Over the last forty-eight months, Pakistan has lost more than half of its market share in Afghanistan to India, according to the head of the Pakistan-Afghanistan Joint Chamber of Commerce and Industry. This trend is reflective of the growing acceptance of India as a major trade partner of Afghanistan. Since this has happened at Pakistan’s expense it is indeed a deep wound for the country. More so, because it has been unfolding for some time now – right in front of the eyes of our policymakers – and almost certainly preventable. There were measures that could perhaps have been taken and steps introduced to neutralise the impact of Indian penetration of the Afghan market. But this challenge from India has not developed in isolation. Our market share has shrunk in Afghanistan also because of China’s penetration of the same market. Clearly, New Delhi’s success can be traced to its habit of heavily subsidising its exports and coupling it with other incentives such as offering air tickets with a 75 per cent rebate while boosting medical tourism. Such tactics are useful when one wants to make inroads into a country. The Afghans thus made a beeline to India thanks to the cheap tickets and free multiple visas without police checks. In a rather telling two-year period Pakistan’s trade with Afghanistan shrunk from $2.7 billion to $1.2 billion. For trade watchers it was a painful development for Pakistan which lost the traditional markets of flour, men and women’s clothes and red meat.
Unless Pakistan can find ways to counter the flooding of the Afghan market with cheap Chinese and subsidized Indian goods, we must be prepared for more losses in the future. The first step is to reinforce Pakistan as a natural market for Afghanistan and offer more meaningful incentives and concessions to Afghan buyers.
Published in The Express Tribune, March 5th, 2018.