President Karzai Signs New Law on NGOs

12 July 2005

On June 15, 2005, President Karzai signed a new Law on Non-Governmental Organizations. The signing of the Law is the culmination of a three-year process of developing a comprehensive new legal framework for NGOs, in which ICNL has been proud to assist. The new Law marks a significant step toward creating a more conducive environment for NGOs to operate in Afghanistan and toward repairing relations between NGOs and the Afghan Government.

The new Law replaces the previous Taliban-era Regulation on the Activities of Domestic and Foreign Non-Governmental Organizations in Afghanistan from 2000. Unlike the Taliban Regulation, the new Law complies with international standards and good regulatory practices in a number of critical areas:

  • NGOs are properly defined as not-for-profit entities and bound by the non-distribution principle, thereby separating them clearly from businesses;
    NGOs are able to pursue a wide range of purposes, including both mutual benefit and public benefit purposes;
  • NGOs are able to form umbrella groups and coordination bodies;
  • NGOs are able to join international organizations and create branch offices;
  • NGOs may be established by both Afghan nationals and foreigners, by natural persons and legal entities;
  • NGOs may be formed by just two founding members;
  • The registration authority must decide on registration applications within 15 days;
  • The grounds for denial are limited and objective;
  • In case of the denial of registration, the registration authority must issue a written explanation to the NGO;
  • NGOs may appeal adverse decisions, such as the denial of registration or termination, to a special dispute resolution commission;
  • The Ministry of Economy is to maintain a central registry of NGOs;
  • NGOs may engage directly in related economic activity, are not prohibited from bidding on government projects and may receive grants, donations and other forms of income;
  • NGOs are subject to record-keeping, financial auditing, and semi-annual reporting requirements;
  • The termination of NGOs is subject to notice and the opportunity to respond;
  • The assets of liquidated NGOs, after payment to creditors, will be distributed to another NGO working for similar objectives.

The Ministry of Economy issued its original draft Law on NGOs in February 2005 and invited ICNL to assist in further developing the draft Law. ICNL worked closely with local partners, including the Agency Coordinating Body for Afghan Relief (ACBAR) and the NGO community in Afghanistan, to highlight the problems and shortcomings in the draft Law and to recommend improvements. Through meetings with NGO representatives, ICNL worked with ACBAR to ensure that the comment process was as open and inclusive as possible. Through multiple meetings with ministry officials and a series of comments provided over four months, ICNL supported local efforts to improve the draft Law. As a result of this process, the draft Law underwent a series of revisions between February and June 2005. Among the most significant improvements are the following:

  • Improved establishment criteria: Establishment provisions that required one founder to have a university degree and relevant experience in the field were removed from the Law.
  • Reduced registration fees: Registration fees were reduced substantially for both domestic (30,000–10,000 Afghanis) and foreign organizations ($2000-$1000).
  • Improved reporting requirements: While the original draft called for quarterly reports, the Law requires simply semi-annual reporting.
  • Independent audits: The requirement that all organizations must prepare an independent audit of their financial statements was modified in recognition of the fact that not all organizations can afford to do so. The Law now authorizes the government to seek alternative methods for NGOs lacking the financial capacity to prepare audits.
  • Improved liquidation procedures: The Law provides that the remaining assets of an NGO (after dissolution and payment of creditors) be transferred to another NGO with similar purposes, rather than to the government in the first instance;
  • NGOs not excluded from bidding: The Law removes the prohibition on NGO bidding altogether, but prohibits NGOs from participating in construction projects and contracts, except in exceptional cases.

ICNL recognizes that the enactment of a sound law is only the first step toward an improved operating environment for NGOs. Furthermore, the new Law still contains gaps, ambiguities and problematic provisions that could create difficulties for both the Government and NGOs. The challenge now becomes the implementation of the Law and the need to address other aspects of the regulatory environment, including taxation and NGO/government cooperation. Thus, while the signing of the Law on NGOs does indeed mark the culmination of the three-year drafting process, it also signals a step toward new challenges.

ICNL is grateful to Counterpart International and to USAID for making ICNL’s engagement in Afghanistan possible. ICNL is indebted to its local partners in Afghanistan, including ACBAR and the Afghan Civil Society Forum (ACSF), for their close cooperation and support.