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A Paradigm Shift in Afghan Economic Policy – From East to West

Dr. Naimat U. Khan

Dr. Naimat U. Khan

After taking charge of Presidency, Ashraf Ghani was very enthusiastic to have more cordial and wide ranging strategic relations with Pakistan, his three frequent visits including the highly criticized visit one toArmy GHQ is indicative of the fact. However, President Ashraf Ghani was not happy with the outcomes which resulted in nose dive slide in the already not-so-good relations between the two states.The relations also witnessed a paradigm shift in Afghan economic policy from Eastern to Western Border since the end of 2014.

Being a landlocked country, Afghanistan is dependent upon two neighboring countries, Pakistan and Iran, to reach maritime sea. On western side, Pakistan has been a strong trading partner of Afghanistan while on Western border Iran has good bi-lateral trade relations with Afghanistan. Statistics show that Pakistan and Iran are the top trading partners of Afghanistan. Till 2013, Afghan trading with Pakistan (western border) was more than Western and northern Border (Iran, Tajakistan, Turkemanistan and Uzbekistan).

After 2014 and President Ghani’s failed overtures to Pakistan, Afghanistan has seen a sharp decrease in Pakistani imports with a corresponding increase from the western neighbour, Iran. For example, in 2013 Pakistan was the top exporting country to Afghanistan with total exports of $1742 million in comparison of Iranian exports of $1510 million. However, the latest statistics of 2016 show that Iranian exports to Afghanistan has increased to $1808 million while Pakistani exports have decreased to $1346 million. Trade between Pak-Afghan was $2.1 billion in 2013 (it was $0.83 billion in 2006) but it is on decreasing trend as evidenced by latest statistics of 2016.

Afghanistan has transit agreements with Pakistan since the time of King Zahir Shah back in 1965in the form of Afghanistan Transit Trade Agreement (ATTA) to allow Afghan goods via Pakistan’s Karachi sea port. The treaty was well effective during Taliban regime in late 1990s. In the changed global scenario in the wake of 9/11 incident, the old ATTA was also reconsidered as it was the shortest route for NATO forces in Afghanistan. In 2010, the transit route saw a new twist when Afghanistan was allowed to export goods to India but with no such facility for Indian goods. The new agreement was named Afghanistan-Pakistan Transit Trade Agreement (APTTA) which became operational in July, 2011.

Recent past shows that President Ashraf Ghani is trying to balance and off-set the dominating role of Pakistan in economic relationship on Eastern border. As a counterpart, Afghanistan has been entering into many agreements with countries on its Western border. Besides transit agreements with Pakistan, Afghanistan is taking keen interest for similar type of contracts with other neighbouring countries on Western and Northern borders. For example, the Chahbahar sea port is a well-appropriate and balanced alternative transit route to its counterpart in Pakistani territory (Karachi Sea Port and Gawadar Sea Port), with special concession for Afghan goods by Iran. In addition,a route among Iran, India and Afghanistan has started operation linking Afghanistan with India via Iran territory of Chahbahar sea port. Moreover, two trilateral transit and trade agreements were signed during TISA that was Afghanistan-Iran-India and Afghanistan-Iran-Tajikistan and four bilateral transits and trade agreements were signed among Iran, Turkmenistan, Uzbekistan and India. In December 2014, Five-Nations agreement on railways (China–Kyrgyzstan–Tajikistan–Afghanistan–Iran) was singed that will link China with Iran via Afghanistan). Using this agreement, in first week of September 2016, China has sent a first train of roughly $4 million worth of goods to Afghanistan via Hairatan (Uzbekistan) in a shorter period in comparison of old insecure and long transit route of Pakistan. Similarly, many highways are proposed to link Afghanistan’s Herat province to Iran and Turkmenistan which will open way for Iran to Tajikistan and China.  On November 28, 2016 the Lazuli railway network was inaugurated between Turkmenistan and Afghanistan. It is proposed that the same Lazuli railway will link Afghanistan with European countries and China via Turkmenistan, Kazakhstan, Azerbaijan, Georgia, and Turkey.

All these steps and agreements by President Ghani show a clear paradigm shift in its economic policies from east to west. With the deteriorating security situation in Afghanistan as a result of withdrawal of international troops; tension on border with Pakistan; appeal to boycott Pakistani goods on social media  and an “un-willing” return of Afghan refugees will further intensify the downturn in  bilateral Pak-Afghan trade. It seems difficult to achieve a target of $5 billionPak-afghan trade in 2017 – a target set by President Ghani during his visit to Pakistan in November 2014.

Zulfiqar Ali Bhutto, former prime minister of Pakistan, once rightly remarked that ‘no two countries in the world share so much in common as Pakistan and Afghanistan’. There it is high time for Pakistan to give more incentives to Afghanistan (with the lowest tariff rate of 5.9% in the region) in the upcoming project of CPEC – China Pakistan Economic Corridor. The trading relationship is beneficial to both countries, and Pakistan is getting more from bi-lateral trade with Afghanistan – a country with 95% imports in comparison of only 5% exports. In addition, bi-lateral trade will pave the way for Pakistani transit goods to Central Asian countries via various locations of Afghan territory i.e., Iran via Islam Qila and Zaranj border; Uzbekistan via Hairatan; Tajikistan via Ali Khanum, Sher Khan Bandar; Turkmenistan via Aqina and Torghundi. So Pakistan needs ought to take serious steps to regain its old level of exports to Afghanistan, otherwise, Pakistan will lose a big market of about 30 million consumers with an equally  huge loss to Pakistani investors in building new infrastructure in battel-torn Afghanistan.

Writer: Dr. Naimat U. Khan

The writer is an Assistant Professor at University of Pseshawar Pakistan. He can be reached at



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