- By: AZIZ ULLAH KHAN
- The write is the MS Economics student at the institute of management sciences Peshawar
- Introduction
Pakistan and Afghanistan, two immediate Muslim neighbors, that not only partake a common border but also have numerous other similarities similar as; verbal, strong literal, ethnical, artistic, and religious ties. Pakistan and Afghanistan roughly share 2600 km long border.
Both countries have long trade relations, characterized by participated artistic ties and profitable interdependence. Afghanistan is endowed with the wealth of natural coffers, including expensive deposits of natural gas, petroleum, sulfur, chromate, and numerous precious monuments, unfortunately due to the continuing conflict they could not make their stylish sweats to explore their further and further resources which can make better their frugality.
Despite of internal complaints, Afghanistan relations with Pakistan has not been satisfactory. Cross border infiltration, deportees, medicine trafficking, militant group, smuggling, and controversies over counterterrorism policy and dialogue with terrorism networks have contributed to settled trust deficiency and eroded relations.
These issues have impacts beyond the security sector, complicating sweats to make stronger trade and profitable ties. Despite pressure, Pakistan is Afghanistan largest exports destination and its third –largest import mate, according to the Pakistan delegacy in Kabul. Afghanistan is a landlocked South Asian country that shares its borders with China, Iran, Tajikistan, Pakistan, Turkmenistan, and Uzbekistan. Afghanistan is an agrarian and mountainous country.
Afghanistan has a controlled profitable system in which the central government directs the frugality in product and distribution. The frugality of Afghanistan has bettered significantly in the last decades. As a landlocked country Afghanistan has substantially depend on Pakistan for conveyance trade with rest of the world, and most of the trade traditionally passed through the border of Pakistan and Iran, utmost profitable and feasible conveyance routes. It was regulated under the Transit Trade agreement of 1965.
Afghan stakeholders hoped to work on a common profitable zone that could greatly enhance the trade for both countries. There are potentially significant openings for Pakistani investors in Afghanistan, but these will not be realized until fiscal mechanisms are streamlined and structure development and particular security are guaranteed.
- TRANSIT TRADE AGREEMENTS
Afghanistan is a landlocked countries it depend on neighbor countries to facilitate the transit of its trade with the global economy. Pakistan and Afghanistan initially signed the Afghanistan transit trade agreement (ATTA) in 1965 to facilitate the transit of goods exported from and imported to Afghanistan using the Pakistani port of Karachi.
In fact, Pakistan provided the transit facility to Afghanistan with its commitment to the UN convention on the law of sea (1958) which makes special provisions for granted landlocked countries access to international sea. The ATTA granted the right to Afghanistan to import duty free goods using the Karachi port, but the ATTA did not granted the reciprocal right to Pakistan to exports goods to the USSR or central Asia republics.
In 2010 both countries signed another agreement which was called Afghanistan Pakistan Transit Trade Agreement (APPTA). The APPTA allow the transit of Afghan exports through Pakistan to the Wagah border with India, and to the seaport cities of Karachi and Gwadr. Pakistan trucks in turn are allowed to move products to all region of Afghanistan, and the Afghan border crossing points at Hairathan, Sher khan Bandar, Turghundai and Akina serve as gateway to Central Asia Republics for Pakistan. In 2012 Pakistan and Afghanistan were agreed to extend the APTTA to Tajikistan, the proposed agreement would allow Tajikistan to use Pakistan’s Gwadar and Karachi ports for its exports and imports. While Pakistan would be granted rights to goods across Tajikistan territory to Kyrgyzstan and Uzbekistan. Later Ashraf Ghani announced that Tajikistan cannot be included in the trade agreement until Indian goods are offered the right to exports goods to Afghanistan across Pakistani territory.
- Bilateral Trade Profile
Due to geographical propinquity and literal and artistic liaison, Pakistan is among Afghanistan largest trade mates. There are 18 trading points along the Pakistan-Afghanistan border, with pivotal crossing points being Torkham and Chaman. Torkham, deposited in Khyber-Pakhtunkhwa, and Chaman, located in Baluchistan, are connected to Afghanistan’s Jalalabad and Kandahar businesses independently.
Pakistan nearly has trade fat in the bilateral trade with Afghanistan. Pakistan’s exports of goods and services to Afghanistan vouchers an increase of 3.63% during the first six months of current FY 2023-24 as compared to the exports of the matching period of last year (SBP). The overall exports to Afghanistan were recorded at $260.716 million during judly-ecember 2023-24 against exports of $251.580 million during july-december 2022-23, according to SBP. On a year-to-year basis, still the exports to Afghanistan dropped by 26.83% from $38.297 million in December 2022, against the exports of 28.019 million in December 2023.
In 2022, Pakistan exported $975M to Afghanistan. The main products exported from Pakistan to Afghanistan were Rice ($176M), Packaged Medicaments ($88.3M), and Other Vegetable canvases ($83.2M). During the last 20 years the exports of Pakistan to Afghanistan have increased at an annualized rate of 4.69%, from $408M in 2003 to $975M in 2022. Similarly in 2022, Afghanistan exported $847M to Pakistan. The main products exported from Afghanistan to Pakistan were Coal Briquettes ($337M), Raw Cotton ($188M), and Grapes ($57.5M). During the last 20 years the exports of Afghanistan to Pakistan have increased at an annualized rate of 19.3%, from $29.8M in 2003 to $847M in 2022.
- CHALLENGES AND OPPORTUNITIES
- Security and border closures
Whenever done, the abrupt and protracted suspension of crossing points by Pakistan as a result of border disputes weakened the Afghan economy. Transit route security concerns and lack of insurance coverage have been affecting the trader. Among other export products, main Afghan exports include perishable fresh fruits and vegetables. It is crucial that the commerce route must be efficient, dependable, and quick. As a strongly import-dependent nation, prompt product delivery helps keep the economic machine running in Afghanistan. Afghan wheat, edible oil, sugar, and meat needs, among other things, have historically been included in the provincial budget forecasts for Khyber Pakhtunkhwa (KP) and Balochistan. It is learnt that demand and supply disruptions across borders tend to arise, and the prohibition on a specific export product from Pakistan that causes scarcity of that product in Afghanistan, leads to unjustified exploitation. - APTTA
The Afghanistan Pakistan Transit Trade Agreement is also a big challenge to the both countries because it has not been resigned due to some issue create from the both sides. Pakistan wants to include Tajikistan in the agreement and Afghanistan is in the favor of Indian. Both of the states are blaming each other for not honoring the terms of the agreement. Some trade controls are also generating difficulties, for example, every truck is required to get checked at the border which creates delays for movement of goods. There is also a demand of installing trackers on trucks which results in fresh cost. Additionally, Afghan trucks are not allowed to carry Indian products to import while using Pakistani route which makes Afghanistan unhappy. - Smuggling/Illegal Trade
In order to reduce unnecessary and mostly illegal taxes and levies collected by the different ministries on the Pakistani side, traders across the border said that tax collection should be streamlined at entrance points. This practice is not only depleting merchants’ funds but also contradicts the claim that it would ease Pakistan-Afghanistan commerce and trade. Illegal and informal trade hinders formal trade growth and discourages legal channels of trade. To combat smuggling and illegal trade channels, the implementation of insurance guarantees, bonded carriers, and tracking devices is crucial. Owing to the lack of bank guarantees on a revolving basis, restrictions on partial shipment, high installation cost of trackers, and heavy security deposits execution of the APTTA security measures are arduous to put into practice. According to rough estimates, smuggling or unauthorized trade across the Pak-Afghan border costs the Pak-Afghan economy approximately $3 billion each year. - Infrastructure Barriers
Infrastructure is the major issue that is currently faced by the Pak-Afghan trade. It increases the processing time at the border crossing. Weak infrastructure also increase the cost of doing business. Lack of matching infrastructure at border crossing points is challenging. According to the Federal Bureau of Revenue, at the Torkham Border, a 2+3 lane facility is available and at Chaman Border 3+3 lane and 2 rail facilities are present whereas on Afghanistan side, only one lane is operational. - Durand Line issue
The Durand Line, the border that separates Pakistan and Afghanistan, was marked in 1893 before the creation of Pakistan but has not been recognized by the Islamic republic of Afghanistan. It has been a source of contention for many years. Afghanistan does not officially recognize the Durand Line as its legitimate border with Pakistan, which has led to border skirmishes and disputes.
- Conclusion
The peaceful economic cooperation between Afghanistan and Pakistan for better transit trade opportunities will help connect South Asia to Central Asia. Export growth is expected to boost domestic employment in both countries and provide foreign exchanges.
Afghan officials see Pakistan as a key market for Afghanistan but face obstacles in achieving that goal. If both countries revive the previous deal, it will create a lot of opportunities for the poor people of the both nations. Besides, it will also bolster the economy of the two countries. By addressing existing challenges and seizing emerging opportunities, both nations can unleash substantial socio-profitable benefits and contribute to broader indigenous cooperation sweats.
A reanimated commitment to enhancing trade ties holds pledge not only for bilateral relations but also for fostering a peaceful and prosperous South Asia. As stakeholders continue to navigate complications, sustained dialogue and realistic programs will be essential in realizing the full potential of Pak-Afghan trade relations in the time to come.