On adapting trade support to country priorities, including reducing the trade deficit
Afghanistan imports between US$7-8 billion worth of goods each year, and exports only around $1 billion.
The government, like many across the world, is aiming to get to a positive trade balance, and has a plan to do so that includes a three-point strategy to support local industry, increase exports (including via a National Export Strategy launched in 2018) and implement reforms to the business environment.
And, there is the recently developed Lapis Lazuli Route that covers regional trade by rail, road and sea – a needed boost for land-locked Afghanistan to connect with its nearby trading partners and on to Europe.
The country’s Ministry of Industry and Commerce is also looking to enhance the institutional side of its trade, revamping a partnership with the Enhanced Integrated Framework (EIF) that will provide analysis of the trade situation and bolster trade expertise in the country.
“We are focused more on soft works rather than hard works with this project. We have priorities for the support to help us in policy generation and improving the capacity of colleagues,” said Rasul Yusefi, Director for Commercial Attachés Coordination at the Ministry of Industry and Commerce.
Plan for action
Informing the country’s trade efforts will be an update to Afghanistan’s Diagnostic Trade Integration Study (DTIS), which was last done in 2012. Supported by EIF, the World Bank will be doing the analysis that will look at how the country could derive more benefits from trade by strengthening its micro-, small- and medium-sized enterprises (MSMEs) and developing the private sector, with a list of points of action. COVID-19’s impacts will be an important element of the research.
The DTIS Update, once completed, will offer a needed evidence base for the Ministry of Commerce and Industry’s strategy moving forward, Yusefi said. The Ministry plans, together with EIF, to develop projects based on the strategic priorities outlined in the document.
Additional support will help promote investment, create stronger connections between the commercial attachés across 16 countries to better streamline their work via a new online system, as well as a feasibility study for industrial parks.
“We tried to match the Ministry's priority agenda with what EIF can offer and put it into a concrete work plan. It makes the support more relevant, effective and sustainable because now it's something really associated with the government agenda,” said Hang Tran, Senior Coordinator at EIF’s Executive Secretariat.
The government recently released its five-year Afghanistan National Peace and Development Framework (2021-2025), a strategy document that lays out the country’s plan for sustainable development and self-sufficiency. It includes market-building and trade, and leveraging the country’s comparative advantages, including its strategic location.
“One of the main areas that we are really focused on within the Ministry of Industry and Commerce is export promotion. Back in 2018, we started exporting pine nuts to China for the first time, and it was a real success,” said Yusefi.
Part of the new partnership with EIF will include a study of three products like pine nuts that have potential, with analysis of the markets and the practicalities of export.
“We've worked in close partnership with ITC to address market barriers and to do the needed market research, so to really address the top priorities of the Ministry,” Tran said.
The country’s major trading partners are neighbors like India, Pakistan and Iran, and Central Asian countries like Uzbekistan and Kazakhstan. To boost exports, Afghanistan is trying to position itself as a regional hub, and to spur the creation of the infrastructure needed to make trade flow, including through rail.
Afghanistan joined the World Trade Organization (WTO) in 2016, and part of EIF’s support will go to needed advising on international trade law, Yusefi said. Running from April 2020 to March 2023, the package of support aims to lay the foundations for future sector-focused work that targets job creation and poverty alleviation.
“We are supporting countries in fragile and conflict situations like Afghanistan to make trade more inclusive, sustainable and beneficial for all, particularly women and MSMEs. And we have to do it in a way that ensures we don’t leave any least developed country behind,” Tran said.
Each least developed country is unique, with particular needs and trade goals, she added.
As an aid recipient, one priority for Afghanistan is ensuring efforts don’t overlap, and that funding goes where it is needed. And, that there is a foundation for peace-building and investments.
“The vision of the government is that we want to be a connecting point within the region, connecting South Asia to Central Asia and to the Middle East. We want to make most use of the strategic position of Afghanistan,” Yusefi said.