New economic opportunities

Apr 08 - 14, 2002

Pakistan and Afghanistan are the close door neighbours having a common border of about 1500 miles, besides common traditions, culture and religious ties. Being a landlocked country, Afghanistan has to rely on Pakistan for transshipments of its incoming and outgoing cargoes.

As the fall out of the historic resistance put up by the people of Afghanistan against the then Soviet Union, Pakistan had to suffer in many ways including huge influx of Afghan refugees within Pakistan territories.

Pakistan had to bear the burden of over 3 million refugees at the peak of the Afghanistan resistance against the Soviets. The problem of refugees aggravated further after September 11 with the influx of population from Afghanistan into Pakistan especially in NWFP, Balochistan that later on dispersed in the urban centres like Karachi, Lahore, Peshawar, Quetta and other parts of the country.

Pakistan has a high stake in the situation in Afghanistan. Political and economic stability to that country is in the interest not only for the region but also for the rest of the world. The strategic position of Afghanistan offers a significant link between Central Asian States and Pakistan. The significance of peace and stability in Afghanistan reflected in the fact that the multi-million dollar project of gas pipeline between Turkmenistan and Pakistan was scrapped due to persistent political disturbances in Afghanistan. Once the peace and normalcy returns to Afghanistan new doors for economic development will be open for the entire region especially for economic development in India suffering from paucity of energy resources.

In the wake of war against the Soviet, civil war within the country and now in the aftermath of September 11 events, the devastating effects of the long time disturbance have paralyzed the civic life in Afghanistan. More than half of the population was affected by displacement, forced migration to neighbouring countries.

It is estimated that there is an immediate need of construction of at least one-lakh houses to provide shelter to the large number of families in the urban areas alone. Buildings in which the educational institutions were housed have been reduced to the ground, industrial units whatsoever in Afghanistan completely destroyed, irrigation projects damaged and the economy of that country lies crippled.

With the settling down of the dust in Afghanistan an era of reconstruction begins in Afghanistan. Initially a fund of dollar one billion has been allocated for the rehabilitation and reconstruction of the shattered infrastructures, buildings, houses and roads.

Although world's major companies are trying to get contracts of the reconstruction of different projects, Pakistan finds itself in a better position to win a major share in the reconstruction process of that country.

Hafeez Urrehman Butt, Chairman Association of Builders and Developers (ABAD) told PAGE that trade delegations seeking their part in Afghanistan are visiting Pakistan to have a share in the Market. He said that ABAD had recently arranged an exhibition of building materials produced by Pakistan and quality wise competitive to international standards.

He said that the construction industry is associated with over 80 allied industries and if we succeeded in getting contracts of reconstruction projects, most of the industries which are running below capacity due to lack of demand will be able to meet the entire need of material required in the process of reconstruction of Afghanistan.

Citing the example of Cement industry he said that this industry is running almost 50 per cent of the capacity due to lower demand within the local market. Some of the cement companies have got orders and have started exporting cement to Afghanistan, however, there are many areas where a collective effort of the public-private sector is required to get advantage of the situation.

On the government to government level, the two countries have agreed to cooperate in various areas to strengthen bilateral relations. Last week, when President Pervez Musharraf visited Kabul to have talks with Hamid Karzai, the Chairman Afghanistan's interim government, the two leaders were in complete unanimity to fight against terrorism and expand economic ties between the two countries.

During the talks, President Musharraf made it clear that Pakistan has only one aim i.e. to assist Afghanistan. President Musharraf is the first head of a country in the region to visit Kabul after the Karzai's interim government took over in December last.

The two sides have mutually decided to coordinate efforts against poppy cultivation and in fighting terrorism and also vowed not to allow each other's country become sanctuary for the wanted persons. The two sides also agreed to cooperate in a number of areas through joint ministerial committees to take forward bilateral ties. On that occasion, President Musharraf urged the international community to speed up the reconstruction and rehabilitation efforts and bring real normalcy back to Afghanistan.

President Musharraf, it may be noted, has announced a $10 million package for Afghanistan.


The Asian Development Bank (ADB) has also proposed a $200 million assistance package include a special assistance loan for rapid impact projects. This assistance is in key areas such as agriculture and institution building, pilot projects for high priority regions including earthquake prone areas, to support the construction of rural access roads, to rehabilitate selected primary schools and to provide educational materials for school children, the rehabilitation of small and medium-scale irrigation system and capacity building within the government.


The Export Promotion Bureau (EPB) is seeking a $50 million worth fund from the government for arranging guarantees and collaterals for the construction companies aspiring to participate in the gigantic task of reconstruction of the shattered roads and buildings in Afghanistan.

Initially, Afghanistan needs at least one lakh new housing units besides construction of roads and official buildings, which were badly damaged in the air strikes by US-led allied forces after terrorist acts of September 11 in New York and Washington.

Tariq Ikram, Chairman EPB says that to facilitate and provide guidelines to the trade and industry with regard to emerging situation and opportunities in Afghanistan, the two committees set up by EPB have started to function.

A separate committee for construction industry set up at Lahore was a necessity because the government wants to see a major breakthrough in this sector's overseas performance and participation. The other committee operating from Islamabad would be dealing with all materials including food items like rice, wheat, textiles and pharmaceuticals.

According to Tariq Ikram, Pakistani construction companies are fully capable of handling international work jobs of a medium size which are restricted a volume of $50 million to $70 million. But construction companies are constrained with funds and are not in a position to meet bank guarantees required for participating in international tenders.

Consequently, the committee set up by the EPB has recommended that a fund of up to $70 million be arranged by the government to meet the bank and other guarantees needed by a company for getting a construction job.

It is not possible for any construction company to give cash as a collateral against bid bond, performance bond, advance mobilization guarantee normally required after winning the contract for reconstruction in that country.

However in the light of Iraq experience where Pakistan's construction companies had participated in tenders on individual basis have now started to form a consortium.

During last nine months exports to Afghanistan stood at $55 million and the government has taken quick measures to promote trade with Afghanistan by removing negative list and now all category of goods could be exported to that country.


Area 647, 500 sq. Km
Population 25,824,882
Irrigated 30, 000 sq. km
Border Countries: Pakistan 2,430 km, Iran 936 km, China 76 km, Tajikistan 1206 km, Turkmenistan 741 km, Uzbekistan 137 km.
Coastline: Landlocked
Natural Resources: Natural gas, petroleum, coal, copper, talc, barites, sulfur, led, zinc, iron ore, salt, precious and semiprecious stones.
Highways: 21,000 km
Pipelines: from Uzbekistan to Begram ((Petroleum products)
From Turkmenistan to Shindad (natural gas) total length 180km


Iftikhar Malik, President of Federation of Pakistan Chambers of Commerce and Industry (FPCCI) says that Pakistan and Afghanistan not only share borders, but the hearts of the people of the two countries beat together. Our relations are historic which common religion, civilization and culture mark. The Afghani and Pakistani people have been connected together by strong inter-linkages and inter-marriages over the years. This relationship has further cemented with the 35 million Afghan refugees staying at Pakistan's soil since last several years.

The business community in Pakistan had welcomed the agreement reached in Bonn, Germany for setting up an interim government in Afghanistan. We believe that it would bring peace and stability in the war-torn country and also provide opportunity for Pakistan to contribute in the reconstruction and rehabilitation of Afghanistan.

Afghanistan has been the missing link in the chain forming this region. With this link now in peace, Pakistan, Afghanistan, Iran, Turkey and Central Asian States will form a region with a common goal of progress and prosperity for the people.

Pakistan has political as well as economic interests in the stability and development of a strong and friendly Afghanistan. The Pakistan businessmen are ready to avail of the emerging opportunities and establish long term commercial contacts with Afghan businessmen for the mutual benefit. FPCCI is of the view that after the set up of an interim government in Afghanistan, massive development construction work be undertaken. This would provide a lot of opportunities not only for Pakistani businessmen but also for the other countries; Pakistan wants to be associated closely in the rehabilitation work, which now exists in Afghanistan.

Pakistan has all the resources and capabilities to meet the needs of that country in all areas of economic activity. Pakistan can send engineers, doctors, architects and builders as well as trained manpower to reconstruct the devastated country. Pakistan can also meet the requirements of material like iron & steel, cement, and all other fixtures and accessories required in building construction besides engineering goods especially in automobile sector.

It may be recalled that a high powered Turkish delegation visited Pakistan recently. The members of the delegation showed great interest in entering into agreement with the Pakistani companies to undertake joint projects in Afghanistan. The FPCCI arranged their meetings with the Pakistani contractors and construction companies, which proved a great success.

Investors from countries are also approaching the private sector in Pakistan to facilitate them in undertaking joint construction projects in Afghanistan. This growing interest of the foreign investors is because of the fact that Pakistan has better understanding of the region and is the gateway to the landlocked Afghanistan. As such the world realizes those Pakistani companies can only be the best business partners for exploring investment opportunities in Afghanistan.

The private sector in Pakistan would be very much interested in building the physical infrastructure projects like roads, highways, schools, and hospitals. For this purpose the private sector in Pakistan is in a position to supply quality construction materials such as cement, iron, steel, bricks etc, It can also meet the demand of vegetable oil, sugar, fertilizers, wheat, medicines, plastic material, rice, electronic appliances, clothings, crockery and many other consumer goods.

The government in Afghanistan could also gainfully utilize Pakistan's expertise in banking and insurance sectors. It is reassuring that Pakistan government has expressed its willingness to establish bank branches in Kabul, Kandhar and Jalalabad. Opening of these branches will boost the existing trade between the two countries,

The interim government in Afghanistan is also considering setting up banks in Pakistan particularly in Peshawar and Quetta, which caters to the major share in trade with Afghanistan. The government of Pakistan is providing all kinds of incentives to the private sector to promote trade with Afghanistan. In this respect it has allowed trade in Pakistani rupee or in convertible currency with duty drawbacks, abolished the permit system and added new products on the list of items to be exported to Afghanistan.

In addition to banking services, Pakistan is also very much interested in establishing bonded warehouses in Afghanistan not only to meet the food and other requirements but also to access the markets of Central Asian States.


Despite having an area of 30,000 km under cultivation Afghanistan does have any permanent crop representing its agriculture sector, hence apart from occasional crops, 45 per cent of the agricultural lands are used for pasture. In order to improve agriculture side, Khair Muhammad Junejo feels that because of close proximity Pakistan and Iran both were in an ideal position to help out Afghanistan to rebuild its devastated agriculture infrastructure.

Pakistan has already offered its services to Afghanistan to rebuild the ravaged agriculture sector. Pakistani engineers having an experience of developing world's largest irrigation system have all the credentials to develop small dams that to re-build irrigation system in Afghanistan enabling it to use its rich lands for growing cash crops in that country.


Representatives of the private sector are of the view that in order to discuss the issue of reconstruction of Afghanistan and to display the depth of construction and relevant industries in Pakistan, international seminars should be organized at various levels in Pakistan. Situation demands and large-scale exhibitions of the construction goods and services available within the country are also imperative to attract the international companies to get supplies from Pakistan.

Pakistan has a strong industrial base in a large number of items such as cement, iron and steel sector largely supported by the huge complex of Pakistan Steel and world's one of the largest base of ship breaking industry, electrical appliances, tiles & ceramics, glass and aluminum, wooden crafts, plastics and paints etc. International exhibition of these items at a large scale at major cities would certainly help attracting international buyers not only for Afghanistan but rest of the world also.


Leaders in trade and industry while appreciating the understanding between the two countries on the government to government level said that good official relations are certainly helpful in improving bilateral relations in all respects. However, professional marketing approach is needed to apply for winning economic gains out of the situation. In this connection they suggested that instead of relying on official delegations, the private sector and representative bodies of the trade and industry should take the initiative with the setting up of business offices well as close liaison with trade bodies or business representatives in Afghanistan to penetrate into the emerging openings.

In this connection, a large trade delegation consisting of 35 leading businessmen is also to visit Afghanistan shortly to explore business opportunities in that country.