Afghanistan (1978-2012) An Economic advantage or curse for Pakistans Economy

Presented by:

Fahad Anwar

 Pakistan and Afghanistan share an immense border known as Durand line of 2430 km determined in 1893. After Pakistans creation in 1947, Afghanistan objected to its admission to the United Nations and decided not to recognize Pakistan as the legitimate inheritor of the territorial agreements reached with the British India.

 For intermittent periods between 1947 and 1973, Kabul extended support to Baluch and Pashtun nationalists inside Pakistan and even called for the creation of a new state called Pashtunistan. Ever since the Soviet invasion of Afghanistan in 1979, large numbers of Afghans have sought refuge in Pakistan

 Afghanistan has long had a dependent economic relationship with neighboring Pakistan. The Afghan Transit Trade Agreement (ATTA), allows Afghanistan to import goods duty free through the port of Karachi is key to their trade. Pakistan is the largest exporter to Afghanistan, with around US$ 1.7 billion in exports annually, which accounts for 36.8% of Afghan imports and 8.4% of Pakistans exports.

 Afghanistan is responsible for more than 90% of the worlds illicit opium production, and 33% of that product is smuggled across the Pakistan-Afghanistan border. From Afghanistan, narcotics are smuggled into Baluchistan province, where they are then trafficked to Iran and later the Middle East and Europe.

 Some of the main items smuggled from Afghanistan into Pakistan are drugs such as opium, hashish, and heroin, as well as lumber, precious stones, copper, automobiles and electronics. Pakistan, Iran, and Afghanistan have agreed to coordinate border security in order to stop drug traffickers, and they have also agreed to block the transport of chemicals used to produce heroin.

 Pakistan finds itself in economic competition with its regional rival Iran and India. Pakistans monopoly over Afghanistans access to sea was recently challenged with the opening of the Iranian port of Chabahar and the linking of it to the ring road in Afghanistan.

 MAJOR EXPORTS: Opium, fruits and nuts, hand woven carpets, wool, cotton, hides and pelts, precious and semi-precious gems.

MAJOR IMPORTS:
Capital goods, food and petroleum products, and most consumer goods.

Major items of export from Pakistan to Afghanistan (US$ Million)

Commodity Description Petro & Petr. Products Plastic & articles there of 03-04 126.617 92.17 04-05 311.333 78.932 05-06 442.88 112.28 06-07 313.92 79.59 07-08 477.14 120.97

Wheat Floor
Animal or Vegetable fats or oil Iron & steel & its products

91.151
58.652 55.216

97.282
106.064 42.602

138.38
150.88 60.60

98.09
106.95 42.96

149.09
162.55 65.29

Major items of import from Pakistan to Afghanistan (US$ Million)

Commodity Description 03-04 04-05 05-06 06-07 07-08

Iron & Steel & its articles

Ed. Fruits, Nuts etc. Edible Vegetable Wood charcoal, wood & articles Leather & Leather manufactures

5.976
12.792 6.238 5.495 0.770

20.024
6.486 2.829 1.955 0.908

12.051
11.55 7.182 3.04 1.511

19.06
18.30 11.430 4.57 2.28

28.62
23.72 17.57 9.42 4.71

Source: WTO Trade data base, World Development Indicators, Federal Bureau of Statistics.

Impact on Pakistans Industry

It is a common phenomenon that whenever a war erupts on a large scale in any country, its fallout is felt in its immediate neighboring countries as well. Inflation rate increases from 2.5 to 18.9% till 2011. Weaponization of Pakistani society started when US sent huge supply of AK47 rifles and other arms/ammunitions for Afghan Mujahedeen. Though solid figures are not available, at least 53,000 Afghan workers using Pakistani passports are reported to have been hired in the U.A.E..

conclusion
Secure border , foreign policy and media can play important role for Pakistan economic advantage as a stable and secure Afghanistan, developing economically, represents a benefit to Pakistans ailing economy, as it may provide a growing market for Pakistani products.