The future of Pak-Afghan trade

Published October 25, 2021
The peaceful economic cooperation between Afghanistan and Pakistan for better transit trade opportunities will help connect South Asia to Central Asia. — Dawn/File
The peaceful economic cooperation between Afghanistan and Pakistan for better transit trade opportunities will help connect South Asia to Central Asia. — Dawn/File

Pakistan and Afghanistan are naturally agrarian countries. Fresh fruits and vegetables are reportedly the most important sector of Afghan agricultural activity, providing a good source of livelihood for millions of farmers for ensuring food security and provision of raw materials for the dried fruit sector.

There are many healthy and mouth-watering fresh products in the country. Some well-known horticulturists consider Afghanistan to be the cradle of global fruit production because the country has many varieties of fruit trees.

But political unrest and wars have ravaged the country since the 1970s. This has severely affected fruit exports to the main market of Pakistan but after the end of the American supported regime, the Afghan fruit industry has been revived.

The recent country-by-country data shows that the bulk of products exported from Afghanistan were purchased by India (47.5pc) and Pakistan (34.5pc). At 97.1pc, Afghanistan’s exports were concentrated in Asian countries while the remaining 2.2pc were sold to European importers.

Currently fruit’s markets of Peshawar are flooded with an enormous quantity of fruits imported from Afghanistan. Kandahari Anaar, a famous pomegranate of Kandahar, a city of Afghanistan, is now being exported to Pakistan via Torkham Border and then transported to Balochistan.

With the increase in supply, Kandahari Anaar is priced at Rs100-200 per kg compared to about Rs250-300 last year

Nowadays, it is priced at Rs100-200 per kg. Last year it was about Rs250-300 per kg. In a recent event, a local retailer of Peshawar fruit market said that this year fruit’s quality is superior. Then why is there such a deflation in imports of Afghani products? This is because, since the US takeover, Americans started to export tasteful commodities to India, Iran, and other Asian countries. After the Taliban takeover, as the foreign policy tilted in favour of Pakistan, almost all fruits trade has been shifted to Pakistan. This excess supply of fruits has made the prices plunge in Pakistani markets.

Given the volatile socio-economic situation in Afghanistan since the Taliban took power two months back, imports of fruits and vegetables from the neighbouring country have recently pushed up prices in Pakistani markets. As an indication that Pakistan’s reciprocal policy shift, sales tax on fruits imported from Afghanistan is zero, Ambassador Mohammad Sadiq said in a Twitter post while sharing a statement from the federal council. “It will help Afghan businessmen and builders a lot,” he said. Afghanistan’s new Taliban government welcomed the decision and called for enhanced bilateral trade.

Afghan Foreign Ministry spokesman Abdul Qahar Balkhi said in a statement that the ministry welcomes the steps taken by Pakistan and called for an increase in trade between the two countries. Earlier, finance minister Shaukat Tarin told the Senate Finance Committee that Pakistan could trade with Afghanistan in rupees as Pakistan’s new government wanted to maintain its dollar reserves.

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.

Afghan officials, especially in the Ghani administration, wished to offer the transit route between Pakistan and Central Asia, but they were keen for a bigger chunk of share in trade proceeds. The governments of Pakistan and Afghanistan need to take further steps to establish mutually beneficial trade relations.

When contacted, Zia-ul-Haq Sarhadi, another prominent businessman and former vice-chairman of the Pakistan-Afghanistan Chamber of Commerce and Industry expressed hope that bilateral trade between Pakistan and Afghanistan would improve. He expects growth in Pakistan-Afghanistan trade as the arrangement has already been announced and government agencies will be operational soon.

Pakistan’s exports to Afghanistan have declined due to the closure of Afghan banks but will resume once financial institutions normalise, he said. He praised the new Afghan administration’s decision to clear more than 5,000 empty containers through customs in Afghanistan’s Hawa Maidan area. In Pakistan, 150-200 empty containers return daily. Traders hope for better trade between the two countries, Mr Sarhadi said.

Human communication is a prerequisite for long-term business relationships. Therefore, further relaxation of the business visa policy is needed. Various options, such as entry visas, long stays, multiple entry visas, and investment visas for businesspeople and skilled workers can be explored and enforced in writing and from a single perspective.

A preferential trade agreement between the two countries will improve the access of Afghan goods to the Pakistani market and address the problem of smuggling. The agreement should include a clear action plan to rationalise tariffs and eliminate double taxation in the region to facilitate investment in both countries. The importance of modern infrastructure, including road and rail, for trade relations cannot be ignored. Both countries should prioritise infrastructure projects to reduce transportation costs.

Published in Dawn, The Business and Finance Weekly, October 25th, 2021

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