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Af-Pak focus: Running the trade gauntlet

Haqmal Masoodzai & Arif Shafi
Trade between Pakistan and Afghanistan is increasing steadily by the year. But the risks and challenges for entrepreneurs trading across the border grow accordingly as everyone with a pocket to fill zeroes in on…
16.04.2013  |  Paktia/Peshawar
Piled high with bales of goods, a pair of British-made Bedford 'jingle trucks' stands parked near the border crossing point at Torkham. (Photo and main photo: Shafi)
Piled high with bales of goods, a pair of British-made Bedford 'jingle trucks' stands parked near the border crossing point at Torkham. (Photo and main photo: Shafi)

Starting up an international business across the Afghanistan-Pakistan border can generate handsome profits, but interested parties should know it comes with more than a few complications.

Despite an enormous increase in trade volume between the countries, insecurity and corruption render the main trucking routes a veritable minefield for firms to negotiate - let alone the real mines that may be planted along the way.

Like most people working the lucrative trade passage, Miskeen Khan, an exporter of heavy machinery based in Peshawar, says corruption of officials is much the same either side of the border: "My troubles started in Pakistan, where every government official on the road demanded money. But the situation is not much different in Afghanistan."

Business through proxies

The vice-chairman of the Afghanistan Chamber of Commerce and Industries (ACCI) Khan Jan Alokozai says that annually Afghanistan imports US 2.5 billion dollars' worth of commodities, including food items, fabric, medication, plastic materials, electric tools, and construction materials.

In turn, Afghanistan exports commodities worth 250 million dollars to Pakistan, mainly comprising dried and fresh fruit, carpets and herbal remedies. Pakistan also relies on Afghanistan to act as a conduit for its own daily imports of food items from Central Asian countries.

The turnover could be multiplied manifold if the major bottlenecks caused by smuggling, corruption and insecurity were cleared, Alokozai and others note.

The difficult road infrastructure and complications at the border also mean that most Pakistani entrepreneurs trading, for example, in Afghanistan's border province of Paktia prefer to do business through Afghan proxies. Yet their presence is not just felt in local economies, but shapes them too.

Such is Pakistan's impact on Afghan trade that the majority of transactions and financial deals in Paktia are conducted in Pakistani rupees, to the exclusion of the afghani national currency.

“Everything we need, excluding air and water, comes from Pakistan,” goes a local saying.

In the rugged reaches of Paktia province, cross-border trade with Pakistan, whether legal or illegal, can mean anything from electrical goods to toys to timber.In the rugged reaches of Paktia Province, cross-border trade with Pakistan, whether legal or illegal, can mean anything from electrical goods to toys to timber. (Photo: Nick Allen)

Insecurity is the main deterrent stopping Pakistani businessmen trading directly here. There are traffic and border police on the highways and near the borders, but they are mainly based close to big townships and district centres. Further out on routes, drivers and their loads are truly crossing the badlands, vulnerable to raids by insurgents and criminal gangs.

"I have been held up by thieves three times along the Kabul-Khost road," said one merchant who preferred to remain anonymous.

Money transfers are another headache. Banks enact large fees for transfers, which are slow and notoriously unreliable - forcing businessmen to carry cash.

Ahmad Shah imports medicine from Pakistan and supplies most of the city pharmacies in Gardez, the capital of Paktia. The chemicals trader says that like other merchants, his business suffers from the mistreatment of the security apparatus and the extortionate demands for money from custom officials.

Clogged traffic arteries

In Paktia, as in other border provinces, the limited road infrastructure is a major obstacle too.

There are two roads that link Paktia to the Pakistani border: One 170km half-paved highway, cuts through Khost and links the province to Miranshah, the capital of Pakistan's North Waziristan tribal agency.

The second road links the province through the Patan District and is around 85km long. This additional border-linking highway was built around three years ago, but flooding and roadside bombs have destroyed around 30 per cent of it already.

Decades to work it out...

The Pakistan and Afghanistan Transit Trade Agreement (ATTA) was signed between the two states in March 1965, to ensure smooth transit of trade goods to and from the neighbours. The chief traffic routes of Peshawar/Torkham and Chaman/Spin Boldak were identified under Article III of the ATTA to facilitate the flow of trade vehicles.

Local affiliations also help. Networks that exist because of the shared Pashtun culture and history continue to be strong trade routes: whether it be Kandahar to Quetta, or Peshawar to Jalalabad and Kabul.

"The long border and insecurity make it difficult to control and curb smugglers." Khan Jan Alokozai, Afghanistan Chamber of Commerce and Industries

Pashtuns were trading across the border long before it was given its modern delineation. Despite a plethora of legal complications and border demarcation disagreements in recent years, business between communities both sides continues to thrive.

The Pakistan Afghanistan Joint Chamber of Commerce and Industry (PAJCCI),  a quango, established just under a year ago, has setup a joint platform for finding cross-border solutions to trade. Turkey and Tajikistan have already shown interest in gaining membership of the chamber.

But the sheer length of the shared border, around 2,500 kilometres in total, makes policing it a logistical nightmare for both governments.

"The long border and insecurity make it difficult to control and curb smugglers," said Alokozai of the ACCI.

Contraband runner's paradise

A lorry in Paktia Province.A truck passes through Gardez, the capital of Paktia. Road conditions are good here and security is tighter than elsewhere, but drivers may still have to negotiate corrupt officials at roadblocks. (Photo: Haqmal Masoodzai)

He estimates that illegal trafficking of smuggled goods and commodities accounts for a black market share of 1.5 billion dollars. Residents near border localities smuggle precious stones, wood and other minerals to Pakistan, and it is a source of income for just about anyone with an eye for an opportunity.

And this is an area where smugglers and corrupt officials can work together to maximize profits. Rehmat A., a 13-year-old who smuggles car spares at the Torkham border crossing, says the khassadars, informal guards appointed by commanders or local government, levy hefty bribes at roadblocks.

“It is routine business to deal with them but they demand more money every day," says the young contrabandist. "Luckily they cannot stop us for an extended period, so they agree to the payment we are prepared to pay quickly,” says the boy, who earns around ten dollars a day.

According to him, big-league smugglers use trucks and other vehicles for carrying black market items en masse across the border, having greased the right palms beforehand. Besides parts for cars, apart from narcotics, the most smuggled items include electronic goods, timber, tyres, pre-fabricated households, food items and even toys.

War and its spin-offs

"The volatile security in Afghanistan is a huge obstacle to my trade," says Jan, an Afghan trader who has returned to Afghanistan from Pakistan to work regularly over the last 30 years, despite the pitfalls.

Those looking to trade across the border must assume their own risks: There are no private security companies providing services for non-military convoys.

But if operators can get inside the military contracting system, they stand to reap the greatest profits of all while the international forces continue large-scale operations in Afghanistan.

The ACCI estimates the current worth of transit business of NATO goods through Pakistan to Afghanistan at between 2 and 2.5 billion dollars.

But the bonanza is already starting to tail off as the NATO are already starting their withrdawal work, due to end by the close of 2014. Which will only leave the civilian trade that has so far doggedly eluded efforts to maximise its potential.

A. Zia also contributed to the editing of this article.

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