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Trade with Afghanistan

February 25, 2014

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AFGHANISTAN has emerged as a major market for Pakistan’s goods, services and labour over the last several years. The value of bilateral trade in goods has already more than doubled to $2.38bn from less than $1bn six years ago. Afghanistan is officially said to have become the second largest trading partner of Pakistan after the US if the undocumented trade — estimated to be worth over $5bn — carried on through informal channels is also factored in. In other words, in spite of its poor internal security our western neighbour is by no means less important than India as far as our economic and commercial interests are concerned. The fact that our industry can also access the energy-rich Central Asian markets through it adds to the urgency of taking measures to raise the existing size of official trade. In reality, however, many fear a decline in bilateral trade because of the fast growth of exports from Iran and India. India is also working on a plan to access the Afghan and Central Asian markets via the Iranian port of Chabahar. Afghanistan’s improving trade ties with Iran and India have begun to show, while the State Bank depicts a 15pc decline in Pakistan’s trade with Afghanistan during the first quarter of the current fiscal year. The volume of trade witnessed a slight drop during the last fiscal too.

Against this backdrop, the recent pledge made by the finance ministers of Pakistan and Afghanistan during the Joint Economic Cooperation meeting in Kabul has raised hopes of improved bilateral trade volume. The completion of dualisation of the 75km Torkham-Jalalabad road, work on which was inaugurated during the JEC meeting, will also go a long way in boosting commercial ties. The long-awaited project to connect the railways of the two countries should help improve infrastructure to support the increase in trade as well. Islamabad also needs to convince Kabul to dismantle the trade barriers, tariff and non-tariff both, that slow the flow of goods from this side of the border. But before it takes up this matter with the Afghan authorities, Islamabad should remove obstacles it has itself created and that are impeding exporters from taking advantage of the growing demand for their products across the Durand Line.