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The perils of going private

The perils of going private

Rampant corruption stands in the way of Afghanistan’s quest for free and unfettered markets, reports Trends magazine.

February 1, 2010 3:58 by

One day before the bidding deadline for a state-owned cement factory in Afghanistan, the government suddenly added a new condition. To qualify, bidders would have to show $25 million in cash.

The only bidder who had access to that kind of money was a relative of the Afghan president, Hamid Karzai. “The bidding conditions were obviously tailor-made for a particular individual,” a member of the Economic Committee of the Afghan parliament, Daoud Sultanzoi, says.

Afghanistan’s privatization program was launched as part of a larger scheme to encourage market-led development in the war-torn country. More than 50 state-owned enterprises in a range of sectors, including energy, mining, transportation, construction, and textiles, would be sold off to the burgeoning Afghan private sector. However, because of parliament calls for greater regulation and monitoring, the process has now been put on hold.

Critics of the program, which is backed by the World Bank, charge that privatization has not been conducted within a legal framework, and they say it has led to what is essentially a plundering of state-owned enterprises by local mafias. In fact, some fear the onset of a Russian-style business oligarchy in Afghanistan.

Sultanzoi says the bidding procedures are fraudulent. “We at the parliament believe that the [privatization] process has not been transparent. Performance schedules do not meet standards, and the privatization of important and profit-making state enterprises have been marred by corruption,” he says.

For this reason, Sultanzoi has spearheaded the obstruction of the privatization of several state-owned enterprises. He cites as examples the attempted sale of Pashtani Bank, which is now a profit-generating bank, and Afghanistan’s national carrier, Ariana Afghan Airlines.

“A mafia group headed by Ghafar Dawi [of Dawi Oil] had manufactured bogus fuel invoices to show that the airline was in debt. By this group’s manipulation and fabrication of figures, they said the company was worth $7 million. I headed the parliamentary initiative to block the sale,” Sultanzoi says.

This Afghan legislator believes that for privatization to serve an effective purpose in revitalizing Afghanistan’s war-shattered economy, the country must stringently apply laws and regulations. “We have enough laws to regulate the process – they just need to be respected and implemented by the president and his government,” he says. “The parliament can play the role of monitor over the process, but the president must let the parliament perform its function.”

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