Afghanistan Corruption Report

Businesses face a very high risk of corruption in the Afghan police. Local police forces often extort bribes (“tax”) at police checkpoints and can resort to violence upon non-payment (HRR 2014). Given the weak rule of law, similar bribes can be extorted by bandits and insurgents (HRR 2014). Afghan National Police (ANP) officers allegedly paid higher-ranking officials at the Ministry of the Interior to get positions and promotions (HRR 2014). The administration of justice is weak, especially when it involves police, making police impunity a problem (HRR 2014). Most Afghans who have contact with the police report paying a bribe; the biggest proportion of bribe-paying to the police are the Wardak and Uruzgan provinces, while the lowest rates are in Panjshir and Badakhshan (Asia Foundation, Nov. 2015).

A UN-commissioned report highlights that public officials supress complaints against corruption in the police, points to salary payments to ghost employees, and recommends the dismissal of key officials (Reuters, Apr. 2015). However, the report was never published, leading to criticism from the Afghan government (Reuters, Apr. 2015).

Corruption is a very high risk when obtaining public services and licences in Afghanistan. The vast majority of firms expect to give gifts or pay bribes when acquiring a water connection, most expect the same for an electrical connection, and 30 percent for obtaining an operating licence (ES 2014). Especially common are bribes in relation to applications for certificates and registration procedures, as well as public utilities (UNODC, Oct. 2013). Almost half of businesses report being expected to exchange facilitation payments or gifts with public officials just to get things done (ES 2014). Widespread corruption obstructs the efficient delivery of services and hinders overall development (BTI 2014). Starting a business is significantly easier and faster than elsewhere in South Asia (DB 2016), but businesses are required to renew licences with the Afghanistan Investment Support Agency (AISA) on an annual basis, and there is a widespread impression of prevailing corruption in this process (SIPRI, Oct. 2015). Investors should visit the official business registration website, which represents a positive step towards transparency.

Businesses face a very high risk of corruption in the Afghani land administration. Among all bribes paid, most are related to registering land (UNODC, Oct. 2013). The majority of firms expect to give gifts or pay bribes to obtain a construction permit (ES 2014), and Afghanistan ranks among the countries where it is most difficult to deal with construction permits as the process is lengthy and costly (DB 2016). Access to land is cumbersome for businesses as land titles to purchase real estate are difficult to acquire (BTI 2014). Most Afghan land is held and transferred informally (ICS 2015). Of Afghanistan’s estimated 1,700 mines, only 300 are legally licenced by the state, and most mining concessions go to people linked to ministries, the government, or the police (Foreign Policy, Jan. 2016). In addition, Afghanistan’s production of 90 percent of the world’s opium fuels corruption in the country (AlJazeera, Oct. 2014).

Due to widespread corruption, weak commercial courts and disputed land titles, companies and investors seeking to purchase land in Afghanistan are advised to conduct thorough due diligence in the process and in identifying reliable partners (ICS 2015).

Companies face a very high risk of corruption in the Afghan tax administration. One in three companies believes that irregular payments and gifts are expected in meetings with tax officials (ES 2014). Some government officials demand unofficial taxes and cause bureaucratic delays to gain from corrupt practices (ICS 2015). Tax collection is low, and Afghanistan has an informal economy equivalent to 80 percent of the licit GDP, a big part of which is the opium economy (BTI 2014). Dealing with taxes takes around 275 hours but involves less administrative procedures than elsewhere in South Asia (DB 2016).

Corruption, graft and smuggling represent very high risks for companies dealing with the Afghan customs administration. Bribery in exchange for undervaluing, under-weighing or not scanning shipment is commonplace (ICS 2015). Most people who had contact with customs authorities report paying a bribe (Asia Foundation, Nov. 2015). Smuggling and the illicit trade of legal goods flourishes in such a system and weakens the rule of law and revenue collection (ICS 2015). Customs agents are frequently appointed by influential people who expect gains from kickback schemes (TOLONews, Dec. 2014). One in four businesses expects to pay bribes and give gifts to obtain an import licence (ES 2014). Responsibilities for trade and customs are spread across ministries, offices and agencies, representing a challenge to businesses and leading to conflicting agendas and interest groups (BTI 2014).

There is a high risk of corruption in public procurement in Afghanistan due to the weak capacity of the state (TI, Oct, 2013). Few companies expect to pay irregular payments or give gifts to obtain a government contract, but patronage and nepotism taint public procurement as contracts are awarded to companies with connections to public officials in Kabul, especially in the areas of construction and fuel (SIPRI, Oct. 2015). The Public Procurement Law regulates public procurement; rules and bidding documents can be found on the website of the National Procurement Authority.

Companies face a high risk of corruption in Afghanistan’s natural resource sector. The country has vast natural resources, but armed groups, cronyism, nepotism and a lack of transparency are obstacles to business in the sector (USIP, Jan. 2015). The mining sector is characterised by a lack of transparency in tender processes, influence peddling and loss of government revenue (USIP, Jan. 2015). Companies should further take note that armed groups illegally mine in Afghanistan (PressTV, Dec. 2015).