Afghanistan - Pakistan Trade
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Afghanistan Pakistan trade and transit cooperation
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Afghanistan - Pakistan Trade
- 1. Tra Afgh Afghan destinat decades trade on Afghan billion i Reason protoco manufa in Afgh regiona informa In Marc commo Afghan wheat f sugar co plastics Pakistan governm telecom technol services major im and cott Pakistan transit t Afghan May ade — hanistan h two deca nistan has be tion for Pak s. Some dow nly recently nistan have c in 2011 to U s for this in ols on Pakist acturing faci hanistan’s tr al economie al trade. ch 2017, the dities that f nistan from P flour, cane a onfectionary s. Among th n provided b ment-related mmunication ogy and tra s. During th mports from ton. n has also b trade and its nistan. Like y 24, 2017 low h has been a ades. Dow By: Dr een a key ex kistani good wnslide has y. Pakistan’s come down USD 1.2 bil nclude heigh tani side; im ilities in Afg rade with Ira s; and incre e most popu found their w Pakistan inc and beet sug y, househol he export of business- an d services, ns, informat nsport, and he same mon m Afghanist been a key s s related ser trade in loc hangin a key exp wnsliding r. Vaqar Ahm xporting ds since two been seen i s exports to from USD llion in 2016 htened secur mproved fghanistan; r an and othe ease in ular way to cluded rice, gar, sucrose ld articles, a f services, nd tion health nth Pakistan tan were coa supplier of rvices to cally-produc 1 ng fru orting de in trade h med and Sy in 2.6 6. rity rise er e, and n’s al ced goo red littl are The No for Afg tran In a esta wit larg em and yea the Pak inc sign We lite tran red bet rev Pak Afg it in A stination has been yed Shujaat ods and serv duced from 7 le under 49 e several exp e most impo orth Atlantic transit serv ghanistan’s nsit via Iran a paper writ ablished tha th Afghanis ge portion o mployed in tr d communic ars 2004-20 ese sectors in khtunkhwa. crease in em nificant in t e also have erature that a nsit-related duction in co tween the tw veal that rec kistan’s trad ghanistan w Af-Pak for Pakis seen only Ahmed vices, its flo 75,000 cont ,000 contain planations f ortant are: r c Treaty Org vices; recent economy; a n and Centra tten in 2015 at transit an tan is most of Pakistan’ rade, transp cation secto 011, employ n Balochist The study mployment w the poorest evidence fr any slowdo reform mea ommercial b wo countries ently exper de and trans were a result k ties — stani good y recently ow has also tainers in 20 ners in 2016 for this redu reduced dem ganisation ( t slowdown and higher f al Asia. 5, we had d commerc important f s population ort, wareho ors. During t yment increa an and Khy also stated t was particul quintiles. om recent own in trans asures leads bilateral tra s. The same rienced redu sit flows wit t of slow pa — I ds for 010 to a 6. There uction. mand of (NATO) n in flows of ial trade for the n ousing, the ased in yber that this larly it or s to a de e studies uction in th ace of
- 2. 2 tax, transport and trade facilitation reforms on both sides. This less than desired pace of reform in formal trade also explains the increased informal trade across the border. A 2016 survey found that among other things that cross-border traders were worried about security of merchandise and inadequate banking facilities While security cooperation between the two countries may continue to remain a challenge, we believe that cooperation in trade is a low hanging fruit, given the powerful business community on both sides. We also have a clear identification of issues which business community is facing. And, given this identification, solutions should be easier to find. For example in 2016, in a survey of over 200 enterprises involved in Afghanistan-Pakistan trade, the business community was particularly worried about: securing merchandise across borders, inadequate cross border banking facilities, weak road and rail linkages between the two economies, uncertainty of air cargo, missing border-related trade infrastructure, and continuous resort to manual custom clearance leading to time delays and cost overruns. While addressing the above-mentioned issues remains important, these are not the only hurdles in scaling up trade between the two countries. A critical study of official documents on both sides, particularly the minutes of Joint Economic Council (JEC) meetings, reveals that several mutually- agreed decisions have yet to be implemented. For instance, both sides had promised to open more trade and transit routes. This needs to be implemented in letter and spirit. Both countries had also agreed to streamline visa-related facilities at the border; multiple long term visas for business persons were promised. More frequent meetings were promised to discuss Afghanistan-Pakistan Transit Issue Contract Agreement (APTICA). A need was also felt to harmonise ECO and SAARC tariff codes. Apart from the need to have a more expanded network of Pakistani banks in Afghanistan, there are challenges in finance and insurance sectors preventing growth of trade. These include exorbitant insurance cost — over 100 percent — for Pakistan transit goods to central Asia which increases overall cost of trade. Besides, insurance remains a significant issue in transport of high-value goods from Pakistan to Afghanistan. There are no formal money exchange companies at border points, thus, for any payment related discrepancy small- and medium-scale traders have to go larger cities to procure foreign exchange. In a recent interaction with Balochistan- based business persons, we were reminded of the importance of Chaman for trading across the border. However Chaman-based traders also faced area-specific challenges which include delay of several months in processing of letters of credit. These letters carry financial limits and therefore need to be broken into smaller denominations. Finally, businessmen resort to the Hawala system since there are no bank branches or formal money exchange companies near Chaman border point. Writers work at www.sdpi.org and have published a detailed study on Social Enterprise Landscape in Pakistan http://dailytimes.com.pk/opinion/24-May-17/trade-low-hanging-fruit-in-af-pak-ties-i
- 3. Tra Kab rel Pakistan and its c the tarif incomin exampl during a regulato Afghan case of compre alternat none wi Afghan As rese conduct sides. F remains to Afgh border i Pakistan (APTTA regardin Kabul o revision Pakistan respons agreem Perhaps Islamab May de — bul and Is ated matt n’s Federal counterpart ff and para- ng goods fro e, in the cas a bumper cr ory duty on nistan. A sim yarn, and le ehensive list te dispute re ith current e nistan-Pakist archers, we ting intervie For example s of the view han trucks fo is a violatio n Transit Tr A); Islamab ng lack of e on JEC deci n of APTTA n’s Comme se on draft p ent already s the failure bad to pick u y 25, 2017 low ha slamabad ters more By: Dr Board of R in Kabul n tariffs impo om both sid se of Pakista rop there is export of p milar duty is eather. FBR t of business esolution co experience o tan trade. e are confus ews with of e, while Afg w that not al or going up on of Afghan rade Agreem bad also com expedient re isions which A. erce Ministr preferential shared with e of both Ka up the phon anging d’s failure e informa sluggis r. Vaqar Ahm Revenue (FB eed to revis osed on des. For an, even additional pulses to s seen in the R has a s persons in ommittee, bu of ed while fficials on b ghanistan llowing acc to India’s nistan- ment mplains esponse from h included ry also awai trade h Kabul. abul and ne and discu 3 g fruit e to pick u lly at the h pace of med and Sy BR) sit e n ut oth cess m its uss ma trad pac The Afg to u lon dep con dis Afg mo exp our gov it is wil dip also ma the cou ma Get agr Sha imm t in Af up the pho Track-I l f reform yed Shujaat atters more i de governan ce of reform e Governme ghanistan d us, it is their nger term. E pendent on P nsumer goo advantages ghanistan te oved ahead. pensive to e r trade need vernments a s the loss of ll end up pa plomacy. Ma o manufactu anufacturing eir cost of pr untries pay m aterials, plan tting a revis reement sign arif meeting mediate and f-Pak t one and d level is a k Ahmed informally a nce is a key m. ent of Pakis oesn’t mov r trade and Eventually th Pakistan for ds supplies . The Gover ells us that w We are wil end reliance ds. We belie are acting na f consumers aying for a b any of these urers or are g- value cha roduction w more for inp nt, and mach sed trade an ned the nex g takes plac d near-term ties — discuss tra key factor at track-I lev y factor in sl stan tells us e fast and re transit loss hey will rem r their food due to cost rnment of we have now lling to buy on Pakistan eve both aively. Ultim s on both sid breakdown o e consumer in agricultu ains. An incr will also mak puts, raw hinery. nd transit xt time a Gh e can be an goal — II ade- r in vel of luggish that if espond in the main and t w n for mately, des who of trade s are ure- and rease in ke both hani-
- 4. 4 Allow us to also remind the governments that a break down in trade diplomacy will mean unanticipated results for some of the planned mega programmes both countries are pursuing. These include Turkmenistan- Afghanistan-Pakistan-India (TAPI) gas pipeline and Central Asia South Asia (CASA) 1000 electricity transmission projects which have the potential to strengthen energy security in both countries. Despite the above-mentioned complex issues, the business community remains bullish on the APPTA and has already proposed that this arrangement should include investment and ‘trade in services’ clause. This can strengthen cross-border value chains and also promote trade-led investment in Afghanistan. Getting a revised TTA signed the next time a Ghani-Sharif meeting takes place can be an immediate and near-term goal. But operationalising the TTA will remain a challenge. Given that there is no significant pressure on governments to move fast on implementing minutes of the JEC, we propose some recommendations which can hold the political representatives and bureaucracy on both sides more accountable for their promises. Firstly, the representatives of Afghanistan Pakistan Joint Chamber of Commerce and Industry should aim to call upon the respective Finance Ministers on a quarterly basis to seek appraisal regarding progress on JEC minutes. Secondly, the representatives of Afghanistan Pakistan Joint Chamber of Commerce and Industry should also meet with presidents of both ECO Chamber of Commerce and Industry and SAARC Chambers of Commerce and Industry with the request to send formal communication to both heads of states. This request should also demonstrate the loss to all stakeholders given the reduced level of cooperation. Thirdly, the apex chambers of commerce on both sides need to invest resources to showcase their argument in print, electronic and social media, and highlight the loss to producers, traders and consumers as a result of lack of bilateral trade cooperation. Our trade which has halved during the past five years now needs to be discussed at a household level, instead of just in public sector quarters. Fourthly, a detailed orientation may be organised for economic journalists in Kabul and Islamabad, so that repeated messaging is ensured through various forms. Sixth, Afghan and Pakistani think tanks should join hands in producing joint research and advocacy material. This will bring out an independent voice for pro- trade and transit reforms. Think tanks should then present these views to the business community, and to respective parliamentary bodies concerned. The proactive approach of these standing committees has often resulted in important reform measures. Seventh, equally important is to work with provincial governments. For example, the stakes are greater for the Government of Khyber- Pakhtunkhwa and their provincial counterpart across the border. Lastly, development partners will also need to invest resources in helping trade advocacy efforts on both sides. Such advocacy efforts should be backed by rigorous research which should demonstrate loss to the poorest of the poor as trade and transit volumes decline. Writers work at www.sdpi.org and have published a detailed study on Social Enterprise Landscape in Pakistan http://dailytimes.com.pk/opinion/25-May-17/trade-low-hanging-fruit-in-af-pak-ties-ii