Afghanistan Offers Five-Year Tax Breaks for Indian Investors

New Delhi: Afghanistan is actively pursuing investment from Indian firms across various sectors, including gold mining, by offering a five-year tax exemption. This initiative was announced by Alhaj Nooruddin Azizi, Afghanistan's Minister of Industry and Commerce, during an interactive session held by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

During the session, Azizi highlighted the potential for investment in Afghanistan, noting the minimal competition in many sectors. "There is a huge potential available in Afghanistan. You will also receive tariff support, and we will be able to give you land. The five-year tax exemption will be given to companies who may be interested to invest in new sectors," he stated.

The Minister added that Indian firms importing machinery for investment projects would only incur a 1 per cent tariff. This move aims to incentivise foreign investment, particularly in the mining sector, which has seen significant underutilisation.

Azizi emphasised the need for technical expertise in gold mining, suggesting that Indian companies send professional teams to conduct preliminary research and exploration before commencing operations. He stressed, however, that any gold extracted must be processed in Afghanistan to create local jobs.

In addressing the broader context of trade relations, Azizi urged Indian officials to resolve what he described as "minor hurdles" that currently impede trade. These include issues related to visas, banking transactions, and air connectivity, which are crucial for enhancing trade and investment between the two countries.

This appeal came during Azizi's six-day visit to India, which is focused on strengthening economic ties. The Afghan delegation is keen to rekindle interest in Afghanistan’s mining sector, which is rich in resources. According to a joint study by the Pentagon and the US Geological Survey, Afghanistan's untapped mineral wealth is estimated at approximately $1 trillion, encompassing a variety of resources such as gold, copper, and lithium.

Despite the potential, Indian industry leaders have expressed caution. Manish Singhal, secretary general of ASSOCHAM, remarked that mining activities necessitate thorough groundwork, including geological surveys, before any commitments can be made. He noted that while Afghanistan has numerous mineral fields, many remain idle due to infrastructural challenges and past security issues.

The session underscored the importance of improving safety and mobility within Afghanistan, factors that Azizi highlighted as having seen recent improvements. Additionally, trade discussions revealed that India currently engages in about $1 billion worth of trade with Afghanistan, largely in the form of imports.

The Afghan government is keen on enhancing this figure, particularly in sectors where it currently relies on imports from other countries, such as food products and manufactured goods. Azizi also expressed a desire for Indian collaboration in local value-added processing, particularly for commodities like saffron and nuts.

The two countries share a historically warm relationship, and Azizi's visit aims to solidify these ties through enhanced trade, investment, and industry cooperation. As both nations explore new avenues for partnership, the focus remains on overcoming existing barriers to foster a mutually beneficial economic environment.