AFGHAN TRADE POLICY

ECONOMIC-OVERVIEW: The economy has improved significantly since the fall of the Taliban regime in 2001 largely because of the infusion of international assistance, the recovery of the agricultural sector, and service sector growth. Despite the progress of the past few years, Afghanistan is extremely poor, landlocked, and highly dependent on foreign aid. Much of the population continues to suffer from shortages of housing, clean water, electricity, medical care, and jobs. Criminality, insecurity, weak governance, lack of infrastructure, and the Afghan Government's difficulty in extending rule of law to all parts of the country pose challenges to future economic growth. Afghanistan's living standards are among the lowest in the world.The international community remains committed to Afghanistan's development, pledging over $67 billion at nine donors' conferences between 2003 and 2010. In July 2012, the donors at the Tokyo conference pledged an additional $16 billion in civilian aid through 2015. Despite this help, the Government of Afghanistan will need to overcome a number of challenges, including low revenue collection, high levels of corruption, weak government capacity, and poor public infrastructure. Afghan President Ashraf GHANI Ahmadzai is dedicated to instituting economic reforms to include improving revenue collection and fighting corruption. However, the reforms will take time to implement and Afghanistan will remain dependent on international donor support over the next several years.

GDP (purchasing power parity):$64.08 billion (2016 est.)GDP - real growth rate:2% (2016 est.)GDP - per capita (PPP):$2,000 (2016 est.)Agriculture - products:opium, wheat, fruits, nuts; wool, mutton, sheepskins, lambskins, poppiesIndustries: small-scale production of bricks, textiles, soap, furniture, shoes, fertilizer, apparel, food products, non-alcoholic beverages, mineral water, cement; hand-woven carpets; natural gas, coal, copper

48%

28%

21%

3%

Sectoral contribution as % of GDP

Services AgricultureIndustry Tax on Import

Afghanistan Trade policy:Afghanistan occupies a key strategic location linking Central Asia with South Asia, providing China and the Far East with a direct trade route with the Middle East and Europe. At the moment, Afghanistan also faces a security threat that has region-wide implications and that can only be addressed effectively by region-wide cooperation

Foreign Trade & Contribution Trade increased more than 10%. The total exports of goods was about US$ 658 million and total imports was US$ 7.004 billion during 2014-2015. Despite increasing exports, the Afghanistan trade balance is generally in deficit and relying on foreign aid heavily.

Customs Department:Afghanistan Customs Department (ACD) is a key department dealing with international trade and transit, therefore, Customs reforms was high on the agenda of the government. In 2004 Afghanistan became a member of World Customs organization (WCO). it has two objectives1. providing protection to society. 2. raising revenue to fund government’s operating expenses and as a means of achieving fiscal

What is a Tariff?A tariff is a duty or tax applied by the Afghan Customs Department to collect the revenue due and payable on imported goods and some exported goods from Afghanistan.Import Tariffs Afghanistan Tariffs (percent ad valorem) for Textiles, Apparel, Footwear and Travel GoodsYarn =2.5%Silk =2.5-10Wool =0-5Cotton =5%Knit fabric 5%Carpet 10-30%Footwear =2.5-10%Travel goods 3.5-10%Home furnishing 2.5-10%

Value of main imported commodities

Spare parts, Mech and Ve-

hicles; 24

Petroleum and Iubricants; 21

Meteal production; 9Wheat and

wheat flour; 5vegetable Oil; 2

Fabric; 2Sugar ; 1

Cigarettes; 1

Tyres and Tubes; 1

Tea; 1Cloths; 1Soaps; 1

Others; 31

Imports:$7.004 billion

Import partners:

Dry fruits27%

Carpets18%

Medical herb16%

Fresh fruits 7%

Oil Seeds7%

Wool and an-imal hair

3%

Skin2%

Karakul Skin2% Others

18%

Value of main exported commodities

Exports:$658 millionAfghanistan is the 158th largest export economy in the world

A Silk Route to Markets:To become an integrated link at the heart of the Silk Road Afghanistan is located in the heart of Eurasia, and since time immemorial, has been at the crossroad of cultures, between the People's Republic of China and the Middle East, and between South Asia and Europe.

Silk Road connects network of trade routes across East, South, Western Asia, Central Asia, North Africa and Europe.

Silk Road makes Central & South Asia the trade and transportation link between Europe & Asia and helps to move Afghanistan from Aid to Trade

Bilateral Trade Arrangements: As Afghanistan is a land lock country and depends on the other countries for its trade, we needed to have the Bilateral Agreements

with our Trade partners. The Government of Afghanistan has signed 31 bilateral tradeWe have Agreements with: Pakistan, Uzbekistan, Tajikistan, Turkmenistan, Kazakhstan, India, China, EU, US, Iran, etc. These Agreements include both Trade and Transit and Annual bilateral meetings.

Bilateral Trade Arrangements causes: 1. Increased Trade 2.Technological Spill over 3.Better Socio-economic & political 4.Business to Business Contact 5.Market Access-closer 6.Competitive Advantage

Regional Economic Integration * To play its central role as a land bridge between Central Asia and South Asia, and the Middle East and the Far East.

* To connect land locked energy rich Central Asia with warm water ports and energy deficient South Asia.

* Afghanistan is a member of International organizations that work on strengthening cooperation on trade, transit and transportation, such as ECO, CAREC and SAARC.

* Afghanistan plays a key role of land link within the Region, as such it can help overcome bilateral problems including border trade.

CAREC: Central Asia Regional Economic Cooperation Trade Infrastructure and Facilities * Afghanistan is connecting the region's key economic hubs to each other, and connecting the landlocked CAREC countries to other global markets to increase trade openness in the region and to stimulate growth and development.

* Hairatan-Mazar-e-Sharif train route connects Central Asia with Europe and Asia. * CAREC Corridor 5 connects East Asia to the Arabian Sea through Central Asia. The route covers the People's Republic of China, the Kyrgyz Republic, Tajikistan, and Afghanistan. The corridor has 3,700 km of roads and 2,000 km of railways.

* CAREC Corridor 6 includes three routes linking Europe and the Russia Federation to the Arabian Sea port of Karachi and Gwadar or Bandar Abbas in the Persian Gulf. The route has 10,600 km of roads and 7,200 km of railways.

SAARC South Asian Association for Regional Cooperation To increase economic cooperation with aim of generating economic growth and increase the standards of living.

*Benefit to Afghanistan from tariff reductions of SAARC members under the framework of SAFTA(agree S.) (e.g. India).

Chabahar port:It is located in south eastern of Iran in Oman sea. Minimum transit distances to Afghanistan, Pakistan & middle Asia & most economical port in commercial trade for these countries. The agreement had signed in the presence of Narendra Modi, Hassan Rohani and Ashraf Ghani in Iran on May 23, 2016. The government of Iran has designated Chabahar as Free Trade and Industrial Zone.

Advantages of Chabahar Port1. It will provide an access route to land-locked Afghanistan, that would be free of Pakistan’s control.2. It would give India access to markets and mineral resources in Afghanistan and central Asia3. Provide access to Hajigak iron ore mine developed by Steel Authority of India.4. It will provide boost to the development of International North South Transport Corridor (INSTC)5. It will provide Market for farm products from Afghanistan6. It will help in combating drug trafficking.

Conclusion:Afghanistan has pursued a liberal trade policy and will reform its trade policy regime in line with the WTO requirements. In the context of regional integration and implementation of bilateral and transit agreements, Afghanistan will promote harmonization with international conventions, agreements and standards in order to move towards Multilateral trading system.

References:1.Afghanistan Ministry of Commerce & Industries.2.The world fact book.

PRESENTED BY:HABIBULLAH NOORZAD