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The Afghanistan opportunity

Most of our legitimate export and import activities are conducted via our southern outlet to the sea through Karachi and Bin Qasim ports. We do not do any significant foreign trading activity through any of the three land outlets – one opening to India, the other to Afghanistan and Iran and the third to China. Of course all these three land outlets are used fairly regularly for smuggling.

The not so significant foreign trade activity via Pakistan-India border in the east and across the Durand Line in the north-west shows the extent of political trust deficit that exists between India and Pakistan on the one hand and on the other between Pakistan and Afghanistan. Trade volumes between Iran and Pakistan could never achieve any significant size perhaps because both are importing countries; the decade long sanctions against Tehran further curtailed their border trade. China-Pakistan border up north is too far away from our industrial and commercial hubs to become a crossing for any significant foreign trading activity.

With the China-Pakistan Economic Corridor (CPEC) project in the offing, the overland outlet in the north connecting Kashgar in China to the sea outlet in the south connecting Gwadar in Pakistan foreign trade between Pakistan and China is expected to jump up many notches. And with sanctions having been lifted from Iran, over land trade between the two countries is also likely to improve perceptibly.

However, trade between India and Pakistan and between Pakistan and Afghanistan and beyond to Central Asian countries would continue to remain too insignificant as long as Islamabad remains unresponsive to the Kabul’s demand to let its trucks with export goods cross over to India via Wagha border and bring back on the same trucks Indian exports to Afghanistan travelling the same route. New Delhi too is likely to continue to bar our exports to India via Wagha using non-tariff measures despite having given Pakistan the MFN status unless we offer India overland transit trade route to Afghanistan and beyond.

Denying the transit trade facility to Afghanistan and India does not yield any economic gain to Pakistan. In fact Pakistan loses millions annually at least in road tax collection from the two countries using our land for trading. However, as a consequence Islamabad gains a lot of Afghan and Indian hostility, adding further to the trust deficit.

The fear that India would use the easy access to Afghanistan market and beyond through the land route via Pakistan to enhance its political clout in the war ravaged country is totally misplaced. In fact by opening up our land for the two to trade all the three neighbouring countries would gain immensely in economic terms. And perhaps Pakistan and Afghanistan would be able to forge a mutually more gainful relationship both economically and politically thereby stabilising the Durand Line for all times to come.

Under the Afghan Trade and Transit Agreement (ATTA) goods bound for Afghanistan are to transit through Pakistan free of duty. This resulted in many of these duty-free items being resold on the black market in Pakistan. When Pakistan clamped down in 2003 on the types of goods permitted duty-free transit, and introduced stringent measures and labels to prevent such practices, re-routing of goods through Iran from the Persian Gulf, increased significantly. The new Afghan-Pak Trade and Transit Agreement (APTTA) allows Afghan trucks to transport exports to India via Pakistan through the Wagha crossing point.

Meanwhile, let us take a closer look at the economic potential of Afghanistan to see what a bonanza we are missing just to counter an imaginary threat from India.

Afghanistan is known for producing some of the finest fruits, vegetables, turtles, and especially pomegranates, apricots, grapes, melons, and mulberries. Several provinces in the north of the country are famous for pistachio cultivation but the area currently lacks proper marketing and processing plants. It is claimed that some Indian companies buy Afghan pistachios for a very low price, process them in India and sell to western countries as Indian products.

The availability of land suitable for grazing has traditionally made animal husbandry an important part of the economy. Natural pastures cover some 7,500,000 acres. The northern regions around Mazar-e-Sharif and Maymanah were the home range for karakul sheep. The country has plenty of water reserves and suitable climate for fish farming. Dense forests of oak trees, walnut trees, and many other species of nuts grow in the southeast and on the northern and north-eastern slopes of the Sulaiman ranges.

Afghanistan is endowed with a wealth of natural resources, including extensive deposits of natural gas, petroleum, coal, marble, gold, copper, chromite, talc, barites, sulphur, lead, zinc, iron ore, salt, precious and semi-precious stones, and many rare earth elements. In 2006, a US Geological Survey estimated that Afghanistan has as much as 36 trillion cubic feet of natural gas, 3.6 billion barrels of oil and condensate reserves. Geologists also found indications of abundant deposits of coloured stones and gemstones, including emerald, ruby, sapphire, garnet, lapis, kunzite, spinel, tourmaline and peridot. In 2010, the Pentagon officials along with geologists revealed the discovery of nearly $1 trillion in untapped mineral deposits in Afghanistan. A memo from the Pentagon stated that Afghanistan could become the “Saudi Arabia of lithium”. Another US Geological Survey estimate from September 2011 showed that the Khanashi carbonatites in the Helmand province of the country have an estimated 1 million metric tonnes of rare earth elements.

Afghanistan signed a copper deal with China (Metallurgical Corp of China Ltd) in 2008 involving an investment of $2.8 billion by Beijing and an annual income of about $400 million to the Afghan government. The country’s Ainak copper mine, located in Logar province, is one of the biggest in the world. It is estimated to hold at least 11 million tonnes or US $33 billion worth of copper. Experts believe that the production of copper could begin within two to three years and iron ore’s in five to seven years.

The country’s other recently announced treasure is the Hajigak iron ore mine, located 130 miles west of Kabul and is believed to hold an estimated 1.8 billion to 2 billion metric tons of the mineral deposits. AFISCO, an Indian consortium of seven companies, led by the Steel Authority of India Limited (SAIL), and Canada’s Kilo Goldmines Ltd are expected to jointly invest $14.6 billion in developing the Hajigak iron mine. The country has several coal mines but these are required to be modernized.

M Ziauddin, "The Afghanistan opportunity," Business recorder. 2016-03-16.
Keywords: Economics , Smuggling--Prevention , International trade , Commercial policy , Economic sanctions , Economic policy , Afghanistan , China , India , Pakistan , America , AFISCO , CPEC , MFN , ATTA , SAIL