Over the last five years Pakistan’s exports to Afghanistan have gone down from $2 billion to $1.3 billion in FY18, as per data from Afghanistan’s Central Statistics Organisation (CSO). As a percentage of Afghanistan’s total imports, Pakistan’s share has gone down from 23 percent to 17 percent in the last fiscal. Given that Afghanistan is considered a captive market and it is all hands on deck to boost exports, this is an alarming trend.
The recent numbers of 1HFY19 posted a 30 percent YoY decrease in Pakistan’s exports to Afghanistan. While many factors played a role in the downward dip in the short run (for more information read “Correcting the picture” published on January 31, 2019), the long term trend has been a blend of gaps left by Pakistan and neighbouring countries aggressively moving into Pakistan’s share.
On Pakistan’s side, volatile exchange rate, lack of banking channels, and frequent closure of Torkham border with trade policy being wielded as a political tool has adversely impacted exports. Perishable goods such as food items have been hit badly in particular.
Better quality Iranian goods are available at prices lower than those of Pakistani goods in Afghanistan’s market, said a source involved in cross border trade with Afghanistan. This sentiment was echoed by Zubair Motiwala (Founder Chairman of Pakistan Afghanistan Joint Chamber of Commerce & Industry) who said that almost all of Pakistan’s Portland cement market has shifted to Iran.
Though India’s share in the pie is 3 percent, it is working fast to remedy that. Motiwala said that exports to Afghanistan are heavily supported by the Indian government that air freights flour to Afghanistan. As a result, most of Afghan’s flour needs are met by India when it used to be amongst Pakistan’s top export. India is willing to grant favours and help anyone that allows its exports to Afghanistan rise, he alleged.
Another way is through Chabahar port. Iran is charging very minimal rates of port usage allowing Afghanistan to import for other countries. But by and large, India is the main beneficiary of Chabahar through exports to not only Afghanistan but other Central Asian Republics as well.
However, things are looking better as Pakistan becomes a party for peace negotiations in Afghanistan. Each time the COAS has gone to Afghanistan, he had brought about good results stated Motiwala.
One positive move in that direction of friendlier ties is the opening of Torkham border for 24 hours, which should be operational in 6 months. However, the President of Sarhad Chamber of Commerce, Faiz Muhammad, was of the view that the border can be kept open 24 hours within a month. Furthermore, Muhammad felt that this move will help medical tourism in particular which has shifted to India he said.Both chamber heads felt very positive as Pakistan becomes instrumental in peace talks.
It is becoming increasingly clear that the way forward to regaining lost market share is through being a facilitator in alleviating the war in Afghanistan. FY18 numbers put Pakistan as the main importing destination for Afghanistan. If that lead is to be maintained and the trend reversed, Pakistan will have to aggressively pursue amity with the neighbouring country.