Status of Trade Trends in Afghanistan: Years 2008-2012


Mojtaba Modabber Jafari

Mojtaba Modabber Jafari

 

Student, M.A (Semester III), Development Economics, South Asian University, New Delhi, India.

N.B: The write up has been submitted as project.

… …

Introduction

The Government of Afghanistan’s approach to trade is largely liberal with minimal restrictions. Import bans are maintained on only a few products, largely on religious grounds, and there are no seasonal restrictions, quotas, or other non-tariff barriers on imports. As an example; imports of salt are, however, subject to strict restrictions due mainly to the fact that the Government of Afghanistan wishes to protect a state-owned salt mine in Takhar province in northern Afghanistan. Locally produced salt is said to be contaminated with heavy metals and mud and hence there remains a strong preference for Pakistani salt. This restriction by the Government has created a market for smuggled salt.[1]

In official communiqués by international donors and the Government there is much reference to reform in business licensing procedures since 2001 as a major milestone toward supporting private sector development in Afghanistan and facilitating trade with its neighbors. Reportedly, the import license application process, which prior to reform in 2006 involved 42 steps, 58 signatures, and several weeks of processing now requires only three steps, six signatures, and two days to process. The main licit exports out of Afghanistan are dried fruits and nuts, carpets and rugs, and wool. There

are, in addition, exports of limited quantities in fresh fruits, cotton, animal by-products, gemstones, and more recently, saffron. The main imports are capital goods, construction materials, foodstuffs, pharmaceuticals, textiles, other manufactured goods, electricity, and petroleum products.[2] Due to the integration of Afghanistan into international markets, the presence of international forces and organizations there was an improved recording of import flows and increased consumption, however relatively less export flows.

History

      With the transitional government Afghanistan entered into a sophisticated phase of trade in which, besides the increasing consumption and rising import – which was fed by foreign aid, the exports had both ups and downs. Increasing hopes to the transitional government led to investment in different industries including manufacturing, services, and resources; thus a rise in resource and agricultural exports. However after the reform in 2006, the trend reversed; with emergence of insecurity through kidnapping and intensive attacks of Taliban, the investment trend started to decline but the import kept on increasing.[3]

 

A Profile of Afghanistan’s trade; years 2008-2012

Year

2008

2009

2010

2011

2012

GDP[4] 10,190,534,636$ 12,486,950,469$ 15,936,784,436$ 18,033,526,069$ 20,161,482,145$
GDP growth rate[5]     % 3.6 21 8.4 7 11.8
Total exports 540,065,594 $ 403,441,006 $ 388,483,635 $ 375,850,935 $ 428,902,710 $
Total imports 3,019,860,129 $ 3,336,434,781 $ 5,154,249,867 $ 6,390,310,947 $ 6,204,984,101 $
Export growth          % -25.3 -3.7 -3.2 14.1
Import growth         % 10.5 54.5 23.9 -2.9
Trade dependence      % 34.9 30.0 34.8 37.5 32.9
Export propensity       % 5.3 3.2 2.4 2.1 2.1
Import propensity       % 29.6 26.7 32.3 35.4 30.8
Import dependency ratio 0.24 0.22 0.25 0.27 0.24
Trade balance -2,479,794,535 -2,932,993,775 -4,765,766,232 -6,014,460,012 -5,776,081,391
Change in trade balance% -18 -62 -26 4
Export/Import coverage% 17.9 12.1 7.5 5.9 6.9

Source: http://comtrade.un.org

 

A Profile of Afghanistan’s trade; years 2008-2012

Since the data on Comtrade for Afghanistan exists only for the years 2008 to 2012, thus after this I will focus on this period of time.

GDP had an increasing rate, and finally in 2012 doubled, comparing to that of 2008; but the drastic fluctuations in growth rate of GDP were the result of change in aid. In this period however the exports were declining, the imports were still rising but in a decreasing rate because the imports were moving towards consumption goods and going far from capital goods. Trade dependence was almost the same but import dependence was increasing, which again shows a shift from export and production to import. In 2008 exports covered almost 18 % of imports, but in 2012 it decreased to nearly 7 %.

 

 Share of major receivers of Afghanistan’s Export

2008

2009

2010

2011

2012

Pakistan 48.9 47.4 39.0 48.1 47.0
India 24.4 18.8 16.8 18.7 16.3
Iran 3.4 10.2 8.2 5.2 6.2
Turkmenistan 2.0 1.4 2.2 1.0 0.0
USA 0.4 4.3 0.9 0.9 0.0
China 0.4 0.9 3.0 1.6 1.1
Total 79.5 83.1 70.1 75.5 70.5

Source: http://comtrade.un.org

In this period a large amount exports has gone to these six countries, of which Pakistan has the largest share of almost 49%. India and Iran with shares of 24.4 & 3.4 % are in second and third position. Fluctuations exists in the export values of this period, finally in 2012 the top three importers remain in their position with India having a decrease and Iran having an increase. Moreover exports to Turkmenistan and USA decreased to zero.

Decrease in total export to these countries shows that Afghanistan being open to global market, has found some other trade partners too. However the total export value in 2012 comparing to that of 2008 had almost been 20% lesser. Decline in exports is both the result of lower investment and lack of competitive power of the products.

Share of major senders of Afghanistan’s Import

2008

2009

2010

2011

2012

Pakistan 16.0 9.2 11.6 13.7 14.2
China 14.2 10.8 13.7 9.0 11.5
Iran 5.8 5.3 7.5 9.1 8.0
India 3.5 3.2 2.2 1.6 1.9
USA 0.6 1.3 1.5 1.4 0.0
Turkmenistan 0.4 2.3 2.3 5.5 0.0
Total 40.5 32.1 38.7 40.4 35.7

Source: http://comtrade.un.org

 

However Pakistan, China, Iran, India, USA and Turkmenistan were the main importers of Afghanistan in this period but they altogether have only exported an amount less than half of the total imports of Afghanistan. Pakistan being the first exporter to Afghanistan, has kept the same place till 2012, as she did in importing from Afghanistan. In this period except Iran, almost imports from all these countries have fallen; thus total imports from these countries declined. However total value of imports in this period has risen, which shows the change in import sources. It means the liberalization helped the appearance of some new sources of import and thus more flows of import entered into Afghanistan, as a result of which domestic industries weakened day by day.

 

Shares of Top-ten Import products at 6-digit level

Code

Details

2008 Amount

2008 %

Code

Details

2012 Amount

2012 %

999999 Other commodities 1,484,703,857 49.2 999999 Other commodities 4,014,217,965 64.7
970190 decorative plaques 409,105,323 13.5 270300 Peat 1,517,526,125 24.5
151800 Animal/ veg. oil 163,225,370 5.4 110100 Wheat/ Maslin flour 175,498,335 2.8
110100 Wheat/ Maslin flour 162,443,037 5.4 680100 Setts, curbstones 163,333,238 2.6
401211 Retreaded rubbers 117,900,451 3.9 580810 Braids 110,201,401 1.8
870891 Radiator for motor 91,811,388 3.0 090230 tea 69,063,797 1.1
580810 Braids 69,920,153 2.3 300670 Gel preps, medicine 36,018,405 0.6
180690 Chocolate, cocoa … 52,062,498 1.7 401211 Retreaded rubbers 31,076,242 0.5
901890 Medical instrument 44,070,337 1.5 620640 Women clothes 20,919,570 0.3
847490 Machine parts 38,288,791 1.3 640320 Footwear 19,728,669 0.3
Total 87.2   99.2

Source: http://comtrade.un.org

 

Share of Top-ten Import commodities at 6-digit level

      In 2008 imports of top-ten products was 87.2 percent of total imports, however this amount reach to 99.2 % in 2012 with change in their position in the top-ten group. This is because most of the imports in 2012 are part of the commodities which are not coded (almost 65 %). However it is clear that the total import is increased in this period.

Some reasons for which imports has increased: [6]

First, foreign aids through NGOs have increased consumption of the society, and led to increase in import.

Second, security problems in the recent years lead to lower investment and in some cases shifting investment outside, thus lower domestic commodities and the need for imports.

Third, however tariff is rate is between 0.5 to 40 percent but the average tariff for the imported goods is only 5 percent, because the high tariff is only for some luxury goods like luxury cars or bikes. Afghanistan shares a 2,340km border with Pakistan and 865km with Iran. In fact, collecting revenue from a low tariff rate was far better than no revenue from smuggled goods.

Fourth, re-export is another reason. Traders observing the opportunity to bring down tariff through the influential authorities, use it to benefit re-export of the imported goods.

 

 

Share of Top-ten Export products at 6-digit level

Code

Details

2008 amount

2008 %

Code

Details

2012 amount

2012 %

570110 Carpet & others 149,622,910 27.7 999999 Other commodities 280,340,061 65.4
080620 Dried grapes 96,439,038 17.9 570110 Carpet & others 72,759,125 17.0
999999 Other commodities 42,262,075 7.8 090930 Seeds of cumin 54,147,304 12.6
080250 Pistachios 41,841,245 7.7 120740 Sesamum seeds 20,641,417 4.8
080212 Almond shelled 36,065,938 6.7 050400 Guts & bladders 1,014,803 0.2
970600 Antiques >100 yrs 29,918,479 5.5  
130219 Vegetable extracts 22,814,393 4.2  
080420 Figs, fresh or dried 16,111,398 3.0  
080610 Fresh grapes 15,527,687 2.9  
080132 cashew nuts 14,928,449 2.8  
Total 86.2 100

Source: http://comtrade.un.org

Share of Top-ten Export products at 6-digit level

In 2008 share of top-ten export commodities is 86.2 % in which carpet with 27.7 % is the first, dried grape 17.9 % the second and the other export commodities are: Pistachios, Almond shelled, Antiques of age>100 years, Vegetable saps & extracts, Figs, fresh or dried, Fresh grapes and Shelled cashew nuts. However in 2012 carpet is the second with only 17 % share in total export and the other exports are: Seeds of cumin, Sesamum seeds, Guts, bladders and stomachs of animal and other commodities.

It seems that the drastic decline in export is partly because of decrease in export of carpet and partly because the export of dried fruits has decreased or in some cases vanished.

Conclusion:

Afghanistan should avoid trade-lead development and focus on development-lead trade. “Today, the central question for LDCs is not so much how they may achieve further liberalization of their trade regime; rather it is how they can effectively promote development with a relatively open trade regime.”[7]The UNDP report on Asia-Pacific Human Development and trading opportunities for the least developed countries summarizes well the vulnerabilities of LDCs: “When it comes to integration into international trade, the least developed countries are in a very vulnerable position. They typically have small economies, difficult topographies, and are located far from international markets, in which they are minor and weak players”. Thus even they cannot bear trading liberally, then how can one expect them to benefit from trade.

 

 

References

http://comtrade.un.org

http://www.worldbank.org/

Regional Trade Regime & Declining Rate of Private Investment in Afghanistan, AFGHANISTAN CENTER FOR RESEARCH & POLICY STUDIES, Ahmad Idrees Rahmani, April 2008

Ministry of commerce: http://moci.gov.af


[1] Regional Trade Regime & Declining Rate of Private Investment in Afghanistan, AFGHANISTAN CENTER FOR RESEARCH & POLICY STUDIES, Ahmad Idrees Rahmani, April 2008

[3] Regional Trade Regime & Declining Rate of Private Investment in Afghanistan, AFGHANISTAN CENTER FOR RESEARCH & POLICY STUDIES, Ahmad Idrees Rahmani, April 2008

[5] Ibid

[6] Regional Trade Regime & Declining Rate of Private Investment in Afghanistan, AFGHANISTAN CENTER FOR RESEARCH & POLICY STUDIES, Ahmad Idrees Rahmani, April 2008

[7] Regional Trade Regime & Declining Rate of Private Investment in Afghanistan, AFGHANISTAN CENTER FOR RESEARCH & POLICY STUDIES, Ahmad Idrees Rahmani, April 2008

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