By Masom Jan Masomy & Shaukatullah Abid
Pic: Wikimedia Commons Chabahar Port
“Iran’s Chabahar port could connect Afghanistan through water with India for bilateral trade. Afghanistan, bypassing Pakistan, should engage in multiple aspects with India and Iran”
According to recent reports, Pakistan has increased tariff taxes on Afghan fruits from 15,000 to 60,000 PKR per ton, an increase sixfold this time. Meanwhile, in another move, Pakistan has not allowed Afghanistan’s 300 trucks loaded with Afghan fruits and vegetables between Afghanistan-Pakistan ports due to the absence of a temporary permit to enter Pakistan, a document to be issued to Afghan drivers on time by Pakistani consulates based in Afghanistan. The decision of the Pakistani government comes amid the export season, while watermelon, melon, grapes, pomegranates, and others got ripped in Afghanistan. This move has led to a halt in fresh fruit exports to Pakistani markets, bringing huge losses to Afghanistan’s farmers and traders and impacting Afghanistan’s economy badly.
However, Afghanistan and Pakistan signed the Afghanistan-Pakistan Transit Trade Agreement (APTTA) in 2010 to expand bilateral trade, provide facilities, and remove existing challenges and barriers between the two countries. Still, Pakistan is not entirely interested in helping address relevant issues with the Afghan side without creating problems and obstacles at transit and transport documents, customs, and tariff levels and closing crossing points against Afghan exports and imports each year. On the other hand, the political relationship between Afghanistan and Pakistan has always been challenging. Since the Afghan Taliban’s rise to power in 2021, tensions have persisted on some unresolved issues between the two countries. For example, the Tehrik-e-Taliban Pakistan (TTP), an outlawed militant group in Pakistan, has exacerbated these tensions by launching attacks on Pakistani security forces, with Pakistan accusing the TTP of operating from Afghan territory. Furthermore, Islamabad’s longstanding policies towards Kabul have strained bilateral relations, using trade and refugee issues as leverage to achieve strategic objectives in Afghanistan.
“Afghan trade with Pakistan and the use of Pakistan’s soil as a transit route for commercial goods were significantly influenced by political factors, which had a profound impact on Afghanistan’s economy.”
During the US-backed Afghan republic government, particularly under the leadership of Mohammad Ashraf Ghani, Afghan trade with Pakistan and the use of Pakistan’s soil as a transit route for commercial goods were significantly influenced by political factors, which had a profound impact on Afghanistan’s economy. Bilateral trade between Afghanistan and Pakistan diminished to $1.2 million as Afghanistan redirected its trade policy to enhance commercial relations with its northern neighbors, such as those in Central Asia. In this context, Afghanistan must reconsider domestic initiatives and develop alternative trade routes with other countries in order to promote and enhance commercial goods for internal and external markets as follows:
Cold Storage and Domestic Investment
Afghanistan’s unstable government has done nothing to provide fundamental infrastructures and modern technology for essential food trade, at domestic level. In this context, Afghanistan should not only prioritize expanding bilateral trade with neighboring regional countries and beyond but it should also consider domestic initiatives to improve and enhance the internal market. One significant challenge for Afghan farmers and traders is the lack of adequate cold storage for fresh fruits and vegetables. According to available data, over 3,000 cold storages have been established in Afghanistan, funded by the private sector, donor organizations, and various countries during the Afghan Republic. However, the country still requires an additional cold storage capacity of 290,000 metric tons. To address this, the Taliban-led Afghan government (Islamic Emirate of Afghanistan) needs to allocate funds for building and increasing cold storage in each fiscal year and provide facilities for the private sector, donor organizations, and other aid countries to focus on constructing more cold storage in various provinces. This initiative could enhance the domestic market’s ability to offer fruits and vegetables year-round, at the same time, reducing reliance on imports from Iran and Pakistan.
“This abundant fruit yield offers significant opportunities for economic growth, job creation, and increased export potential. Afghanistan can produce juices, dried fruits, jams, and other value-added products by investing in modern processing facilities.“
Moreover, given that Afghanistan’s annual fruit production exceeds nearly 1.5 million metric tons, the fruits can be processed into various byproducts. This abundant fruit yield offers significant opportunities for economic growth, job creation, and increased export potential. Afghanistan can produce juices, dried fruits, jams, and other value-added products by investing in modern processing facilities. These efforts can help diversify the economy, reduce post-harvest losses, and improve the livelihoods of farmers and local communities. The government must motivate the private sector including foreign investment and provide facilities to encourage investment in the fruit processing industry. By fostering a favorable business environment, the government can attract domestic and foreign investors, stimulate innovation, and enhance the competitiveness of Afghanistan’s fruit products in international markets.
Utilizing Alternative Trade Routes
Afghanistan’s geostrategic location connects it to Chinese, Russian, and Indian markets via the Wakhan corridor, Central Asia transit route, and Chabahar port. The Islamic Emirate of Afghanistan states that the Wakhan road to the Chinese border is now complete, directly linking Afghanistan with China. This development is crucial for Afghan-China bilateral trade, eliminating the need to import Chinese products through Pakistan. Moreover, the Wakhan corridor is a strategic point regarding geopolitical interests, connecting China with Iran, the Middle East, and Central Asia with China. Investment in Wakhan is vital for China and Afghanistan to operate for direct trade between the two countries. Furthermore, the Taliban-led Afghanistan enjoys cordial relations with Central Asia countries and Russia, particularly in bilateral trade. For example, Afghanistan had trade $100 million in exports and $1.4 billion in imports with Central Asia’s five countries, including Russia, in 2023. Therefore, Afghanistan should further consider increasing bilateral trade with Central Asia and transport its goods to Russia through Central Asia transit on an annual basis, it will reduce dependency on Pakistan.
“Afghanistan should further consider increasing bilateral trade with Central Asia..”
Meanwhile, India and the Taliban, on several occasions, have interacted on regional connectivity, particularly operating the Chabahar port. Recently, India has signed an agreement with Iran to invest $120, and Afghanistan has plans to invest$35 million at the port to make it operative for trade. Iran’s Chabahar port could connect Afghanistan through water with India for bilateral trade. Afghanistan, bypassing Pakistan, should engage in multiple aspects with India and Iran to make Chabahar fully operative for bilateral trade between Afghanistan and India. Additionally, the air corridor initiative, originally established between Afghanistan and India in 2017 and later expanded to include other countries, played a pivotal role in enhancing Afghanistan’s export capabilities. The export volume through this corridor increased from 1,720 metric tons in 2017 to 7,500 metric tons in 2020. Therefore, it is crucial for Afghanistan to prioritize the revival of air corridors with both regional and Western countries. This would facilitate the regular transfer of Afghanistan’s products, notably dry fruits like pine nuts, walnuts, almonds, and pistachios, to international markets. Ultimately, enhancing Afghan trade through improved domestic facilities and new trade channels reduces dependency on Pakistan, boosts the global competitiveness of Afghan products, ensures a consistent domestic supply, promotes economic diversification, and drives sustainable economic growth. This approach also fosters regional trade partnerships, enhancing political stability. Additionally, it attracts foreign investments, further strengthening the nation’s economic resilience.
Authors:
Masom Jan Masomy is a Research Fellow at the South Asia Foresight Network (SAFN) in Washington, D.C. Assistant Professor at the Regional Studies Centre at the Afghanistan Academy of Sciences in Kabul, Afghanistan. He writes on South Asia’s political, security, and economic affairs.
Shaukatullah Abid is an assistant Professor at the Economics Institute of Afghanistan Academy of Sciences. He writes on economic, foreign investment and political economy of Afghanistan.
*The opinions expressed are those of the authors and do not represent the official position of SAFN.
