SEATTLE — As a country that has been plagued by war since the 1970s, trade in Afghanistan has been impacted by the socio, political and economic instability in the country. With the GDP showing a great decline in the past 20 years, tapping into the country’s trade potential can go a long way in sustainably alleviating poverty in the future and attracting foreign direct investment to the country.
Afghanistan is one of the MENAP countries (Middle East, North Africa, Afghanistan and Pakistan) being impacted by the low global oil prices, with the growth in oil exports only averaging about 1.7 percent.
Moreover, it is essential to crack down on the drug trade in Afghanistan so that funding for terrorist groups in the country is cut. Unfortunately, opium is a very commonly distributed drug in the country.
Underlying weaknesses in infrastructure and immobilities in labor and lack of capital and other resources in the country are adversely affecting the state of trade in Afghanistan. Afghanistan was only the 104th largest export economy in the world in the year 2015. The primary exports of the country include fruits, precious stones, vegetables and resins.
The aggregate revenue currently generated by Afghan trade with other countries amounts to $5 billion. This has impacted the terms of trade of the country as they majorly rely on other trade partners for vital raw materials and other essential resources.
The country majorly relies on the export of primary products like natural resources and agricultural goods, making it difficult for them to get a fair share of the value of their export goods. Beneficiation is vital to galvanize trade in Afghanistan so that export goods and services become more competitive with more value added.
Yet, despite the deficits and economic uncertainty, Afghanistan is strategically at the epicenter of a large trading hub and fast-growth economies as it is bordered by countries like Iran and India. The United States, the United Arab Emirates, Turkey and Pakistan are also very valuable trade allies for Afghanistan.
Globally, countries like India are expanding and opening up more outlets for trade in the region. India recently introduced a new trade route with Iran and sent its first wheat shipment to Afghanistan via the Chabahar port. As part of the shipment, India is supplying more than 1.1 million tons in the form of grants.
India has already committed more than $500 million toward edifying infrastructure and communication links by developing road and rail connections in the region. Not only is India a primary export destination for Afghanistan, but it is also ameliorating the state of infrastructure in the country. Afghanistan, in turn, exported nearly 40 tons of dried and fresh fruits to India this year alone.
Improving diplomatic and trade relations with other countries is beneficial in order to attract investment. Consequently, investment between Russia and Afghanistan is currently valued at $200 million.
It is vital to bolster trade in Afghanistan to boost employment and specialization. Economic, social and structural reforms aiming to improve education and training is therefore very important to prepare the nation for further developments.
To conclude, galvanizing regional trade in Afghanistan will help it develop better and normalized trade relations with other neighboring countries which could benefit trade, commerce and connectivity for the country in the long run.
– Shivani Ekkanath