kandahar and Nangarhar. In the name changed in the property book Kabul, where a messenger circulates the (safaee), electricity book and sanitation forms on the applicant’s behalf, it takes 15 tax book. This involves several agencies Municipality 1% days—more than in the provincial cities and can take from 30 days in Kandahar but less than if done by the applicant in to 183 in Kabul, assuming that no bribe is person. The differences mainly reflect the paid (figure 6.3). Some of the differences Ministry of Finance Court fees frequency of the Amlak committee meet- in time are due to variation in the volume 1% 3% ings (where Arazi, the Ministry of Finance of applications and shortages of technical and the Ministry of Agriculture may all be personnel capable of accepting and pro- represented). cessing applications in a timely manner. Work piles up, leading to backlogs and Once the applicant returns to the primary delays. In addition, the use of paper rather court with the completed circular forms than digital records slows the processing Source: Doing Business database. to have the new deed signed by both of approvals everywhere. Moreover, the Note: The values displayed are the fees as a percentage parties to the transaction, the primary overall process at the municipal prop- of the property value. court judge’s review of the deed prepared erty offices lacks transparency; there are by the clerk takes from 9 days in Balkh to allegations of corruption and informal 31 days in Kabul. Judges do not always payments, and disputes are common. WHAT CAN BE IMPROVED? accept the value established by the municipality, which can cause additional Fees are uniformly applied across the Good practices in other economies suggest delays. country. In all locations the total cost ways in which Afghanistan could improve of transferring property is 5% of the its own land administration system. property value (US$1,575 for the Doing The biggest bottleneck occurs Business case study property).14 The larg- Make standardized forms and when the applicant requests the est share of the cost, 3% of the property fee schedules available at title transfer at the municipality, value (US$945), is payable to the court primary courts which means having the name (Mahkama) as a registration fee (figure Making standardized forms for sale changed in the property book 6.4).15 In addition, the Ministry of Finance and purchase agreements available (safaee), electricity book and and the municipality each charge 1% of in hard copy at the primary courts or sanitation tax book. the property value (US$315). online would reduce the time required REGISTERING PROPERTY 55 to record property transfers—because average to register property. Switching Economies with varied widespread use of standardized con- to an administrative system would also circumstances and income levels tracts reduces the potential for mistakes make property transfers more trans- made good progress through a and irregularities. When introducing parent. This is especially important in step-by-step approach in going standardized contracts, courts should Afghanistan, whose judicial system is digital. publicize their availability and the considered to lack transparency.16 benefits of using them. Turkey, among other economies, provides standard- Several countries took property registra- reduced the time to transfer property by ized contracts at the registry, where tion out of the courts in recent decades. 38% on average, compared with only 7% parties simply fill out the contracts and The Dominican Republic made some for those that did not.18 Computerization submit them on the spot. Easy access property registration procedures admin- also helps reduce duplication in the stor- to fee schedules and documentation istrative and set time limits on registra- age of information and makes it possible requirements for land registration tion. The time to register property fell by to consolidate a large amount of infor- also saves businesses time, as well as 44%. El Salvador took registration out of mation in one database. It optimizes increasing predictability in the applica- the courts and unified the registry with processes by streamlining workflows tion of regulations and reducing the the cadastre in 1999, cutting several and helps compile information in ways perception of corruption. months off the time to register property. not possible with manual systems. In Honduras followed suit, placing registra- addition, it allows the land registry to Make property registration an tion under a new agency reporting to the set up tracking mechanisms to assess administrative process executive branch. performance and improve customer Finding court registration too bur- service. densome, many property owners in Afghanistan’s Cabinet of Ministers Afghanistan use alternative methods to recently decided that property registra- Moreover, computerization increases secure property rights—with the result tion should move from the courts to the the reliability of land records—by making that transactions are not opposable to independent land authority Arazi as an it possible to create backup copies of third parties. But property registration is administrative process. A pilot project records, avoid the misplacement and loss an administrative matter, not a judicial is due to begin soon in the provinces of records and prevent fraudulent actions. one. When judges are involved in prop- of Herat and Kabul. This is a promising Digitized records protect information erty registration, they have less time for start—especially because registering from natural disasters such as floods or resolving disputes, their main business. property is especially cumbersome in earthquakes, from wars and from the those provinces.17 For a model, policy effects of time (excessive use, moisture).19 makers could look to the country’s suc- In Pakistan the floods of 2010 destroyed Many property owners in cessful experience in taking company thousands of paper land records, leading Afghanistan use alternative registration out of the commercial courts. to the loss of the only evidence that people methods to secure property As represented by the city of Kabul, where had of their land tenure.20 rights—with the result that the Afghanistan Investment Support transactions are not opposable to Agency serves as a one-stop shop for third parties. Computerization increases the company registration, Afghanistan ranks first among South Asian economies on reliability of land records—by Taking registration entirely out of the the ease of starting a business. making it possible to create courts—considered an international backup copies of records, avoid the misplacement and loss of good practice—makes it easier to unify Digitize land-related records records and prevent fraudulent or link the registry with the cadastre. and processes actions. That in turn makes it easier to detect While many economies have modern- overlapping and duplicate titles, saving ized their land registry by introducing time in due diligence and improving technology, Afghanistan continues to Developing economies should not be the security of property rights. Only rely on paper-based records systems (as discouraged by the magnitude of the 15% of economies that involve courts do 74 other economies covered by Doing changes involved in going digital. Yet in registration have a unified cadastre Business). Economies that invest in a they should be aware that it yields and registry—while more than half of digital land registration system benefit in results only in the long run. Economies other economies do. Where the cadas- several ways. The first is through greater with varied circumstances and income tre and registry are in the same agency, efficiency. The 37 economies that com- levels made good progress through a entrepreneurs spend 40 days less on puterized their land records since 2011 step-by-step approach (figure 6.5).21 56 DOING BUSINESS IN AFGHANISTAN 2017 FIGURE 6.5  What are the stages in projects digitizing land records? Afghanistan could look to Rwanda—the only African Before going digital country that has succeeded in Reviewing the legal documenting all rights to land. framework Going digital Conducting a cost-benefit analysis of the technology Computerizing should be tailored to the local context.24 involved the land registry Afghanistan could look to Rwanda—the Taking into account Going beyond digital human, social and Scanning land ownership only African country that has suc- organizational factors documents Offering online services ceeded in documenting all rights to for land transactions Having fully digital land.25 The two countries have com- land records Providing information mon features—fragmented land laws, on the real estate market a predominantly agrarian economy, Connecting the registry recurring land-related conflicts,26 and to other agencies returning refugees putting pressure on the government to address tenure insecurity and land-related conflict.27 Source: Doing Business database. Rwanda’s achievement came thanks to 15 years of dedicated reform efforts, Sierra Leone computerized its Ministry necessity in Afghanistan, as is expand- starting with a comprehensive review of of Lands, Country Planning and the ing survey coverage. Cadastral maps its legal and institutional framework.28 Environment. Among South Asian econ- increase tenure security by providing Today the country is at number 4 in the omies, Sri Lanka computerized its land information about the physical char- Doing Business global ranking on the ease registry in Colombo five years ago. The acteristics of land and the boundaries of registering property. new electronic system helped increase of parcels. Despite political will, survey the registry’s efficiency in processing mapping remains a challenging task Resolving a land dispute in Afghanistan property transfer applications. Pakistan, in Afghanistan because of the dif- can take years at court as well as sub- the only South Asian economy for which ficult context (manual field surveying, stantial resources, and the system does Doing Business recorded a reform in limited infrastructure, security issues). not always offer fair representation. registering property in 2015/16, started Adopting information and communica- Moreover, there is no compensation deploying an automated land records tion technology would help link land mechanism for losses incurred by system in the province of Punjab back registries with the cadastral system. parties who engaged in good faith in a in 2007. property transaction based on errone- Improve tenure security and ous information certified by courts. To ensure a successful transition, dispute resolution mechanisms Primary courts are responsible for both policy makers need to take into account for land transferring property and resolving such considerations as a supportive Many legal disputes in Afghanistan are first-instance property disputes. These legal framework and the appropri- related to land. Lack of tenure security processes need to be separated into dif- ate information technology and data causes conflicts that exacerbate ethnic ferent entities to remove potential bias infrastructure—all currently missing in and religious tensions and undermine from mechanisms of redress. Afghanistan. Another necessary precur- sustainable development and public sor to digitization is an efficient paper- trust. The poor tenure security stems When disputes do arise, having in based system, because computerizing from multiple historical factors: place a specialized dispute resolution an inefficient one may result in a more outdated systems, vested interests, mechanism ensures more expedient expensive system that’s still inefficient.22 confusing legal frameworks, overlapping resolution.29 Alternative dispute resolu- Though costlier than scanned records, responsibilities, lack of local capacity, tion (such as mediation) can help ease digital databases have a greater effect decades of conflict, the expropriation of the burden on congested courts. Just a on efficiency by allowing quick title large landholdings under Soviet rule and dozen economies have mediation proce- searches and protecting against double widespread displacement of poor and dures specifically for land disputes. One registration. vulnerable people.23 is Liberia, which instituted a program for resolving land disputes through media- Creating a coherent cadastre model Increasing tenure security is a process, tion to fill a gap left by the virtual col- by developing urban master plans is a not a single event, and interventions lapse of its court system after the civil REGISTERING PROPERTY 57 war.30 Afghanistan’s situation suggests a when it started decentralizing its property Combining the services of the Municipality need for a similar mechanism. registration services in 2010. It opened of Bujumbura, the tax authority and the 10 offices responsible for estimating the land registry under one roof enabled com- Replace the property valuation value of properties in their zone using the panies to avoid multiple visits to different process with a standardized master table. agencies and thus complete property schedule of property values transfers faster. The process of property valuation by Streamline internal processes municipal officers lacks transparency. The process at the Makhzan is straightfor- Make transparency of Anecdotal evidence suggests that prop- ward, but every deed search requires the information a priority erty owners sometimes offer informal approval of the chief of the Makhzan and Transparency is essential to the quality payments to encourage officers to under- takes up to eight days to complete. People of a land administration system. It helps value property, so that less tax is owed to come to the Makhzan for a wide range of eliminate asymmetries in information the government.31 In addition, municipal needs—from property issues to certificates between users and officials and increases officers often rely on the book value of to claim a pension—resulting in long lines the efficiency of the land market. It also land and buildings to assess the amount and delays. Creating a dedicated channel minimizes the possibilities for informal pay- owed, rather than the current value. for deed searches would speed up access ments to register property, change a title or Moreover, on-site valuation of property to the property archives of the Makhzan. acquire information on land and property. can be a source of delays. Conversely, complicated processes and There is also room for streamlining the limited availability of information in the land Different solutions could be considered. process at the Mustofiat. Applicants sector facilitate bribery (figure 6.6).33 One option with potential revenue advan- need to submit the circular forms to the tages would be to replace the variable Mustofiat’s human resources director- The Afghan land administration registration fee (assessed at 5% of the ate to get its staff’s signatures certified. system should make all land- property value) with a flat fee or a fixed This takes up to three days. Staff iden- related information—on rate per square meter, depending on the tity checks could be conducted internally, procedures, property transactions property’s location. A study could assess without burdening the applicants. After and fees—publicly available and the potential impact on tax revenue. the Mustofiat certifies the property ensure that it is clear and easily Reasonable flat fees can remove incen- transfer taxes owed, it could forward the accessible. tives to avoid registering property trans- circular forms directly to the human fers or to undervalue properties. The Arab resources directorate, where applicants To achieve transparency, the Afghan land Republic of Egypt reduced its registration could pick up the final forms. A couple administration system should make all tax from 3% of the property value to a of years ago the Kyrgyz Republic made land-related information—on procedures, flat fee of around US$200. The volume registering property easier by simplifying property transactions and fees—publicly of transactions increased, and property documentation requirements. available and ensure that it is clear and registration revenue went up by 39%.32 easily accessible. In addition, statistics on Consolidate postregistration the number of land disputes in the first A second option would be to establish procedures instance should be officially recorded, a standardized schedule of property Once property buyers receive a new deed consolidated, regularly updated and made values. This would ensure uniformity and from the primary court, they need to bring publicly available. Some 100 economies consistency in the valuation process, it to the municipality to get the name in already compile statistics tracking the reduce delays and allow the transacting the books changed. This procedure can performance of their land services, and parties to anticipate their tax liabilities. To take up to six months. If the primary court half of them make those statistics public. ensure transparency, the schedule should updated the name with the municipal- be made available at the municipality and ity directly and immediately—with no Transparency usually brings account- published online. Since property improve- involvement of the applicant—this would ability by empowering citizens—through ments are not systematically recorded both save time and reduce opportunities knowledge of what to expect and which in the cadastre, an inspector could be for corruption. agencies or individuals to hold account- dispatched during the property valuation able. But strong mechanisms for holding process to ensure that the property is as Another, more ambitious option would those parties accountable are also critical. described and that no construction has be to implement a one-stop shop for To ensure accountability, Afghanistan gone unrecorded. Addis Ababa, Ethiopia, property registration—something under- needs to implement a specific and introduced a master table denoting prop- taken not only in high-income economies. independent means for filing an official erty values for different zones of the city Burundi opened a one-stop shop in 2013. complaint about land services. 58 DOING BUSINESS IN AFGHANISTAN 2017 FIGURE 6.6  A better and more transparent land administration system is associated NOTES with a lower incidence of bribery at the land registry 1. World Bank, “Revitalizing Agriculture Reported incidence of for Growth, Jobs, and Food Security in bribery for land services (%) Afghanistan,” 2017, http:/ /www.worldbank 80 .org/en/country/afghanistan/publication /revitalizing-agriculture-for-growth-jobs-and -food-security-in-afghanistan; U.S. Agency 70 for International Development (USAID), “Afghanistan: Agriculture,” https:/ /www.usaid 60 .gov/afghanistan/agriculture. 2. About 70% of urban real estate is unregistered 50 and 85% of property transactions are informal, according to 2010 USAID estimates cited 40 by Walter Pincus, “Reinventing Afghan Real Estate,” Washington Post, September 20, 2010, 30 http:/ /www.washingtonpost.com /wp-dyn/content/article/2010/09/20 20 /AR2010092005660.html. 3. Land was flagged as a major unmet issue 10 for private sector development in the World Bank’s Interim Strategy Note for Afghanistan 0 for 2012–14 (http:/ /www.worldbank.org/en 0 5 10 15 20 25 30 /news/feature/2012/06/05/afghanistan -interim-strategy-note-2012-2014). Score on overall quality of land administration 4. World Bank, World Development Report 1989 (New York: Oxford University Press, 1989). Source: World Bank, Doing Business 2015: Going Beyond Efficiency (Washington, DC: World Bank, 2014), p. 62. 5. Modernization and computerization of land Note: The score on the overall quality of land administration is obtained through a set of questions on reliability, management in the Indian state of Karnataka transparency, coverage and dispute resolution. For example, an economy receives 1 point if it has a functional quadrupled land-related revenue from US$120 electronic database for encumbrances; 1 point if it makes the documents and fee schedules for property registration million in 2000 to US$480 million in 2008. publicly available (online or on public boards); 1 point if it compiles statistics on land transactions and makes them publicly available and so on. The highest possible score, indicating the highest overall quality, is 30 points. European Parliament, Report on the Role of The reported incidence of bribery refers to the share of people reporting in Transparency International’s Global Property Rights, Property Ownership and Wealth Corruption Barometer 2013 survey that when they had contact with land services in the previous 12 months, they Creation in Eradicating Poverty and Fostering paid a bribe for services. The correlation between the score on the overall quality of land administration and the Sustainable Development in Developing Countries reported incidence of bribery is −0.60. The relationship is significant at the 1% level after controlling for income per (2014). capita. The analysis is based on 88 observations. 6. Besides the information held in land registries and cadastres, other geographic, environmental and socioeconomic data are also useful for urban planning and development. 7. The other economies in South Asia are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. 8. Investors’ ability to purchase or lease land is very limited in Afghanistan (because of lack of transparency in the property market, frequent title disputes and rapidly rising prices). In addition, the government owns most land. 9. A kunda is a book containing up to 100 legal documents. Normally a separate kunda is used for each type of document. There are 27 types in total, with title deeds accounting for about 10% of all legal documents in the archives. 10. As represented by the city of Kabul, Afghanistan is second to last in the Doing Business ranking on the ease of registering property (186 of 190 economies). Libya, the Marshall Islands, the Federated States of Micronesia and Timor-Leste are all tied in last place (187). 11. The application includes the address and district of the property, the seller’s deed archive number and the date the seller’s deed was issued, the boundaries and sale price of the property, a statement that the seller wants to sell the property to the buyer, and whether the property is mortgaged. The circular forms contain information on the seller and the buyer REGISTERING PROPERTY 59 as well as boxes where the relevant authorities displacement and increase in land disputes is add information and signatures at different commonly recognized. Amnesty International, steps of the process. In addition, the owner “Afghanistan: Out of Sight, Out of Mind: The must provide evidence—officially certified Fate of the Afghan Returnees,” June 22, 2003, documents or oral testimony from reliable https:/ /www.amnesty.org/en/documents witnesses—that he or she is the legitimate /asa11/014/2003/en/. owner. 24. World Bank Group, Independent Evaluation 12. The municipality’s engineering team looks at Group, “Lessons from Land Administration the building’s size, location, technical features Projects: A Review of Project Performance and construction materials. The Amlak Assessments” (World Bank Group, committee establishes the value of the land Washington, DC, 2015). and also checks for back-due sanitation taxes 25. In Rwanda 10.67 million land parcels were and makes sure that the property is free from demarcated and entered in the Land Tenure any restrictions (such as mortgages or public Regularization (LTR) and Land Administration land). The use of a messenger to circulate the Information System (LAIS) database over a forms to these municipal entities cuts two period of 15 years. procedures in Kabul. 26. Rwanda identified land scarcity and land- 13. The paper title deeds at Makhzans are often related conflicts as contributing to the 20th- in poor condition as a result of wars and bad century genocide in the country. climatic conditions. It is also common for 27. Thea Hilhorst and Frédéric Meunier, How deeds to have been lost or misplaced. Innovations in Land Administration Reform 14. Additional costs—such as fees charged by Improve on Doing Business: Cases from Lithuania, messengers—are set at the local level, but the Republic of Korea, Rwanda and the United their impact on the overall cost is negligible. Kingdom (Washington, DC: World Bank, 2015). 15. The 3% rate applies for property values 28. Polly Gillingham and Felicity Buckle, “Rwanda above AFN 1 million. According to interviews Land Tenure Regularization Case Study,” conducted during this project, the tax for Evidence on Demand, 2014, doi:10.12774 transferring a property should be 1% but the /eod_hd.march2014. court charges 2% extra as a stamp duty fee. 29. Edgar Chavez, Laura Diniz, Frédéric Meunier, Below AFN 1 million, the registration fee is 2%. Parvina Rakhimova and Marilyn Youbi, The value of the case study property is AFN “Registering Property: Measuring the Quality 1,879,943 (US$31,500). of Land Administration Systems,” in World 16. Transparency International ranks Afghanistan Bank, Doing Business 2015: Going Beyond at 166 among 168 economies on its Corruption Efficiency (Washington, DC: World Bank, Perceptions Index, which assesses perceived 2014). levels of corruption as determined by expert 30. The Liberian government set up the National assessments and opinion surveys (https:/ / Land Commission to address fundamental land www.transparency.org/country/AFG). tenure issues and develop interim measures 17. A five-year strategic plan is under preparation for resolving land disputes. and will serve as the basis for a 50-year road 31. Firm survey data for Afghanistan show that map for Arazi. corruption is the second most important 18. Doing Business database. obstacle to business (cited by 16.2% of firms), 19. Kevin Barthel, Grenville Barnes and J. David after political instability (cited by 25%). Stanfield, “Land Registration Modernization in Incidents of bribery reported by firms occur Developing Economies: A Discussion of the twice as often as the South Asian average. Main Problems in Central/Eastern Europe, Enterprise Survey database, World Bank, Latin America and the Caribbean,” URISA http:/ /www.enterprisesurveys.org/. Journal 12, no. 4 (2000): 27–36. 32. World Bank, Doing Business 2008 (Washington, 20. UN-Habitat, “Provincial Government of Khyber DC: World Bank, 2007). Pakhtunkhwa and UN-Habitat Inaugurates 33. Transparency International, “Corruption in the GIS Labs for Computerization and Digitization Land Sector,” Working Paper 4 (Berlin, 2011). Process of Land Records,” October 3, 2012, http:/ /www.fukuoka.unhabitat.org/projects /voices/pakistan/detail01_en.html. 21. Klaus Deininger and Aparajita Goyal, “Going Digital: Credit Effects of Land Registry Computerization in India,” Journal of Development Economics 99, no. 2 (2012): 236–43. 22. Laura Diniz, Frédéric Meunier, Haya Mortada, Parvina Rakhimova and Joonas Taras, “Registering Property: The Paths to Digitization,” in World Bank, Doing Business 2016: Measuring Regulatory Quality and Efficiency (Washington, DC: World Bank, 2016). 23. When massive repatriation of refugees occurred, the United Nations High Commissioner for Refugees (UNHCR) reported that 74.3% of returnees did not have access to farmland. The link between 60 DOING BUSINESS IN AFGHANISTAN 2017 Data Notes T he indicators presented and is inexpensive and easily replicable, so analyzed in Doing Business mea- METHODOLOGY data can be collected in a large sample of sure business regulation and the locations and economies. Because stan- protection of property rights—and their The Doing Business in Afghanistan 2017 dard assumptions are used in the data effect on businesses, especially small data were collected in a standardized collection, comparisons and benchmarks and medium-size domestic firms. First, way. To start, the team customized the are valid across locations. Finally, the data the indicators document the complex- Doing Business questionnaires for the not only highlight the extent of specific ity of regulation, such as the number specific study in Afghanistan. The ques- regulatory obstacles to business but also of procedures to start a business or tionnaires use a simple business case to identify their source and point to what to register a transfer of commercial ensure comparability across locations might be reformed. property. Second, they gauge the time and economies and over time—with and cost to achieve a regulatory goal assumptions about the legal form of the or comply with regulation, such as the business, its size, its location and the LIMITS TO WHAT IS time and cost to enforce a contract, nature of its operations. Questionnaires MEASURED go through bankruptcy or trade across were administered to local experts, borders. Third, they measure the extent including lawyers, business consultants, The Doing Business methodology has four of legal protections of property, for architects, engineers, public officials, limitations that should be considered example, the protections of minority magistrates and other professionals when interpreting the data. First, the data investors against looting by company routinely administering or advising on often focus on a specific business form— directors or the range of assets that legal and regulatory requirements. These generally a limited liability company can be used as collateral according to experts had several rounds of interaction (or its legal equivalent) of a specified secured transactions laws. Fourth, a set with the Doing Business in Afghanistan size—and may not be representative of of indicators documents the tax burden team, involving conference calls, written the regulation on other businesses (for on businesses. Finally, a set of data correspondence and visits by the team. example, sole proprietorships). Second, covers different aspects of employment The data from questionnaires were transactions described in a standardized regulation. The 11 sets of indicators subjected to numerous rounds of verifi- case scenario refer to a specific set of measured in Doing Business were added cation, leading to revisions or expansions issues and may not represent the full over time, and the sample of economies of the information collected. set of issues that a business encounters. and cities expanded. Third, the measures of time involve The Doing Business methodology offers an element of judgment by the expert This report presents Doing Business indi- several advantages. It is transparent, respondents. When sources indicate cators for five locations in Afghanistan. using factual information about what different estimates, the time indicators The data for all sets of indicators in laws and regulations say and allowing reported in Doing Business represent the Doing Business in Afghanistan 2017 are multiple interactions with local respon- median values of several responses given current as of November 2016. The data dents to clarify potential misinterpreta- under the assumptions of the standard- for Kabul and 189 other economies tions of questions. Having representative ized case. used for comparison are based on the samples of respondents is not an issue; indicators in Doing Business 2017: Equal Doing Business is not a statistical survey, Finally, the methodology assumes Opportunity for All, the 14th in a series and the texts of the relevant laws and that a business has full information on of annual reports published by the regulations are collected and answers what is required and does not waste World Bank Group. checked for accuracy. The methodology time when completing procedures. In DATA NOTES 61 Economy characteristics Gross national income per capita Doing Business in Afghanistan 2017 reports 2015 income per capita as published in the World Bank’s World Development Indicators 2016. Income is calculated using the Atlas method (in current U.S. dollars). For cost indicators expressed as a per- centage of income per capita, 2015 gross national income (GNI) per capita in current U.S. dollars is used as the denominator. Afghanistan’s income per capita for 2015 is US$630 (AFN 37,599). Region and income group Doing Business uses the World Bank regional and income group classifications, available at http://data.worldbank.org/about/ country-and-lending-groups. Regional averages presented in figures and tables in the Doing Business in Afghanistan 2017 report include economies from all income groups (low, lower middle, upper middle and high income), though high-income OECD economies are assigned the “regional” classification OECD high income. Exchange rate The exchange rate used in the Doing Business in Afghanistan 2017 report is: US$1 = 59.7 Afghani (AFN). practice, completing a procedure may in the Doing Business 2017 report, the data licenses and permits and completing take longer if the business lacks informa- under the old and new methodologies are any required notifications, verifications tion or is unable to follow up promptly. highly correlated.1 or inscriptions for the company and Alternatively, the business may choose to employees with relevant authorities. disregard some burdensome procedures. For both reasons the time delays reported STARTING A BUSINESS The ranking of locations on the ease of in Doing Business would differ from the starting a business is determined by recollection of entrepreneurs reported Doing Business records all procedures sorting their distance to frontier scores in the World Bank Enterprise Surveys or officially required, or commonly done in for starting a business. These scores are other firm-level surveys. practice, for an entrepreneur to start up the simple average of the distance to and formally operate an industrial or com- frontier scores for each of the component mercial business, as well as the time and indicators (figure 7.2). The distance to CHANGES IN WHAT IS cost to complete these procedures and frontier score shows the distance of an MEASURED the paid-in minimum capital requirement economy or location to the “frontier,” (figure 7.1). These procedures include which is derived from the most efficient Doing Business 2017 has three major the processes entrepreneurs undergo practice or highest score achieved on innovations. First it expands the paying when obtaining all necessary approvals, each indicator. taxes indicator set to also cover postfil- ing processes. Paying taxes is the final indicator set to be changed as part of the FIGURE 7.1  What are the time, cost, paid-in minimum capital and number of methodology update initiated in Doing procedures to get a local limited liability company up and running? Business 2015. Second, three indicator sets Cost (starting a business, registering property (% of income per capita) and enforcing contracts) were expanded Formal operation to cover a gender dimension, in addition to labor market regulation which was Paid-in expanded last year. Starting a business $ Number of minimum was expanded to also measure the process capital procedures of starting a business when all sharehold- ers are women. Registering property now also measures equality in ownership rights Entrepreneur to property. And enforcing contracts was Time (days) expanded to measure equality in eviden- Preregistration Registration, Postregistration incorporation tiary weight for men and women. Despite the changes in methodology introduced 62 DOING BUSINESS IN AFGHANISTAN 2017 To make the data comparable across Procedures FIGURE 7.2  Starting a business: getting a local limited liability company up and locations, several assumptions about the A procedure is defined as any interaction running business and the procedures are used. of the company founders with external Rankings are based on distance to parties (for example, government agen- frontier scores for four indicators Assumptions about the cies, lawyers, auditors or notaries) or 25% Time 25% Cost businesses spouses (if legally required). Interactions Preregistration, As % of income The business: between company founders or company registration and per capita, no postregistration bribes included ƒƒ Is a limited liability company (or its officers and employees are not counted (in calendar days) legal equivalent). as procedures. Procedures that must be 12.5% 12.5% ƒƒ Operates in the selected location completed in the same building but in women men ƒƒ Is 100% domestically owned and has different offices or at different counters 12.5% men 12.5% women five owners, none of whom is a legal are counted as separate procedures. If 12.5% 25% entity. founders have to visit the same office women Paid-in ƒƒ Has start-up capital of 10 times several times for different sequential minimum 12.5% capital men income per capita. procedures, each is counted separately. ƒƒ Performs general industrial or com- The founders are assumed to complete 25% Paid-in 25% Procedures minimum capital mercial activities, such as the produc- all procedures themselves, without Procedures are Funds deposited in a tion or sale to the public of products middlemen, facilitators, accountants or completed when bank or with a notary or services. The business does not lawyers, unless the use of such a third final document before registration (or is received up to three months after perform foreign trade activities and party is mandated by law or solicited incorporation), as % of income per capita does not handle products subject to a by the majority of entrepreneurs. If the special tax regime, for example, liquor services of professionals are required, or tobacco. It is not using heavily pol- procedures conducted by such profes- Two types of local liability companies luting production processes. sionals on behalf of the company are are considered under the starting a busi- ƒƒ Leases the commercial plant or counted as separate procedures. Each ness methodology. They are identical in offices and is not a proprietor of real electronic procedure is counted as a all aspects, except that one company is estate. The amount of the annual separate procedure. Obtaining approval owned by five married women and the lease for the office space is equiva- from a spouse to own a business or leave other by five married men. The distance lent to 1 times income per capita. the home is considered a procedure if it to frontier score for each indicator is the The size of the entire office space is is required by law or if by failing to do average of the scores obtained for each approximately 929 meters (10,000 so an individual will suffer consequences of the component indicators for both of square feet). under the law, such as the loss of rights these standardized companies. ƒƒ Does not qualify for investment to financial maintenance. Documents incentives or any special benefits. or permissions required for only one After a study of laws, regulations and ƒƒ Has at least 10 and up to 50 employ- gender for registering and operating a publicly available information on busi- ees one month after the commence- company, opening a bank account or ness entry, a detailed list of procedures is ment of operations, all of them obtaining a national identification card developed, along with the time and cost to domestic nationals. are considered additional procedures. comply with each procedure under normal ƒƒ Has a turnover of at least 100 times circumstances and the paid-in minimum income per capita. Both pre- and postincorporation pro- capital requirement. Subsequently, local ƒƒ Has a company deed 10 pages long. cedures that are officially required or incorporation lawyers, notaries and govern- commonly done in practice for an entre- ment officials complete and verify the data. The owners: preneur to formally operate a business are ƒƒ Have reached the legal age of majority recorded (table 7.1). Any interaction with Information is also collected on the and are capable of making decisions an external party within three months of sequence in which procedures are to as an adult. If there is no legal age of registration is considered a procedure, be completed and whether procedures majority, they are assumed to be 30 except value added tax or goods and ser- may be carried out simultaneously. It is years old. vices tax registration, which is counted assumed that any required information ƒƒ Are sane, competent and in good whenever the assumed turnover exceeds is readily available and that the entre- health and have no criminal record. the determined threshold. preneur will pay no bribes. If answers ƒƒ Are married, and their marriages are by local experts differ, inquiries continue monogamous and registered with the Procedures required for official cor- until the data are reconciled. authorities. respondence or transactions with public DATA NOTES 63 TABLE 7.1  What do the starting procedures are excluded. For example, includes all official fees and fees for legal a business indicators measure? procedures to comply with environmental or professional services if such services regulations are included only when they are required by law or commonly used Procedures to legally start and formally operate a company (number) apply to all businesses conducting gen- in practice. Fees for purchasing and Preregistration (for example, name verification or eral commercial or industrial activities. legalizing company books are included reservation, notarization) Procedures that the company undergoes if these transactions are required by Registration in the selected location to connect to electricity, water, gas and law. Although value added tax regis- Postregistration (for example, social security waste disposal services are not included tration can be counted as a separate registration, company seal) in the starting a business indicators. procedure, value added tax is not part Obtaining approval from spouse to start a of the incorporation cost. The company business, to leave the home to register the Time law, the commercial code, and specific company, or to open a bank account Time is recorded in calendar days. The regulations and fee schedules are used Obtaining any gender-specific document for company registration and operation, national measure captures the median duration as sources for calculating costs. In the identification card or opening a bank account that incorporation lawyers or notaries absence of fee schedules, a government Time required to complete each procedure indicate is necessary in practice to officer’s estimate is taken as an official (calendar days) complete a procedure with minimum source. In the absence of a government Does not include time spent gathering follow-up with government agencies and officer’s estimate, estimates by incor- information no unofficial payments. It is assumed that poration lawyers are used. If several Each procedure starts on a separate day the minimum time required for each pro- incorporation lawyers provide different (two procedures cannot start on the same day)— though procedures that can be fully completed cedure is one day, except for procedures estimates, the median reported value online are an exception to this rule that can be fully completed online, for is applied. In all cases the cost excludes Registration process considered completed once which the time required is recorded as bribes. final incorporation document is received or company can officially start operating half a day. Although procedures may take No prior contact with officials takes place place simultaneously, they cannot start Paid-in minimum capital on the same day (that is, simultaneous The paid-in minimum capital require- Cost required to complete each procedure (% of income per capita) procedures start on consecutive days), ment reflects the amount that the Official costs only, no bribes again with the exception of procedures entrepreneur needs to deposit in a bank that can be fully completed online. A reg- or with a notary before registration or up No professional fees unless services required by law or commonly used in practice istration process is considered completed to three months after incorporation and Paid-in minimum capital (% of income per once the company has received the final is recorded as a percentage of the econ- capita) incorporation document or can officially omy’s income per capita. The amount Funds deposited in a bank or with a notary commence business operations. If a pro- is typically specified in the commercial before registration (or up to three months after cedure can be accelerated legally for an code or the company law. Many econo- incorporation) additional cost, the fastest procedure is mies require minimum capital but allow chosen if that option is more beneficial businesses to pay only a part of it before agencies are also included. For example, to the province’s ranking. For obtaining registration, with the rest to be paid after if a company seal or stamp is required a spouse’s approval, it is assumed that the first year of operation. In Turkey in on official documents, such as tax dec- permission is granted at no additional June 2015, for example, the minimum larations, obtaining the seal or stamp is cost unless the permission needs to capital requirement was 10,000 Turkish counted. Similarly, if a company must be notarized. It is assumed that the liras, of which one-fourth needed to be open a bank account in order to complete entrepreneur does not waste time and paid before registration. The paid-in any subsequent procedure—such as reg- commits to completing each remaining minimum capital recorded for Turkey is istering for value added tax or showing procedure without delay. The time that therefore 2,500 Turkish liras, or 10.2.% proof of minimum capital deposit—this the entrepreneur spends on gathering of income per capita. transaction is included as a procedure. information is ignored. It is assumed Shortcuts are counted only if they fulfill that the entrepreneur is aware of all The data details on starting a business can four criteria: they are legal, they are avail- entry requirements and their sequence be found at http://www.doingbusiness able to the general public, they are used from the beginning but has had no prior .org. This methodology was developed by by the majority of companies, and avoid- contact with any of the officials involved. Simeon Djankov, Rafael La Porta, Florencio ing them causes delays. López-de-Silanes and Andrei Shleifer (“The Cost Regulation of Entry,” Quarterly Journal of Only procedures required of all busi- Cost is recorded as a percentage of Economics 117, no. 1 [2002]: 1–37) and is nesses are covered. Industry-specific the economy’s income per capita. It adopted here with minor changes. 64 DOING BUSINESS IN AFGHANISTAN 2017 EFFICIENCY OF CONSTRUCTION necessary to obtain construction DEALING WITH PERMITTING permits and approvals. CONSTRUCTION PERMITS Doing Business divides the process of ƒƒ Has a licensed architect and a licensed building a warehouse into distinct pro- engineer both registered with the local Doing Business records all procedures cedures in the questionnaire and solicits association of architects or engineers. required for a business in the construc- data for calculating the time and cost to BuildCo is not assumed to have any tion industry to build a warehouse along complete each procedure (figure 7.4). other employees who are technical or with the time and cost to complete each These procedures include but are not licensed experts, such as geological or procedure. In addition, Doing Business limited to: topographical experts. measures the building quality control ƒƒ Obtaining and submitting all rel- ƒƒ Has paid all taxes and taken out all index, evaluating the quality of building evant project-specific documents (for necessary insurance applicable to its regulations, the strength of quality control example, building plans, site maps general business activity (for example, and safety mechanisms, liability and insur- and certificates of urbanism) to the accidental insurance for construction ance regimes, and professional certifica- authorities. workers and third-person liability). tion requirements. Information is collected ƒƒ Hiring external third-party supervi- ƒƒ Owns the land on which the ware- through a questionnaire administered to sors, engineers or inspectors (if house will be built and will sell the experts in construction licensing, includ- necessary). warehouse upon its completion. ing architects, civil engineers, construction ƒƒ Obtaining all necessary clearances, lawyers, construction firms, utility service licenses, permits and certificates Assumptions about the providers and public officials who deal with ƒƒ Submitting all required notifications. warehouse building regulations, including approvals, ƒƒ Requesting and receiving all neces- The warehouse: permit issuance and inspections. sary inspections (unless completed ƒƒ Will be used for general storage by a private, third-party inspector). activities, such as storage of books or The ranking of locations on the ease stationery. The warehouse will not be of dealing with construction permits is Doing Business also records procedures used for any goods requiring special determined by sorting their distance to for obtaining connections for water and conditions, such as food, chemicals or frontier scores for dealing with construc- sewerage. Procedures necessary to regis- pharmaceuticals. tion permits. These scores are the simple ter the warehouse so that it can be used ƒƒ Will have two stories, both above average of the distance to frontier scores as collateral or transferred to another ground, with a total constructed area for each of the component indicators entity are also counted. of approximately 1,300.6 square (figure 7.3). meters (14,000 square feet). Each To make the data comparable across floor will be 3 meters (9 feet, 10 locations, several assumptions about the inches) high. FIGURE 7.3  Dealing with construction construction company, the warehouse ƒƒ Will have road access and be located permits: efficiency and quality of building project and the utility connections are in the periurban area of the selected regulation used. location (that is, on the fringes of Rankings are based on distance to the location but still within its official frontier scores for four indicators Assumptions about the limits). Days to comply Cost to comply construction company ƒƒ Will not be located in a special eco- with formalities with formalities, The construction company (BuildCo): nomic or industrial zone. to build a as % of warehouse warehouse value ƒƒ Is a limited liability company (or its ƒƒ Will be located on a land plot of legal equivalent). approximately 929 square meters ƒƒ Operates in the selected location. (10,000 square feet) that is 100% 25% 25% ƒƒ Is 100% domestically and privately owned by BuildCo and is accurately Time Cost owned. registered in the cadastre and land 25% 25% ƒƒ Has five owners, none of whom is a registry. Procedures Building quality legal entity. ƒƒ Is valued at 50 times income per control index ƒƒ Is fully licensed and insured to carry capita. out construction projects, such as ƒƒ Will be a new construction (there was Steps to comply Quality of building with formalities; regulation and its building warehouses. no previous construction on the land), completed when implementation final document is ƒƒ Has 60 builders and other employees, with no trees, natural water sources, received all of them nationals with the technical natural reserves or historical monu- expertise and professional experience ments of any kind on the plot. DATA NOTES 65 that are legally required, or that are done FIGURE 7.4  What are the time, cost and number of procedures to comply with formalities to build a warehouse? in practice by the majority of companies, to build a warehouse are counted, even if they may be avoided in exceptional cases. Cost This includes obtaining technical condi- (% of warehouse value) tions for electricity or clearance of the Completed electrical plans only if they are required to warehouse obtain a building permit (table 7.2). Number of Time procedures Time is recorded in calendar days. The measure captures the median duration A business in the that local experts indicate is necessary construction to complete a procedure in practice. It is industry Time assumed that the minimum time required Preconstruction Construction Postconstruction (days) and utilities for each procedure is one day, except for procedures that can be fully completed online, for which the time required is recorded as half a day. Although proce- ƒƒ Will have complete architectural and (150 gallons) a day. Will have a peak dures may take place simultaneously, technical plans prepared by a licensed water use of 1,325 liters (350 gallons) they cannot start on the same day (that architect. If preparation of the plans a day and a peak wastewater flow of is, simultaneous procedures start on con- requires such steps as obtaining fur- 1,136 liters (300 gallons) a day. secutive days), again with the exception ther documentation or getting prior ƒƒ Will have a constant level of water of procedures that can be fully completed approvals from external agencies, demand and wastewater flow through- online. If a procedure can be acceler- these are counted as procedures. out the year. ated legally for an additional cost and ƒƒ Will include all technical equipment ƒƒ Will be 1 inch in diameter for the water required to be fully operational. connection and 4 inches in diameter TABLE 7.2  What do the indicators on ƒƒ Will take 30 weeks to construct for the sewerage connection. the efficiency of construction permitting (excluding all delays due to adminis- measure? trative and regulatory requirements). Procedures Procedures to legally build a warehouse A procedure is any interaction of the (number) Assumptions about the utility company’s employees or managers, or Submitting all relevant documents and obtaining connections any party acting on behalf of the company, all necessary clearances, licenses, permits and certificates The water and sewerage connections: with external parties, including govern- Submitting all required notifications and receiving ƒƒ Will be 150 meters (492 feet) from the ment agencies, notaries, the land registry, all necessary inspections existing water source and sewer tap. If the cadastre, utility companies and public Obtaining utility connections for water and there is no water delivery infrastructure inspectors—and the hiring of external sewerage in the location, a borehole will be dug. private inspectors and technical experts Registering the warehouse after its completion If there is no sewerage infrastructure, where needed. Interactions between com- (if required for use as collateral or for transfer of the warehouse) a septic tank in the smallest size avail- pany employees, such as development able will be installed or built. of the warehouse plans and inspections Time required to complete each procedure (calendar days) ƒƒ Will not require water for fire protec- conducted by employees, are not counted Does not include time spent gathering tion reasons; a fire extinguishing as procedures. However, interactions with information system (dry system) will be used external parties that are required for the Each procedure starts on a separate day— instead. If a wet fire protection system architect to prepare the plans and draw- though procedures that can be fully completed is required by law, it is assumed that ings (such as obtaining topographic or online are an exception to this rule the water demand specified below geological surveys), or to have such docu- Procedure considered completed once final document is received also covers the water needed for fire ments approved or stamped by external protection. parties, are counted as procedures. No prior contact with officials ƒƒ Will have an average water use of Procedures that the company undergoes Cost required to complete each procedure (% of warehouse value) 662 liters (175 gallons) a day and an to connect the warehouse to water and Official costs only, no bribes average wastewater flow of 568 liters sewerage are included. All procedures 66 DOING BUSINESS IN AFGHANISTAN 2017 the accelerated procedure is used by the if any building regulations (including TABLE 7.3  What do the indicators on majority of companies, the fastest proce- the building code) or any regulations building quality control measure? dure is chosen. It is assumed that BuildCo dealing with construction permits are Quality of building regulations index (0–2) does not waste time and commits to com- available on a website that is updated Accessibility of building regulations pleting each remaining procedure without as soon as the regulations change; 0.5 delay. The time that BuildCo spends on if the building regulations are avail- Clarity of requirements for obtaining a building permit gathering information is not taken into able free of charge (or for a nominal Quality control before construction index account. It is assumed that BuildCo is fee) at the relevant permit-issuing (0–1) aware of all building requirements and authority; 0 if the building regulations Whether licensed or technical experts approve their sequence from the beginning. are distributed to building profession- building plans als through an official gazette free of Quality control during construction index Cost charge (or for a nominal fee), if they (0–3) Cost is recorded as a percentage of the must be purchased or if they are not Types of inspections legally mandated during warehouse value (assumed to be 50 times made easily accessible anywhere. construction income per capita). Only official costs ƒƒ Whether the requirements for obtain- Implementation of legally mandated inspections in practice are recorded. All the fees associated with ing a building permit are clearly Quality control after construction index completing the procedures to legally build specified. A score of 1 is assigned if (0–3) a warehouse are recorded, including those the building regulations (including Final inspection legally mandated after associated with obtaining land use approv- the building code) or any acces- construction als and preconstruction design clearances; sible website, brochure or pamphlet Implementation of legally mandated final receiving inspections before, during and clearly specifies the list of required inspection in practice after construction; obtaining utility con- documents to submit, the fees to be Liability and insurance regimes index (0–2) nections; and registering the warehouse paid and all required preapprovals of Parties held legally liable for structural flaws after property. Nonrecurring taxes required for the drawings or plans by the relevant building occupancy the completion of the warehouse project agencies; 0 if none of these sources Parties legally mandated to obtain insurance to are also recorded. Sales taxes (such as specify any of these requirements or if cover structural flaws after building occupancy or insurance commonly obtained in practice value added tax) or capital gains taxes are these sources specify fewer than the Professional certifications index (0–4) not recorded. Nor are deposits that must three requirements mentioned above. be paid up front and are later refunded. Qualification requirements for individual who approves building plans The building code, information from local The index ranges from 0 to 2, with Qualification requirements for individual who experts, and specific regulations and fee higher values indicating clearer and more supervises construction or conducts inspections schedules are used as sources for costs. If transparent building regulations. In the Building quality control index (0–15) several local partners provide different esti- United Kingdom, for example, all relevant Sum of the quality of building regulations, quality mates, the median reported value is used. legislation can be found on an official control before construction, quality control during government website (a score of 1). The construction, quality control after construction, BUILDING QUALITY CONTROL legislation specifies the list of required liability and insurance regimes, and professional certifications indices The building quality control index is documents to submit, the fees to be paid based on six other indices—the quality and all required preapprovals of the draw- of building regulations, quality control ings or plans by the relevant agencies (a score of 1 is assigned if the national before construction, quality control dur- score of 1). Adding these numbers gives association of architects or engineers ing construction, quality control after the United Kingdom a score of 2 on the (or its equivalent) must review the construction, liability and insurance quality of building regulations index. building plans, if an independent firm regimes, and professional certifications or expert who is a licensed architect or indices (table 7.3). The indicator is based Quality control before engineer must review the plans, if the on the same case study assumptions as construction index architect or engineer who prepared the measures of efficiency. The quality control before construction the plans must submit an attestation index has one component: to the permit-issuing authority stating Quality of building regulations ƒƒ Whether by law a licensed architect that the plans are in compliance with index or licensed engineer is part of the the building regulations or if a licensed The quality of building regulations index committee or team that reviews and architect or engineer is part of the has two components: approves building permit applications committee or team that approves the ƒƒ Whether building regulations are eas- and whether that person has the plans at the relevant permit-issuing ily accessible. A score of 1 is assigned authority to refuse an application. A authority; 0 if no licensed architect or DATA NOTES 67 engineer is involved in the review of occur most of the time but not always building regulations; 0 if the legally the plans to ensure their compliance or if inspections are not mandated by mandated final inspection does not with building regulations. law regardless of whether or not they occur in practice, if the legally man- commonly occur in practice. dated final inspection occurs most The index ranges from 0 to 1, with higher of the time but not always or if a final values indicating better quality control The index ranges from 0 to 3, with higher inspection is not mandated by law in the review of the building plans. In values indicating better quality control regardless of whether or not it com- Rwanda, for example, the City Hall in during the construction process. In monly occurs in practice. Kigali must review the building permit Antigua and Barbuda, for example, the application, including the plans and draw- Development Control Authority is legally The index ranges from 0 to 3, with ings, and both a licensed architect and a mandated to conduct phased inspections higher values indicating better quality licensed engineer are part of the team under the Physical Planning Act of 2003 control after the construction process. that reviews the plans and drawings. (a score of 1). However, the Development In Haiti, for example, the Municipality Rwanda therefore receives a score of 1 Control Authority rarely conducts these of Port-au-Prince is legally mandated on the quality control before construction inspections in practice (a score of 0). to conduct a final inspection under the index. Adding these numbers gives Antigua and national Building Code of 2012 (a score Barbuda a score of 1 on the quality control of 2). However, most of the time the final Quality control during during construction index. inspection does not occur in practice (a construction index score of 0). Adding these numbers gives The quality control during construction Quality control after construction Haiti a score of 2 on the quality control index has two components: index after construction index. ƒƒ Whether inspections are mandated The quality control after construction by law during the construction pro- index has two components: Liability and insurance regimes cess. A score of 2 is assigned if an ƒƒ Whether a final inspection is man- index in-house supervising engineer (for dated by law in order to verify that The liability and insurance regimes index example, an employee of the building the building was built in accordance has two components: company), an external supervising with the approved plans and existing ƒƒ Whether any parties involved in engineer or a government agency is building regulations. A score of 2 is the construction process are held legally mandated to conduct risk- assigned if an in-house supervising legally liable for latent defects such based inspections. A score of 1 is engineer (that is, an employee of as structural flaws or problems in assigned if an in-house supervising the building company), an external the building once it is in use. A score engineer (that is, an employee of supervising engineer or an external of 1 is assigned if at least two of the the building company), an external inspections firm is legally mandated following parties are held legally liable supervising engineer or an external to verify that the building has been for structural flaws or problems in the inspections firm is legally mandated built in accordance with the approved building once it is in use: the architect to conduct technical inspections at plans and existing building regulations or engineer who designed the plans different stages during the construc- or if a government agency is legally for the building, the professional in tion of the building or if a government mandated to conduct a final inspec- charge of supervising the construc- agency is legally mandated to conduct tion upon completion of the building; tion, the professional or agency that only technical inspections at different 0 if no final inspection is mandated conducted the inspections or the stages during the construction. A by law after construction and no third construction company; 0.5 if one of score of 0 is assigned if a government party is required to verify that the the parties is held legally liable for agency is legally mandated to con- building has been built in accordance structural flaws or problems in the duct unscheduled inspections, or if no with the approved plans and existing building once it is occupied; 0 if no technical inspections are mandated building regulations. party is held legally liable for struc- by law. ƒƒ Whether the final inspection is imple- tural flaws or problems in the building ƒƒ Whether inspections during con- mented in practice. A score of 1 is once it is in use, if the project owner or struction are implemented in practice. assigned if the legally mandated final investor is the only party held liable, if A score of 1 is assigned if the legally inspection after construction always the liability is determined in the court mandated inspections during con- occurs in practice or if a supervis- or if liability is stipulated in a contract. struction always occur in practice; 0 ing engineer or firm attests that the ƒƒ Whether any parties involved in if the legally mandated inspections do building has been built in accordance the construction process is legally not occur in practice, if the inspections with the approved plans and existing required to obtain a latent defect 68 DOING BUSINESS IN AFGHANISTAN 2017 liability—or decennial (10-year) liabil- score of 0). Adding these numbers gives of years of practical experience or be ity—insurance policy to cover possible Madagascar a score of 1 on the liability a registered member of the national structural flaws or problems in the and insurance regimes index. order (association) of engineers or building once it is in use. A score of 1 pass a qualification exam. A score of is assigned if the architect or engineer Professional certifications index 0 is assigned if the professional must who designed the plans for the build- The professional certifications index has meet only one of the requirements, if ing, the professional or agency that two components: the professional must meet two of the conducted the technical inspections, ƒƒ The qualification requirements for requirements but neither of the two is the construction company, or the the professional responsible for to have a university degree, or if the project owner or investor is required verifying that the architectural plans professional is subject to no qualifica- by law to obtain either a decennial or drawings are in compliance with tion requirements. liability insurance or a latent defect the building regulations. A score of 2 liability insurance policy to cover is assigned if this professional must The index ranges from 0 to 4, with higher possible structural flaws or problems have a minimum number of years of values indicating greater professional in the building once it is in use or if a practical experience, must have a uni- certification requirements. In Cambodia, decennial liability insurance or latent versity degree (a minimum of a bach- for example, the professional responsible defect liability insurance policy is elor’s) in architecture or engineering for verifying that the architectural plans commonly obtained in practice by the and must also either be a registered or drawings are in compliance with the majority of any of these parties even member of the national order (asso- building regulations must have a relevant if not required by law; a score of 0 is ciation) of architects or engineers or university degree and must pass a quali- assigned if no party is required by law pass a qualification exam. A score of fication exam (a score of 1). However, the to obtain either a decennial liability 1 is assigned if the professional must professional supervising construction insurance or a latent defect liability have a university degree (a minimum must only have a university degree (a insurance policy and such insurance is of a bachelor’s) in architecture or score of 0). Adding these numbers gives not commonly obtained in practice by engineering and must also either Cambodia a score of 1 on the professional any party, if the requirement to obtain have a minimum number of years of certifications index. an insurance policy is stipulated in a practical experience or be a registered contract, if any party must obtain a member of the national order (asso- Building quality control index professional insurance policy to cover ciation) of architects or engineers or The building quality control index is the the safety of workers or any other pass a qualification exam. A score of sum of the scores on the quality of build- defects during construction but not a 0 is assigned if the professional must ing regulations, quality control before decennial liability insurance or latent meet only one of the requirements, if construction, quality control during con- defect liability insurance policy that the professional must meet two of the struction, quality control after construc- would cover defects after the building requirements but neither of the two is tion, liability and insurance regimes, and is in use, or if any party is required to have a university degree, or if the professional certifications indices. The to pay for any damages caused on professional is subject to no qualifica- index ranges from 0 to 15, with higher their own without having to obtain an tion requirements. values indicating better quality control insurance policy. ƒƒ The qualification requirements for the and safety mechanisms in the construc- professional who conducts the tech- tion regulatory system. The index ranges from 0 to 2, with higher nical inspections during construction. values indicating more stringent latent A score of 2 is assigned if this profes- The data details on dealing with construc- defect liability and insurance regimes. sional must have a minimum number tion permits can be at http://www.doing In Madagascar, for example, under of years of practical experience, must business.org. article 1792 of the Civil Code both the have a university degree (a minimum architect who designed the plans and the of a bachelor’s) in architecture or engi- construction company are held legally neering and must also either be a reg- GETTING ELECTRICITY liable for latent defects for a period of 10 istered member of the national order years after the completion of the building of engineers or pass a qualification Doing Business records all procedures (a score of 1). However, there is no legal exam. A score of 1 is assigned if the required for a business to obtain a perma- requirement for any party to obtain a professional must have a university nent electricity connection and supply for decennial liability insurance policy to degree (a minimum of a bachelor’s) in a standardized warehouse (figure 7.5). cover structural defects, nor do most par- architecture or engineering and must These procedures include applications ties obtain such insurance in practice (a also either have a minimum number and contracts with electricity utilities, DATA NOTES 69 FIGURE 7.5  Doing Business measures the connection process at the level of this area a new electricity connection distribution utilities is not eligible for a special investment promotion regime (offering special subsidization or faster service, for example). ƒƒ Is located in an area with no physical constraints. For example, the property is not near a railway. ƒƒ Is a new construction and is being Generation Transmission connected to electricity for the first time. Distribution ƒƒ Has two stories, both above u New connections ground, with a total surface area of u Network operation and maintenance u Metering and billing approximately 1,300.6 square meters (14,000 square feet). The plot of Customer land on which it is built is 929 square meters (10,000 square feet). ƒƒ Is used for storage of goods. all necessary inspections and clearances simple average of the distance to frontier from the distribution utility and other scores for all the component indicators Assumptions about the electricity agencies, and the external and final con- except the price of electricity (figure 7.6). connection nection works. The questionnaire divides The electricity connection: the process of getting an electricity Data on reliability of supply are collected ƒƒ Is a permanent one. connection into distinct procedures and from the electricity distribution utilities ƒƒ Is a three-phase, four-wire Y connec- solicits data for calculating the time and or regulators, depending on the specific tion with a subscribed capacity of 140 cost to complete each procedure. technical nature of the data. The rest of kilovolt-amperes (kVA) with a power the data, including data on the transpar- factor of 1, when 1 kVA = 1 kilowatt In addition, Doing Business measures the ency of tariffs and the procedures for (kW). reliability of supply and transparency of obtaining an electricity connection, are tariffs index (included in the aggregate collected from all market players—the distance to frontier score and ranking electricity distribution utility, electric- FIGURE 7.6  Getting electricity: on the ease of doing business) and the ity regulatory agencies and independent efficiency, reliability and transparency price of electricity (omitted from these professionals such as electrical engineers, aggregate measures). The reliability of electrical contractors and construction Rankings are based on distance to frontier scores for four indicators supply and transparency of tariffs index companies. The electricity distribution encompasses quantitative data on the utility consulted is the one serving the Days to obtain Cost to obtain a an electricity connection, as % of duration and frequency of power outages area (or areas) where warehouses are connection income per capita as well as qualitative information on the located. If there is a choice of distribu- mechanisms put in place by the utility for tion utilities, the one serving the largest monitoring power outages and restoring number of customers is selected. 25% 25% power supply, the reporting relationship Time Cost 25% 25% between the utility and the regulator for To make the data comparable across Procedures Reliability power outages, the transparency and locations, several assumptions about the of supply and transparency accessibility of tariffs and whether the warehouse, the electricity connection of tariffs utility faces a financial deterrent aimed at and the monthly consumption are used. Steps to file a connection Power outages limiting outages (such as a requirement application, prepare and regulatory a design, complete mechanisms in to compensate customers or pay fines Assumptions about the works, obtain approvals, place to monitor when outages exceed a certain cap). warehouse go through inspections, and reduce them; install a meter and transparency of The warehouse: sign a supply tariffs The ranking of locations on the ease of ƒƒ Is owned by a local entrepreneur. contract getting electricity is determined by sort- ƒƒ Is located in the selected location. ing their distance to frontier scores for ƒƒ Is located in an area where similar Note: The price of electricity is measured but does getting electricity. These scores are the warehouses are typically located. In not count for the rankings. 70 DOING BUSINESS IN AFGHANISTAN 2017 ƒƒ Has a length of 150 meters. The con- company employees and steps related to TABLE 7.4 What do the getting nection is to either the low- or medi- the internal electrical wiring, such as the electricity indicators measure? um-voltage distribution network and design and execution of the internal elec- Procedures to obtain an electricity is either overhead or underground, trical installation plans, are not counted connection (number) whichever is more common in the as procedures. Procedures that must be Submitting all relevant documents and obtaining area where the warehouse is located. completed with the same utility but with all necessary clearances and permits ƒƒ Requires works that involve the different departments are counted as Completing all required notifications and crossing of a 10-meter-wide road (by separate procedures (table 7.4). receiving all necessary inspections excavation or overhead lines) but are Obtaining external installation works and possibly purchasing material for these works all carried out on public land. There is The company’s employees are assumed no crossing of other owners’ private to complete all procedures themselves Concluding any necessary supply contract and obtaining final supply property because the warehouse has unless the use of a third party is man- Time required to complete each procedure access to a road. dated (for example, if only an electrician (calendar days) ƒƒ Includes only negligible length in the registered with the utility is allowed to Is at least one calendar day customer’s private domain. submit an application). If the company Each procedure starts on a separate day ƒƒ Does not require work to install the can, but is not required to, request the internal wiring of the warehouse. This services of professionals (such as a pri- Does not include time spent gathering information has already been completed up to and vate firm rather than the utility for the Reflects the time spent in practice, with little including the customer’s service panel external works), these procedures are follow-up and no prior contact with officials or switchboard and the meter base. recorded if they are commonly done. Cost required to complete each procedure For all procedures, only the most likely (% of income per capita) Assumptions about the monthly cases (for example, more than 50% of Official costs only, no bribes consumption for March the time the utility has the material) Value added tax excluded ƒƒ It is assumed that the warehouse and those followed in practice for con- Reliability of supply and transparency of operates 30 days a month from 9:00 necting a warehouse to electricity are tariffs index (0–8) a.m. to 5:00 p.m. (8 hours a day), counted. Duration and frequency of power outages with equipment utilized at 80% of Tools to monitor power outages capacity on average, and that there Time Tools to restore power supply are no electricity cuts (assumed for Time is recorded in calendar days. The simplicity reasons). Regulatory monitoring of utilities’ performance measure captures the median duration ƒƒ The monthly energy consumption is that the electricity utility and experts indi- Financial deterrents aimed at limiting outages 26,880 kilowatt-hours (kWh); hourly cate is necessary in practice, rather than Transparency and accessibility of tariffs consumption is 112 kWh. required by law, to complete a procedure Price of electricity (cents per kilowatt-hour) ƒƒ If multiple electricity suppliers exist, with minimum follow-up and no extra Price based on monthly bill for commercial the warehouse is served by the payments. It is assumed that the mini- warehouse in case study cheapest supplier. mum time required for each procedure is Note: While Doing Business measures the price ƒƒ Tariffs effective in March of the cur- one day. Although procedures may take of electricity, it does not include these data when calculating the distance to frontier score for getting rent year are used for calculation of place simultaneously, they cannot start electricity or the ranking on the ease of getting electricity. the price of electricity for the ware- on the same day (that is, simultaneous house. Although March has 31 days, procedures start on consecutive days). for calculation purposes only 30 days It is assumed that the company does not recorded exclusive of value added tax. are used. waste time and commits to completing All the fees and costs associated with each remaining procedure without delay. completing the procedures to connect Procedures The time that the company spends on a warehouse to electricity are recorded, A procedure is defined as any interac- gathering information is not taken into including those related to obtaining tion of the company’s employees or its account. It is assumed that the com- clearances from government agencies, main electrician or electrical engineer pany is aware of all electricity connection applying for the connection, receiving (that is, the one who may have done the requirements and their sequence from inspections of both the site and the internal wiring) with external parties, the beginning. internal wiring, purchasing material, such as the electricity distribution utility, getting the actual connection works and electricity supply utilities, government Cost paying a security deposit. Information agencies, electrical contractors and Cost is recorded as a percentage of the from local experts and specific regula- electrical firms. Interactions between economy’s income per capita. Costs are tions and fee schedules are used as DATA NOTES 71 sources for costs. If several local part- charged may vary depending on the customer and the average number of ners provide different estimates, the credit standing of the company. The outages per customer) and the SAIDI median reported value is used. In all best possible credit standing and thus value is below a threshold of 100 hours cases the cost excludes bribes. the lowest possible commission are and the SAIFI value below a threshold of assumed. Where a bond can be put up, 100 outages. Security deposit the value recorded for the deposit is the Utilities may require security deposits as annual commission times the five years Because the focus is on measuring the a guarantee against the possible failure of assumed to be the length of the con- reliability of the electricity supply, a customers to pay their consumption bills. tract. If both options exist, the cheaper location is not eligible to obtain a score For this reason the security deposit for a alternative is recorded. if outages are too frequent or long-lasting new customer is most often calculated for the electricity supply to be consid- as a function of the customer’s estimated In Honduras in June 2015 a customer ered reliable—that is, if the SAIDI value consumption. requesting a 140-kVA electricity connec- exceeds the threshold of 100 hours or the tion would have had to put up a security SAIFI value exceeds the threshold of 100 Doing Business does not record the full deposit of 126,894 Honduran lempiras outages.2 A location is also not eligible amount of the security deposit. If the (US$5,616) in cash or check, and the to obtain a score on the index if data on deposit is based on the customer’s deposit would have been returned only power outages are not collected. actual consumption, this basis is the at the end of the contract. The customer one assumed in the case study. Rather could instead have invested this money For all locations that meet the criteria as than the full amount of the secu- at the prevailing lending rate of 20.66%. determined by Doing Business, a score on rity deposit, Doing Business records the Over the five years of the contract this the reliability of supply and transparency present value of the losses in interest would imply a present value of lost of tariffs index is calculated on the basis earnings experienced by the customer interest earnings of 77,272.68 lempiras of the following six components: because the utility holds the secu- (US$3,420). In contrast, if the customer ƒƒ What the SAIDI and SAIFI values are. rity deposit over a prolonged period, in chose to settle the deposit with a bank If SAIDI and SAIFI are 12 (equivalent most cases until the end of the contract guarantee at an annual rate of 2.5%, the to an outage of one hour each month) (assumed to be after five years). In amount lost over the five years would be or below, a score of 1 is assigned. If cases where the security deposit is just 15,861.75 lempiras (US$702). SAIDI and SAIFI are 4 (equivalent used to cover the first monthly con- to an outage of one hour each quar- sumption bills, it is not recorded. To Reliability of supply and ter) or below, 1 additional point is calculate the present value of the lost transparency of tariffs index assigned. Finally, if SAIDI and SAIFI interest earnings, the end-2015 lending Doing Business uses the system average are 1 (equivalent to an outage of one rates from the International Monetary interruption duration index (SAIDI) hour per year) or below, 1 more point Fund’s International Financial Statistics and the system average interruption is assigned. are used. In cases where the security frequency index (SAIFI) to measure the ƒƒ What tools are used by the distribu- deposit is returned with interest, the duration and frequency of power outages tion utility to monitor power out- difference between the lending rate and in each of the selected locations. SAIDI is ages. A score of 1 is assigned if the the interest paid by the utility is used to the average total duration of outages over utility uses automated tools, such calculate the present value. the course of a year for each customer as the supervisory control and data served, while SAIFI is the average number acquisition (SCADA) system; 0 if it In some economies the security deposit of service interruptions experienced by a relies solely on calls from customers can be put up in the form of a bond: the customer in a year. Annual data (covering and records and monitors outages company can obtain from a bank or an the calendar year) are collected from dis- manually. insurance company a guarantee issued tribution utility companies and national ƒƒ What tools are used by the distribu- on the assets it holds with that financial regulators on SAIDI and SAIFI. Both tion utility to restore power supply. A institution. In contrast to the scenario SAIDI and SAIFI estimates include load score of 1 is assigned if the utility uses in which the customer pays the deposit shedding. automated tools, such as the SCADA in cash to the utility, in this scenario system; 0 if it relies solely on manual the company does not lose ownership A location is eligible to obtain a score on resources for service restoration, control over the full amount and can the reliability of supply and transparency such as field crews or maintenance continue using it. In return the com- of tariffs index if the utility collects data personnel. pany will pay the bank a commission on electricity outages (measuring the ƒƒ Whether a regulator—that is, an enti- for obtaining the bond. The commission average total duration of outages per ty separate from the utility—monitors 72 DOING BUSINESS IN AFGHANISTAN 2017 the utility’s performance on reliability maximum period defined by the regula- The price of electricity is measured of supply. A score of 1 is assigned if tor (a score of 1). Customers are noti- in US$ cents per kilowatt-hour. On the regulator performs periodic or fied of a change in tariffs ahead of the the basis of the assumptions about real-time reviews; 0 if it does not next billing cycle and can easily check monthly consumption, a monthly bill monitor power outages and does not effective tariffs online (a score of 1). for a commercial warehouse in each require the utility to report on reliabil- Adding these numbers gives the Czech of the selected locations is computed ity of supply. Republic a score of 8 on the reliability for the month of March. As noted, the ƒƒ Whether financial deterrents exist to of supply and transparency of tariffs warehouse uses electricity 30 days a limit outages. A score of 1 is assigned index. month, from 9:00 a.m. to 5:00 p.m., so if the utility compensates customers different tariff schedules may apply if a when outages exceed a certain cap, On the other hand, several economies time-of-use tariff is available. if the utility is fined by the regulator receive a score of 0 on the reliability of when outages exceed a certain cap or supply and transparency of tariffs index. The data details on getting electricity can if both these conditions are met; 0 if The reason may be that outages occur be found for each economy at http:// www no compensation mechanism of any more than once a month and none of the .doingbusiness.org. The initial methodology kind is available. mechanisms and tools measured by the was developed by by Carolin Geginat and ƒƒ Whether electricity tariffs are trans- index are in place. An economy may also Rita Ramalho (“Electricity Connections parent and easily available. A score receive a score of 0 if either the SAIDI or and Firm Performance in 183 Countries,” of 1 is assigned if effective tariffs are SAIFI value (or both) exceeds the thresh- Global Indicators Group, World Bank Group, available online and customers are old of 100. For Papua New Guinea, for Washington, DC, 2015) and is adopted here notified of a change in tariff a full bill- example, the SAIDI value (211) exceeds with minor changes. ing cycle (that is, one month) ahead the threshold. Based on the criteria of time; 0 if not. established, Papua New Guinea cannot receive a score on the index even though REGISTERING PROPERTY The index ranges from 0 to 8, with the country has regulatory monitoring higher values indicating greater reli- of outages and there is a compensation Doing Business records the full sequence ability of electricity supply and greater mechanism for customers. of procedures necessary for a business transparency of tariffs. In the Czech (the buyer) to purchase a property from Republic, for example, the distribution If an economy issued no electricity con- another business (the seller) and to utility company PREdistribuce uses nections between June 2015 and June transfer the property title to the buyer’s SAIDI and SAIFI metrics to monitor and 2016, or if electricity is not provided during name so that the buyer can use the collect data on power outages. In 2015 that period, the economy receives a “no property for expanding its business, use the average total duration of power practice” mark on the procedures, time the property as collateral in taking new outages in Prague was 0.49 hours per and cost indicators. In addition, a “no prac- loans or, if necessary, sell the property customer and the average number of tice” economy receives a score of 0 on the to another business. It also measures outages experienced by a customer reliability of supply and transparency of the time and cost to complete each of was 0.33. Both SAIDI and SAIFI are tariffs index even if the utility has in place these procedures. In addition, Doing below the threshold and indicate that automated systems for monitoring and Business measures the quality of the land there was less than one outage a year restoring outages, there is regulatory over- administration system in each economy. per customer, for a total duration of less sight of utilities on power interruptions, The quality of land administration than one hour. So the Czech Republic and tariffs are publicly available. index has five dimensions: reliability of not only meets the eligibility criteria for infrastructure, transparency of informa- obtaining a score on the index, it also Price of electricity tion, geographic coverage, land dispute receives a score of 3 on the first com- Doing Business measures the price of elec- resolution and equal access to property ponent of the index. The utility uses an tricity but does not include these data when rights. automated system (SCADA) to identify calculating the distance to frontier score faults in the network (a score of 1) and for getting electricity or the ranking on the The ranking of locations on the ease of restore electricity service (a score of 1). ease of getting electricity. (The data are registering property is determined by The national regulator actively reviews available on the Doing Business website, at sorting their distance to frontier scores the utility’s performance in providing http:/ /www.doingbusiness.org.) The data for registering property. These scores reliable electricity service (a score of 1) on electricity prices are based on standard- are the simple average of the distance to and requires the utility to compensate ized assumptions to ensure comparability frontier scores for each of the component customers if outages last longer than a across locations and economies. indicators (figure 7.7). DATA NOTES 73 FIGURE 7.7  Registering property: on their behalf. Local property lawyers, (6,000 square feet). A two-story efficiency and quality of land notaries and property registries provide warehouse of 929 square meters administration system information on procedures as well as (10,000 square feet) is located on the the time and cost to complete each of land. The warehouse is 10 years old, is Rankings are based on distance to frontier scores for four indicators them. in good condition and complies with all safety standards, building codes Days to transfer Cost to transfer property, as % of To make the data comparable across and other legal requirements. It has property between two local companies property value locations, several assumptions about the no heating system. The property of parties to the transaction, the property land and building will be transferred in and the procedures are used. its entirety. 25% 25% ƒƒ Will not be subject to renovations Time Cost 25% 25% Assumptions about the parties or additional building following the Procedures Quality of land The parties (buyer and seller): purchase. administration index ƒƒ Are limited liability companies (or the ƒƒ Has no trees, natural water sources, legal equivalent). natural reserves or historical monu- Steps to transfer Reliability, ƒƒ Are located in the periurban area of ments of any kind. property so that it transparency and can be sold or used coverage of land the selected location. ƒƒ Will not be used for special purposes, as collateral administration system; ƒƒ Are 100% domestically and privately and no special permits, such as for protection against land disputes; equal access owned. residential use, industrial plants, to property rights ƒƒ Have 50 employees each, all of whom waste storage or certain types of agri- are nationals. cultural activities, are required. ƒƒ Perform general commercial activities. ƒƒ Has no occupants, and no other party EFFICIENCY OF TRANSFERRING holds a legal interest in it. PROPERTY Assumptions about the property As recorded by Doing Business, the pro- The property: Procedures cess of transferring property starts with ƒƒ Has a value of 50 times income per A procedure is defined as any interaction obtaining the necessary documents, capita. The sale price equals the value. of the buyer or the seller, their agents (if such as a copy of the seller’s title if nec- ƒƒ Is fully owned by the seller. an agent is legally or in practice required) essary, and conducting due diligence if ƒƒ Has no mortgages attached and has or the property with external parties, required. The transaction is considered been under the same ownership for including government agencies, inspec- complete when it is opposable to third the past 10 years. tors, notaries and lawyers. Interactions parties and when the buyer can use ƒƒ Is registered in the land registry or between company officers and employ- the property, use it as collateral for a cadastre, or both, and is free of title ees are not considered. All procedures bank loan or resell it (figure 7.8). Every disputes. that are legally or in practice required for procedure required by law or necessary ƒƒ Is located in a periurban commercial registering property are recorded, even in practice is included, whether it is the zone, and no rezoning is required. if they may be avoided in exceptional responsibility of the seller or the buyer ƒƒ Consists of land and a building. The cases (table 7.5). It is assumed that the or must be completed by a third party land area is 557.4 square meters buyer follows the fastest legal option available and used by the majority of property owners. Although the buyer FIGURE 7.8 What are the time, cost and number of procedures required to transfer property between two local companies? may use lawyers or other professionals where necessary in the registration pro- Cost (% of property value) cess, it is assumed that the buyer does Buyer can use not employ an outside facilitator in the the property, registration process unless legally or in resell it or use it as practice required to do so. collateral Number of Land & two-story procedures Time warehouse Time is recorded in calendar days. The Seller with property measure captures the median dura- registered and no title disputes Time tion that property lawyers, notaries or Preregistration Registration Postregistration (days) registry officials indicate is necessary to complete a procedure. It is assumed 74 DOING BUSINESS IN AFGHANISTAN 2017 TABLE 7.5  What do the indicators on including fees, transfer taxes, stamp ƒƒ How immovable property is identified. the efficiency of transferring property duties and any other payment to the A score of 1 is assigned if there is a measure? property registry, notaries, public agen- unique number to identify properties cies or lawyers. Other taxes, such as for the majority of land plots; 0 if there Procedures to legally transfer title on immovable property (number) capital gains tax or value added tax, are are multiple identifiers. Preregistration procedures (for example, checking excluded from the cost measure. Both for liens, notarizing sales agreement, paying costs borne by the buyer and those borne The index ranges from 0 to 8, with higher property transfer taxes) by the seller are included. If cost esti- values indicating a higher quality of Registration procedures in the selected economy mates differ among sources, the median infrastructure for ensuring the reliabil- Postregistration procedures (for example, filing reported value is used. ity of information on property titles and title with municipality) boundaries. In Turkey, for example, the Time required to complete each procedure (calendar days) QUALITY OF LAND land registry offices in Istanbul maintain ADMINISTRATION titles in a fully digital format (a score of Does not include time spent gathering information The quality of land administration index 2) and have a fully electronic database Each procedure starts on a separate day— is composed of five other indices: the to check for encumbrances (a score of though procedures that can be fully completed reliability of infrastructure, transparency 1). The Cadastral Directorate offices in online are an exception to this rule of information, geographic coverage, land Istanbul have digital maps (a score of Procedure considered completed once final dispute resolution and equal access to 2), and the Geographical Information document is received property rights indices (table 7.6). Data Directorate has a public portal allowing No prior contact with officials are collected for each of the selected users to check the plans and cadastral Cost required to complete each procedure locations. information on parcels along with satel- (% of property value) lite images (a score of 1). Databases Official costs only, no bribes Reliability of infrastructure index about land ownership and maps are No value added or capital gains taxes included The reliability of infrastructure index has linked to each other through the TAKBIS six components: system, an integrated information system that the minimum time required for each ƒƒ How land titles are kept at the registry for the land registry offices and cadastral procedure is one day, except for proce- of the selected location. A score of 2 offices (a score of 1). Finally, there is a dures that can be fully completed online, is assigned if the majority of land titles unique identifying number for properties for which the time required is recorded are fully digital; 1 if the majority are (a score of 1). Adding these numbers as half a day. Although procedures may scanned; 0 if the majority are kept in gives Turkey a score of 8 on the reliability take place simultaneously, they cannot paper format. of infrastructure index. start on the same day, again with the ƒƒ Whether there is an electronic data- exception of procedures that can be base for checking for encumbrances. Transparency of information fully completed online. It is assumed A score of 1 is assigned if yes; 0 if no. index that the buyer does not waste time and ƒƒ How maps of land plots are kept at The transparency of information index commits to completing each remaining the mapping agency of the selected has 10 components: procedure without delay. If a procedure location. A score of 2 is assigned if ƒƒ Whether information on land owner- can be accelerated for an additional cost, the majority of maps are fully digital; ship is made publicly available. A the fastest legal procedure available and 1 if the majority are scanned; 0 if the score of 1 is assigned if information used by the majority of property owners majority are kept in paper format. on land ownership is accessible by is chosen. If procedures can be under- ƒƒ Whether there is a geographic anyone; 0 if access is restricted. taken simultaneously, it is assumed that information system—an electronic ƒƒ Whether the list of documents they are. It is assumed that the parties database for recording boundar- required for completing any type of involved are aware of all requirements ies, checking plans and providing property transaction is made publicly and their sequence from the beginning. cadastral information. A score of 1 is available. A score of 0.5 is assigned Time spent on gathering information is assigned if yes; 0 if no. if the list of documents is accessible not considered. ƒƒ How the land ownership registry online or on a public board; 0 if it is and mapping agency are linked. A not made available to the public or if it Cost score of 1 is assigned if information can be obtained only in person. Cost is recorded as a percentage of the about land ownership and maps are ƒƒ Whether the fee schedule for property value, assumed to be equivalent kept in a single database or in linked completing any type of property to 50 times income per capita. Only offi- databases; 0 if there is no connection transaction is made publicly available. cial costs required by law are recorded, between the different databases. A score of 0.5 is assigned if the fee DATA NOTES 75 TABLE 7.6  What do the indicators on the quality of land administration measure? of 0.5 is assigned if the service stan- dard is accessible online or on a public Reliability of infrastructure index (0–8) board; 0 if it is not made available to Type of system for archiving information on land ownership the public or if it can be obtained only Availability of electronic database to check for encumbrances in person. Type of system for archiving maps ƒƒ Whether there is a specific and sepa- Availability of geographic information system rate mechanism for filing complaints about a problem that occurred at Link between property ownership registry and mapping system the mapping agency. A score of Transparency of information index (0–6) 0.5 is assigned if there is a specific Accessibility of information on land ownership and separate mechanism for filing a Accessibility of maps of land plots complaint; 0 if there is only a general Publication of fee schedules, lists of registration documents, service standards mechanism or no mechanism. Availability of a specific and separate mechanism for complaints The index ranges from 0 to 6, with higher Publication of statistics about the number of property transactions values indicating greater transparency in Geographic coverage index (0–8) the land administration system. In the Coverage of land registry at the level of the selected location and the economy Netherlands, for example, anyone who Coverage of mapping agency at the level of the selected economy and the economy pays a fee can consult the land owner- Land dispute resolution index (0–8) ship database (a score of 1). Information Legal framework for immovable property registration can be obtained at the office, by mail Mechanisms to prevent and resolve land disputes or online using the Kadaster website (http://www.kadaster.nl). Anyone can Equal access to property rights index (-2–0) also get information online about the list Unequal ownership rights to property between unmarried men and women of documents to submit for property reg- Unequal ownership rights to property between married men and women istration (a score of 0.5), the fee schedule Quality of land administration index (0–30) for registration (a score of 0.5) and the Sum of the reliability of infrastructure, transparency of information, geographic coverage, land dispute service standards (a score of 0.5). And resolution and equal access to property rights indices anyone facing a problem at the land registry can file a complaint or report an schedule is accessible online or on a ƒƒ Whether there are publicly available error by filling in a specific form online public board or is free of charge; 0 if official statistics tracking the number (a score of 1). In addition, the Kadaster it is not made available to the public of transactions at the immovable makes statistics about land transactions or if it can be obtained only in person. property registration agency. A score available to the public, reporting a total of ƒƒ Whether the agency in charge of of 0.5 is assigned if statistics are pub- 178,293 property transfers in Amsterdam immovable property registration lished about property transfers in the in 2015 (a score of 0.5). Moreover, any- commits to delivering a legally selected location in the past calendar one who pays a fee can consult online binding document that proves prop- year; 0 if no such statistics are made cadastral maps (a score of 0.5). It is also erty ownership within a specific time publicly available. possible to get public access to the fee frame. A score of 0.5 is assigned if the ƒƒ Whether maps of land plots are made schedule for map consultation (a score service standard is accessible online publicly available. A score of 0.5 is of 0.5), the service standards for delivery or on a public board; 0 if it is not made assigned if maps are accessible by of an updated plan (a score of 0.5) and a available to the public or if it can be anyone; 0 if access is restricted. specific mechanism for filing a complaint obtained only in person. ƒƒ Whether the fee schedule for access- about a map (a score of 0.5). Adding ƒƒ Whether there is a specific and sepa- ing maps is made publicly available. these numbers gives the Netherlands a rate mechanism for filing complaints A score of 0.5 is assigned if the fee score of 6 on the transparency of infor- about a problem that occurred at schedule is accessible online or on a mation index. the agency in charge of immovable public board or free of charge; 0 if it is property registration. A score of 1 not made available to the public or if it Geographic coverage index is assigned if there is a specific and can be obtained only in person. The geographic coverage index has four separate mechanism for filing a ƒƒ Whether the mapping agency com- components: complaint; 0 if there is only a general mits to delivering an updated map ƒƒ How complete the coverage of the mechanism or no mechanism. within a specific time frame. A score land registry is at the level of the 76 DOING BUSINESS IN AFGHANISTAN 2017 selected location. A score of 2 is registration is required by law; 0 if no against land disputes. In Lithuania, for assigned if all privately held land plots such guarantee is required. example, according to the Civil Code and in the location are formally registered ƒƒ Whether there is a specific compen- the Law on the Real Property Register, at the land registry; 0 if not. sation mechanism to cover for losses property transactions must be registered ƒƒ How complete the coverage of the incurred by parties who engaged in at the land registry to make them oppos- land registry is at the level of the good faith in a property transaction able to third parties (a score of 1.5). The economy. A score of 2 is assigned based on erroneous information property transfer system is guaranteed if all privately held land plots in the certified by the immovable property by the state (a score of 0.5) and has a economy are formally registered at registry. A score of 0.5 is assigned if compensation mechanism to cover for the land registry; 0 if not. yes; 0 if no. losses incurred by parties who engaged ƒƒ How complete the coverage of the ƒƒ Whether the legal system requires in good faith in a property transaction mapping agency is at the level of verification of the legal validity of the based on an error by the registry (a score the selected location. A score of 2 is documents necessary for a property of 0.5). A notary verifies the legal validity assigned if all privately held land plots transaction. A score of 0.5 is assigned of the documents in a property transac- in the location are mapped; 0 if not. if there is a review of legal validity, tion (a score of 0.5) and the identity of ƒƒ How complete the coverage of the either by the registrar or by a profes- the parties (a score of 0.5), in accordance mapping agency is at the level of the sional (such as a notary or lawyer); 0 with the Law on the Notary Office (Law economy. A score of 2 is assigned if there is no review. I-2882). Lithuania has a national data- if all privately held land plots in the ƒƒ Whether the legal system requires base to verify the accuracy of identity economy are mapped; 0 if not. verification of the identity of the par- documents (a score of 1). In a land dis- ties to a property transaction. A score pute between two Lithuanian companies The index ranges from 0 to 8, with higher of 0.5 is assigned if there is verifica- over the tenure rights of a property worth values indicating greater geographic tion of identity, either by the registrar US$745,000, the Vilnius District Court coverage in land ownership registration or by a professional (such as a notary gives a decision in less than one year (a and cadastral mapping. In the Republic or lawyer); 0 if there is no verification. score of 3). Finally, statistics about land of Korea, for example, all privately held ƒƒ Whether there is a national database disputes are collected and published; land plots are formally registered at the to verify the accuracy of identity there were a total of seven land disputes land registry in Seoul (a score of 2) and documents. A score of 1 is assigned if in the country in 2015 (a score of 0.5). in the economy as a whole (a score of 2). such a national database is available; Adding these numbers gives Lithuania a In addition, all privately held land plots 0 if not. score of 8 on the land dispute resolution are mapped in Seoul (a score of 2) and ƒƒ How much time it takes to obtain a index. in the economy as a whole (a score of decision from a court of first instance 2). Adding these numbers gives Korea (without appeal) in a standard land Equal access to property rights a score of 8 on the geographic coverage dispute between two local businesses index index. over tenure rights worth 50 times The equal access to property rights index income per capita and located in has two components: Land dispute resolution index the selected location. A score of 3 is ƒƒ Whether unmarried men and unmar- The land dispute resolution index assess- assigned if it takes less than one year; ried women have equal ownership es the legal framework for immovable 2 if it takes between one and two rights to property. A score of –1 is property registration and the accessibility years; 1 if it takes between two and assigned if there are unequal owner- of dispute resolution mechanisms. The three years; 0 if it takes more than ship rights to property; 0 if there is index has eight components: three years. equality. ƒƒ Whether the law requires that all ƒƒ Whether there are publicly available ƒƒ Whether married men and married property sale transactions be reg- statistics on the number of land women have equal ownership rights istered at the immovable property disputes in the first instance. A score to property. A score of –1 is assigned if registry to make them opposable to of 0.5 is assigned if statistics are there are unequal ownership rights to third parties. A score of 1.5 is assigned published about land disputes in the property; 0 if there is equality. if yes; 0 if no. economy in the past calendar year; 0 ƒƒ Whether the formal system of if no such statistics are made publicly Ownership rights cover the ability to immovable property registration is available. manage, control, administer, access, subject to a guarantee. A score of 0.5 encumber, receive, dispose of and is assigned if either a state or private The index ranges from 0 to 8, with higher transfer property. Each restriction is con- guarantee over immovable property values indicating greater protection sidered if there is a differential treatment DATA NOTES 77 for men and women in the law consider- NOTES ing the default marital property regime. For customary land systems, equality is 1. For more information, see the data notes in assumed unless there is a general legal the Doing Business 2017 report. provision stating a differential treatment. 2. According to a study based on evidence from India between 1994 and 2005, a higher- quality electricity supply, with no more than The index ranges from –2 to 0, with two outages a week (or no more than about higher values indicating greater inclu- 100 a year), leads to higher nonagricultural incomes. Ujjayant Chakravorty, Martino siveness of property rights. In Mali, for Pelli and Beyza P. Ural Marchand, “Does the example, unmarried men and unmarried Quality of Electricity Matter? Evidence from women have equal ownership rights to Rural India,” FEEM Working Paper 11.2014 (Fondazione Eni Enrico Mattei, Milan, 2014). property (a score of 0). The same applies to married men and married women who can use their property in the same way (a score of 0). Adding these numbers gives Mali a score of 0 on the equal access to property rights index—which indicates equal property rights between men and women. In contrast, in Swaziland, unmar- ried men and unmarried women do not have equal ownership rights to property according to the Deeds Registry Act of 1968, article 16 (a score of –1). The same applies to married men and married women who are not permitted to use their property in the same way accord- ing to the Deeds Registry Act of 1968, articles 16 and 45 (a score of –1). Adding these numbers gives Swaziland a score of –2 on the equal access to property rights index—which indicates unequal property rights between men and women. Quality of land administration index The quality of land administration index is the sum of the scores on the reliability of infrastructure, transparency of informa- tion, geographic coverage, land dispute resolution and equal access to property right indices. The index ranges from 0 to 30, with higher values indicating better quality of the land administration system. The data details on registering property can be found at http://www.doingbusiness.org. 78 DOING BUSINESS IN AFGHANISTAN 2017 Province Snapshots BALKH (MAZAR-I-SHARIF) Starting a business (rank) 2 Getting electricity (rank) 2 Distance to frontier score (0–100) 86.19 Distance to frontier score (0–100) 44.03 Procedures (number) 7.5 Procedures (number) 7 Time (days) 7.5 Time (days) 94 Cost (% of income per capita) 19.9 Cost (% of income per capita) 1,957.3 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 2 Registering property (rank) 2 Distance to frontier score (0–100) 38.43 Distance to frontier score (0–100) 36.72 Procedures (number) 14 Procedures (number) 11 Time (days) 108 Time (days) 119 Cost (% of warehouse value) 31.8 Cost (% of property value) 5.0 Building quality control index (0–15) 2 Quality of land administration index (0–30) 6 HERAT (HERAT) Starting a business (rank) 4 Getting electricity (rank) 5 Distance to frontier score (0–100) 85.94 Distance to frontier score (0–100) 38.95 Procedures (number) 7.5 Procedures (number) 7 Time (days) 8.5 Time (days) 140 Cost (% of income per capita) 19.9 Cost (% of income per capita) 1,983.9 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 4 Registering property (rank) 5 Distance to frontier score (0–100) 27.62 Distance to frontier score (0–100) 24.17 Procedures (number) 23 Procedures (number) 11 Time (days) 133 Time (days) 236 Cost (% of warehouse value) 32.1 Cost (% of property value) 5.0 Building quality control index (0–15) 2 Quality of land administration index (0–30) 4 PROVINCE SNAPSHOTS 79 KABUL (KABUL) Starting a business (rank) 1 Getting electricity (rank) 1 Distance to frontier score (0–100) 92.08 Distance to frontier score (0–100) 45.04 Procedures (number) 3.5 Procedures (number) 6 Time (days) 7.5 Time (days) 114 Cost (% of income per capita) 19.9 Cost (% of income per capita) 2,274.7 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 5 Registering property (rank) 4 Distance to frontier score (0–100) 22.39 Distance to frontier score (0–100) 27.50 Procedures (number) 13 Procedures (number) 9 Time (days) 356 Time (days) 250 Cost (% of warehouse value) 82.7 Cost (% of property value) 5.0 Building quality control index (0–15) 2.5 Quality of land administration index (0–30) 3 KANDAHAR (KANDAHAR) Starting a business (rank) 2 Getting electricity (rank) 4 Distance to frontier score (0–100) 86.19 Distance to frontier score (0–100) 42.36 Procedures (number) 7.5 Procedures (number) 7 Time (days) 7.5 Time (days) 109 Cost (% of income per capita) 19.9 Cost (% of income per capita) 1,970.6 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 1 Registering property (rank) 1 Distance to frontier score (0–100) 39.29 Distance to frontier score (0–100) 40.31 Procedures (number) 14 Procedures (number) 11 Time (days) 96 Time (days) 75 Cost (% of warehouse value) 28.4 Cost (% of property value) 5.0 Building quality control index (0–15) 2 Quality of land administration index (0–30) 4 NANGARHAR (JALALABAD) Starting a business (rank) 4 Getting electricity (rank) 3 Distance to frontier score (0–100) 85.94 Distance to frontier score (0–100) 42.94 Procedures (number) 7.5 Procedures (number) 7 Time (days) 8.5 Time (days) 104 Cost (% of income per capita) 19.9 Cost (% of income per capita) 1,957.3 Minimum capital (% of income per capita) 0.0 Reliability of supply and transparency of tariffs index (0–8) 0 Dealing with construction permits (rank) 3 Registering property (rank) 3 Distance to frontier score (0–100) 31.71 Distance to frontier score (0–100) 35.60 Procedures (number) 21 Procedures (number) 12 Time (days) 104 Time (days) 97 Cost (% of warehouse value) 34.3 Cost (% of property value) 5.0 Building quality control index (0–15) 2 Quality of land administration index (0–30) 4 80 DOING BUSINESS IN AFGHANISTAN 2017 Indicator Snapshots Starting a business Cost Paid-in minimum Distance to Ease of starting a Procedures Time (% of income per capital frontier score business Province (City) (number) (days) capita) (% of income per capita) (0–100) (rank) Balkh (Mazar-i-Sharif) 7.5 7.5 19.9 0.0 86.19 2 Herat (Herat) 7.5 8.5 19.9 0.0 85.94 4 Kabul (Kabul) 3.5 7.5 19.9 0.0 92.08 1 Kandahar (Kandahar) 7.5 7.5 19.9 0.0 86.19 2 Nangarhar (Jalalabad) 7.5 8.5 19.9 0.0 85.94 4 Note: Procedures and time are calculated as the average of both men and women. Dealing with construction permits Cost Building quality Distance to Ease of dealing with Procedures Time (% of warehouse control index frontier score construction permits Province (City) (number) (days) value) (0–15) (0–100) (rank) Balkh (Mazar-i-Sharif) 14 108 31.8 2 38.43 2 Herat (Herat) 23 133 32.1 2 27.62 4 Kabul (Kabul) 13 356 82.7 2.5 22.39 5 Kandahar (Kandahar) 14 96 28.4 2 39.29 1 Nangarhar (Jalalabad) 21 104 34.3 2 31.71 3 Getting electricity Reliability of supply Cost and transparency of Distance to Ease of getting Procedures Time (% of income per tariffs index frontier score electricity Province (City) (number) (days) capita) (0-8) (0–100) (rank) Balkh (Mazar-i-Sharif) 7 94 1,957.3 0 44.03 2 Herat (Herat) 7 140 1,983.9 0 38.95 5 Kabul (Kabul) 6 114 2,274.7 0 45.04 1 Kandahar (Kandahar) 7 109 1,970.6 0 42.36 4 Nangarhar (Jalalabad) 7 104 1,957.3 0 42.94 3 Registering property Quality of land Distance to Ease of registering Procedures Time Cost administration index frontier score property Province (City) (number) (days) (% of property value) (0–30) (0–100) (rank) Balkh (Mazar-i-Sharif) 11 119 5.0 6 36.72 2 Herat (Herat) 11 236 5.0 4 24.17 5 Kabul (Kabul) 9 250 5.0 3 27.50 4 Kandahar (Kandahar) 11 75 5.0 4 40.31 1 Nangarhar (Jalalabad) 12 97 5.0 4 35.60 3 LIST OF PROCEDURES 81 List of Procedures • Photos of the owners or board members are expected as a result of the merger of AISA • Legal form or identity (for example, sole and ACBRIP. LIST OF PROCEDURES proprietorship, corporation or limited liability STARTING A BUSINESS company) Procedure 7. Request and obtain a tax Balkh (Mazar-i-Sharif) • Articles of incorporation identification number from the Ministry • Company’s name and address (lease of Finance Standard company legal form: Private limited Time: 1 day agreement) liability company Cost: None Minimum capital requirement: None Up until December 2016, AISA was issuing an Comments: Up until December 2016, an officer Data as of: November 2016 invoice in the amount of AFN 2,847 to be paid at of AISA filed the letter issued by AISA with the Afghan United Bank. Once the payment was the tax authority to request a tax identification Procedure 1. Obtain husband’s made, the applicant obtained a letter (maktoob) number for the new company. Changes to this to register the company with ACBRIP. Changes permission to leave the house procedure are expected as a result of the merger to this procedure are expected as a result of the Time: 1 day of AISA and ACBRIP. merger of AISA and ACBRIP. Cost: None Comments: Under the 1977 Afghanistan Civil Procedure 8. Obtain license Law, a married woman will not be entitled to Procedure 4. Pay licensing fees Time: 1 day alimony if she leaves her residence without Time: 1 day Cost: None (Cost paid in procedure 4) her husband’s permission or for non-permitted Cost: AFN 2,847 Comments: A registration certificate was printed purposes. Comments: Fees were paid at the Afghan United and handed to the investor. The certificate Bank. Changes to this procedure are expected as allowed the company to start commercial Procedure 2. Verify the availability of a result of the merger of AISA and ACBRIP. activities. With the unification of licensing the company’s name and the good processes under ACBRIP, new business licenses standing of its owners Procedure 5. Register the new company will be issued by ACBRIP and registration Time: 1 day with the ACBRIP certificates will no longer be required. Cost: None Time: 1 day STARTING A BUSINESS Comments: Up until December, 2016 while Cost: None (Cost paid in procedure 6) Afghanistan Investment Support Agency Comments: The applicant presented a letter Herat (Herat) (AISA)’s operations were gradually transferred obtained from AISA at the office of the ACBRIP Standard company legal form: Private limited to the Afghanistan Central Business Registry in Mazar-i-Sharif to request the company’s (ACBRIP), a local officer of AISA in Mazar-i- liability company registration. The ACBRIP issued a signed letter Sharif sent an e-mail to AISA headquarters in and an invoice in the amount of AFN 4,500 to Minimum capital requirement: None Kabul requesting confirmation of the availability be paid at the ACBR’s cashiers located on the Data as of: November 2016 of the company’s proposed name and the same premises. With the unification of licensing financial good standing of its owners. Changes processes under the ACBRIP, registration of the Procedure 1. Obtain husband’s to this procedure are expected as a result of the business license will be done directly by ACBRIP. permission to leave the house merger of AISA and ACBRIP. Time: 1 day Procedure 6. Pay registration and Cost: None Procedure 3. Submit a license publication fees Comments: Under the 1977 Afghanistan Civil application and obtain a letter for Time: 1 day Law, a married woman will not be entitled to registration of the company Cost: AFN 4,500 (AFN 2,000 for registration + alimony if she leaves her residence without Time: 1 day AFN 2,500 for publication) her husband’s permission or for non-permitted Cost: None Comments: Registration fees and the cost of purposes. Comments: The applicant submits an application publication in the official gazette for a notice of form providing the following information and the company’s incorporation were paid at the documents: ACBRIP office in Mazar-i-Sharif. The cost of • Name of the company’s owners and copies of publication varied depending on the length of their national identification cards (tazkeras) the advertisement. Changes to this procedure 82 DOING BUSINESS IN AFGHANISTAN 2017 Procedure 2. Verify the availability of With the unification of licensing processes under Procedure 2. Register the company and the company’s name and the good the ACBRIP, registration of the business license obtain a tax identification number standing of its owners will be done directly by ACBRIP. Time: 3 days Time: 1 day Cost: None (Cost paid in procedure 3) Cost: None Procedure 6. Pay registration and Comments: The applicant must provide the Comments: Up until December, 2016 while publication fees following documents to register the company: Afghanistan Investment Support Agency Time: 1 day • Application form (available online) (AISA)’s operations were gradually transferred Cost: AFN 4,500 (AFN 2,000 for registration + to the Afghanistan Central Business Registry AFN 2,500 for publication) • Copy of the ID or passport of the director or (ACBRIP), a local officer of AISA in Herat sent an directors Comments: Registration fees and the cost of e-mail to AISA headquarters in Kabul requesting publication in the official gazette for a notice • Two sets of color passport photographs of the confirmation of the availability of the company’s of the company’s incorporation were paid director or directors proposed name and the financial good standing at the ACBRIP office in Herat. The cost of • Articles of incorporation of its owners. Changes to this procedure are publication varied depending on the length of • Tax identification form expected as a result of the merger of AISA and the advertisement. Changes to this procedure ACBRIP. are expected as a result of the merger of AISA Details on all new businesses and investments and ACBRIP. were collected by the ACBRIP and sent to the Procedure 3. Submit a license Ministry of Justice in Kabul for publication in application and obtain a letter for Procedure 7. Request and obtain a tax the official gazette. The text is drafted by the registration of the company ACBRIP, though businesses can draft their own identification number from the Ministry text if they prefer. The gazette entry includes, at a Time: 1 day of Finance minimum, the following information: Cost: None Time: 2 days Comments: The applicant, usually the president Cost: None • Name of the company of the company, submits an application form Comments: Up until December 2016, an officer • Name of the president and vice president of providing the following information and of AISA filed the letter issued by AISA with the company documents: the tax authority to request a tax identification • Location • Name of the company’s owners and copies of number for the new company. Changes to this • Initial capital their national identification cards (tazkeras) procedure are expected as a result of the merger of AISA and ACBRIP. • Type of operation • Photos of the owners or board members • Type of activity • Legal form or identity (for example, sole Procedure 8. Obtain license proprietorship, corporation or limited liability Time: 1 day Procedure 3. Pay registration, company) Cost: None (Cost paid in procedure 4) publication and licensing fees • Articles of incorporation Comments: A registration certificate was printed Time: 1 day • Company’s name and address (lease and handed to the investor. The certificate agreement) Cost: AFN 7,347 (AFN 2,000 for registration allowed the company to start commercial + AFN 2,500 for publication + AFN 2,847 activities. With the unification of licensing Up until December 2016, AISA was issuing an licensing fee) processes under ACBRIP, new business invoice in the amount of AFN 2,847 to be paid at Comments: Fees are paid at the cashier located licenses will issued by ACBRIP and registration the Afghan United Bank. Once the payment was at the one-stop shop. certificates will no longer be required. made, the applicant obtained a letter (maktoob) to register the company with ACBRIP. Changes to this procedure are expected as a result of the STARTING A BUSINESS Procedure 4. Obtain license merger of AISA and ACBRIP. Time: 3 days Kabul (Kabul) Cost: None (Cost of AFN 2,847 paid in Standard company legal form: Private limited procedure 3) Procedure 4. Pay licensing fees liability company Comments: Once the application is accepted Time: 1 day Minimum capital requirement: None and the fees are paid at the cashier’s counter, the Cost: AFN 2,847 Data as of: June 2016 investment license is obtained. Comments: Fees were paid at the Afghan United Bank. Changes to this procedure are STARTING A BUSINESS Procedure 1. Obtain husband’s expected as a result of the merger of AISA and permission to leave the house ACBRIP. Kandahar (Kandahar) Time: 1 day Standard company legal form: Private limited Cost: None Procedure 5. Register the new company liability company Comments: Under the 1977 Afghanistan Civil with the ACBRIP Minimum capital requirement: None Law, a married woman will not be entitled to Time: 1 day Data as of: November 2016 alimony if she leaves her residence without Cost: None (Cost paid in procedure 6) her husband’s permission or for non-permitted Comments: The applicant presented a letter purposes. Procedure 1. Obtain husband’s obtained from AISA at the office of the ACBRIP permission to leave the house in Herat to request the company’s registration. Time: 1 day The ACBRIP issued a signed letter and an invoice Cost: None in the amount of AFN 4,500 to be paid at the ACBR’s cashiers located on the same premises. LIST OF PROCEDURES 83 Comments: Under the 1977 Afghanistan Civil Comments: The applicant presented a letter her husband’s permission or for non-permitted Law, a married woman will not be entitled to obtained from AISA at the office of the purposes. alimony if she leaves her residence without ACBRIP in Kandahar to request the company’s her husband’s permission or for non-permitted registration. The ACBR issued a signed letter Procedure 2. Verify the availability of purposes. and an invoice in the amount of AFN 4,500 to the company’s name and the good be paid at the ACBR’s cashiers located on the same premises. With the unification of licensing standing of its owners Procedure 2. Verify the availability of Time: 1 day processes under the ACBRIP, registration of the the company’s name and the good Cost: None business license will be done directly by ACBRIP. standing of its owners Comments: Up until December, 2016 while Time: 1 day the Afghanistan Investment Support Agency Cost: None Procedure 6. Pay registration and (AISA)’s operations were gradually transferred Comments: Up until December, 2016 while publication fees to the Afghanistan Central Business Registry Afghanistan Investment Support Agency Time: 1 day (ACBRIP), a local officer of AISA in Jalalabad (AISA)’s operations were gradually transferred Cost: AFN 4,500 (AFN 2,000 for registration + sent an e-mail to AISA headquarters in Kabul to the Afghanistan Central Business Registry AFN 2,500 for publication) requesting confirmation of the availability of the (ACBRIP), a local officer of AISA in Kandahar Comments: : Registration fees and the cost of company’s proposed name and the financial sent an e-mail to AISA headquarters in Kabul publication in the official gazette for a notice good standing of its owners. Changes to this requesting confirmation of the availability of the of the company’s incorporation were paid at procedure are expected as a result of the merger company’s proposed name and the financial the ACBRIP office in Kandahar. The cost of of AISA and ACBRIP. good standing of its owners. Changes to this publication varied depending on the length of procedure are expected as a result of the merger the advertisement. Changes to this procedure Procedure 3. Submit a license of AISA and ACBRIP. are expected as a result of the merger of AISA and ACBRIP. application and obtain a letter for registration of the company Procedure 3. Submit a license Time: 1 day application and obtain a letter for Procedure 7. Request and obtain a tax Cost: None registration of the company identification number from the Ministry Comments: The applicant submits an Time: 1 day of Finance application form providing the following Cost: None Time: 1 day information and documents: Comments: The applicant submits an Cost: None Comments: Up until December 2016, an officer • Name of the company’s owners and copies of application form providing the following of AISA filed the letter issued by AISA with their national identification cards (tazkeras) information and documents: the tax authority to request a tax identification • Photos of the owners or board members • Name of the company’s owners and copies of number for the new company. Changes to this • Legal form or identity (for example, sole their national identification cards (tazkeras) procedure are expected as a result of the merger proprietorship, corporation or limited liability • Photos of the owners or board members of AISA and ACBRIP. company) • Legal form or identity (for example, sole • Articles of incorporation proprietorship, corporation or limited liability Procedure 8. Obtain license • Company’s name and address (lease company) Time: 1 day agreement) • Articles of incorporation Cost: None (Cost paid in procedure 4) Comments: A registration certificate was printed Up until December 2016, AISA was issuing an • Company’s name and address (lease and handed to the investor. The certificate invoice in the amount of AFN 2,847 to be paid at agreement) allowed the company to start commercial the Afghan United Bank. Once the payment was Up until December 2016, AISA was issuing an activities. With the unification of licensing made, the applicant obtained a letter (maktoob) invoice in the amount of AFN 2,847 to be paid at processes under ACBRIP, new business to register the company with ACBRIP. Changes the Afghan United Bank. Once the payment was licenses will issued by ACBRIP and registration to this procedure are expected as a result of the made, the applicant obtained a letter (maktoob) certificates will no longer be required. merger of AISA and ACBRIP. to register the company with ACBRIP. Changes to this procedure are expected as a result of the STARTING A BUSINESS merger of AISA and ACBRIP. Procedure 4. Pay licensing fees Nangarhar (Jalalabad) Time: 1 day Cost: AFN 2,847 Procedure 4. Pay licensing fees Standard company legal form: Private limited Comments: Fees were paid at the Afghan United Time: 1 day liability company Bank. Changes to this procedure are expected as Cost: AFN 2,847 Minimum capital requirement: None a result of the merger of AISA and ACBRIP. Comments: Fees were paid at the Afghan United Data as of: November 2016 Bank. Changes to this procedure are expected as Procedure 5. Register the new company a result of the merger of AISA and ACBRIP. Procedure 1. Obtain husband’s with the ACBRIP permission to leave the house Time: 1 day Procedure 5. Register the new company Time: 1 day Cost: None (Cost paid in procedure 6) with the ACBRIP Cost: None Comments: The applicant presented a Time: 1 day Comments: Under the 1977 Afghanistan Civil letter obtained from AISA at the office of the Cost: None (Cost paid in procedure 6) Law, a married woman will not be entitled to ACBRIP in Jalalabad to request the company’s alimony if she leaves her residence without registration. The ACBR issued a signed letter 84 DOING BUSINESS IN AFGHANISTAN 2017 and an invoice in the amount of AFN 4,500 to relevant department for further processing. The drawings are then reviewed by the DoUD be paid at the ACBR’s cashiers located on the The municipality assigns an engineer to inspect construction department, which checks the same premises. With the unification of licensing the land plot. Because the municipality has structural strength of the building, and by the processes under the ACBRIP, registration of the only a few field engineers, the wait time for the DoUD technical department, which checks the business license will be done directly by ACBRIP. inspection might be five to seven days. plans for the utilities. The DoUD finance department calculates the Procedure 6. Pay registration and Procedure 2. Receive inspection of the fee for review of the drawings according to a fee publication fees land plot schedule and gives the applicant an invoice to Time: 1 day Time: 1 day be paid at Da Afghanistan Bank. The formula for Cost: AFN 4,500 (AFN 2,000 for registration + Cost: None the fee (for commercial buildings) is as follows: AFN 2,500 for publication) Comments: Accompanied by a representative volume of the building (in cubic meters) × Comments: Registration fees and the cost of from BuildCo, the municipality’s engineer AFN 4,700 × 0.035 × 0.02. For the case study publication in the official gazette for a notice visits the land plot to verify its location, size warehouse, with a volume of 3,901.5 cubic of the company’s incorporation were paid at and boundaries and to check whether it is in a meters, the fee is AFN 12,836. the ACBRIP office in Jalalabad. The cost of residential or commercial area. In addition, the DoUD charges the applicant publication varied depending on the length of the two days’ wages for the technical engineer who advertisement. Changes to this procedure are Procedure 3. Obtain a sketch of the reviewed the technical plans, at AFN 1,500 a day. expected as a result of the merger of AISA and Overall, BuildCo has to pay AFN 15,836 (AFN land plot and preliminary approval from ACBRIP. 12,836 reviewing fee + AFN 3,000 engineer’s the municipality fee). Time: 3 days Procedure 7. Request and obtain a tax Cost: None Once all the drawings are reviewed, the DoUD identification number from the Ministry Comments: After the inspection the engineer prints out the site plan and specifies the building of Finance prepares a sketch of the land plot and attaches parameters. BuildCo signs a statement on the Time: 2 days it to the application material. The relevant site plan committing that it will build only on Cost: None department of the municipality then provides the specified land plot and according to the Comments: Up until December 2016, an officer a preliminary approval of the application and approved plans. The DoUD makes three copies of AISA filed the letter issued by AISA with returns the package to BuildCo to submit to the of this document—one for the municipality’s the tax authority to request a tax identification Department of Urban Development (DoUD, construction department, the second for BuildCo number for the new company. Changes to this the local branch of the Ministry of Urban and the last for its records. procedure are expected as a result of the merger Development) for further processing. This step involves significant corruption risks, of AISA and ACBRIP. and a bribe of US$500–1,000 to expedite the Procedure 4. Obtain preliminary process is very common. The Doing Business Procedure 8. Obtain license approval from the Department of Urban project does not record informal payments. Time: 1 day Development Cost: None (Cost paid in procedure 4) Time: 20 days Procedure 5. Obtain the building permit Comments: A registration certificate was printed Cost: AFN 15,836 from the municipality and handed to the investor. The certificate Comments: BuildCo submits the application Time: 30 days allowed the company to start commercial to the director of the DoUD. The DoUD checks Cost: AFN 74,031 activities. With the unification of licensing the master plan to see whether the location is processes under ACBRIP, new business Comments: BuildCo takes the package to the suitable for a warehouse (that is, whether the licenses will issued by ACBRIP and registration mayor, who signs the application and refers it plot is in a residential or commercial area). If certificates will no longer be required. to the municipality’s technical department. The the conclusion is positive, the DoUD provides a technical department checks the master plan checklist of the documents to be submitted: to verify that the proposed building is in line • Sketch of the land plot with city planning guidelines. It then refers the • Architectural drawings application to the engineering department to calculate the building permit fee based on the LIST OF PROCEDURES • Map or plan of the utilities (electricity, water, size of the building. sewerage and ventilation systems) DEALING WITH CONSTRUCTION The application material is then forwarded to PERMITS • Estimate of the costs of the project the municipality’s planning department, which • Copy of the diploma of the project designer or makes a copy of the drawings and archives it. Balkh (Mazar-i-Sharif) engineer responsible for the architectural and The planning department then issues a letter, engineering drawings signed by the mayor, to the revenue department. Warehouse value: AFN 1,879,943 (US$31,500) Data as of: November 2016 • Copy of the construction company license The revenue department creates an invoice issued by the Afghanistan Investment Support based on the calculations provided by the Agency engineering department. Once BuildCo pays the Procedure 1. Submit a building permit fee, the municipality issues an official letter to application to the municipality Once BuildCo submits all the required the relevant district and the police department Time: 10 days documents to the DoUD, its architecture stating that BuildCo has been granted a building Cost: None department checks the drawings of both the permit. exterior (roads, sidewalks) and the interior Comments: To obtain a building permit, BuildCo (rooms, corridors). If any mistakes are found, the The formula for the building permit fee is as must submit an application to the municipality, drawings are sent back to BuildCo for correction. follows: volume of the building (in cubic meters) attaching a copy of the land deed. The head of × 2,300 / 100,000 × 750 + a 10% fee (for the the municipality refers the application to the LIST OF PROCEDURES 85 engineer who reviewed the application). For the Comments: See comments under procedure 6. Comments: Accompanied by a representative case study warehouse, with a volume of 3,901.5 from BuildCo, the two construction department cubic meters, the fee is AFN 74,031. Procedure 13. Drill a well for water representatives and the district engineer visit the site. They check the location of the supply proposed building against the land deed, and the Procedure 6. Receive random Time: 7 days engineer takes a photo of the land plot and the inspection from the municipality during Cost: AFN 119,361 surrounding area. construction Comments: Water supplies in Mazar-i-Sharif Time: 1 day are obtained from groundwater sources and manmade wells. BuildCo must dig its own well. Procedure 3. Obtain a sketch of the Cost: None land plot and preliminary approval Builders normally drill up to 30–50 meters deep, Comments: The municipality inspects the from the municipality though this depends on the needs of the project. construction once every month over a seven- Time: 7 days month period to check for possible violations of The well is drilled by the construction company Cost: None the land boundaries and the permitted height or by a private contractor. The ground in the of the building. There are two engineers at the Comments: After the inspection the district Mazar-i-Sharif area is soft and muddy, so the municipality who periodically conduct such engineer draws a sketch of the land plot, cost of drilling is relatively low. On average in inspections, with no specific schedule. Most completes a standard form and signs each page Mazar-i-Sharif, drilling a 50-meter well costs construction projects in Mazar-i-Sharif are of the application package. The engineer also about US$2,000 (at US$40 per meter) and inspected. attaches a photo of the land plot taken during takes about a week. the inspection along with a detailed plan of the plot. The engineer submits the entire package to Procedure 7. Receive random Procedure 14. Build a septic tank for the district head, who approves the materials, inspection from the municipality during sewage stamps the package and forwards it to the construction Time: 30 days municipality’s construction department. Time: 1 day Cost: AFN 387,925 The two representatives assigned to the case Cost: None at the construction department check the land Comments: Because Mazar-i-Sharif lacks a Comments: See comments under procedure 6. comprehensive sewerage system, BuildCo must deed against the land archives, then add a report build a septic tank. The cost depends on the size to the application and submit the package to Procedure 8. Receive random of the septic tank and the quality of construction. the head of the department. This official signs inspection from the municipality during On average in Mazar-i-Sharif, building a septic off on the application and prepares an official construction tank costs around US$6,500 and takes 30 days. letter to the Department of Urban Development The construction is done by BuildCo or by a (DoUD, the local branch of the Ministry of Time: 1 day private contractor. Urban Development) providing the name of the Cost: None applicant and information on the location. Once Comments: See comments under procedure 6. DEALING WITH CONSTRUCTION PERMITS the mayor signs off on the application package, it is referred to the DoUD. BuildCo usually takes Procedure 9. Receive random Herat (Herat) the application from the municipality to the inspection from the municipality during Warehouse value: AFN 1,879,943 (US$31,500) DoUD itself to expedite the process. construction Data as of: November 2016 Time: 1 day Procedure 4. Obtain preliminary Cost: None Procedure 1. Submit a building permit approval from the Department of Comments: See comments under procedure 6. application to the mayor Urban Development Time: 21 days Time: 30 days Procedure 10. Receive random Cost: None Cost: AFN 15,836 inspection from the municipality during Comments: To obtain a building permit, BuildCo Comments: BuildCo submits the application construction must submit an application to the mayor along package to the DoUD. Within two business days Time: 1 day with a copy of the land deed and relevant after receiving the application, the DoUD checks Cost: None drawings. The mayor signs off on the application the master plan to see whether the location is and forwards it to the municipality’s construction suitable for a warehouse (that is, whether the Comments: See comments under procedure 6. department and the head of the relevant plot is in a residential or commercial area). If district. The construction department assigns the conclusion is positive, the DoUD provides a Procedure 11. Receive random two representatives to the case—one from the checklist of the documents to be submitted: inspection from the municipality during property section and one from the revenue construction section. The district office assigns an engineer • Sketch of the land plot Time: 1 day to conduct an on-site inspection of the land and • Architectural drawings Cost: None prepare a sketch of the land plot. Because these • Map or plan of the utilities (electricity, water, officials are usually busy, the wait time for the sewerage and ventilation systems) Comments: See comments under procedure 6. inspection is around three weeks. • Estimate of the costs of the project Procedure 12. Receive random • Copy of the diploma of the project designer or Procedure 2. Receive inspection of the inspection from the municipality during engineer responsible for the architectural and land plot engineering drawings construction Time: 1 day Time: 1 day Cost: None Cost: None 86 DOING BUSINESS IN AFGHANISTAN 2017 • Copy of the construction company license the fee at a bank and brings back the receipt. Procedure 11. Receive random issued by the Afghanistan Investment The construction department attaches its copy inspection from the municipality during Support Agency of the site plan to the receipt, and this package construction of documents serves as the building permit. Once BuildCo submits all the required Time: 1 day The construction department issues a letter documents to the DoUD, its architecture Cost: None informing the district head that the permit has department checks the drawings of both the Comments: See comments under procedure 8. been issued. exterior (roads, sidewalks) and the interior (rooms, corridors). If any mistakes are found, the The fee for the building permit (for commercial Procedure 12. Receive random drawings are sent back to BuildCo for correction. buildings) is calculated as AFN 325 per square meter, from which amount 5% is collected for inspection from the municipality during The drawings are then reviewed by the DoUD construction the building permit fee. construction department, which checks the Time: 1 day structural strength of the building, and by the Cost: None DoUD technical department, which checks the Procedure 7. Receive inspection Comments: See comments under procedure 8. plans for the utilities. from the municipality and the The DoUD finance department calculates the district authority before the start of Procedure 13. Receive random fee for review of the drawings according to a fee construction inspection from the municipality during schedule and gives the applicant an invoice to be Time: 1 day paid at Da Afghanistan Bank. The fee estimation construction Cost: None takes around four days. The formula for the fee Time: 1 day Comments: The inspector from the construction (for commercial buildings) is as follows: volume Cost: None department and the responsible district engineer of the building (in cubic meters) × AFN 4,700 coordinate with BuildCo to inspect the land plot Comments: See comments under procedure 8. × 0.035 × 0.02. For the case study warehouse, before the start of construction. The inspector with a volume of 3,901.5 cubic meters, the fee is marks the boundaries of the land plot in the Procedure 14. Receive random AFN 12,836. presence of the engineer. BuildCo can start inspection from the municipality during In addition, the DoUD charges the applicant building once this step has been completed, construction two days’ wages for the technical engineer who though in some cases the inspectors might Time: 1 day reviewed the technical plans, at AFN 1,500 a day. ask for bribes to allow the commencement of Cost: None Overall, BuildCo has to pay AFN 15,836 (AFN construction. The Doing Business project does not record informal payments. Comments: See comments under procedure 8. 12,836 reviewing fee + AFN 3,000 engineer’s fee). Procedure 8. Receive random Procedure 15. Receive random Once all the drawings are reviewed, the DoUD inspection from the municipality during prints out the site plan and specifies the building inspection from the municipality during construction construction parameters. BuildCo signs a statement on the Time: 1 day Time: 1 day site plan committing that it will build only on the specified land plot and according to the Cost: None Cost: None approved plans. The DoUD makes three copies Comments: The municipality’s inspectors Comments: See comments under procedure 8. of this document—one for the municipality’s conduct a general assessment of the construction department, the second for BuildCo construction twice a month during the Procedure 16. Receive random and the last for its records. construction process. These inspections are inspection from the municipality during typically unscheduled and conducted without construction prior notice. The Herat municipality has two Time: 1 day Procedure 5. Receive inspection of inspectors. In most cases the inspectors are the land plot by the municipality for Cost: None accompanied by an armed guard for security estimation of the building permit fee Comments: See comments under procedure 8. purposes. In some cases they might ask for Time: 1 day small bribes. The Doing Business project does not Cost: None record informal payments. Procedure 17. Receive random Comments: The municipality’s construction inspection from the municipality during department, to estimate its fee for the building Procedure 9. Receive random construction permit, sends an inspector to assess the land inspection from the municipality during Time: 1 day as well as to make sure that there has been Cost: None construction no construction activity and that BuildCo did Time: 1 day Comments: See comments under procedure 8. not take more land than was approved for construction. A representative of BuildCo must Cost: None be present during this inspection. Comments: See comments under procedure 8. Procedure 18. Receive random inspection from the municipality during Procedure 6. Pay the building permit Procedure 10. Receive random construction fee and obtain the building permit inspection from the municipality during Time: 1 day Time: 18 days construction Cost: None Cost: AFN 21,135 Time: 1 day Comments: See comments under procedure 8. Comments: The inspector from the construction Cost: None department submits a report to the head of Comments: See comments under procedure 8. the department, which serves as the basis for calculating the building permit fee. BuildCo pays LIST OF PROCEDURES 87 Procedure 19. Receive random Comments: A copy of the land deed is needed standardized and depends on the parameters of inspection from the municipality during to apply for a building permit in Kabul. But after the project. construction decades of conflict most people have lost their The building permit approval process takes as deeds. When a deed is lost, the owner must Time: 1 day long as a year if BuildCo does not pay bribes advertise the case through radio or newspapers Cost: None and about a month if it does. The Doing Business and then request a duplicate deed from the court. Comments: See comments under procedure 8. project does not record informal payments. BuildCo must file a written claim with the court of appeals of Kabul stating that it has lost its Procedure 20. Receive random Procedure 6. Receive random inspection deed. The claim must include the property inspection from the municipality during specification, deed number, district number and from the municipality at the start of construction the number of the court that issued the deed. construction Time: 1 day Time: 1 day Cost: None Cost: None Comments: See comments under procedure 8. Procedure 2. Receive inspection of the Comments: At the start of construction, land plot officials from the municipality’s district office, Time: 1 day the construction control department and the Procedure 21. Receive random Cost: None district police visit the construction site to verify inspection from the municipality during Comments: Accompanied by a representative the construction permit. If the builder has a construction from BuildCo, a field engineer from the valid building permit, it can continue the work; Time: 1 day municipality’s technical department visits the otherwise the project is stopped unless the Cost: None land plot to check whether it is in a residential or builder pays bribes. The Doing Business project Comments: See comments under procedure 8. commercial area, to measure its size and to verify does not record informal payments. its boundaries. Procedure 22. Drill a well for water Procedure 7. Receive random inspection supply Procedure 3. Obtain a sketch of the from the police during construction Time: 10 days land plot and preliminary approval from Time: 1 day Cost: AFN 208,883 the municipality Cost: None Comments: Water supplies in Herat are obtained Time: 2 days Comments: Either the municipality or the police from groundwater sources and manmade wells. Cost: None department typically visits the construction BuildCo must dig its own well. Builders normally Comments: After the inspection the engineer site every month (for an average of about six drill up to 50 meters deep, though this depends prepares a sketch of the land plot and brings it inspections for a 30-week project). Inspectors on the needs of the project. The well is drilled by back to the municipality’s technical department. often demand bribes of AFN 5,000 to AFN BuildCo or by a private contractor. 10,000 at each visit. The Doing Business project The time and cost for drilling a well depend on Procedure 4. Obtain zoning approval does not record informal payments. the type of soil. In Herat drilling a well generally from the municipality takes around 10 days and costs around US$70 Time: 7 days Procedure 8. Receive random per meter, or around US$3,500 for a 50-meter inspection from the municipality during Cost: None well. construction Comments: BuildCo must obtain a zoning approval from the municipality to ensure that Time: 1 day Procedure 23. Build a septic tank for the proposed building is in compliance with the Cost: None sewage Kabul master plan. The master plan is 15–20 Comments: See comments under procedure 7. Time: 30 days years old and has not been recently updated. If everything is in order and BuildCo pays a bribe, Cost: AFN 358,084 Procedure 9. Receive random inspection it may receive the zoning approval in a few days. Comments: Because Herat lacks a Without a bribe, approval takes about a week. from the police during construction comprehensive sewerage system, BuildCo must Time: 1 day The Doing Business project does not record build a septic tank. The cost depends on the size Cost: None informal payments. of the septic tank and the quality of construction. Comments: See comments under procedure 7. On average in Herat, building a septic tank costs around US$6,000 and takes one month. The Procedure 5. Obtain the building permit construction is done by BuildCo or by a private from the municipality Procedure 10. Receive random contractor. Time: 300 days inspection from the municipality during Cost: AFN 358,084 construction DEALING WITH CONSTRUCTION PERMITS Comments: BuildCo submits a copy of the land Time: 1 day deed, the zoning approval, the architectural Cost: None Kabul (Kabul) drawings and proof of its employees’ Comments: See comments under procedure 7. Warehouse value: AFN 1,879,943 (US$31,500) qualifications. If the property is in the Kabul Data as of: June 2016 master plan, the designs are sent to the Procedure 11. Receive random engineering department and a committee inspection from the police during Procedure 1. Obtain copy of the land approves them. BuildCo then pays the building permit fee. The municipality sends copies of the construction deed Time: 1 day approval to various municipal departments (such Time: 3 days Cost: None as the police). The building permit fee is not Cost: AFN 3,000 Comments: See comments under procedure 7. 88 DOING BUSINESS IN AFGHANISTAN 2017 Procedure 12. Drill a well for water the boundaries in order to prepare a sketch of In addition, the DoUD charges the applicant supply the plot. two days’ wages for the technical engineer who Time: 7 days reviewed the technical plans, at AFN 1,500 a day. Procedure 3. Obtain a sketch of the land Overall, BuildCo has to pay AFN 15,836 (AFN Cost: AFN 298,404 12,836 reviewing fee + AFN 3,000 engineer’s Comments: Water supplies in Kabul are obtained plot and preliminary approval from the fee). from groundwater sources and manmade wells. municipality BuildCo must dig its own well. The well is drilled Time: 3 days Once all the drawings are reviewed, the DoUD by BuildCo or by a private contractor. Cost: None prints out the site plan and specifies the building parameters. BuildCo signs a statement on the Builders normally drill up to 50 meters deep. Comments: After the inspection the engineer site plan committing that it will build only on The cost can range from US$10 to US$1,000 prepares a sketch of the land plot and attaches the specified land plot and according to the per meter depending on the quality of the soil. it to the application material. The relevant approved plans. The DoUD makes three copies In Kabul the cost for drilling is generally around department of the municipality then provides of this document—one for the municipality’s US$100 per meter, so drilling a 50-meter well a preliminary approval of the application and construction department, the second for BuildCo costs around US$5,000. returns the package to BuildCo to submit to the and the last for its records. Department of Urban Development (DoUD, the local branch of the Ministry of Urban If everything is correct, the DoUD issues its Procedure 13. Build a septic tank for Development) for further processing. approval in three to four weeks, after which sewage BuildCo must apply to the municipality for final Time: 30 days Procedure 4. Obtain preliminary approval. Approval takes less time if the applicant Cost: AFN 895,211 approval from the Department of Urban pays bribes or is affiliated with influential public Comments: Because Kabul lacks a figures such as members of Parliament or the Development comprehensive sewerage system, BuildCo must provincial council. The Doing Business project Time: 25 days does not record informal payments. build a septic tank. The cost depends on the size Cost: AFN 15,836 of the septic tank and the quality of construction. On average in Kabul, building a septic tank costs Comments: BuildCo submits the application to the DoUD, which checks the master plan to see Procedure 5. Obtain the building permit around US$15,000 and takes 30 days. The construction is done by BuildCo or by a private whether the location is suitable for a warehouse from the municipality contractor. (that is, whether the plot is in a residential or Time: 30 days commercial area). If the conclusion is positive, Cost: AFN 39,018 DEALING WITH CONSTRUCTION PERMITS the DoUD provides a checklist of the documents Comments: After the DoUD approves the plans, to be submitted: BuildCo brings the approved package back to Kandahar (Kandahar) • Sketch of the land plot the municipality’s construction department. Warehouse value: AFN 1,879,943 (US$31,500) The construction department calculates the • Architectural drawings Data as of: November 2016 building permit fee based on the area of the • Map or plan of the utilities (electricity, water, proposed building (in square meters). BuildCo sewerage and ventilation systems) pays the fee and takes the receipt to the head Procedure 1. Submit a building permit of the department, who submits the package • Estimate of the costs of the project application to the mayor of documents to the mayor for approval. Once • Copy of the diploma of the project designer or Time: 11 days the mayor approves the building permit, the engineer responsible for the architectural and Cost: None municipality sends the approval copies to various engineering drawings Comments: To obtain a building permit, BuildCo municipal departments (such as the police). must submit an application to the municipality, • Copy of the construction company license BuildCo needs to call the assigned engineer at addressed to the mayor, with a copy of the issued by the Afghanistan Investment Support the municipality to provide notification of the land deed attached. The mayor sends the Agency start of construction. application to the property commission. This Once BuildCo submits all the required The building permit fee for commercial buildings commission, headed by the mayor, is made documents to the DoUD, its architecture is AFN 30 per square meter. For the case study up of representatives of several municipal department checks the drawings of both the warehouse, with 1,300.6 square meters, the departments, such as the construction exterior (roads, sidewalks) and the interior building permit fee is therefore AFN 39,018. department, technical department and property (rooms, corridors). If any mistakes are found, the department. drawings are sent back to BuildCo for correction. The property commission assigns a field engineer Procedure 6. Receive random The drawings are then reviewed by the DoUD to inspect the land plot. Because there are only inspection from the municipality during construction department, which checks the a few field engineers, the wait time for this structural strength of the building, and by the construction inspection is usually a week. DoUD technical department, which checks the Time: 1 day plans for the utilities. Cost: None Comments: The municipality conducts Procedure 2. Receive inspection of the The DoUD finance department calculates the several inspections during construction. These land plot fee for review of the drawings according to a fee inspections are typically unscheduled and Time: 1 day schedule and gives the applicant an invoice to conducted without prior notice. While their Cost: None be paid at Da Afghanistan Bank. The formula for frequency depends on the project and the Comments: Accompanied by a representative the fee (for commercial buildings) is as follows: location of the construction site, the inspections from BuildCo, the field engineer visits the land volume of the building (in cubic meters) × occur at least once every two months on average plot. The engineer takes a GIS picture of the plot, AFN 4,700 × 0.035 × 0.02. For the case study over a seven-month construction period. There completes necessary measurements and marks warehouse, with a volume of 3,901.5 cubic are 10 engineers at the municipality, and each meters, the fee is AFN 12,836. LIST OF PROCEDURES 89 construction site is assigned to one of them. though this depends on the needs of the project. Procedure 3. Obtain a sketch of the Bribes are very common during inspections. The The well is drilled by BuildCo or by a private land plot and preliminary approval from Doing Business project does not record informal contractor. the municipality payments. The cost can vary depending on the quality of the Time: 7 days soil. In Kandahar drilling a well generally costs Cost: None Procedure 7. Receive random around US$40 per meter, or around US$2,000 Comments: After the inspection the engineer inspection from the municipality during for a 50-meter well. A simpler well might cost prepares a sketch of the land plot and brings it construction between US$700 and US$1,000. back to the municipality’s technical and sectoral Time: 1 day department. The head of the department writes Cost: None an official letter referring the application to the Procedure 14. Build a septic tank for Comments: See comments under procedure 6. Department of Urban Development (DoUD, sewage the local branch of the Ministry of Urban Time: 15 days Development) while keeping a copy for its Procedure 8. Receive random Cost: AFN 358,084 archives. BuildCo usually takes the application to inspection from the municipality during Comments: Because Kandahar lacks a the DoUD itself to accelerate the process. construction comprehensive sewerage system, BuildCo must Time: 1 day build a septic tank. The cost depends on the size Procedure 4. Obtain preliminary Cost: None of the septic tank and the quality of construction. approval from the Department of Urban Comments: See comments under procedure 6. On average in Kandahar, building a septic tank costs around US$6,000 and takes 15 days. The Development construction is done by BuildCo or by a private Time: 30 days Procedure 9. Receive random contractor. Cost: AFN 15,836 inspection from the municipality during Comments: BuildCo submits the application construction DEALING WITH CONSTRUCTION PERMITS to the DoUD. The DoUD checks the master Time: 1 day plan to see whether the location is suitable for Cost: None Nangarhar (Jalalabad) a warehouse (that is, whether the plot is in a Comments: See comments under procedure 6. Warehouse value: AFN 1,879,943 (US$31,500) residential or commercial area). If the conclusion Data as of: November 2016 is positive, the DoUD provides a checklist of the documents to be submitted: Procedure 10. Receive random inspection from the Department of Procedure 1. Submit a building permit • Sketch of the land plot Urban Development during construction application to the mayor • Architectural drawings Time: 1 day Time: 5 days • Map or plan of the utilities (electricity, water, Cost: AFN 700 Cost: None sewerage and ventilation systems) Comments: The DoUD inspects the construction Comments: BuildCo prepares an application • Estimate of the costs of the project around three to four times during the letter to the mayor indicating that it is the legitimate owner of the land plot and specifying • Copy of the diploma of the project designer or construction period. Each inspection costs AFN the parameters of the proposed building. engineer responsible for the architectural and 700 if the building is within the administrative BuildCo attaches a copy of the land deed and engineering drawings borders of the city, and AFN 1,000 if it is outside these borders. submits the application to the municipality’s • Copy of the construction company license administration department. The mayor signs issued by the Afghanistan Investment Support off on the application and forwards it to the Agency Procedure 11. Receive random property division of the municipality’s technical inspection from the Department of and sectoral department (previously the Once BuildCo submits all the required Urban Development during construction documents to the DoUD, its architecture construction department). The property division Time: 1 day department checks the drawings of both the checks the land deed against the archives to Cost: AFN 700 exterior (roads, sidewalks) and the interior verify its accuracy and confirm that the land (rooms, corridors). If any mistakes are found, the Comments: See comments under procedure 10. belongs to the applicant. The property division drawings are sent back to BuildCo for correction. then sends the application to the field engineer Procedure 12. Receive random in the technical and sectoral department who is The drawings are then reviewed by the DoUD responsible for the relevant district. construction department, which checks the inspection from the Department of structural strength of the building, and by the Urban Development during construction DoUD technical department, which checks the Time: 1 day Procedure 2. Receive inspection of the plans for the utilities. Cost: AFN 700 land plot Time: 1 day The DoUD finance department calculates the Comments: See comments under procedure 10. Cost: None fee for review of the drawings according to a fee Comments: Accompanied by a representative schedule and gives the applicant an invoice to Procedure 13. Drill a well for water be paid at Da Afghanistan Bank. The formula for from BuildCo, the field engineer visits the land supply plot to check whether it is in a residential or the fee (for commercial buildings) is as follows: Time: 4 days commercial area, to measure its size and to verify volume of the building (in cubic meters) × AFN Cost: AFN 119,361 its boundaries. 4,700 × 0.035 × 0.02. Comments: Water supplies in Kandahar For the case study warehouse, with a volume of are obtained from groundwater sources and 3,901.5 cubic meters, the fee is AFN 12,836. manmade wells. BuildCo must dig its own well. Builders normally drill up to 30–50 meters deep, 90 DOING BUSINESS IN AFGHANISTAN 2017 In addition, the DoUD charges the applicant Procedure 7. Receive random Procedure 15. Receive random two days’ wages for the technical engineer who inspection from the municipality during inspection from the municipality during reviewed the technical plans, at AFN 1,500 a day. construction construction Overall, BuildCo must pay AFN 15,836 (AFN Time: 1 day Time: 1 day 12,836 reviewing fee + AFN 3,000 engineer’s Cost: None Cost: None fee). Comments: See comments under procedure 6. Comments: See comments under procedure 6. Once all the drawings are reviewed, the DoUD prints out the site plan and specifies the building Procedure 8. Receive random Procedure 16. Receive random parameters. BuildCo signs a statement on the site plan committing that it will build only on the inspection from the municipality during inspection from the municipality during specified land plot and according to the approved construction construction plans. The DoUD makes three copies of this Time: 1 day Time: 1 day document—one for the municipality, the second Cost: None Cost: None for BuildCo and the last for its records. Comments: See comments under procedure 6. Comments: See comments under procedure 6. Procedure 5. Pay the building permit fee Procedure 9. Receive random Procedure 17. Receive random and obtain the building permit inspection from the municipality during inspection from the municipality during Time: 10 days construction construction Cost: AFN 32,187 Time: 1 day Time: 1 day Comments: Once the fees of the DoUD are Cost: None Cost: None paid, BuildCo takes the package of approved Comments: See comments under procedure 6. Comments: See comments under procedure 6. documents back to the municipality’s technical and sectoral department. The municipality Procedure 10. Receive random Procedure 18. Receive random calculates the building permit fee on the basis of inspection from the municipality during inspection from the municipality during the volume of the building. construction construction The formula for the building permit fee is as Time: 1 day Time: 1 day follows: volume of the building (in cubic meters) Cost: None Cost: None × AFN 750 × 0.01 + 10%. For the case study Comments: See comments under procedure 6. Comments: See comments under procedure 6. warehouse, with a volume of 3,901.5 cubic meters, the fee is AFN 32,187. Procedure 11. Receive random Procedure 19. Receive random Once BuildCo pays the fee and brings back the inspection from the municipality during inspection from the municipality during receipt, the municipality issues an approval construction construction letter in three copies—one for BuildCo, one Time: 1 day Time: 1 day for the relevant district and another for the relevant police department. The letter provides Cost: None Cost: None notification that the building permit has been Comments: See comments under procedure 6. Comments: See comments under procedure 6. issued and that construction can begin. Procedure 12. Receive random Procedure 20. Drill a well for water Procedure 6. Receive random inspection from the municipality during supply inspection from the municipality during construction Time: 7 days Time: 1 day Cost: AFN 179,042 construction Cost: None Comments: Water supplies in Jalalabad are Time: 1 day Comments: See comments under procedure 6. obtained from groundwater sources and Cost: None manmade wells. BuildCo must dig its own well. Comments: The inspection engineer assigned by Builders normally drill up to 50 meters deep, the municipality typically visits the construction Procedure 13. Receive random though this depends on the location and needs of site two or three times a month to check the inspection from the municipality during the project. The well is drilled by BuildCo or by a progress of the building. Because of the limited construction private contractor. number of inspectors at the municipality, Time: 1 day however, only about 70% of buildings are being The cost can vary depending on the quality of the Cost: None inspected. soil. On average in Jalalabad, drilling a well costs Comments: See comments under procedure 6. around US$60 per meter, or about US$3,000 for The inspection engineer records each inspection a 50-meter well. in a journal. This journal is not submitted to any Procedure 14. Receive random agency after the construction, but is used to inspection from the municipality during keep track of inspections and for future reference construction Procedure 21. Build a septic tank for in case problems arise with the quality of the sewage Time: 1 day construction. Time: 30 days Cost: None Cost: AFN 417,765 Comments: See comments under procedure 6. Comments: Because Jalalabad lacks a comprehensive sewerage system, BuildCo must build a septic tank. In Jalalabad septic tanks are normally 3 or 4 cubic meters. Building a septic LIST OF PROCEDURES 91 tank of this size costs around US$7,000 and Procedure 4. Purchase the transformer the medium-voltage side is turned on to check takes about one month. The construction is done and carry out external works the meter and the transformer. Then the main by BuildCo or by a private contractor. Time: 50 days switch on the lower-voltage side is turned on to inspect the condition of the meter by increasing Cost: AFN 596,807 (US$10,000) (Cost for the and decreasing the load for the next two hours. If connection works, including the transformer and the system is working well, the meter is secured labor) (locked) and the customer receives written Comments: The DABS planning and engineering LIST OF PROCEDURES permission to use electricity. section in Mazar-i-Sharif appoints a team of GETTING ELECTRICITY three inspectors to estimate the size of the Once the flow starts, the customer must pay a transformer needed and provide the customer charge of 1% of the connection fee. Balkh (Mazar-i-Sharif) with a list of the required materials. The Utility: Da Afghanistan Breshna Sherkat (DABS) customer can either get all connection materials GETTING ELECTRICITY Data as of: November 2016 through DABS or buy them on the private market. The external connection works can be Herat (Herat) carried out by the customer’s contractor or by Procedure 1. Submit application for Utility: Da Afghanistan Breshna Sherkat (DABS) DABS. In the majority of cases in Mazar-i-Sharif a new electricity connection to the Data as of: November 2016 the connection works are carried out by DABS; DABS office in Mazar-i-Sharif and await in these cases the customer pays 10% of the external site inspection amount spent to purchase the materials for the Procedure 1. Submit application for Time: 10 days connection to the utility. a new electricity connection to DABS Cost: None headquarters in Kabul and await The items to be purchased include: Comments: The customer submits a formal external site inspection request for a new connection to the DABS office • 140-kVA transformer (about US$4,000) Time: 30 days in Mazar-i-Sharif. The application form must • 630 A switchboard (US$1,000) Cost: AFN 5,000 (Cost of a round trip to Kabul) include information on the property and on the • Three dry switches (US$600 each) Comments: For a three-phase connection type of activity requiring power. customers in Herat must submit their application • Pillars for overhead connection (US$2,500) to DABS headquarters in Kabul. For security • Other materials (fuse, lightning arresters, steel reasons most travel to Kabul by plane. Procedure 2. Receive site inspection cable for overhead connection and the like) by the DABS energy control section in In Herat electricity is not currently distributed Mazar-i-Sharif except in industrial parks. Time: 1 day Procedure 5.* Obtain approval of the Cost: None transformer and materials Procedure 2. Receive site inspection Comments: The DABS energy control section Time: 14 days by the DABS operations department in in Mazar-i-Sharif performs a site inspection Cost: None to verify the feasibility of the new connection. Herat Comments: The customer must obtain clearance Inspectors assess whether the power station Time: 1 day of the transformer and materials from the utility. has the capacity for the new connection. The The three inspectors appointed by the DABS Cost: None customer is required to be present during the planning and engineering section in Mazar-i- Comments: The DABS operations department inspection. If the outcome of the inspection Sharif check and approve the items purchased in Herat performs a site inspection to verify the is positive, the head of the DABS operations by the customer. Once the materials have been feasibility of the new connection. Inspectors department in Mazar-i-Sharif provides the approved, the connection works can start. assess whether the power station has the technical details to DABS headquarters in Kabul. capacity for the new connection. The customer is required to be present during the inspection. Procedure 6. Purchase the meter from If the outcome of the inspection is positive, the Procedure 3. Obtain approval from DABS and obtain installation permission head of the operations department provides the DABS headquarters in Kabul and pay Time: 14 days technical details to DABS headquarters in Kabul. the connection fee Cost: AFN 55,000 (Cost of the meter, related Time: 14 days material, labor and installation works) Procedure 3. Obtain approval from Cost: AFN 84,100 (AFN 84,000 connection Comments: In Mazar-i-Sharif the meter can be fee [AFN 600 per kilovolt-ampere] + AFN 100 DABS headquarters in Kabul and pay purchased either on the private market or from application fee) DABS; purchasing it from DABS is the more the connection fee Comments: DABS headquarters grants common practice. Time: 30 days the approval for the substation distribution Cost: AFN 89,100 (AFN 84,000 connection transformer and refers the applicant to the DABS fee [AFN 600 per kilovolt-ampere] + AFN 100 Procedure 7. Receive the meter application fee + AFN 5,000 for a round trip to office in Mazar-i-Sharif for further processing. The customer pays the connection fee, which installation by DABS and then Kabul) is established by DABS headquarters in Kabul electricity flow Comments: DABS headquarters grants and applies to all cities. The customer makes Time: 5 days the approval for the substation distribution the payment in a bank and takes the receipt Cost: None transformer and refers the applicant to the back to DABS. For three-phase and single-phase Comments: The DABS technical department DABS office in Herat for further processing. commercial connections DABS charges a installs the meter. Customers in Herat usually travel to Kabul to connection fee of AFN 600 per kilovolt-ampere collect the approval. The customer pays the Once the new line connection is completed, (kVA). DABS does not charge a security deposit. connection fee, which is established by DABS the electricity supply is turned back on and the headquarters in Kabul and applies to all cities. transmission line is energized. The dry switch on The customer makes the payment in a bank and * Simultáneo con el trámite anterior. 92 DOING BUSINESS IN AFGHANISTAN 2017 takes the receipt back to DABS. For three-phase Procedure 7. Receive the meter Procedure 3. Purchase the transformer and single-phase commercial connections installation and then electricity flow and carry out external works DABS charges a connection fee of AFN 600 per Time: 5 days Time: 60 days kilovolt-ampere (kVA). DABS does not charge a Cost: None Cost: AFN 716,169 (US$12,000) (Cost for the security deposit. Comments: The DABS technical department connection works, including the transformer and checks the installation of the transformer and the labor) Procedure 4. Purchase the transformer connection to the network. In Herat the meter is Comments: DABS appoints three inspectors to and carry out external works installed by the customer’s contractor. estimate the size of the substation distribution Time: 60 days transformer needed and provide the customer Once the new line connection is completed, Cost: AFN 596,807 (US$10,000) (Cost for the with a list of the required materials. The the electricity supply is turned back on and the connection works, including the transformer and customer can either obtain all connection transmission line is energized. The dry switch on labor) materials through DABS or buy them on the the medium-voltage side is turned on to check Comments: The DABS planning and engineering private market. Once the materials have been the meter and the transformer. Then the main department in Herat appoints three inspectors: approved, the transformer can be installed. The switch on the lower-voltage side is turned on to one from the planning and engineering external connection works can be carried out inspect the condition of the meter by increasing department itself, one from the network by the customer’s contractor or by DABS. In the and decreasing the load for the next two hours. If department (Shabaka) and one from the grid majority of cases in Kabul the works are carried the system is working well, the meter is secured extension department. The inspectors estimate out by the customer’s contractor. If they are done (locked) and the customer receives written the size of the transformer needed and provide by DABS, the utility would charge 10% of the permission to use electricity. the customer with a list of the required materials. amount that the customer spent to purchase all The customer can either obtain all connection Once the flow starts, the customer must pay a the necessary items. materials through DABS or buy them on the charge of 1% of the connection fee. The items to be purchased include the following: private market. Once the materials have been approved, the transformer can be installed. The GETTING ELECTRICITY • 140-kVA transformer (about US$4,000) external connection works can be carried out • 630 A switchboard (US$1,000) by the customer’s contractor or by DABS. In the Kabul (Kabul) • Three dry switches (US$600 each) majority of cases in Herat the works are carried Utility: Da Afghanistan Breshna Sherkat (DABS) out by the customer’s contractor. If they are done • Pillars for overhead connection (US$2,500) Data as of: June 2016 by DABS, the utility would charge 10% of the • Other materials (fuse, lightning arresters, amount that the customer spent to purchase all steel cable for overhead connection and the the necessary items. Procedure 1. Submit application for a like) new electricity connection to DABS and The items to be purchased include the following: await external site inspection • 140-kVA transformer (about US$4,000) Time: 21 days Procedure 4.* Obtain approval of the Cost: AFN 84,100 (AFN 84,000 connection transformer and materials • 630 A switchboard (US$1,000) fee [AFN 600 per kilovolt-ampere] + AFN 100 Time: 14 days • Three dry switches (US$600 each) application fee) Cost: None • Pillars for overhead connection (US$2,500) Comments: The customer submits a formal Comments: The customer must obtain clearance • Other materials (fuse, lightning arresters, request for a new connection to the DABS of the transformer and materials from the utility. steel cable for overhead connection and the electricity department in Kabul. The department The DABS operations department assigns like) conducts a site visit to check the feasibility of the three engineers to check and approve the items project. If there is enough capacity available, the purchased by the customer. The engineers send a connection is granted. report to the head of the operations department Procedure 5.* Obtain approval of the with the results of the inspection. transformer and materials For three-phase and single-phase commercial connections DABS charges a connection fee of Time: 14 days Procedure 5. Purchase the meter from AFN 600 per kilovolt-ampere (kVA). DABS does Cost: None not charge a security deposit. DABS and obtain installation permission Comments: The customer must obtain clearance Time: 14 days of the transformer and materials from the utility. Cost: AFN 55,000 (Cost of the meter, related The DABS operations department in Herat Procedure 2. Receive site inspection by material, labor and installation works) assigns three engineers to check and approve the DABS and await estimate Comments: The customer needs to buy a meter. items purchased by the customer. The engineers Time: 14 days In Kabul the meter can be purchased either on send a report to the head of the operations Cost: None the private market or from DABS; purchasing it department with the results of this inspection. Comments: Several sections of the DABS from DABS is the more common practice. electricity department are involved in the site Procedure 6. Purchase the meter and inspection, and they provide a time schedule for conducting the visit. The customer is required Procedure 6. Receive the meter obtain installation permission to be present for the site inspection. Once this installation by DABS and then Time: 14 days inspection is completed, the customer needs to electricity flow Cost: AFN 55,000 (Cost of the meter, related pick up a letter with the estimated cost of the Time: 5 days material, labor and installation works) connection. Cost: None Comments: The customer needs to buy a meter. In Herat the meter cannot be obtained from the Comments: The DABS technical department utility; instead, the customer must purchase it on checks the installation of the transformer and the the private market. connection to the network and installs the meter. *Simultáneo con el trámite anterior. LIST OF PROCEDURES 93 Once the new line connection is completed, The customer pays the connection fee, which Comments: In Kandahar the meter can be the electricity supply is turned back on and the is established by DABS headquarters in Kabul purchased either on the private market or from transmission line is energized. The dry switch on and applies to all cities. The customer makes DABS; purchasing it from DABS is the more the medium-voltage side is turned on to check the payment in a bank and takes the receipt common practice. the meter and the transformer. Then the main back to DABS. For three-phase and single-phase switch on the lower-voltage side is turned on to commercial connections DABS charges a Procedure 7. Receive the meter inspect the condition of the meter by increasing connection fee of AFN 600 per kilovolt-ampere installation by DABS and then and decreasing the load for the next two hours. If (kVA). DABS does not charge a security deposit. the system is working well, the meter is secured electricity flow (locked) and the customer receives written Time: 5 days Procedure 4. Purchase the transformer Cost: None permission to use electricity. and carry out external works Comments: The DABS technical department Once the flow starts, the customer must pay a Time: 60 days installs the meter. charge of 1% of the connection fee. Cost: AFN 596,807 (US$10,000) (Cost for the connection works, including the transformer and Once the new line connection is completed, GETTING ELECTRICITY labor) the electricity supply is turned back on and the Comments: The DABS planning and transmission line is energized. The dry switch on Kandahar (Kandahar) engineering department in Kandahar appoints the medium-voltage side is turned on to check three inspectors: one from the planning and the meter and the transformer. Then the main Utility: Da Afghanistan Breshna Sherkat (DABS) engineering department itself, one from the switch on the lower-voltage side is turned on to Data as of: November 2016 inspect the condition of the meter by increasing network department (Shabaka) and one from the grid extension department. The inspectors and decreasing the load for the next two hours. If Procedure 1. Submit application for the system is working well, the meter is secured estimate the size of the transformer needed and a new electricity connection to DABS provide the customer with a list of the required (locked) and the customer receives written headquarters in Kabul and await materials. The customer can either obtain all permission to use electricity. external site inspection connection materials through DABS or buy them Once the flow starts, the customer must pay a Time: 15 days on the private market. Once the materials have charge of 1% of the connection fee. Cost: None been approved, the transformer can be installed. Comments: The customer mails a formal request The external connection works can be carried GETTING ELECTRICITY for a new connection to DABS headquarters out by the customer’s contractor or by DABS. in Kabul. The application form must include In the majority of cases in Kandahar the works Nangarhar (Jalalabad) information on the property and on the type of are carried out by the customer’s contractor. If they are done by DABS, the utility would charge Utility: Da Afghanistan Breshna Sherkat (DABS) activity requiring power. 10% of the amount that the customer spent to Data as of: November 2016 purchase all the necessary items. Procedure 2. Receive site inspection Procedure 1. Submit application for by the DABS energy control section in The items to be purchased include the following: a new electricity connection to DABS Kandahar • 140-kVA transformer (about US$4,000) headquarters in Kabul and await Time: 1 day external site inspection • 630 A switchboard (US$1,000) Cost: None • Three dry switches (US$600 each) Time: 10 days Comments: The DABS energy control section • Pillars for overhead connection (US$2,500) Cost: None in Kandahar performs a site inspection to verify Comments: The customer mails a formal request the feasibility of the new connection. Inspectors • Other materials (fuse, lightning arresters, steel for a new connection to DABS headquarters assess whether the power station has the cable for overhead connection and the like) in Kabul. The application form must include capacity for the new connection. The customer information on the property and on the type of is required to be present during the inspection. Procedure 5.* Obtain approval of the activity requiring power. If the outcome of the inspection is positive, the head of the DABS operations department in transformer and materials Kandahar provides the technical details to DABS Time: 14 days Procedure 2. Receive site inspection headquarters in Kabul. In most cases in Kandahar Cost: None by the DABS operations department in the customer travels to Kabul to submit the Comments: The customer must obtain clearance Jalalabad technical details to DABS headquarters in person. of the transformer and materials from the Time: 1 day utility. The three inspectors appointed by the Cost: None Procedure 3. Obtain approval from DABS planning and engineering department Comments: The DABS operations department DABS headquarters in Kabul and pay in Kandahar check and approve the items in Jalalabad performs a site inspection to verify the connection fee purchased by the customer. Once the materials the feasibility of the new connection. Inspectors have been approved, the connection works can assess whether the power station has the Time: 14 days start. capacity for the new connection. The customer Cost: AFN 89,100 (AFN 84,000 connection fee [AFN 600 per kilovolt-ampere] + AFN 100 is required to be present during the inspection. application fee + AFN 5,000 for a round trip to Procedure 6. Purchase the meter from If the outcome of the inspection is positive, the Kabul) DABS and obtain installation permission head of the operations department provides the technical details to DABS headquarters in Kabul. Comments: DABS headquarters grants Time: 14 days the approval for the substation distribution Cost: AFN 55,000 (Cost of the meter, related transformer and refers the applicant to the material, labor and installation works) DABS office in Kandahar for further processing. * Simultáneo con el trámite anterior. 94 DOING BUSINESS IN AFGHANISTAN 2017 Procedure 3. Obtain approval from assigns three engineers to check and approve the primary court signs the application and circular DABS headquarters in Kabul and pay items purchased by the customer. The engineers forms to initiate a search of the deed records at the connection fee send a report to the head of the operations the Makhzan. department with the results of this inspection. Time: 14 days Cost: AFN 84,100 (AFN 84,000 connection Procedure 2. Submit the signed circular fee [AFN 600 per kilovolt-ampere] + AFN 100 Procedure 6. Purchase the meter from forms to the chief of the Makhzan to application fee) DABS and obtain installation permission initiate the search of registered deeds Comments: DABS headquarters grants Time: 14 days Time: 5 days the approval for the substation distribution Cost: AFN 55,000 (Cost of the meter, related Cost: None transformer and refers the applicant to the material, labor and installation works) Comments: The applicant gives the signed DABS office in Jalalabad for further processing. Comments: The customer needs to buy a meter. circular forms to the Makhzan to initiate the The customer pays the connection fee, which In Jalalabad the meter can be purchased either search of its historical records of registered is established by DABS headquarters in Kabul on the private market or from DABS; purchasing deeds. The Makhzan keeper conducts a deed and applies to all cities. The customer makes it from DABS is the more common practice. search in the archives based on the details the payment in a bank and takes the receipt provided by the applicant (registry number back to DABS. For three-phase and single-phase and photos of the property). The clerk of the commercial connections DABS charges a Procedure 7. Receive the meter installation by DABS and then Makhzan then ensures that the information on connection fee of AFN 600 per kilovolt-ampere the circular forms matches the records. The (kVA). DABS does not charge a security deposit. electricity flow keeper gives the deed book and the owner’s Time: 5 days property deed to the chief of the Makhzan, who Procedure 4. Purchase the transformer Cost: None checks that the recorded ownership is correct and carry out external works Comments: The DABS technical department and signs the appropriate circular form. checks the installation of the transformer and the Time: 60 days connection to the network and installs the meter. Cost: AFN 596,807 (US$10,000) (Cost for the Procedure 3. Submit the circular forms connection works, including the transformer and Once the new line connection is completed, to the property office (Milkiat-ha) of labor) the electricity supply is turned back on and the the municipality Comments: The DABS planning and transmission line is energized. The dry switch on Time: 2 days engineering department in Jalalabad appoints the medium-voltage side is turned on to check Cost: None (A charge of 1% of the property value three inspectors: one from the planning and the meter and the transformer. Then the main is paid in procedure 9.) engineering department itself, one from the switch on the lower-voltage side is turned on to Comments: The head of the district municipality network department (Shabaka) and one from inspect the condition of the meter by increasing signs the circular forms and writes to the relevant the grid extension department. The inspectors and decreasing the load for the next two hours. If offices (the Milkiat-ha and the engineering estimate the size of the transformer needed and the system is working well, the meter is secured team) to request that they further process provide the customer with a list of the required (locked) and the customer receives written the application. The applicant submits the materials. The customer can either obtain all permission to use electricity. application to these offices in person. connection materials through DABS or buy them Once the flow starts, the customer must pay a on the private market. Once the materials have The applicant first takes the circular forms to the charge of 1% of the connection fee. been approved, the transformer can be installed. Milkiat-ha for confirmation of the ownership. The external connection works can be carried out by the customer’s contractor or by DABS. In the majority of cases in Jalalabad the works Procedure 4. Submit the circular are carried out by the customer’s contractor. If forms to the engineering team of the they are done by DABS, the utility would charge LIST OF PROCEDURES municipality 10% of the amount that the customer spent to REGISTERING PROPERTY Time: 2 days purchase all the necessary items. Cost: None Balkh (Mazar-i-Sharif) Comments: For purposes of assessment of the The items to be purchased include the following: Property value: AFN 1,879,943 (US$31,500) property value, the engineering team looks at the • 140-kVA transformer (about US$4,000) building’s size, location, technical features and Data as of: November 2016 • 630 A switchboard (US$1,000) construction materials as well as a sketch of the property. • Three dry switches (US$600 each) Procedure 1. Obtain and submit • Pillars for overhead connection (US$2,500) application form and two circular forms Procedure 5. Submit the circular forms • Other materials (fuse, lightning arresters, at the primary court to the Amlak committee steel cable for overhead connection and the Time: 3 days Time: 3 days like) Cost: None Cost: None Comments: The seller must file an application at Comments: An Amlak committee establishes the primary court in the district in which the land Procedure 5.* Obtain approval of the is located. Once the application is filed, the head the value of the land after an inspection of the transformer and materials property. The value is entered on the appropriate of the Makhzan (the appeals court archives) Time: 14 days circular form, along with a charge of 1% of that must verify the validity of the property deed in Cost: None value that is to be paid at a bank. This procedure the appeals court registry. The seller obtains, fills also includes checking for back-due sanitation Comments: The customer must obtain clearance out and submits an application form along with taxes and making sure that the property is free of the transformer and materials from the utility. two circular forms (one for the sale of the land, from any restrictions such as mortgages. The DABS operations department in Jalalabad one for the sale of the building). The judge of the *Simultáneo con el trámite anterior. LIST OF PROCEDURES 95 Procedure 6. Submit the circular forms Comments: The applicant returns to the primary Procedure 3. Submit the circular forms to the provincial revenue department court with the completed circular forms and the to the property office (Milkiat-ha) of (Mustofiat) of the Ministry of Finance receipts as proof of payment. The primary court the municipality judge orders the clerk to prepare a new deed in Time: 2 days Time: 2 days two copies. The new deed is scrutinized by the Cost: None (A charge of 1% of the property value Cost: None (A charge of 1% of the property value judge, who signs both copies. The konda (stub is paid in procedure 9.) is paid in procedure 9.) copy) is maintained in the primary court until the Comments: The applicant takes the circular full record book is passed on to the Makhzan for Comments: The head of the district municipality forms to the tax collection office of the local storage at the end of the financial year. signs the circular forms and writes to the relevant Mustofiat for certification of the property transfer offices (the Milkiat-ha and the engineering fees owed. The Ministry of Finance also levies team) to request that they further process a charge of 1% of the value determined by the Procedure 11. Apply for title transfer the application. The applicant submits the municipality. Time: 90 days application to these offices in person. Cost: None The applicant first takes the circular forms to the Procedure 7. Submit the circular forms Comments: The applicant takes the new deed Milkiat-ha for confirmation of the ownership. to the human resources directorate to the Milkiat-ha directorate to have the owner’s name changed in the books (safaee) as well as of the Mustofiat for certification of for all utilities. Procedure 4. Submit the circular signatures forms to the engineering team of the Time: 1 day REGISTERING PROPERTY municipality Cost: None Herat (Herat) Time: 2 days Comments: The circular forms are submitted Cost: None to the human resources directorate to have the Property value: AFN 1,879,943 (US$31,500) signatures of the local and provincial (regional) Comments: For purposes of assessment of the Data as of: November 2016 property value, the engineering team looks at the Mustofiat staff certified. building’s size, location, technical features and Procedure 1. Obtain and submit construction materials as well as a sketch of the Procedure 8. Submit the completed application form and two circular forms property. circular forms to the primary court at the primary court judge Time: 3 days Procedure 5. Submit the circular forms Time: 1 day Cost: None to the Amlak committee Cost: None Comments: The seller must file an application at Time: 4 days Comments: The completed circular forms are the primary court in the district in which the land Cost: None reviewed by the primary court judge. The court is located. Once the application is filed, the head Comments: An Amlak committee establishes clerk writes in the property transfer fees for the of the Makhzan (the appeals court archives) the value of the land after an inspection of the applicant to pay at a designated bank. must verify the validity of the property deed in property. The value is entered on the appropriate the appeals court registry. The seller obtains, fills circular form, along with a charge of 1% of that Procedure 9. Pay the property transfer out and submits an application form along with value that is to be paid at a bank. This procedure fees at the designated bank two circular forms (one for the sale of the land, also includes checking for back-due sanitation Time: 1 day one for the sale of the building). The judge of the taxes and making sure that the property is free primary court signs the application and circular from any restrictions such as mortgages. Cost: AFN 93,997 (3% of the property value forms to initiate a search of the deed records at to the primary court [registration fees are 3% the Makhzan. for property values above AFN 1 million, 2% Procedure 6. Submit the circular forms otherwise] + 1% to the municipality + 1% to the to the provincial revenue department Mustofiat) Procedure 2. Submit the signed circular (Mustofiat) of the Ministry of Finance Comments: The seller pays the property transfer forms to the chief of the Makhzan to Time: 3 days fees at the designated bank. For property valued initiate the search of registered deeds Cost: None (A charge of 1% of the property value at less than AFN 1 million, the registration fee is Time: 6 days is paid in procedure 9.) 2% of the property value; for property valued at Cost: None more than AFN 1 million (as in the Doing Business Comments: The applicant takes the circular Comments: The applicant gives the signed forms to the tax collection office of the local case study), the registration fee is 3%. A fee circular forms to the Makhzan to initiate the schedule for registration fees was introduced Mustofiat for certification of the property transfer search of its historical records of registered fees owed. The Ministry of Finance also levies by a presidential decree and a decision of a deeds. The Makhzan keeper conducts a deed commune commission of the two chambers a charge of 1% of the value determined by the search in the archives based on the details municipality. of Parliament published on April 9, 2009. This provided by the applicant (registry number followed the elimination of the property transfer and photos of the property). The clerk of the tax of 5% by a presidential decree dated July 14, Makhzan then ensures that the information on Procedure 7. Submit the circular forms 2008. the circular forms matches the records. The to the human resources directorate keeper gives the deed book and the owner’s of the Mustofiat for certification of Procedure 10. Submit the completed property deed to the chief of the Makhzan, who signatures circular forms, with payment receipts, checks that the recorded ownership is correct Time: 1 day to the primary court and signs the appropriate circular form. Cost: None Time: 9 days Comments: The circular forms are submitted Cost: None to the human resources directorate to have the 96 DOING BUSINESS IN AFGHANISTAN 2017 signatures of the local and provincial (regional) REGISTERING PROPERTY making sure that the property is free from any Mustofiat staff certified. restrictions such as mortgages. Kabul (Kabul) Procedure 8. Submit the completed Property value: AFN 1,879,943 (US$31,500) Procedure 4. Submit the circular forms circular forms to the primary court Data as of: June 2016 to the provincial revenue department judge (Mustofiat) of the Ministry of Finance Time: 1 day Procedure 1. Obtain and submit Time: 5 days Cost: None application form and two circular forms Cost: None (A charge of 1% of the property value Comments: The completed circular forms are at the primary court is paid in procedure 7.) reviewed by the primary court judge. The court Time: 3 days Comments: The applicant takes the circular clerk writes in the property transfer fees for the Cost: None forms to the tax collection office of the local applicant to pay at a designated bank. Comments: The seller must file an application at Mustofiat for certification of the property transfer the primary court in the district in which the land fees owed. The Ministry of Finance also levies Procedure 9. Pay the property transfer is located. Once the application is filed, the head a charge of 1% of the value determined by the of the Makhzan (the appeals court archives) municipality. fees at the designated bank Time: 1 day must verify the validity of the property deed in Cost: AFN 93,997 (3% of the property value the appeals court registry. The seller obtains, fills Procedure 5. Submit the circular forms out and submits an application form along with to the human resources directorate to the primary court [registration fees are 3% two circular forms (one for the sale of the land, of the Mustofiat for certification of for property values above AFN 1 million, 2% one for the sale of the building). The judge of the signatures otherwise] + 1% to the municipality + 1% to the primary court signs the application and circular Mustofiat) Time: 3 days forms to initiate a search of the deed records at Comments: The seller pays the property transfer Cost: None the Makhzan. fees at the designated bank. For property valued Comments: The circular forms are submitted at less than AFN 1 million, the registration fee is to the human resources directorate to have the 2% of the property value; for property valued at Procedure 2. Submit the signed circular signatures of the local and provincial (regional) more than AFN 1 million (as in the Doing Business forms to the chief of the Makhzan to Mustofiat staff certified. case study), the registration fee is 3%. A fee initiate the search of registered deeds schedule for registration fees was introduced by a Time: 8 days presidential decree and a decision of a commune Procedure 6. Submit the completed Cost: None circular forms to the primary court commission of the two chambers of Parliament Comments: The applicant gives the signed published on April 9, 2009. This followed the judge circular forms to the Makhzan to initiate the elimination of the property transfer tax of 5% by Time: 1 day search of its historical records of registered a presidential decree dated July 14, 2008. deeds. The Makhzan keeper conducts a deed Cost: None search in the archives based on the details Comments: The completed circular forms are Procedure 10. Submit the completed provided by the applicant (registry number reviewed by the primary court judge. The court circular forms, with payment receipts, and photos of the property). The clerk of the clerk writes in the property transfer fees for the Makhzan then ensures that the information on applicant to pay at a designated bank. to the primary court Time: 20 days the circular forms matches the records. The keeper gives the deed book and the owner’s Procedure 7. Pay the property transfer Cost: None property deed to the chief of the Makhzan, who fees at the designated bank Comments: The applicant returns to the primary checks that the recorded ownership is correct Time: 1 day court with the completed circular forms and the and signs the appropriate circular form. receipts as proof of payment. The primary court Cost: AFN 93,997 (3% of the property value judge orders the clerk to prepare a new deed in to the primary court [registration fees are 3% two copies. The new deed is scrutinized by the Procedure 3. Submit the circular forms for property values above AFN 1 million, 2% judge, who signs both copies. The konda (stub to the property office (Milkiat-ha) of otherwise] + 1% to the municipality + 1% to the copy) is maintained in the primary court until the the municipality Mustofiat) full record book is passed on to the Makhzan for Time: 15 days Comments: The seller pays the property transfer storage at the end of the financial year. Cost: None (A charge of 1% of the property value fees at the designated bank. For property valued is paid in procedure 7.) at less than AFN 1 million, the registration fee is Procedure 11. Apply for title transfer Comments: The applicant takes the circular 2% of the property value; for property valued at forms to the Milkiat-ha for certification of more than AFN 1 million (as in the Doing Business Time: 150 days the property’s location and valuation and case study), the registration fee is 3%. A fee Cost: None confirmation of the ownership. The engineering schedule for registration fees was introduced by a Comments: The applicant takes the new deed presidential decree and a decision of a commune to the Milkiat-ha directorate to have the owner’s team looks at the building’s size, location, technical features and construction materials commission of the two chambers of Parliament name changed in the books (safaee) as well as published on April 9, 2009. This followed the for all utilities. as well as a sketch of the property. An Amlak committee establishes the value of the land elimination of the property transfer tax of 5% by after an inspection of the property. The value is a presidential decree dated July 14, 2008. entered on the appropriate circular form, along with a charge of 1% of that value that is to be paid at a bank. This procedure also includes checking for back-due sanitation taxes and LIST OF PROCEDURES 97 Procedure 8. Submit the completed checks that the recorded ownership is correct Comments: The circular forms are submitted circular forms, with payment receipts, and signs the appropriate circular form. to the human resources directorate to have the to the primary court signatures of the local and provincial (regional) Procedure 3. Submit the circular forms Mustofiat staff certified. Time: 31 days Cost: None to the property office (Milkiat-ha) of Comments: The applicant returns to the primary the municipality Procedure 8. Submit the completed court with the completed circular forms and the Time: 2 days circular forms to the primary court receipts as proof of payment. The primary court Cost: None (A charge of 1% of the property value judge judge orders the clerk to prepare a new deed in is paid in procedure 9.) Time: 1 day two copies. The new deed is scrutinized by the Comments: The head of the district municipality Cost: None judge, who signs both copies. The konda (stub signs the circular forms and writes to the relevant Comments: The completed circular forms are copy) is maintained in the primary court until the offices (the Milkiat-ha and the engineering reviewed by the primary court judge. The court full record book is passed on to the Makhzan for team) to request that they further process clerk writes in the property transfer fees for the storage at the end of the financial year. the application. The applicant submits the applicant to pay at a designated bank. application to these offices in person. Procedure 9. Apply for title transfer The applicant first takes the circular forms to the Procedure 9. Pay the property transfer Time: 183 days Milkiat-ha for confirmation of the ownership. fees at the designated bank Cost: None Time: 1 day Comments: The applicant takes the new deed Cost: AFN 93,997 (3% of the property value to the Milkiat-ha directorate to have the owner’s Procedure 4. Submit the circular to the primary court [registration fees are 3% name changed in the books (safaee) as well as forms to the engineering team of the for property values above AFN 1 million, 2% for all utilities. municipality otherwise] + 1% to the municipality + 1% to the Time: 2 days Mustofiat) REGISTERING PROPERTY Cost: None Comments: The seller pays the property transfer Comments: For purposes of assessment of the fees at the designated bank. For property valued Kandahar (Kandahar) property value, the engineering team looks at the at less than AFN 1 million, the registration fee is Property value: AFN 1,879,943 (US$31,500) building’s size, location, technical features and 2% of the property value; for property valued at Data as of: November 2016 construction materials as well as a sketch of the more than AFN 1 million (as in the Doing Business property. case study), the registration fee is 3%. A fee Procedure 1. Obtain and submit schedule for registration fees was introduced application form and two circular forms Procedure 5. Submit the circular forms by a presidential decree and a decision of a to the Amlak committee commune commission of the two chambers at the primary court of Parliament published on April 9, 2009. This Time: 3 days Time: 4 days followed the elimination of the property transfer Cost: None Cost: None tax of 5% by a presidential decree dated July 14, Comments: The seller must file an application at Comments: An Amlak committee establishes 2008. the primary court in the district in which the land the value of the land after an inspection of the is located. Once the application is filed, the head property. The value is entered on the appropriate of the Makhzan (the appeals court archives) circular form, along with a charge of 1% of that Procedure 10. Submit the completed must verify the validity of the property deed in value that is to be paid at a bank. This procedure circular forms, with payment receipts, the appeals court registry. The seller obtains, fills also includes checking for back-due sanitation to the primary court out and submits an application form along with taxes and making sure that the property is free Time: 20 days two circular forms (one for the sale of the land, from any restrictions such as mortgages. Cost: None one for the sale of the building). The judge of the Comments: The applicant returns to the primary primary court signs the application and circular Procedure 6. Submit the circular forms court with the completed circular forms and the forms to initiate a search of the deed records at receipts as proof of payment. The primary court to the provincial revenue department the Makhzan. judge orders the clerk to prepare a new deed in (Mustofiat) of the Ministry of Finance two copies. The new deed is scrutinized by the Time: 5 days Procedure 2. Submit the signed circular judge, who signs both copies. The konda (stub Cost: None (A charge of 1% of the property value copy) is maintained in the primary court until the forms to the chief of the Makhzan to is paid in procedure 9.) full record book is passed on to the Makhzan for initiate the search of registered deeds Comments: The applicant takes the circular storage at the end of the financial year. Time: 5 days forms to the tax collection office of the local Cost: None Mustofiat for certification of the property transfer Comments: The applicant gives the signed fees owed. The Ministry of Finance also levies Procedure 11. Apply for title transfer circular forms to the Makhzan to initiate the a charge of 1% of the value determined by the Time: 30 days search of its historical records of registered municipality. Cost: None deeds. The Makhzan keeper conducts a deed Comments: The applicant takes the new deed search in the archives based on the details Procedure 7. Submit the circular forms to the Milkiat-ha directorate to have the owner’s provided by the applicant (registry number name changed in the books (safaee) as well as to the human resources directorate and photos of the property). The clerk of the for all utilities. of the Mustofiat for certification of Makhzan then ensures that the information on the circular forms matches the records. The signatures keeper gives the deed book and the owner’s Time: 2 days property deed to the chief of the Makhzan, who Cost: None 98 DOING BUSINESS IN AFGHANISTAN 2017 REGISTERING PROPERTY Procedure 4. Submit the circular Procedure 9. Pay the property transfer forms to the engineering team of the fees at the designated bank Nangarhar (Jalalabad) municipality Time: 1 day Property value: AFN 1,879,943 (US$31,500) Time: 2 days Cost: AFN 93,997 (3% of the property value Data as of: November2016 Cost: None to the primary court [registration fees are 3% Comments: For purposes of assessment of the for property values above AFN 1 million, 2% Procedure 1. Obtain and submit property value, the engineering team looks at the otherwise] + 1% to the municipality + 1% to the application form and two circular forms building’s size, location, technical features and Mustofiat) at the primary court construction materials as well as a sketch of the Comments: The seller pays the property transfer property. fees at the designated bank. For property valued Time: 3 days at less than AFN 1 million, the registration fee is Cost: None 2% of the property value; for property valued at Comments: The seller must file an application at Procedure 5. Submit the circular forms more than AFN 1 million (as in the Doing Business the primary court in the district in which the land to the Amlak committee case study), the registration fee is 3%. A fee is located. Once the application is filed, the head Time: 4 days schedule for registration fees was introduced of the Makhzan (the appeals court archives) Cost: None by a presidential decree and a decision of a must verify the validity of the property deed in Comments: An Amlak committee establishes commune commission of the two chambers the appeals court registry. The seller obtains, fills the value of the land after an inspection of the of Parliament published on April 9, 2009. This out and submits an application form along with property. The value is entered on the appropriate followed the elimination of the property transfer two circular forms (one for the sale of the land, circular form, along with a charge of 1% of that tax of 5% by a presidential decree dated July 14, one for the sale of the building). The judge of the value that is to be paid at a bank. This procedure 2008. primary court signs the application and circular also includes checking for back-due sanitation forms to initiate a search of the deed records at taxes and making sure that the property is free the Makhzan. Procedure 10. Submit the completed from any restrictions such as mortgages. circular forms, with payment receipts, Procedure 2. Submit the signed circular to the primary court Procedure 6. Submit the circular forms Time: 20 days forms to the chief of the Makhzan to to the provincial revenue department initiate the search of registered deeds Cost: None (Mustofiat) of the Ministry of Finance Comments: The applicant returns to the primary Time: 5 days Time: 5 days court with the completed circular forms and the Cost: None Cost: None (A charge of 1% of the property value receipts as proof of payment. The primary court Comments: The applicant gives the signed is paid in procedure 9.) judge orders the clerk to prepare a new deed in circular forms to the Makhzan to initiate the Comments: The applicant takes the circular two copies. The new deed is scrutinized by the search of its historical records of registered forms to the tax collection office of the local judge, who signs both copies. The konda (stub deeds. The Makhzan keeper conducts a deed Mustofiat for certification of the property transfer copy) is maintained in the primary court until the search in the archives based on the details fees owed. The Ministry of Finance also levies full record book is passed on to the Makhzan for provided by the applicant (registry number a charge of 1% of the value determined by the storage at the end of the financial year. and photos of the property). The clerk of the municipality. Makhzan then ensures that the information on the circular forms matches the records. The Procedure 11. Apply for title transfer keeper gives the deed book and the owner’s Procedure 7. Submit the circular forms Time: 50 days property deed to the chief of the Makhzan, who to the human resources directorate Cost: None checks that the recorded ownership is correct of the Mustofiat for certification of Comments: The applicant takes the new deed and signs the appropriate circular form. signatures to the Milkiat-ha directorate to have the owner’s Time: 2 days name changed in the books (safaee) as well as Procedure 3. Submit the circular forms Cost: None for all utilities. to the property office (Milkiat-ha) of Comments: The circular forms are submitted the municipality to the human resources directorate to have the Procedure 12. Obtain the governor’s Time: 2 days signatures of the local and provincial (regional) signature on the new deed Mustofiat staff certified. Time: 2 days Cost: None (A charge of 1% of the property value is paid in procedure 9.) Cost: None Comments: The head of the district municipality Procedure 8. Submit the completed Comments: To increase the security of title, signs the circular forms and writes to the relevant circular forms to the primary court the applicant seeks to have the deed signed by offices (the Milkiat-ha and the engineering judge the governor or by someone delegated by the team) to request that they further process Time: 1 day governor. the application. The applicant submits the Cost: None application to these offices in person. Comments: The completed circular forms are The applicant first takes the circular forms to the reviewed by the primary court judge. The court Milkiat-ha for confirmation of the ownership. clerk writes in the property transfer fees for the applicant to pay at a designated bank. ACKNOWLEDGMENTS 99 Acknowledgments Doing Business in Afghanistan 2017 was and led by Indira Chand, in collaboration No. AID-EGEE-G-15-00001. The opinions produced by the Global Indicators Group with the South Asia regional com- expressed in this publication are those of the Development Economics Vice munications team. The webpage (http of the author(s) and do not necessarily Presidency of the World Bank Group ://www.doingbusiness.org/afghanistan) reflect the views of the U.S. Agency for and led by Tommaso Rooms. The team was developed by Kunal Patel, Kamalesh International Development. comprised Anushavan Hambardzumyan, Sengaonkar, Bishal Raj Thakuri, and Eugene Bempong Nyantakyi, Maria Hashim Zia. The report was edited by Camila Roberts, and Mariline Vieira. The Alison Strong and Luis Liceaga produced study was prepared under the direction the layout. of Mierta Capaul. Wagma Mohmand Karokhail, Esperanza Lasagabaster, and The project was funded by USAID as part Stephen Ndegwa provided guidance. of the World Bank Group Investment Climate Program in Afghanistan. The The team is grateful for valuable com- World Bank team would also like to ments provided by colleagues from across thank the Afghanistan Chamber of the World Bank Group. Peer review com- Commerce & Industries (ACCI), Da ments were provided by Arvind Jain and Afghanistan Breshna Sherkat (DABS), Alice Ouedraogo. Additional comments the Independent Directorate of Local were received from Atiqullah Ahmadzai, Governance (IDLG), and the Ministry of Mohammad Sulaiman Akbari, Humayoon Commerce and Industries (MOCI) for Chakhansuri, Richard Spencer Hogg, their collaboration on this project. Suhail Kassim, Esperanza Lasagabaster, Claudia Nassif, and Aminata Ndiaye. Data collection was carried out in col- Experts in each of the four areas mea- laboration with Samuel Hall. More sured were consulted when drafting the than 100 lawyers, physical planners, individual chapters: Marie Lily Delion, engineers, architects, developers, con- Laura Diniz, Tazeen Hasan, Sarah Iqbal, tractors and public officials contributed Marton Kerkapoly, Frédéric Meunier, to the Doing Business in Afghanistan 2017 Fanny Missfeldt-Ringius, Thomas study. The team would like to express its Moullier, Mohammad Yasin Noori, Tigran special gratitude to the national and local Parvanyan, Nayda Almodovar Reteguis, government officials, members of the and Alessio Zanelli. judiciary and land registry officials who participated in the project and provided Meagan Noelle Andrews, Ahmad Shoaib valuable comments during the consulta- Faitree, Julio Fuster, Folad Hashimi, Joyce tion and data-review period. The names Ibrahim, Marwa Mahgoub, Trimor Mici, of those wishing to be acknowledged are Mario Nascimento, Madalina Papahagi, listed on the following pages. Monique Pelloux, Hiska Noemi Reyes, Pilar Salgado Otónel, Sheela Samimy, and This publication was made possible through Moussa Traore provided valuable assis- support provided by the USAID Mission in tance at various stages of the project. The Afghanistan, U.S. Agency for International communications campaign was designed Development, under the terms of Award 100 DOING BUSINESS IN AFGHANISTAN 2017 PRIVATE SECTOR Haji Aziz Rahman Arab Golden Zishan Construction Mohammad Mukhtar Tahwi Win Kabul-Istanbul Shafiqullah Sarwari Balkh Khawar Consulting Services MAZAR-I-SHARIF Mohammad Siddiq Muradi CONTRIBUTORS and Logistic Company Afghanistan Investment Bashir Sadaat Support Agency (AISA) Ahmad Omid Aman KANDAHAR Bashir Sadaat Construction HERAT Hamza Fayaz Construction Company Eng. Mohammad Aman Spar Ahmad Rafi Naderi, Reshad Barakzai Company Da Afghanistan Breshna Sherkat Afghanistan Independent Afghanistan Independent Bar Fateh Mohammad Hakimi Association (AIBA) - Kandahar (DABS), Mazar- e Sharif Bar Association (AIBA) Ihsanullah Baz Electric and Ihsan Legal Services Construction Company Masood Pooyesh Zabihullah Popal Amar Barter Construction Haji Zainullah Aino Construction and Najibullah Noori Company Kamawal Business Consultancy Logistic Company Etimad Legal and Consulting Services Said Waheed Haji Majnoon Khaksaar Abdul Hadi Sarwari Antworth Consulting Services Khaksaar Stanikzai Al-Hadi Amin Construction Zubaidullah Jahed and Electric Company Construction Company Jahan Araa Electric and Haji Sultan Mohammad construction Company Mawlavizada Hamidullah Momen Hamayon Waziri Aria Afghan Construction Momen Advocates Al-Hadi Amin Construction Abdul Wahed Sakhaee and Electric Company Company New Peak Construction Company Haji Hamayoon Pashadwal Mohammad Shoaib Latifi Pashadwal Construction Company Pashtoon Atif Masud Akbari Arwand Road Construction Atif Afghan Consulting Services New Peak Construction Company Company Ghulam Qadir Roshani Thermal Power Delawar Rahimi Mohammad Nader Poya Naqibullah Rasooly Producing Company Bilal Nematyar Engineering Oroj-e- Balkh Company Awandeshan Consulting Services Construction Company (BNECC) Adam Khan Saydi Mohammad Nasim Amini Wazir Ahmad Al Wazir Sayedi Qazi Advocacy Esmatullah Atal Shahr-e-Naw Electric Company Bana Heart Electricity Services Bilal Nematyar Engineering Mr. Zarwali Construction Company (BNECC) Mirza Najmuddin Shahrukhi Benafsha Sultani Shawkat Nesar Shahrukhi Construction Company Dadgustar Consulting Services Construction Company Zabihullah Maqsodi Kahkashan Etemad Ltd Mohammad Nasim Nasir Abdul Ghaffar Fayaz Mohammad Yaqoob Yama Success Star Consulting Dadgustar Legal Services Spin Ghar Legal Services Abdul Hameed Kandahar Electricity Power Abdul Haq Bashari Nasir Ahmad Salehi Wali Mohammad Farahi Transmission Services Tamadon Consulting Services Dawaran Consulting Services Wali Mohammad Electric Services Company Jamil Ahmad Popal Amanullah Faqiri, Kandahar Zahir United Farhat Abbas Momand Construction, Road Building Delta Plus Consultancy Watanyar Construction Company & Supply Company PUBLIC SECTOR Mohammad Rahim Niazi Enhanced Construction Company Rahmanullah Mayar CONTRIBUTORS KABUL Maihan Zeba Construction Sayed Ahmad Haidari Company HERAT Haidari Karokhi Electricity Zalmai Bakhtyari Abdul Sattar Alokozay and Construction Bakhtar-e-Bastan Solar Wind Abdul Qasam Afghanistan Investment Masum Afzali Consulting Services Support Agency (AISA) Abdul Qadir Ahmadi Ali Saberi Hema Salang Electricity and Ekmal Construction Company Abdul Hadi Eng. Delawar Morady Construction Company Mia Saheb Ltd Da Afghanistan Breshna Ashequllah Safai Ensaf Block Construction Company Sherkat (DABS), Herat Noor Ahmad Hamed Niamatullah Nemat Noor Legal Services New Alkawsar Sherkat Sayed Farzad Alavi European Technology Company Matiullah Khaksar JALALABAD Wakil Ahmad Hamkar Ofoq Alborz Afghan Wire Organization for Afghanistan Ghulam Nabi Rahmanzai Wakman Samim National Rights Afghanistan Investment and Electricity Services Huriyat Advocates Support Agency (AISA) Abdul Wali Akbari Hekmatullah Samadi Rohullah Habib Pamir Streamline Ehsanullah Shayan Poya Adalat Legal Consultancy Justice for All Construction Company Da Afghanistan Breshna Yahya Wafamal Sherkat (DABS), Nangarhar Saleha Shahid Ahmad Regional Office Syana Construction Company Khurasan Legal Services Shahid Tejarati Sherkat Abdul Basir Yarzada Mohammad Naser Qurishi Mohammad Ismail Abdul Hai Karimi Da Afghanistan Breshna Tabesh Herat Electricity Services Legal Oracles Zahid Karimi Electrical Services Sherkat (DABS), Nangarhar Nematullah Barakzai Regional Office JALALABAD Sayed Ahmad Lex Ferghana Zala Consulting Services Abdul Wahid Samadi Afghanistan Independent Bar Khalid Hatam KABUL Haji Abdul Latif Karimi Association (AIBA) - Nangarhar Riaa Barker Gillete Zeyarmal Daman Construction Eng. Abdul Ahad Barekzai Company (ZDCC) Da Afghanistan Breshna Said Shafiqullah Mushfiq Zahid Safi Sherkat (DABS), Kabul Afghanistan Independent Bar Riaa Barker Gillete Samiullah Association (AIBA) - Nangarhar Zeyarmal Daman Construction Tariq Samadi Qariburrahman Labib Da Afghanistan Breshna Company (ZDCC) Abdul Subhan Yousufzai Schema Legal Services Sherkat (DABS), Kabul Al Amanat Advocacy Abdul Qayoum Mohammadi Skywards Construction Company MAZAR-I-SHARIF Amin Jan Mushfiq KANDAHAR Amin Jan Mushfiq Mohammad Haroon Khurrami Consulting Services Najibullah Ahmadi Aryan Khurrami Company Hedayatullah Rahmati Skywards Construction Company Afghanistan Investment Haji Abdul Baqi Umari Ahmad Khosraw Rasa Support Agency (AISA) Daeem Electric Logistics Nooraqa Dawari Azeen Shahr Construction and Services Company Stonecutter Company Company Sayed Rasool Baqi Da Afghanistan Brishna Maroof Ahmadzai Sharkat (DABS), Kandahar Wahidqudrat Ltd. Doing Business 2017 Doin Busin ss in Af h nist n 2017 www.doingbusiness.org/afghanistan Comp rin Busin ss R ul tion for Dom stic Firms in 5 Af h n Provinc s with 189 Oth r Economi s