Analysis & Opinion

Financial Year 2017-2018: Improvement in Pak-Afghan Trade Relations

In the contemporary age of globalisation, where state boundaries are getting blurred by the revolution in transportation and communication technologies, trade has become one of the most essential components that need to be maintained and increased for national growth and prosperity. 

Trade (or in other words economic cooperation) that was once considered a tool of low politics by the experts of political science and international relations have gained the position asa tool of high politics in practice now. Besides aiding in the overall national growth and progress of a nation-state, trade and economy are also incorporated as coercive tools in international politics by countries in order to influence the policy of other countries according to their vested interests.

On one side, where trade and economic cooperation is negatively used to influence the policy of other states, the same tools are also used in order to improve relations and build confidence among states as well and decrease the probability for conflict by increasing interdependencebetween them which ultimately raises the cost of conflict and makes it an unattractive policy for states to peruse.

Pakistan and Afghanistan are neighbours that besides sharing a long border also share many other commonalities as well such as culture, language, religion, history and geography.Unfortunately, due to divergence of political interests and distractions created by the interference of extra-regional powers in the region, both countries have been unable to fully harness the potential of their bilateral relations, especially in the domain of trade & economic cooperation.

Afghanistan is a landlocked country and Pakistan provides the cheapest and the shortest transit route for international and bilateral trade. Pakistani sea-ports provides Afghanistan with the best access route to the markets of Africa, Middle-East and South-East Asia. According to a recent survey, the bilateral trade potential between Pakistan and Afghanistan is up to US$5 billion.

The earlier quarter of 2018, Pakistan’s bilateral trade with Afghanistan decreased substantially owing to the adverse law and order and security situation in Afghanistan. In the beginning of 2018, Pak-Afghan bilateral trade was estimated at US$ 3 billion which decreased to US$ 500 million in the first quarter of the same year. Fortunately, recent trends show an optimistic picture about the future of Pak-Afghan bilateral trade and economic cooperation. According to a report released by the Embassy of Pakistan in Kabul on October 30, 2018, there was a substantial increase in Afghanistan’s exports to Pakistan by 29.53% in the financial year 2017-2018.

On the other hand, Pakistan still remains the largest export market for Afghanistan. Imports from Pakistan also surged by 18.33% in the financial year 2017-2018. In the previous financial year, Afghanistan imports amounted up to US$ 1,271 million and in financial year 2017-2018 it increased to US$ 1,504 million. For Afghanistan, Karachi port remained the most significant trade transit route. Afghanistan’s imports through Karachi port in the financial year 2017-2018 was worth US$ 3.321 billion which is a third of Afghanistan’s total import bulk for that financial year.

According to the statistics provided by the Observatory of Economic Complexity, Afghanistan is the 142nd largest export economy in the world with a plethora of products being offered such as fruits, vegetables, nuts, raw cotton and most importantly gold. Since 2011, Afghanistan’s imports have increased by 17.5% in 2016. Gold has gained the position of the top commodity being exported by Afghanistan whichamounts to 20.3% (US$ 243 million) of the country’s total exports.

Furthermore, Afghanistan is the 97th largest importer in the world with imports amounting up to US$ 9 billion in year 2016 and its imports have decreased by the annualized rate of -7.4% in 2011 (US$ 12.5 billion) till US$ 9 billion in 2016.

By examining the exports and imports of both Pakistan and Afghanistan, it can be concluded that both countries can benefit substantially by fulfilling the export and import requirements of each other. For example, broadcasting equipment, stone processing machines and other engines make up 13% of Afghanistan’s total imports while peat along with other petroleum products make up 13.73% of the total imports. Furthermore, wheat and other products make up 10.19%, while defence related equipment make up 10.23% of Afghanistan’s total import percentage.

Pakistan is already the top import and export destination for Afghanistan (US$ 406 million worth exports and US$ 1.68 billion worth of imports). Pakistan can easily fulfil majority of the Afghan import needs if one looks at Afghan import commodities. Pakistan can provide quality defence and other basic technological equipment to Afghanistan, including the petroleum products that are imported in bulk by Afghanistan. Besides this, Pakistan is proficient in producing agricultural products and has a strong military industrial complex whichenables it to fulfil the needs of Afghanistan in a cost-effective and efficient manner. While on the other hand, Pakistan can prove to be a good market for Afghanistan’s export products such as gold, dry fruits, vegetables and fruits.

Increasing bilateral cooperation in trade and increasing economic interdependence between the two countries, Pakistan and Afghanistan will be better able to remove majority of the irritants and misunderstandings that are creating a hindrance in improved bilateral relations.Increasing economic cooperation will also increase people to people contact between Pakistan and Afghanistan and will also open new vistas of cooperation between the two neighbouring countries. Enhanced trade ties will remove the political mistrust and will also help in building confidence between Pakistan and Afghanistan, an element that is missing in huge proportions in Pak-Afghan bilateral relations.

There is no easy road to peace but incremental steps will help in bringing back peace and stability eventually and the first step towards this goal which can be in the form of increased bilateral trade and economic cooperation. Recent indicators relating to bilateral trade between Pakistan and Afghanistan show an encouraging picture and it is high time that both countries capitalise on this vital opportunity for their respective national interests and the greater good of the entire region.


The writer Mr. Muhammad Taimur Khan is a freelance journalist. He holds an M. Phil Degree in International Relations from  National Defence University, Islamabad.