Afghanistan’s Transformed Trade Strategy Ends Pakistan’s Dominance of Afghan Economic Markets7 / March 2017 | 0 Comment
In the past few years the rise of political tensions between Afghanistan and its eastern neighbor, Pakistan has negatively affected trade relations of the two making their trade flow to its lowest possible level. The rise of political tension between the two countries caused Afghanistan to change its economic policies and trade partners from east to western and northern countries.
It was until 2013 that most of Afghanistan’s trade was with Pakistan, but after 2014 when Pakistan snubbed Kabul’s trade and commercial suggestions and created political tension in between, Afghanistan decided to seek alternative partners and routes, building productive business ties with its western and northern neighbors.
In 2013, the total exports from Pakistan to Afghanistan was valued $ 1742 million, whereas, Iran’s exports to Afghanistan was valued $ 15,100 million. The latest figures from 2016 show that Iran’s exports to Afghanistan have increased to 1808 million dollars, while Pakistan’s export to Afghanistan has declined to 1346 million dollars.
Inauguration of Chabahar port with the cooperation of Tehran and New Delh has created a stable trading route in Afghanistan, which is an alternative to the port of Karachi and Gwadar. In addition, Afghanistan has signed several multilateral trade agreements with its northern and western neighbors.
Signing of two trilateral trade agreements (Afghanistan-Iran – India) and (Afghanistan- Tajikistan -Iran) as well as four bilateral commercial agreements with Iran, Turkmenistan, Uzbekistan and India, indicate Afghanistan’s efforts diverting its business strategy toward the western and northern partners.
In December 2014 a quintet railway agreement was signed by Afghanistan, China, Qrghzystan, Tajikistan and Iran and this railway links China through Afghanistan to Iran. With this railway in September 2016, China sent commercial goods to Afghanistan that valued $ 4 million.
In November 2016 Afghanistan inaugurated Lajaward railway network with Turkmenistan which connects the country to European countries and China through Turkmenistan, Kazakhstan, Azerbaijan, Georgia and Turkey.
Expanding trade Relations
One of the other factors affecting business situation in Afghanistan is the recognition of the country’s membership in the World Trade Organization that took place last year. Earlier, Afghanistan had trade ties with 50 countries, but now it has increased to 163 countries. To reduce its dependency on Pakistan, Afghanistan has built extensive trade relations with Central Asia, the United Arabic Emirates, China, Russia and Germany.
Instead of relying on Pakistan, Kabul imports food, plastic and petrochemical equipments, fruit and vegetables from Iran, flour and cement from Kazakhstan and Tajikistan, technological and electronic equipment from China, drugs and medical supplies from India, construction material from Germany, oil from Russia and Iran and other necessities from other Central Asian countries.
According to officials from Afghanistan Chamber of Commerce and Industries, the volume of trade between Iran and Afghanistan has increased by more than 2 billion dollars and with India the trade volume has increased to more than a billion dollars. The officials said that the increase in imports of cement from India and Tajikistan has drastically reduced Afghanistan’s dependency on Pakistani cement.
According to Pakistani media reports, Afghanistan has reduced the import of cement from Pakistan by 4, 5%, which is a decrease from 0.174 million tons to 0.1666 million tons.
In addition, statistics compiled by Pakistan shows that Afghanistan’s cement imports from India has increased significantly. For example, from July 2016 to January 2017 Afghanistan’s import of cement from India increased by 76.34 percent.
Import of flour from Pakistan had unprecedented decline lately. Afghanistan’s Central Statistics officials say that Pakistani Flour is no more preferred in Afghan markets but it is Khazakhstan which dominates the flour markets of Afghanistan. However, some Pakistani media reported in July 2016 that Afghanistan’s new trade policies caused 800 flour processing factories in Pakistan to shut down.
For importing oil Afghanistan tries to expand business relations with Russia. On a recent trip to Moscow, Salahuddin Rabbani, the Afghan foreign minister met his counterpart Sergey Lavrov, where Russia pledged to annually export 1.5 million tons of fuels to Afghanistan.
Multiple commercial ports
According to Afghanistan Chamber of Commerce and Industries officials, Afghan commercial ports are more activated than ever. Currently Aqina and Hairatan ports are largely used for transport of goods and services.
Afghanistan runs its commercial trades with Iran through Islam Qala and Zaranj ports, with Uzbekistan through Hairatan, with Tajikistan through Sheer Khan Bandar, and with Turkmenistan through Aqina and Turghandi ports.
Siyamuddin Pesarlai, a spokesman for the Afghanistan Chamber of Commerce and Industries told Khabarnama, along with Pakistan Uzbekistan was also causing troubles for Afghan traders; however, Afghanistan’s new foreign policy approach has led increased political relations of Kabul-Tashkent.
ACCI officials stress that currently only low level threats and challenges exists in Sher Khan Bandar as a result of instability in Kunduz province.
Mr. Pesarlai added that Chabahar and Aqina ports and Lajaward railway play an important role paving the way for regional trade relations of Afghanistan. “Previously Afghanistan could export limited amount of goods to India through Waga port, nonetheless, inauguration of Chabahar port and air cargo led to extensive import and export of commercial goods between the two countries.” He added.
Cutting off trade
ACCI officials in Afghanistan say that a 10-day closure of Torkham border has led trade turnover between Afghanistan and Pakistan to its lowest level.
Mr. Pesarlai told Khabarnama that in this period, there has been no trade exchange between the two countries. The closure of Torkham border has caused serious changes in market rates of some items in Afghanistan including fruit and vegetables. These changes show that the prices of some raw materials such as vegetables have doubled in Kabul markets.
At the same time, flower market in Kabul is deeply affected by the closure of border. These days, most of flower shops in Kabul are almost closed. According to the Central Statistics Organization of Afghanistan, in 2016 Afghanistan needed 5.9 million ton flowers of which 1.44 million tons were imported and the rest was produced inside Afghanistan.
It seems that Afghanistan needs an alternative solution either from domestic production or imports of raw materials and flowers.
The economic signs that markets in Afghanistan showed during the past two weeks indicate that economic and trade policies of the Afghan government towards Pakistan has been effective and constructive. Given that last year when political tensions between Afghanistan and Pakistan led to the closure of border, Afghanistan’s economy was severely affected, and the occurrence of border closure on repeat signals that Afghanistan’s trade situation has improved and tangible changes are on the way.
Only last year Pakistan blocked the Torkham border five times and closed Spin Boldak border for 12 days. Afghan businessmen claim that last year their business suffered severe financial losses. The closure of borders for six times led Afghan businessmen turn their backs to Pakistan. Officials from Afghanistan’s Chamber of Commerce and Industry demand Afghan businessmen to stop trading with and through Pakistan.
This indicates that markets across the country as crucially important part of Afghanistan’s economy has reached a serious alignment with Afghanistan’s foreign affairs bodies in dealing with Pakistan.
Ali Akbar contributed to this report.