Afghan Transit Trade and suggestions for both countries

Afghan Transit Trade and suggestions for both countries

 sources say that in last fiscal year 2023-24, volume of Afghan transit was $2.887bn. 

In the wake of crackdown on smuggling, the Afghan transit trade has declined by 89 per cent in the first five months of the current financial year.

Afghan Transit Trade

The Afghan Transit Trade (ATT) refers to the transportation of goods and commodities through one country’s territory (Pakistan, in this case) for delivery to landlocked Afghanistan. It operates under the Afghanistan–Pakistan Transit Trade Agreement (APTTA), which governs the legal framework for facilitating trade between the two nations. The trade primarily includes goods like machinery, food items, fuel, and consumer goods imported through Pakistani ports (e.g., Karachi and Gwadar) and transported to Afghanistan.

Volume of Afghan Transit Trade

The volume of Afghan transit trade has fluctuated due to various factors, including political instability, security issues, and economic challenges. As of recent estimates:

• In 2023, Afghan transit trade through Pakistan saw a significant increase, reaching $5 billion, according to official reports.

• However, illicit trade (smuggling) often undermines accurate volume reporting, as goods imported under the transit trade framework are sometimes diverted into Pakistan’s domestic market.

Effects of the Pak-Afghan Conflict on Trade

The Pak-Afghan war, insurgencies, and cross-border tensions have had several impacts on Afghan transit trade:

  1. Disruption of Supply Chains • Frequent border closures, such as at Torkham and Chaman, disrupt trade routes, delaying shipments and increasing costs. • Security risks discourage traders and transport companies from engaging in cross-border commerce.
  2. Economic Costs • Pakistan faces revenue losses due to smuggling and reduced transit fees. • Afghanistan suffers from limited access to essential goods, inflating prices for consumers and stifling its economy.
  3. Reduced Trade Confidence • Persistent conflict reduces the trust of Afghan traders in using Pakistani ports and routes, pushing them toward alternatives like Iran’s Chabahar Port or routes through Central Asia.
  4. Growth of Informal Economy • The lack of effective governance and mutual cooperation has fueled an informal economy, including smuggling and corruption, harming both countries’ formal trade systems.

Advice to Both Sides

For Pakistan

1.  Strengthen Security Measures

  •   Enhance border security to prevent smuggling while ensuring smooth transit for legitimate goods.

2.  Reform Transit Policies

  •   Simplify customs procedures to make Pakistan a more attractive transit hub.

3.  Diversify Ports and Routes

  •   Promote Gwadar and other ports as viable alternatives to Karachi, increasing capacity and efficiency.

4.  Diplomatic Engagement

  •   Improve relations with Afghanistan through trust-building measures and collaborative economic projects.

For Afghanistan

1.  Expand Trade Partnerships

  •   Diversify trade routes and agreements with regional players like Central Asian states, Iran, and India to reduce dependence on Pakistan.

2.  Strengthen Domestic Economy

  •   Invest in infrastructure and industries to decrease reliance on imports.

3.  Ensure Transparency

  •   Work to reduce corruption and ensure that goods meant for transit are not diverted.

4.  Focus on Stability

  •   Address internal conflicts and establish policies that encourage foreign investment and trade.

Mutual Recommendations

1.  Revise APTTA

  •   Update the Afghanistan-Pakistan Transit Trade Agreement to address current challenges, ensuring fair and efficient trade.

2.  Promote Regional Connectivity

  •   Collaborate on initiatives like the China-Pakistan Economic Corridor (CPEC) and the TAPI pipeline to benefit from shared infrastructure and economic opportunities.

3.  Facilitate Confidence-Building

  •   Establish regular dialogue to address disputes and create joint mechanisms for resolving trade and security issues.

4.  Combat Smuggling Together

  •   Launch joint operations and share intelligence to tackle illicit trade.

By fostering cooperation and mutual respect, both nations can transform their trade relations into a catalyst for economic growth and regional stability.

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