The most important factor for stability in the region is the return of normalcy in Afghanistan

Jan 26 - Feb 01, 2004

Trade ties between Pakistan and Afghanistan have started taking a new shape. There are indications that the growing volume of trade from Pakistan, for the first time, is going to cross $ one billion mark at the end of the current financial year.

Pakistan has always been a major source of supplies goods for Afghanistan but unfortunately most of the cross border trade used to be transpired through illegal channels in the past. This was not possible without connivance of the corrupt causing losses to the national revenues. The corrective measures, recently taken by the two governments have produced results but still there is much room for improvement.

Pakistan has reduced the number of items on the negative list and more items are also being reduced on the negative list. This negative list was a major cause of illegal trade and those items in negative list were used to be traded through illegal channels.

Besides saving duty and taxes, another reason contributing towards illegal trade was the absence of traveling facilities between the two countries. The Afghan government has now agreed to ease traveling difficulties and has decided to issue three-month multiple visas to intended business men from Pakistan.

The two governments have recently agreed to enhance bilateral trade for which linkages in banking; roads, air and communications sectors are being established.


It may be pointed out that the two governments have allowed four Pakistani banks to open their branches in Kabul. Out of the four licenses issued to Pakistani banks, National Bank has started operations in Kabul some three months back while the remaining three banks including First Micro Finance Bank, Habib Bank and the Standard Chartered Bank are in the process of establishing their branch network. So far, the National Bank of Pakistan is the only foreign bank operating in Kabul, but competition is building up with first Micro Finance Bank, majority owned by the Agha Khan Fund for Economic Development, the Standard Chartered preparing to open soon.


On the occasion of recent visit of Hidayat Amin Arsala, Vice President of Afghanistan, the Finance Minister Shaukat Aziz has said that the bilateral trade between the two countries was growing rapidly. The total volume of trade between the two countries was estimated at $620 million in the previous year which is expected to take quantum jump a year to a record level of $ one billion at the end of the financial year.

The transit trade with Afghanistan has also picked up and a lot of the bottlenecks with regard to transit trade are also being removed.


The reconstruction process of Afghanistan with the financial support from the developed countries offers great opportunities for the countries in the region in general and to Pakistan in particular due to its close vicinity with that country. The reconstruction process through now started picking up yet it is delayed due to disturbed conditions prevailed for a long time in that country.

The reconstruction process however proved to be a windfall for the ailing cement sector in Pakistan. Currently, those cement units located in the NWFP and Upper Punjab are running over 90 percent of their capacity due to increasing demand of cement in Afghanistan. Besides cement sector, the allied construction industries have also started gaining from the situation.


Pakistan had earlier announced a package of $100 million to participate in the reconstruction process of that country. In this regard, the funds will be utilized for construction of Jalalabad-Torkham road for which tenders have also been issued. The construction of this road will start next month. Besides construction of the road, Pakistan has also announced construction projects for an academic block in Jalalabad and Kabul Universities and a kidney centre in Jalalabad. Other projects to be supported by Pakistan are including an artificial limb center in Kandahar and an information technology center in Mazare sharif.

Pakistan was also working on the technical feasibility study for laying a railway track from Chamman to Kandahar, that will made Kandahar a central place for transit trade to Central Asia besides providing a link with Karachi port. Another major development in the area of communication links with Afghanistan and the Central Asian States is the development of Gwadar port being development with the assistance of Asian Development Bank. As far as the air links were concerned, PIA has also started three weekly flights to Afghanistan and these links are going to open up Afghanistan for trade with rest of the world.


The Afghan finance minister Ashraf Ghani is also coming Pakistan to participate in the Economic Coordination Organization (ECO) meeting to be held in Islamabad at the end of the current month. This is for the first time that ECO economic ministers are meeting to discuss ways and means to enhance cooperation between the member countries.

The most important factor for stability in the region is the return of normalcy in Afghanistan. Once political and economic stability returns to Afghanistan much larger projects like cross border gas and oil pipelines from Central Asia are also in store which promise for economic glory in the region.