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 being 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 cross border 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 highest 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 downward 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 Asia and Turkey.