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Afghanistan Trade Policy Achievements and Issues – Analysis

By Shokrullah Amiri

Introduction: In this article, it has been tried to present an argument about trade policy development in Afghanistan. Initially, providing a brief background, then summarising key policy achievements and issues in the post and pre Afghanistan WTO membership, arguing how WTO membership has worked out, existing institutional challenges to policy development and finally presenting conclusion and recommendation.

Background
Afghanistan is a landlocked country with its economy mostly dependent on aids. The inflow of billions of US dollars to Afghanistan from donor countries has been the key source of trade since 2001. This is happening despite the fact that the country is rich in natural resources such as Lithium, Iron, Copper, Cobalt and so on which according to The Telegraph (2010) it is estimated to have the worth of 3 trillion US dollars. Afghanistan’s failure to extract its resources has always been criticized by the economists however these institutional voids can turn into great business opportunities for international firms that not only have the financial resources but also have the capacity and experience to successfully explore such resources that would not only benefit them but the whole stakeholders in the country.

Likewise, the country is located in the heart of Asia, connecting three important regions: South Asia, Central Asia and both of these regions with the Iranian plateau in the west to Europe. Afghanistan’s geography has set the course of Afghan history for millennia as the gateway for both invaders and traders. However very little has been done to modernize or expand this connectivity with the needs of the 21st century. Failure to achieve this has resulted in the subcontinent to be one of the least connected regions of the world.

Policy Achievement
Afghanistan’s post-Taliban economic and the political era is a much different one than it was before the year 2001 (i.e. during Taliban regime) which the improvement is recognized by a great level of interdependence dominating all walks of life in the country. With these positive notes, it is believed that Afghanistan has started moving towards right directions in order to become a geo-economically and geopolitically a strategic nation in the region by connecting all of the six countries that Afghanistan shares a border with; Pakistan, China, Iran, Tajikistan, Uzbekistan, and Turkmenistan.

The importance of international trade is realized in Afghanistan National Development Strategy (MoFA, 2013) which under the said strategy (ANDS) the government has so far signed multiple bilateral agreements such as the South Asian Free Trade Area (SAFTA) (SAARC, n.d), Preferential Trade Agreement (PTA) with India (MoCI, n.d)) and Afghanistan and Pakistan Trade and Transit Agreement (APTTA) (ACD, 2011). Afghanistan National Peace and Development Framework (ANPDF), Chabahar Trade and Transit Route, new trade ports established with Turkmenistan and China.

All these agreements were giving the optimism that the country was a pro-free trade country and that was finally proved when Afghanistan formally became the 164th WTO member in 2016 (WTO, 2016). Since then, importantly, Afghanistan has recently launched the 2000 years old Lapis Lazuli Trade/ Transport Route with Turkmenistan, Azerbaijan, Georgia, and Turkey to reach European markets by road and the sea.

Additionally, considering the security and geopolitical issues of the region, Afghanistan has so far launched over 11 air cargo corridors from Afghanistan to Asian and European countries to diversify its connectivity with regional and international countries.

The Post-WTO Membership Era
The all-time high exports in Afghanistan is achieved in the post-WTO membership accession era. According to trading economics, exports in Afghanistan increased to 831.93 USD million in 2017 from 596.46 USD million in 2016. Exports in Afghanistan averaged 385.21 USD million from 2000 until 2017, reaching an all-time high of 831.93 USD million in 2017 and a record low of 69.10 USD million in 2002.

Overall it is commonly believed in Afghanistan that the country would benefit from more market access, international supply chains, lesser tariffs, significant FDI for vast natural resources, transport of energy through pipelines from surplus energy of Central Asia countries to emerging markets in South Asia, like India, Pakistan, China and beyond (CASA, 2017).

Afghanistan’s WTO membership has given the current administration a clearer direction for the Afghan economy to become more liberalized with a vibrant private sector that is difficult to repeal. WTO membership has pushed the Afghan government to normalize tariffs and implement structural and administrative reforms for private sector development. It has helped the government to improve the weakened economic policies and reduce corruption in the country.

The Afghanistan WTO membership has helped Afghanistan to become top improver with record reforms to improve the business climate in Afghanistan. With the five major reforms, Afghanistan ranked top improver in the World Bank doing business report in the year 2017/18. As a result, Afghanistan has improved its position from 183rd to 167th position in the global ease of doing business rankings.

Trade Policy Processes in Afghanistan
Within the first decade (2001-2010), the Afghan government free trade policy-making process has had a complicated (many approaches) process due to the fact that the government was newly established, had to meet different donor’s conditions and the overall knowledge about the understanding of the market economy system by the Afghan masses including the civil servant was very limited.

It was further mixed as Afghanistan was experiencing not an organic transition from a traditional and controlled economy to a market economy defined in the Afghan constitution. The (2001-2014) policies were not aligned with the private sector and Afghanistan economic potentials for development and most of them found out to fall short of the commitments those policies used to hold.

Nevertheless, the policy-making in current government generally follows through the following key steps in Afghanistan:

* I. Policy direction is usually obtained from ANDPF or given by the President who himself was a former economic advisor to the World Bank, Afghanistan Commitment to the WTO, and receive inputs of the private sector directly.
* II. The sector minister is tasked by the president either in the cabinet meeting or High Council of Economics to develop the concept.
* III. The ministry launches the dialogue with the policy stakeholders (including international partners) which finally lead to the development of the draft policy concept.
* IV. The draft policy concept is discussed and draft the concept gets approved (or rejected) in High Council of Economic or Cabinet Meeting.
* V. If the proposed policy does not require the legislative process, then it is implemented by sector ministry.
* VI. Otherwise, based on cabinet/council decision, the sectoral ministry submits the refined policy proposal to Afghanistan Institute of Law which is operating under the Ministry of Justice.
* VII. The Ministry of Justice then analyze it with regard to all laws, regulations, and guidelines then submits it to the Cabinet for approval.
Once approved, the proposed legislation will be handed over to the Afghan parliament for debate and approval. Once it is passed, it is finally approved by President of Afghanistan then sectoral ministry starts implementations.

Policy Implementations and Challenges in Afghanistan
With having all the pre-WTO membership challenges to trade policy development in Afghanistan, the current administration has come a long way and has managed to overcome some of the challenges and open up the Afghan air cargo routes and land borders with Central Asian countries for trade development in Afghanistan, however, challenges to policy development and implementation still remains.

* There are 18 government entities dealing directly or indirectly with international trade development in Afghanistan. Every entity gives importance to its own policies making it very hard for coordination, cooperation, and collaboration.
* Policymaking and implementation in Afghanistan has failed to form a coalition for implementation, particularly at political levels, for instance, the deputy minister(s) representing a different political party than the minister in the same ministry.
* The love of every new politician at minister and deputy minister levels, coming up with a new policy initiative while side-lining the implementation of the already approved and developed ones which could have achieved some outcomes.
* During the past two decades, policy development and implementation lacked not only the political will but also the political action so that it could create an authorizing environment for policy implementations in Afghanistan.
* The weak legal analysis and research by the Ministry of Justice of Afghanistan
* The existence of political patronage and governance in policymaking and implementation.
* The international community representation by different funding agencies with their different approaches and conditionality’s, which still form the basis of their continued practical engagement and financial support, have made it harder for the government of Afghanistan. They are still spending a big sum of money through off-budget leading to inaccurate aggregate data about financial resources to allow policymaking through the available budget.
* Policy failure in Afghanistan is also strongly interlinked with insecurity, corruption and inadequate technical capacities in trade policy development.

Conclusion

The recent outcomes show that the current administration is better experienced in trade policy development and implementation than the previous administrations. However, the Afghan government lacks a strong system of trade policy development relying on one specialized institution with strong cooperation, coordination, and collaboration between all stakeholders so that the know-how, know-what, and know-why capitalize in one specialized entity. And the need to continue with Deputy for Policy and Strategic Planning in almost every of 18 government institution dealing with the trade policies appears to be in some or another way obsolete.

Recommendation
Considering the above mentioned contextual challenges, coming up with recommendation would be difficult. However, the lessons learned in the past two decades suggest that it is better for policy development in Afghanistan to establish an independent specialist entity such as Afghanistan Institute of Economic Policy Development under the umbrella of the Ministry of Finance which has the budget at its disposal. This initiative will allow the rest of the entities to specialize in the implementations of the policy developed by the Institute. The capacity and skills will capitalize on one specialized entity, make it easy for the private sector to keep dialogue mostly with one entity, limit politicians to start developing new policy again and reduce corruptions and the institute will be free from conflict of interest in policy-making too.

The institute shall also monitor and evaluate the lead implementing partner of the policy and report to the Office of the President of The Islamic Republic of Afghanistan.


(Author Shokrullah Amiri is a private sector development specialist with more than 10 years of work experience. He is currently working as Head of Private Sector Development and Outreach Department at the Administrative Office of the President of Afghanistan (AoP).

Published Date: Sunday, April 21st, 2019 | 09:24 AM

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