Strengthening Afghanistan Pakistan economic engagement, academic exchanges and social linkages Dr. Vaqar Ahmed, SDPI

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Seventh Round of Afghanistan Pakistan
Bilateral Dialogue
29-30th April, 2019 | Islamabad
Session title: Strengthening economic engagement, academic
exchanges and social linkages – Integral to expanding bilateral
connectivity for development1
Dr. Vaqar Ahmed, Joint Executive Director, SDPI
Let me start by thanking RPI and HSF for organizing this meeting and
particularly to Mr. Raoof Hassan for making an effort to bring us all together
to brainstorm ideas for a more peaceful future in Afghanistan, Pakistan and
the region. I join my Pakistani colleagues in thanking the delegation from
Afghanistan for visiting Islamabad and indulge in this discussion. I have
been part of several recent track-I and track-II bilateral dialogues and must
say that the tone on both sides is optimistic this time.
The first part of my talk is a situation analysis.
1 This version is notedited.

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The last time I was in Kabul, I had emphasized that a key casualty of
difficult political relations between the two countries has been the lagging
economic cooperation not just between neighbours but also the region. We
have put trade and investment dialogue on a back burner. We have not been
able to depoliticize trade. This has put in danger the livelihoods, jobs and
welfare of people on both sides of the border.
In SDPI’s 2015 report we had demonstrated that:2
“During the period 2004–2011 employment in Balochistan and Khyber
Pakhtunkhwa provinces increased in trade, transport, warehousing and
communication (TTWC) sectors. This increase in employment was
particularly significant in the poorest quintiles associated with Afghan
transit and bilateral trade.
During the same period household incomes in TTWC sectors increased
more vis-à-vis non-trade sectors in Khyber Pakhtunkhwa and
Balochistan.”
These gains achieved in the past represent an opportunity for the future. The
easiest path would be to insulate economic cooperation from political
differences and let the business community on both sides interact more closely
2 Shabbir,S. and Ahmed, V., 2015. WelfareImpacts of Afghan Trade on the Pakistani Provincesof Balochistan and
Khyber Pakhtunkhwa. Stability:International Journal of Security and Development, 4(1), p.Art. 6. DOI:
http://doi.org/10.5334/sta.et

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with each other. To scale up trade and investment value chains, business
community will require facilitation measures. These are all documented in the
meetings held between the two governments during 2014-15. The
Afghanistan Pakistan Joint Economic Commission (JEC) process had provided
important policy proposals which if expedited can certainly provide significant
confidence on both sides and also act gradually in lessening of a trust deficit
and building decent working relations between economic ministries in both
countries.
In my meetings with Afghan counterparts in 2017 I had informed that Pakistan
had shared the revised draft of Afghanistan Pakistan Transit Trade Agreement
(APTTA) with Afghan counterparts. Also, Pakistan had shared revisions to
Afghanistan Pakistan Preferential Trade Agreement (PTA) way back in
December 2015. Since then according to my knowledge there hasn’t been any
official response from Kabul. After some persuasion from the Pakistan-
Afghanistan Joint Chamber of Commerce & Industry (PAJCCI) the Commerce
Ministries of both sides met in 2018 however APTTA and PTA were not
discussed. Neither was a discussion on how to expedite other decisions of the
last JEC meeting which in fact included cooperation in infrastructure and social
sectors as well.
The failure of both sides to insulate economic cooperation from political
differences has led to time lags in implementation of important transboundary
programmes including TAPI pipeline, CASA-1000, cooperation in water sector,

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and disaster risk reduction. Some variants of donor fatigue phenomenon are
also visible. The multilateral development institutions on both sides have been
questioning the seriousness of Afghanistan and Pakistan to cooperate in trade
and investment agreements. There are important projects lined up which
require foreign funding including Peshawar – Kabul Highway, customs
integrated electronic exchanges at several border points, automated scanning
and quarantine services – to name a few. However in my interaction with the
donor community, this funding will be subject to how best both countries are
able to have a broadbased dialogue on socio-economic cooperation which
ultimately can result in greater value for money not just from the view point
of development partners but also the recipient countries. This broadbased
dialogue must result in reinitiating of JEC, APTTA and PTA dialogue at track-I
level.
Let me extend this argument a bit further and propose that Afghanistan will
not be able to optimize the dividends from Central Asia Regional Economic
Cooperation (CAREC) Programme and Pakistan will not be able to optimize
the dividends from China Pakistan Economic Corridor (CPEC) unless the
decisions of previous JEC are implemented.
The second part of my talk revolves around gaps in the current business-to-
business engagement.

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While forums such as PAJCCI have played a key role in cementing business
relationships on both sides, however a large part of cooperation has revolved
around the trading community. The manufacturing community is still missing
from the dialogue. These are the producers from agro-based and
manufacturing industries who have an incentive to form joint ventures.
In SDPI’s enterprise level survey, conducted in 2017, Pakistani manufacturing
community has been keen on foreign direct investment in Afghanistan in
sectors which include textile, leather, food and diary processing, chemicals,
pharmaceuticals, plastics, iron and steel. Some potential investors also
approached governments on both sides to ease and facilitate the creation of
investment value chains and joint ventures. However this hasn’t met with
much success. The opportunity here is that the pace of industrialization in not
only Afghanistan but western parts of Pakistan can be vastly increased if value
chains in crop sector, livestock, food processing and small scale manufacturing
are allowed to flourish.
This is of course easier said than done. For example, this cannot just be
achieved by easing visa regulations and allowing liberal movement of raw
material and inputs for industry on both sides. Rather this will also require
research in to key production activities where both countries have capacities
to raise industrial units. We will also require research on sector-specific
regulatory constraints on both sides.

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To expedite this research our proposal was to link the scholarships provided
by the Government of Pakistan to Afghan students with a clear methodology
which can as a result, identify key areas of cooperation in agriculture,
manufacturing and services sectors. Currently the 3000 Afghan scholars
availing scholarships in Pakistan are mostly confined to medicine and
engineering disciplines which are equally important. These scholarships can
however be scaled up with the help of private sector universities in Pakistan
which have better academia-industry linkages.
The last part of my intervention puts forward select proposals to improve
Pakistan’s image in Afghanistan in turn also providing the people of
Afghanistan the chance of see how improved social linkages with Pakistan
can help a more certain economic future.
SDPI has proposed to the government:
 More frequent meetings between Afghan and Pakistani trade officials to
discuss: faster customs clearance processes; insurance of transport
vehicles, containers and consignments; tracking and monitoring of
consignments; role of SROs hurting bilateral trade; credit facility for
traders; and currency swaps. Better trade dispute resolution
mechanisms can be envisaged through inputs from PAJCCI. Apart from
the civil service on both sides, interaction on trade cooperation should
also be prioritized during parliamentary engagements. The

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parliamentary committees on commerce and trade on both sides may
like to increase frequency of their dialogue.
 Expediting work on ongoing road and railways projects linking the
various cities across the Afghanistan-Pakistan border should remain a
medium to long term agenda. Likewise air cargo and passenger flight
options for business community need to be increased. Business persons
on both sides may be allowed visa-on-arrival facility. This will also have
a positive impact on removal of non-tariff barriers on both sides and will
also help an increase in trade-in-services. In the case of trade-in-
services, Pakistan’s private hospitals have immensely benefited from
providing timely and quality service to Afghan patients. This can be
scaled up in future.3 For effective promotion of ‘made-in-Pakistan’,
Trade Development Authority of Pakistan could collaborate with PAJCCI
to increase frequency of export goods exhibitions inside Afghanistan.
 Transit reforms related to transportation, customs and border controls
will also have a quick impact in terms of increasing formal bilateral
trade. Pakistan railways had initiated cargo trains to facilitate increased
quantities of merchandise in transit. An evaluation may be undertaken
if this measure has led to anticipated gains. Timely completion and
3 See Rabia Manzoor, S. K. Toru, and V. Ahmed (2017) Health Services Trade between India and Pakistan.The
Pakistan Journal of Social Issues.VolumeVIII (2017).

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effective management of Torkham-Jalalabad dual carriageway and
Chamman–Kandahar rail link can also slash the transit costs.
 Pakistan should help in automation of trade flows at border points.
Afghanistan may be supported by Pakistan’s Federal Board of Revenue
(FBR) for putting Weboc-like systems at new border points where trade
is being allowed. Where automation and conventional trade-related
infrastructure may not be possible, relevant authorities on both sides
could consider establishing ‘border haats’ which have been successful in
the case of several Asian economies.4
 The banking channels between the two countries should be expanded to
curtail informal trade flows, illegal flow of money and related
transactions. This will also be important from the view point of recent
demands put forward by Financial Action Taskforce. For Afghanistan it
is difficult to transfer foreign currency abroad particularly in larger
amounts. This issue can be addressed if both countries accept each
other’s currency for trading purposes.
 Bilateral FDI cooperation may be facilitated through easing of foreign
exchange controls by SBP, particularly with a view point to enhance
investment cooperation with Afghanistan
4 See Saad Shabbir and Vaqar Ahmed (2016) Trade with Iran:Prospects for Pakistan.Criterion Quarterly, Vol 10 No
4.

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 Ministry of Commerce in Pakistan and FBR should revisit obsolete SROs
that are hurting the bilateral trade. Several of these SROs are now
obsolete howevercontinue to burden the traders and often times restrict
trade
 The civil society and think tanks working on Afghanistan-Pakistan trade
cooperation should be strengthened by the governments and
development partners. They should independently hold annual
Afghanistan-Pakistan economic summits which also benefit from the
presence of investors and business community of both sides.
Cooperation between media outfits is need of the hour. Television
channels on both sides could partner for airing evidence-based talk
shows which explore and exhibit the trade and investment cooperation
potential. This will also enable people on both sides to see stories of
success resulting from closer business to business relations. The
relevant sports board on both sides could also look into the potential of
‘cricket diplomacy’ in bringing the two sides closer.
 The Ministries of Commerce in both countries should institutionalize a
dedicated Afghanistan-Pakistan desk with research, monitoring and
evaluation capabilities. This unit will: a) coordinate the implementation
of decisions undertaken at various government forums, and b)
undertake specific research tasks related to Afghanistan-Pakistan
bilateral trade and investment cooperation. This will also regularly allow

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both sides to update current assessment on the missing facilities
curtailing cross border transit and commercial trade. Weak border-
related trade infrastructure was pointed out as a key constraint in our
survey
 The planned trans-boundary cooperation projects in the Central Asian
region should go beyond the currently ongoing work on CASA-1000,
TAPI and some road sector projects. A high-powered working group
comprising of experts from Afghanistan, Pakistan and select Central
Asian countries should be facilitated so that an inventory of projects can
be planned. Such projects will strengthen economic and political
interdependencies in the region
 The scholarships allowed to Afghan students can be scaled up with the
help of private sector universities in Pakistan which have better
academia-industry linkages. Also, business schools in both countries
could partner and arrange study trips for faculty and students enabling
each other to see how business partnerships can be strengthened.
 Both countries must come together to push for early SAARC Heads of
State Summit in which several important transport and energy
cooperation agreements are expected. Counties which are part of
Economic Cooperation Organization (ECO) and Shanghai Cooperation
Organization (SCO) can be asked to help in putting SAARC process back

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on track. Ultimately connectivity in South Asia is bound to help other
economic blocs in the region.
Let me end this part of my talk with a positive note.
After several months of decline in Afghanistan Pakistan trade, we finally
started to see an uptick during late-2018. Afghanistan was once again among
the top export destinations for Pakistan in the fourth quarter of 2019. We
asked the authorities what had changed? There was still no progress on JEC,
APTTA and PTA. To explore this further we were asked to sit with the border
control authorities and customs department officials on both sides. To the
pleasant surprise of most of us, this increase actually came about due to the
cooperation of a few customs officials on both sides who were willing to walk
over and discuss with each other every time some formality, truck permit,
container specification, tracker requirements were found missing. Their
personal working relationship and sense of responsibility towards achieving
higher trade traffic on both sides made this happen. This for us was a lesson
that in leadership. Many a times we await decisions from the higher political
authorities whereas the solution lies in the hands of those who are able to
exercise their own job description in the most loyal manner. It is in this
anecdote we find reasons to attach greater importance to people-to-people
cooperation between Afghanistan and Pakistan.

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Thank you!
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