Pakistan, Afghanistan and prospects of the coal trade
For Pakistan, next door neighbor Afghanistan is its fifth largest export market, but the volume of trade between the two countries has been shrinking. From a high of more than $2.5 billion a few years ago, trade has dropped in value to just under $1 billion. This is unfortunate given the huge potential for trade between the two countries estimated to go beyond $5 billion if a conducive environment is created.
One big reason for a drop in trade is the isolation of Afghanistan from the international banking system. No third-party payments are allowed in the absence of an internationally accepted banking system. But there are many other reasons that hinder the growth of trade.
Afghanistan was mostly reliant on foreign aid, which accounted for 70 percent of its total budgetary expenditure, and which is no longer coming in due to the absence of international recognition. The US is withholding the release of $7 billion of Afghan assets held in US banks. In addition, there are insurmountable hurdles to cross that come in the way of promoting trade. These include countless security checks at the border, agonizing documentation, a lack of administrative infrastructure to deal with the clearance of goods, a lack of coordination among the many different agencies operating at the border. As a result, the volume of trade has dropped substantially.
There is however a glimmer of hope. Recently, Pakistan has decided to facilitate the import of coal by easing border restrictions. Until now Pakistan was mostly dependent on coal imported from South Africa, Australia, Indonesia etc. Now there is renewed interest in Afghanistan’s coal which is considerably cheaper than coal from other exporting countries. Pakistan’s thermal power plants need coal and that need is growing. Just a few days ago, a high-powered delegation went to Kabul and discussed a range of steps to be taken to improve trade. The discussions also included the possible increase in the import of Afghan coal to be used in power plants in the country. It was decided more border crossings would be opened to increase the volume of trade. Significantly, it was also agreed some important crossings would be operated around the clock to bolster trade.
Afghanistan received 3 billion Afghanis (or $33.8 million) in customs revenue on more than 16 billion Afghanis worth of coal exported to Pakistan in six months. Currently, Pakistan imports around 3,000 tonnes of coal every day from Afghanistan. This number is likely to increase as more facilitation measures are adopted by the officials of the two countries. It has also been agreed to allow the coal trade to take place in Pakistani rupees.
The current approach of ‘security’ considerations being paramount has to be reviewed as peace in Afghanistan takes hold. It is imperative then that Pakistan should view the whole issue from a long-term perspective: the benefit from Central Asia’s energy reserves.
Rustam Shah Mohmand
This is a more realistic approach to promoting bilateral trade. There is a need to reappraise the whole policy on trade with Afghanistan to help attain the full potential between Islamabad and Kabul. What is needed is a drastic overhaul of the current trading framework which regulates trade between the two countries.
Following the wholly unwarranted fencing of a long border, there is now the need for opening more border crossings all along the 2,600 km long border. More importantly, there is a need to reduce the documentation and needless security checks. There has to be an easy and quick procedure for the clearance of goods. The involvement of multiple agencies has to be discontinued. There is a need for a ‘captain’ of the team at each such border crossing and he must be an authorized civilian officer. Barter trade must be allowed to take place regularly.
In a further effort to promote business and trade, the Pakistani government should take the step of allowing India-Afghanistan trade through Pakistani territory. On the one hand, this would bolster and promote regional trade and on the other, it would be especially welcomed by Afghans who want to trade with India. As CPEC projects gain momentum, the prospects of regional trade involving India, Pakistan, Afghanistan, China and countries of Central Asia would become mutually beneficial; all partners in a new network of trade and business that could transform millions of lives.
That should be the goal and objective of Pakistan’s policy makers both in the short and long term, bringing not only prosperity but also political stability to the entire region. The current approach of ‘security’ considerations being paramount has to be reviewed as peace in Afghanistan takes hold. It is imperative then that Pakistan should view the whole issue from a long-term perspective; that it would benefit from Central Asia’s energy reserves and induce them to use the Pakistan route to the sea. Afghanistan as a springboard to Central Asia gains more critical importance in any such new approach to increase trade.
- Rustam Shah Mohmand is a specialist of Afghanistan and Central Asian Affairs. He has served as Pakistan’s ambassador to Afghanistan and also held position of Chief Commissioner Refugees for a decade.