On August 15, the Taliban took over Kabul and declared their rule over Afghanistan. Taliban showed favourable sea change with the grant of public amnesty and thus adopted a soft diplomatic approach. They asked fleeing people not to fear but return to peace. Likewise, the Taliban’s open talks to form inclusive government may be the best strategy and good omen for Afghanistan itself, besides representing a broader dealing more acceptable to the world at large and regional countries.
Taliban spokesperson Zabihullah Mujahid at his first press conference, said that the Taliban would continue trading with neighbouring countries and steps would be taken to promote trade. Business people and traders widely welcomed the announcement and the Pakistan Stock Exchange (PSX) and the country’s bilateral trade with Afghanistan saw a short term sudden rise.
Pakistan exported goods worth US$1bn to Afghanistan in FY21, less than 4% of total exports and just 0.3% of GDP. More than half of this is food commodities and the rest comprises chemicals, pharmaceuticals, cement, packaging material, etc. Because of the small size of the Pakistan-Afghanistan trade, the impact of any prolonged disruption to trade on most listed Pakistani companies is marginal, stock experts believe. There may be grounds for Pakistani exports to increase once trade does resume, with Pakistan likely to recognize a government led by the Taliban or includes them.
On a negative note, a review of export data suggests that shipments to Afghanistan have been on a continuous decline in the past ten years – from nearly US$2.0bn in FY11 to less than US$1bn in FY20. If exports to Afghanistan increase, the cement sector may be a crucial beneficiary (Pakistan exported 4.7mn tons of cement to Afghanistan in FY11 vs just 2.5mn tons in FY21).
Moreover, in the medium to longer-term, provided Afghanistan remains stable, Pakistan may finally link up with the Central Asian Republics in a trade and energy corridor. This vision has been in place since at least the 1990s.
However, on a concerning note, experts fear that the foreign investment in Pakistan from the world would further fall in the coming months due to fear of any prolong instability in Afghanistan. Resultantly, the investors would wait till things settle down in Kabul.
The Taliban takeover in Afghanistan has several unanswered questions. Key among them is the shape of the future Afghanistan government, its acceptability to the international community, and whether the promises made by the Taliban will be honoured, particularly the amnesty to surrendered security forces and government workers.
The non-tariff barriers, sluggish bureaucracy, poor infrastructure and unstable geopolitics are significant hurdles to trade with Afghanistan, local media pointed out and added that the previous Afghan government led by President Ashraf Ghani was more dependent on India, Iran and its Central Asian neighbours for its trade needs.
So, it bought fewer Pakistani products, especially cement and iron, to meet its requirements. Analysts said with less Indian influence, Pakistan might increase exports to Afghanis in the long run. “If trade diversion happens and some quantity of it is diverted to Pakistan, then these industries in Pakistan stand to benefit from such proposition,” said the report released by a local research house.
We conclude here with an optimistic note from AHL Research, that in the longer term, stability in Afghanistan bodes well for the entire region in general and Pakistan-Afghanistan relations in particular. This could be a game-changer for Pakistan in terms of economic development as Afghanistan can function as a link between Pakistan and central Asia. Moreover, Afghanistan’s geographical location relies on neighbouring countries for transit to its other trading partners.
Therefore, the opening of trade routes will benefit Afghanistan and aid Pakistan’s CPEC expansion, a step that will help establish Pakistan as a regional trade corridor.
(www.tradechronicle.com)