Afghanistan has evolved to one of Pakistan’s top three trade partners. The volume of bilateral trade between the two countries has increased manifold during the last few years and has increased from US $1110.9 million in 2005-06 to US $2.4 billion in 2011-12. Exports from Pakistan to Afghanistan have increased from US $1063.4 million to US $2449 million during the said period. Main exports include pharmaceutical products, foods, textile, petroleum products and building material. Pakistan also represents a major export market for Afghan products, with roughly about US $71 million exported to Pakistan every year, equal to 21.8 percent of all Afghan exports. Much of Afghanistan’s exports are raw materials, which are processed or used in manufacturing in Pakistan. Apart from the formally recorded flows there is also evidence of a large-scale informal trade between the two countries.
Afghanistan-Pakistan Transit Trade Agreement (APTTA) was signed in 2010. APTTA allows Afghan trucks to carry Afghan products to the huge markets of India and China as well as the rest of the world through the seaports of Karachi, Port Qasim and Gwadar. In July 2012, Afghanistan and Pakistan agreed to extend APTTA to Tajikistan as first step for establishment of North-South trade corridor. The trade between Pakistan and Afghanistan is expected to reach $5 billion by 2015.
The two states also signed an MoU on the construction of rail tracks in Afghanistan to connect with Pakistan railways which has been in the making since at least 2005. According to APTTA, the entry points for the Afghan trade cargo into Pakistan are Karachi Port and Port Qasim. The exit points are Torkhum in Khyber Pakhtunkhwa (KP) and Chamman in Balochistan.
Other than these two existing trade routes, a third proposed trade route is still under discussion. The proposed third trade corridor is a three-branched route originating from Karachi and ending in Kabul. APTTA stimulated employment and business inside Pakistan as services and logistical businesses support to Afghan trucks. Afghan freight forwarders and transport operators are also allowed to establish business in Pakistan to support trade and transit activities.
Historically, Afghanistan has been a major trading partner of Pakistan. Following the Soviet invasion of Afghanistan in 1979, and the subsequent period of civil war, formal trade between Pakistan and Afghanistan ceased but informal trade between the two countries remained substantial. Since the end of Taliban regime in 2001 and resumption of normal trade relations, documented trade between the two countries has expanded rapidly. Between 2002 and 2010, there was a seven-fold increase in Pakistan’s exports to Afghanistan.
The US and Nato have been transporting large quantities of logistic goods to Afghanistan for sustenance of their troops and conduct of operations. Since Pakistan afforded an easy access to Afghanistan, so it was an obvious and convenient choice for the US and Nato forces to transit its military equipments, reconstruction material and logistic cargo to Afghanistan via Pakistan. For sustaining the force in a land-locked Afghanistan, the US and Nato needed to import a wide range of materiel into Afghanistan, the bulk of which routed through the port of Karachi.
Businessmen and common people who are attached with trade and business activities across Afghanistan and Pakistan are generating handsome profits though there are few complications involved like insecurity, corruption and poor road infrastructure. By removing the barriers both government and businesspeople can get maximum profit. Most people in KPK and Balochistan are dependent on trade with Afghanistan.
Another major issue is the smuggling of goods and commodities which is harming the formal trade. Additionally the volatile security in Afghanistan is a huge obstacle for trade. Traders are worried about this issue also. After the start of withdrawal of Nato forces from Afghanistan, that is due to end by the close of 2014, major trade of Nato goods between Afghanistan-Pakistan will be closed and only civilian trade will be left. There is an estimate that currently 17 percent cargo moving to Afghanistan through Pakistan is Afghan Cargo (Non Commercial which pertains to humanitarian aid) and 83 percent is Nato cargo.
The post-2014 US exit scenario presents opportunities and challenges for Pakistan-Afghanistan relations. If we look at the opportunities, the reconstruction in Afghanistan is major opportunity for Pakistani industrialists. All other goods and service sectors will also be able to take benefit of this. And if we look at the challenges, the major challenge will be insecurity that will adversely affect trade.
Pakistan is already facing economic problems and losing transit trade with Afghanistan that will harm its economy. Pakistan and Afghanistan have great prospects to cooperate not only in the fields of politics and security but also in the fields of trade and economy. The question is: how can we safeguard the trade between Afghanistan-Pakistan after the exit of Nato forces?
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.