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Pakistan-Afghan Trade Ties Must Look For Improvement

Despite strained relations, Pakistan’s exports to Afghanistan reached a two-year high during the first 10 months of the current fiscal year. Afghanistan is the second largest export market for Pakistan while Pakistan is major trading partner of it. But their relations have tense history.

Pakistan and Afghanistan have never maintained permanent friendly and trade relations with each other, despite the landlocked western neighbor has remained mostly dependent on Pakistan for its day-to-day transaction while both countries are also immediate markets for each other and for future both need to strengthen trade cooperation.

The latest report from the State Bank of Pakistan shows the country’s exports to Afghanistan reached $1.282 billion during July-April 2917-18. This was higher than the figure of $956 million in the same period last year.

Frankly speaking for the last five years, the government never made any serious attempt to improve trade ties with the war-torn neighbor. In 2014-15, exports to Afghanistan were $1.699 billion which fell to $1.230 billion in fiscal year 2016 before further declining to $1.165 billion in financial year 2017, depicting the downward path.

Nevertheless, fiscal year 2018 recorded exceptional results than the past two years and the performance in the remaining two months could help beat the previous three-year record.

Up to 50 percent of flour mills have now been closed due to low exports. Pakistan’s textile products have historically had a large share in Afghanistan but the recent penetration of Indian and Chinese products has replaced the country from its traditional market of finished and unfinished textile products. Due to smuggling to Afghanistan, the size of the exports is likely to be twice as much as the official figures of Pakistan Bureau of Statistics report.

The overall exports of the country have shown a growth of 14 percent during the 10 months, with sales to Afghanistan being a contributory factor. Exporters have been complaining that the export of pharmaceutical products has sharply dropped due to cheaper supply from India and China. Pakistan is a major exporter of pharmaceutical products to Afghanistan, Sri Lanka, Bangladesh as well as some African countries.

Traders Demand Delink Economics From Politics To Promote Mutual Trust

The resumption of trade will ease political tensions and increase bilateral trade which presently has been mixed amid a new deal signed in 2010 to strengthen trade relations and facilitate Afghan transit trade through Pakistan as both sides of the border complaining of continued barriers to exchange. Trade will benefit countries, ensuring regional stability and sustainable peace. With the more trade route openings, officials and the business community on both sides have welcomed the resumption of trade.

Afghan and Pakistani traders have long urged their respective governments to delink economics from politics to promote mutual trust. Afghanistan shares a common religion, race, history, ethnicity and geography with Pakistan, bilateral relations have always been strained. These troubled relations have prompted Afghans to look for alternate routes and they have turned their attention to the India-funded Iranian port of Chabahar for transit trade, bypassing Pakistan.

Despite this, the Pakistani ports of Karachi and Gwadar are still the most economical routes for Afghan transit trade. This has been confirmed by business leaders in both countries. Recent figures are showing a rise in Afghanistan’s trade with Iran (both transit and bilateral) and a corresponding decline in business with Pakistan.

 

Signs Of Improvement

The latest engagements between the top leadership of Pakistan and Afghanistan, initiated by Pakistan’s Army Chief General Bajwa have shown sign of improvement of relations between the two countries.

Afghanistan and Pakistan need to realize that the geopolitical realities have changed. Trade will benefit countries, ensuring regional stability and sustainable peace. Both nations need to improve trade facilitation through streamlined payments settlement and improved insurance mechanisms, the use of bonded carriers, trade financing, tax collection, and documentation.

Moreover, people-to-people contact is necessary for good trade relations; therefore the business visa policy needs to be relaxed further. Various options, such as visa-on-arrival, long-term, multiple-entry visas, and investment-friendly visas for businessmen and skilled workers, should be explored and implemented in by both sides. If Pakistan is to take full advantage of the China-Pakistan Economic Corridor, it must be able to position itself as a regional trade hub. It seems security policy has hindered trade policy in the last year.

Repeated Closures Of The Torkham Border

Repeated closures of the Torkham border, tensions between Pak-Afghan armed forces as well as new trade tariffs from the Pakistani side contributed to the 80 percent fall in trade between the two countries. We must remember that this trade has traditionally been advantageous to Pakistan as an export market. This export market has gone down in a year when the government had declared an increase in exports to be among its top priorities.

Only a few weeks ago, the Pakistani government announced the imposition of new tariffs on goods traded between the two countries. This raised to a huge outcry by traders on both sides of the border, who were concerned that trade between the two countries, could collapse. It is only after much protest and lobbying by traders that the government has now asked traders to prepare a list of goods for which it could consider removing the new regulatory duties.

Security issues have been allowed precedence over economic cooperation. There have been few buyers in Afghanistan for that as trade with Pakistan offers no clear advantages to them. Afghanistan had already begun to use Iran more for transit trade. Iran becoming a possible alternative port should worry Pakistan, which wants to project Gwadar as the port of choice for the future. Closing the border eight times in a single year and following it up by imposing new duties is a poor approach to improve trade.

Future Measures

The government has taken a positive first step to consider an exemption list. Much more is needed to restore the confidence of traders. Otherwise, the entire CPEC exercise could be of no use. Pakistan and Afghanistan trade has decreased from 2.7 billion dollars to 1.2 billion dollars in less than two years. Pakistani and Afghan traders voiced concerns at the sharp fall in bilateral trade due to political tensions between the neighbours and impediments to the implementation of transit trade agreements.

The Pakistan-Afghanistan Joint Chamber of Commerce and Industry (PAJCCI) organized the ‘Cross-Border Round table’ in collaboration with Pakistani Centre for Research and Security Studies (CRSS) and a UK-based organization called Safeworld. At a joint press conference with Afghan traders at the end of talks in Islamabad, PAJCCI called on both governments to separate trade from politics. In a unanimous resolution released at the conclusion of talks, the traders said: “We want governments on both sides to segregate business ties from political and security tensions and suggest bilateral and transit trade needs rejuvenation.”

In 2014, the two countries had pledged to boost bilateral trade to 5 billion US dollars in five years. Worsening relations, border closures and hindrances to implementation of transit agreements have affected the trade volume. They called for confidence-building measures to overcome mistrust in the Pakistan-Afghanistan relationship that was not only hampering political dialogue but also significantly impacting economic cooperation between the two countries.

Afghan Chambers of Commerce President said Pakistani traders were interested in trade through Gwadar and Karachi port as they were near to Afghanistan. Afghanistan has been facilitating Pakistan trade with the Central Asian states and Afghan businessmen also want similar cooperation from the Pakistani side.

The delegates demanded a meeting of the Afghanistan-Pakistan Transit Trade Coordination Authority (APTTCA) on facilitating discussions to revive the economic transition leading to peace and prosperity across the border. Pakistan had hosted the last meeting of APTTCA, an important forum to deal with problems affecting smooth implementation of the 2010 revised transit treaty.

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