- By: Iftikhar Ahmed
- (ifti12560@gmail.com)
- The writer is a research scholar at the Institute of Management Sciences (IM Sciences) Peshawar
Despite sharing a long border, same religion, cultural similarities and a shared history of thousands of years, bilateral trade between Pakistan and Afghanistan is a big failure of economic cooperation between the two nations. According to The Observatory of Economic Complexity (OEC) Pakistan is the biggest export destination of Afghanistan and the 9th largest import partner with 440 Million USD exports and 176 million USD imports from Pakistan in 2022. Pakistan is among Afghanistan’s largest trading partners with bilateral trade between the two neighbors reaching $1.86 billion in the fiscal year 2023.
A myriad of factors contributes to the smooth flow of goods and services across a 2,640 kilometres (1,640 miles) long border known as the Durand Line, a bone of contention between the two nations. A volatile security environment in Afghanistan and adjacent tribal areas of Pakistan along with a lack of trust, is equally contributing to the already unfavourable cross-border trade conditions. Despite this, the two neighbours have inked several trade agreements amid heightened border tensions. The two sides also agreed to finalize the long-pending Afghanistan-Pakistan Transit Trade Agreement (APTTA) within the next two months, he added. APTTA is a bilateral trade agreement signed in 2010 by Pakistan and Afghanistan that calls for greater facilitation in the movement of goods between the two countries.
Inefficient Border Management including complex and lengthy customs procedures, prolonged clearance times, and inadequate infrastructure at border crossings like Torkham lead to delays and increased transportation costs. Limited banking integration poses a great challenge to formal money transfer mechanisms leading to financial hurdles and lacking transparency. To cope with the same, The Trade Development Authority of Pakistan (TDA) has sanctioned barter trade with three nations i.e. Iran, Afghanistan and Russia on specific goods, including petroleum and gas, to bypass Western sanctions on those countries and ease pressure on its declining foreign exchange reserves. The barter trade mechanism lists 26 commodities that Pakistani state- and privately-owned entities can export to these countries including Afghanistan.
However, barter trade is not without its cons; political pressure from Western nations and the USA, lack of transparency and allied issues such as money laundering & smuggling; and relatively restricted scope of bilateral trade. In addition, the Valuation mechanism poses another formidable challenge. In the absence of regulations or guidelines in place, determining the value of goods for barter purposes can be an inaccurate, complex and cumbersome phenomenon which restricts barter trade.
A concerted and sincere effort on the part of both governments with the consent of all stakeholders including the business community, traders, chambers of commerce and political as well as military establishments is required. There is a dire need to enhance Security Cooperation through joint measures and fostering trust between the two nations. Governments may put efforts to Streamline border procedures like Simplified customs procedures, investment in road infrastructure, and adoption of technology-driven solutions to accelerate clearance times.
Promoting formal banking channels, harmonizing trade policies, investing in infrastructure development and enhancing Afghan productive capacity is of no less importance. Prevailing security concerns and apprehension of cross-border terrorist activities by TTP supported by some sections of the Afghan government require immediate attention. The government of Pakistan has repeatedly demanded stern action against militant groups involved in terrorist acts in Pakistan.