PBC carries out highly significant study on Pak-Afghan trade

ISLAMABAD: There is huge potential for additional trade between Pakistan and Afghanistan of more than $500 million which should be explored to boost not only bilateral trade between the two countries but also to build stronger friendlier political ties.

A study of Pakistan Business Council (PBC) titled ‘Afghan Transit Trade through Pakistan & Pakistan-Afghanistan Bilateral Trade’ issued here on Wednesday revealed that Pakistan continues to be the favoured transit route for Afghanistan’s imports catering for 54 per cent of Afghanistan’s transit imports in 2015. Despite fear in some quarters that Pakistan is losing out to Iran when it comes to Afghan transit trade, this has not so far happened.

An analysis of declared values of Afghan transit trade shipments and a comparison with prices as studied by Afghanistan’s export partners do not show significant discrepancies in declared and export prices except in a few cases. Out of the 2,067 products imported at HS Code 6-digit level, 13 products showed evidence of under invoicing that could not be explained as a difference in originating countries. The percentage of products showing discrepancies was only 0.62%.

The key findings of the PBC revealed that in 2010, 59% of Afghanistan’s imports from countries with which it did not share a border transited through Pakistan. In 2015, 54% of Afghanistan’s imports from non-neighbouring countries transited through Pakistan indicating the importance of Pakistan as a transit route for Afghanistan.

Since not all of Afghanistan’s trading partners have studied their international trade data for 2015, total exports to Afghanistan and exports to Afghanistan by non-neighbouring trading partners have been estimated by taking an average of the last three years’ exports to Afghanistan for non-studying countries. Keeping in view the slowdown in the Afghan economy, this methodology may have led to the assumption of higher trade figures than actual for these countries. Based on available data and best estimates, it can be seen that Afghanistan’s imports in 2015 have declined by roughly 10% to $7.66 billion from the 2014 figure of $8.54 billion. The highest figure for Afghanistan’s imports in the recent past was $12.43 billion in 2011. Since 2011, Afghanistan’s imports have been in decline, one reason for it could be the general slowdown in Afghanistan caused mainly by a withdrawal of foreign military forces and donors, the study said.

It said that the exports to Afghanistan from Afghanistan’s non-neighbouring countries that had been declining since 2011, recovered somewhat in 2015. In 2011, exports from non-neighbouring countries were $7.89 billion. In 2014 this figure fell to $4.30billion which increased by 38% in 2015 to $5.94.

In 2015, $677 million imports from China dominated Afghanistan’s transit trade through Pakistan accounting for 48% of Afghanistan’s imports through APTTA. However, unlike previous years the USA was not among the top 5 trading partners of Afghanistan utilising APTTA for exports to Afghanistan. The USA slipped down to 6th place with $126 million. Malaysia was 2nd to China when it came to utilising transit routes through Pakistan. Afghanistan’s imports from Malaysia were worth $487million, which was 15%of Afghanistan’s transit imports through Pakistan.

The PBC highlighted that the product mix of imports through transit trade in 2015 remained similar to the product mix for 2014. New products in the top 20 transit imports in 2015 were sugar, meat of ducks, fowl cuts, telephones for cellular networks, machines for reception, milk powder and air conditioners.

Referring to specific items, the PBC pointed out that woven pile and chenille fabric, HS 580190, at US $544.6million was the highest commodity imported into Afghanistan using the APTTA in 2015, this accounted for nearly 17% of total Afghan transit trade imports through Pakistan. The top 10 transit trade products comprised 56% of Afghanistan’s imports using APTTA. These included vegetable fats & oils, palm oil, refined cane or beet sugar, reception apparatus for televisions, woven fabrics of cotton, black tea, narrow woven fabrics of manmade fibres, duck meat, and edible mix/preparations of animal/vegetable fats & oils.

Values of 16 out of the top 20 imports through APTTA in 2015 were more than the values studied as exports to Afghanistan by trading partners. For example, for woven pile and chenille fabric, imports through APTTA were $544.6million but trading partners studied exports to Afghanistan of $0.01 million of this product in 2015.

This discrepancy was also evident for the following products: vegetable fats and oils, palm oil, reception apparatus for televisions, woven fabrics of cotton, black tea, fabrics of manmade fibres, duck meat, animal/vegetable fats and oils, new tires of cars, frozen fowl cuts and offal, green tea, cell phones, milk powder, padlocks and air conditioners. In the case of meat and edible offal of ducks, no exports to Afghanistan were studied in 2015 by any of its trading partners, the study maintained.

The data released by the PBC disclosed that from a peak of $2.66 billion in 2011, Pakistan’s exports to Afghanistan have shown a declining trend. Between 2014 & 2015, Pakistan’s exports to Afghanistan have declined by 8.5%, from $1.88 billion in 2014 to $1.72 billion in 2015.

Pakistan’s imports from Afghanistan have remained roughly static at $0.390 billion between 2014 & 2015. Since Pakistan’s exports to Afghanistan have declined while imports have remained constant, the trade balance, which is still in Pakistan’s favour, has declined from $1.69 billion to $1.49 billion.

Pakistan’s exports to Afghanistan as a percentage of total world’s exports to Afghanistan remained constant at 22% in 2015 i.e. 22% of all Afghanistan’s imports originated from Pakistan.

Pakistan’s imports from Afghanistan as a percentage of total world imports from Afghanistan decreased marginally from 45% in 2014 to 42% in 2015.

With nearly half of Afghanistan’s exports finding a market in Pakistan and nearly a quarter of its imports originating from Pakistan, Pakistan remains a crucial international trading partner for Afghanistan.

Pakistan’s top export to Afghanistan in 2015 was HS Code 110100, wheat or meslin flour, and the top import from Afghanistan was, HS Code 080610, fresh grapes.

Total additional potential trade between Afghanistan and Pakistan, based on 2015’s data, was $576.86 million of which $500.72million were potential exports to Afghanistan and $76.14 million were potential imports from Afghanistan. HS Code 300490, medicaments was the top potential export to Afghanistan at $36.55 million and HS Code 080212, almonds, fresh, dried, shelled or peeled was the top potential import from Afghanistan at $13.65 million, study said.

Comparison of per unit prices of imports through APTTA with per unit prices of Pakistan’s imports.

For the purpose of this comparison, products which had a price discrepancy of at least 100% (i.e. Pakistan’s import price was at least twice the import value declared for imports via APTTA) were identified. Next those products were short-listed for analysis which had imports of at least $1.0 million into Pakistan and similarly Afghan imports for the same were $1.0 million and above.

The PBC further said that the country of origin was compared for products that met the above criteria to ensure that price differential between Pakistan’s import price and price of imports through APTTA destined for Afghanistan was not because of differences in origin.

Out of 2,067 products imported through APTTA at HS Code 6-digit level, 36 products met the criteria. These products include machines for reception, needles and the like, tricycles and the like, articles of iron and steel, footwear, hetercycl compounds, electric lighting fittings, automatic circuit breakers, glassware and aluminum containers among others.

Out of these 36 products, 16 products showed evidence of under invoicing when price of imports through APTTA was compared with the price studied by Afghanistan’s trading partners.

The comparison of per unit prices of imports through APTTA with per unit prices of exports to Afghanistan revealed that using exports to Afghanistan as a proxy for Afghanistan’s imports, per unit prices of imports through transit trade were compared with per unit prices of exports to Afghanistan by partner countries. Products for which the declared price of imports through APTTA was at least half the studied price of exports to Afghanistan by its partner country were identified as possibly being under invoiced.

Forty-two products showed indications of possible under invoicing of which one product, green tea, was among the top 20 imports through APTTA in 2015.

Out of the products that showed evidence of under invoicing, 13 products had the same top originating country in the case of imports through APTTA and international exports to Afghanistan. These products included hetercycl, antibiotics, apparel and clothing accessories, sports footwear, footwear other than sports, tableware, glassware, chain/roller of iron or steel, articles of iron or steel, locks, hinges, insulated winding wire of copper and electrical insulators.

Except for antibiotics for which the originating country was India, all other products which were potentially under-invoiced originated from China.

For imports through APTTA values of 37 products (other than the 16 of the top 20 imports through APTTA in 2015) was also found to be higher than corresponding product values studied by trading partners as exports to Afghanistan in 2015, the study added. -MUSHTAQ GHUMMAN