Pakistan eyes greater Central Asian trade benefits 

The emerging regional trade outlook after the US withdrawal from Afghanistan has led to an active engagement between Pakistan and Central Asian Republics. The US defeat in Afghanistan also eliminated the Indian influence in the neighbouring country, which sits at the crossroads to South and Central Asia.

Capitalising on this, Pakistan is intensifying trade with Afghanistan and countries in Central Asia. Adviser to the Prime Minister on Commerce Abdul Razak Dawood hopes to grow trade with landlocked Uzbekistan, Tajikistan, Turkmenistan, Kyrgyzstan and Kazakhstan to $1.5 billion a year from less than a billion in the past decade.

The Central Asian Republics are rich in energy resources; therefore, the region is crucial for power-hungry Pakistan to obtain cheap electricity. In return, the Central Asian countries would get access to Pakistani markets for their high quality cotton and agricultural products; and more importantly access to the Pakistani ports.

Transit trade for Uzbekistan has already begun. Uzbekistan is currently highly reliant on the Iranian seaport of Bandar Abbas, accessed through Turkmenistan but they also have a transit trade agreement with Afghanistan, while Pakistan also has Afghanistan Pakistan Transit Trade Agreement.

The Afghanistan-Uzbekistan-Pakistan transit trade would give access to Pakistani seaports to Uzbekistan and offer access to all five Central Asian States for Pakistani exports. This would help enhance trade and regional connectivity and open doors for increasing Pakistan’s exports to Uzbekistan, while harnessing the potential of a $90 billion market in Central Asia.

Earlier, Dawood said that the Pakistani exporters had been concentrating on Europe, the UK, America, Japan and Korea, “But there is a much bigger world so one of our policies is to look at the Central Asian Republics and that is why we have selected this “Silk Route Reconnect” theme and we have selected Uzbekistan. Uzbekistan is the only country that is connected with all the Central Asian Republics and they have very good infrastructure.”

Ghulam Samad, a senior research specialist at CAREC Institute, notes in a presentation that connecting with Central Asia provides an opportunity to get access to Eurasian Economic Union countries.

“[The] Central Asian economies are unexplored yet. If Pakistan taps in and develops concentration of its export market it may be the beginning of diversification of its export markets that are unfortunately concentrated to a few economies historically.”

“Energy cooperation with its surplus Central Asia will also benefit Pakistan’s comparative advantage.”

Pakistan’s Federal Board of Revenue (FBR) had already proposed certain amendments in the Customs rules and transit trade rules for seamless transit trade, which would magnify Pakistan’s role in the immediate region and the entire world.

The FBR intends to broaden the scope of transit trade to Tajikistan, Uzbekistan and Turkmenistan through Torkham, Chaman and Ghulam Khan via Afghanistan.

“As the country plans to expand its transit trade relationship with the countries beyond Afghanistan, the transit trade rules and [the] Customs rules would govern Pakistan cargo exported to Tajikistan, Uzbekistan and Turkmenistan through Torkham, Chaman and Ghulam Khan via Afghanistan,” a government official said. “There will be strategic trade and cooperation agreements, going forward.”

Although, there are some concerns in the west; regional players such as China and Russia are quite positive about this development. Pakistan may also play a proactive role to capitalise on these geo-political developments.

Dr Kaiser Bengali noted, “Overtly, Pakistan is handling the Afghan situation well. We must recognise the new government at an early date, subject to it observing basic acceptable tenets of governance. We must also offer economic cooperation for the sake of the Afghan people.”

Bengali said, “Pakistan must extend ‘Supplier Credit’ facility to Afghanistan for import of Pakistani produced/manufactured products only. It will allow Afghan traders to import from Pakistan on credit, with exporters paid by the government of Pakistan, which recovers/writes off the amounts from the Afghan government at a future date.”

When Chinese President Xi Jinping in 2013 inaugurated the Belt and Road Initiative (BRI), which is eventually to comprise a vast network of infrastructure projects spanning more than 60 countries, it largely excluded Afghanistan, moving through Central Asia and Pakistan instead.

But with the beginning of Nato troops’ withdrawal from Afghanistan in 2014, China revised the policy and started considering the country as a primary link between the Central Asian Republics and the China-Pakistan Economic Corridor.

Shams Burney, a trader and transporter, said that the Taliban had just come and it was too early to predict anything. “However, the first impressions are quite promising. The traders believe that the government officials would follow the orders to the letter, which will eliminate corruption to a significant extent.”

Burney said that generating revenues is the biggest challenge being faced by the Taliban. “Therefore, they would certainly take trade facilitation and enhancement measures, which may include trade agreements with the neighbours involving access to Central Asia.”

Burney, who has been in the transit trade business for a long time, expressed optimism about the developments in the neighbouring country.

“[The] Taliban announced general amnesty and there has been nothing otherwise, which has built up the confidence and trust of [the] traders, which is evident that trade is on, large quantities of miscellaneous goods are going there.”

“As they grow stable, uncertainty will be ended and business activities will increase, opening up opportunities for Pakistan’s business community.”

Burney said that the goods from Pakistan were going to Central Asia, but it was a long and hectic process. “Access to Pakistan’s vehicles to Central Asia, as Pakistani vehicles go into Afghanistan and Afghan vehicles come into Pakistani ports, will multiply bilateral trade with Central Asia.”

The government of Ashraf Ghani was influenced by India and denied access to Central Asia unless Pakistan gave open access to Indian cargo vehicles through Pakistan to Afghanistan. “Things seem to have changed, and I am hopeful trade with Afghanistan, Central Asia and Russia would prosper.”

A couple of months earlier, Taliban spokesman Zabihullah Mujahed announced most import duties had been reduced by as much as 40 per cent to boost trade. Afghanistan mostly imports food items, construction material and fuel, which increased trade between the two countries significantly, and influx of fruits and vegetables also eased prices in Pakistan.

The trade between Afghanistan and Pakistan had already resumed, as the Taliban quickened the documentation process that facilitated the trade activities at the Torkham border.

An official of the Pakistan Customs said around 1,200 loaded trucks daily crossed the border from and to Afghanistan and the number is increasing.

“I believe it is too early to comment on the opportunities arising out of it. Firstly, we need to see whether the Taliban reopens economic ties with the west. And their money with the central bank is released or not. Then, we will have to see if China pours BRI’s activities in Afghanistan,” A A H Soomro, managing director of KASB Securities said.

“In the absence of any massive economic development in Afghanistan, we can only export food, pharmaceuticals, cements, steel, etc. Regional trade will only be viable once peace prevails and China intervenes. Still a long way to go.”

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