Security-centric policies and trade

Pakistan appears to be trapped in a paradox. While its private sector leaders advocate for dialogue and inclusion, its public policy, both in words and actions, suggests otherwise. Pakistan has refrained from engaging with other countries and has excluded dissenting voices.

The state has ardently advocated for connectivity for cross-border trade. It is involved in multiple transit and preferential trade agreements with Central Asian states, including Azerbaijan, Uzbekistan, Tajikistan and Kazakhstan, to promote regional trade. Pakistan also aspires to become a pivotal Eurasian trade hub for the International North-South Transport Corridor (INSTC), an alternative to traditional routes that connect India, Iran, Azerbaijan, Russia and Central Asia via ship, rail and road. However, geopolitical complications and current strains emanating from the war on Iran have reduced the INSTC to a mere concept as of now.

State functionaries often emphasise Pakistan's geostrategic location as a unique selling point, a leverage that leaders repeatedly highlight as a potential game-changer. However, this leverage loses its significance when political considerations hinder critical movement through the strategic location. This is precisely what transpired after Pakistan closed its border with Afghanistan on October 11, 2021. Consequently, the leverage has lost its value, as evidenced by some concerning basic data.

For instance, Pakistan's cumulative trade with Afghanistan and the five Central Asian republics during 2025 surpassed $2.41 billion, but has since receded to a mere fraction of last year's figures since the border closure. Data released by the State Bank of Pakistan indicates that exports to Afghanistan plummeted to $219.5 million in July-December 2025, a significant decline from the $505.8 million recorded during the same period in 2024. Similarly, imports from Afghanistan amounted to slightly above $6 million in July-December 2025, compared to the $10 million recorded in the same period in 2024.

The cross-border trade movement to the Eastern border has also been severely impacted, as India has opted to suspend its participation. Consequently, the leverage has effectively been suspended, albeit for all practical reasons, although not attributable to Pakistan's actions.

It is unsurprising that the current policy raises a fundamental question: how can Pakistan develop and engage in trade if its western and eastern neighbours remain closed or are subject to politically-induced suspensions, albeit intermittent?

This question emerged during a recent reception with European diplomats who expressed a keen interest in understanding the rationale behind the suspension of all movement on the western border. These inquiries stem from a fundamental thesis: economic interests should ideally serve as effective deterrents to unlimited war or, at the very least, restrict the extent of war or perpetual state of conflict with a neighbouring nation. This principle also dictates the appropriate duration for a country to withhold its exportable surplus, thereby denying itself essential foreign exchange, which is crucial for maintaining a balanced budget and facilitating investment.

A recent import-export traders' meeting convened by the Center for Research and Security Studies in Islamabad also unveiled some concerning truths.

Pakistan has lost its Afghan market to Iran, Uzbekistan, and even Turkey. The loss of Afghanistan has resulted in a substantial reduction in Pakistan's overall trade, as the traders emphasised. According to these traders, the impact extended beyond Afghanistan, encompassing Central Asia and beyond.

Traders, informed of the situation, expressed concern that many had received advance payments in the millions of dollars from their clients and subsequently purchased raw materials that are now rendered obsolete or stale. The absence of a border and the disruption of supply have resulted in the loss of contacts and opportunities, at least temporarily. Traders emphasised that returning the advance payments, which were initially received in dollars, presents a daunting task due to the stringent remittance regulations. Consequently, both customers and traders have suffered losses.

Pakistan's economic leverage is currently severely constrained by security-centric policies, which are rooted in the belief that coercion can induce cooperation in the security realm. The lack of consistency in policy and the reluctance to shield business from political influences continue to hinder the country's potential long-term economic and socio-political gains.

While it is undeniable that every individual's life holds immense value, particularly of those serving in national service, it is crucial to consider the broader economic implications of placing the lives of state security personnel above the interests of the nation as a whole. Sri Lanka, for instance, lost thousands of lives on its mainland, including in Colombo, due to the LTTE insurgents. However, it maintained open borders with India and other potential investors.

Taiwan, while firmly aligned with the Western camp, enjoys preferential treatment from China, which views it as an integral part of its territory and is patiently awaiting its re-integration with the mainland. China provides Taiwanese investors and businessmen with various advantages, such as tax exemptions and rebates, which Beijing exercises with strategic finesse. Despite running tensions with the Taiwanese government, Beijing has never compromised its strategic leverage with the Taiwanese business and investor community.

It is hoped that the latest round of talks between Pakistan and Afghanistan in China will help de-escalate the conflict and facilitate the reopening of borders. However, it is essential that guarantees are provided to permanently safeguard the cross-border movement against closures induced by political tensions.

Without the implementation of durable and predictable mechanisms, translating Pakistan's geographic advantage or leverage into tangible economic benefits will remain elusive.