By Aamir Latif
KARACHI, Pakistan
Pakistan and Afghanistan are losing out on the huge potential for trade due to fraught diplomatic relations and poor connectivity, according to traders and experts, who urged radical measures to rectify the situation.
Trade between the two countries currently stands at $1.5 billion compared with $2.5 billion in 2015.
Pakistan Afghanistan Joint Chamber of Commerce and Industries Chairman Zubair Motiwala told Anadolu Agency: “Fortunately, there is a huge trade potential between the two brotherly countries as Afghanistan a landlocked country, heavily depends on Pakistan.
“But, unfortunately, we are not exploiting this potential.”
The actual trade potential between the two countries, according to Motiwala, is over $10 billion but because of multiple hurdles, which are very much addressable, bilateral trade -- documented and undocumented -- is not more than $4 billion.
Government and independent estimates suggest that or undocumented trade between the two neighbors is around $2.5 billion.
The first and foremost step, Motiwala suggested, is to build trust between Kabul and Islamabad.
"Lack of trust, which is at level in recent decades, has crumbled the bilateral trade," he added.
Rationalization of customs duty is another step, which could boost depreciating trade between the two neighbors, he said.
“I have personally told President Ashraf Ghani during a recent meeting that irrational customs duties are badly affecting trade between the two countries, which need to be addressed.
“He [Ghani] agreed to my suggestion and a committee representing both sides was formed to address the issue, but said know what, not even a single meeting of that committee has so far been held,” he maintained.
'Colossal financial losses'
A strict visa regime, sporadic closure of crossings and absence of strong mediation and arbitration points in both countries are other factors, which demand immediate solution, Motiwala said.
“Security comes first, there is no doubt about that. But when you close crossings after every one or two months in the name of terrorist, who by the way, never use gates to infiltrate, then the confidence of traders from both sides is shattered,” Motiwala added, referring to closure of borders by Islamabad in recent months following a spate of terrorism in the country, for which it blames Afghanistan-based militant groups.
Afghanistan Chamber of Commerce and Industries (ACCI) Vice President Khan Jan Alakozay agrees the rift between Islamabad and Kabul is detrimental to bilateral trade, business community and common people in both countries.
“Globally, it is a known fact that trade between neighbors is always the easiest and cheapest, but unfortunately trade between Pakistan and Afghanistan is on trajectory,” Alakozay told Anadolu Agency, urging Kabul and Islamabad to relax the tariff regime and adopt friendly postures.
Atif Ikram, head of regional trade committee of Federation of Pakistan Chambers of Commerce and Industries (FPCCI) -- a central body of Pakistani businessmen and traders, agreed with Motiwala.
“The recent closure of borders has not only caused colossal financial losses to traders from both sides, but it has allowed India, Iran, and China to replace Pakistani products in Afghan markets,” Ikram told Anadolu Agency.
“Our policymakers want to improve trade with countries which are thousands of miles away but continue to ignore neighboring nations which is surprising.
“Imports from Afghanistan do not require foreign exchange because many Afghan traders happily accept rupee which should be exploited.”
After Iran, Pakistan was Afghanistan's second-largest trade partner for long but China has recently replaced Islamabad while the U.K. and Germany have also improved their trade with the war-stricken country, he added.
Ikram further said Pakistan had not been able to improve trading points -- northwestern Torkham and southwestern Chaman -- and operationalize Ghulam Khan crossing, which had facilitated trade between Kabul and Tehran.
According to ACCI, Afghanistan had long been importing hundreds of containers via Pakistan’s Karachi port annually but that has now fallen considerably with Kabul developing alternate routes such as Iran's Chabahar port and growing trade with Iran, Central and Turkey.
Need for mutual understanding
Pakistan’s longtime rival India has recently launched its air-cargo service for Afghanistan, which would help it reduce border issues with Islamabad.
Islamabad allows only Afghan exports to India through its northeastern Wagha border but it does not permit exports from India meant for Afghanistan.
Making things further complicated, Afghan President last week in New Delhi announced that his country would not provide road access to Pakistan for trade with Central Asian states unless it was given trade access to India by Islamabad.
The Afghan government has also imposed regulatory duties on various Pakistan products which helped similar Iranian and Indian goods to replace Pakistani items.
Islamabad and Kabul have recently imposed on entry of each others’ goods transport to their respective territories following the expiry of the Afghanistan-Pakistan Trade Agreement (APTA).
Enjoying the trade volume heavily in its favor with a ratio of 80-20, Pakistan exports rice, petroleum products, cement, flour, pharmaceutical products, vegetables, leather products, plastic articles, chemical products, transport equipment, and wheat. it imports fruits -- pomegranates and grapes -- and hand-knitted carpets from the landlocked country.
The recent diplomatic stand-off and increase in import duty have badly affected Afghan fruits exports to Pakistan as well.
Fruit sellers from southern Kandahar province last week announced they would stop exporting fresh fruits to Pakistan in protest against in import duty.
Afghanistan was earning up to $2 billion per annum from transit trade services provided to Pakistan for the Central Asian states, but the Kabul government believes the losses it sustains because of Pakistani government not allowing Afghan trucks bring goods from India are greater than this profit.
“The way forward is mutual understanding; Pakistan has fruits such as mango, banana and other items for which Afghanistan and the Central Asia are main markets.
"Similarly, for Afghanistan’s grapes, pomegranates, marble and other items Pakistan is the nearest and most easily accessible market,” Alakozay said.
*Shadi Khan Saif contributed to this story from Kabul, Afghanistan.
