Afghanistan’s Economic Gain and Loss from “National Air Corridor Program”
Afghan President Ashraf Ghani with Indian President Narendra Modi on December 1, 2014 (
Narendra Modi)
Afghanistan's National Air Corridor Program may not be sustainable, and gaining access to the Karachi port should be a priority for the Afghan government.
Afghanistan has long been suffering from what Paul Collier describes in his book
The Bottom Billion as a “landlocked trap”—a landlocked situation with bad neighbors. Afghanistan’s lack of direct access to the sea and a capricious political relationship with neighboring Pakistan has marginalized the country from the international trade network, thereby hampering economic growth, surging unemployment, and proliferating poverty.
In recent years, Afghanistan has experienced a sharp decline in economic growth. The GDP growth substantially dwindled from
14.5 percent in 2012 to 2.6 percent in 2017, resulting in staggering
40 percent unemployment and 36 percent poverty rates. Its trade deficit, spurred by an extremely low export volume (
6 percent of the GDP in absolute terms), has been growing substantially—jumping from
31.6% of GDP in 2016 to 33.6 percent of GDP in 2017.
Pakistan has remained Afghanistan’s largest trade and transit partner for decades. The aggregate trade between the two countries peaked at
$2.7 billion during 2014-15. Afghan traders have used Pakistan as a route to access the gigantic Indian market. However, in the past few years, due to a turbulent political relationship between the South Asian neighbors, Pakistan has imposed several superfluous regulatory barriers to trade and shut down the Chaman and Torkham borders on multiple occasions. Such policies plummeted Pakistan’s trade relationship with Afghanistan—reducing the bilateral trade to
$500 million—and impeded Afghan traders’ access to the Indian market. Thus, it was imperative for the Afghan government to diversify its trading partners and abrogate Pakistan’s intrusive impact on trade with India.
In June 2017, the Afghan government launched the “Afghanistan-India Air Corridor” as a pilot project to facilitate trade between Kabul and New Delhi via air freight. “Our goal is to change Afghanistan to an exporter country. Unless we are an exporter country, poverty and instability will not be eliminated”, said
Afghan President Ashraf Ghani during the launching ceremony.
Since then, Afghanistan has exported 3,318 metric tons (MT) of goods through 155 flights to the Indian capital. The Special Inspector General for Afghanistan Reconstruction (SIGAR) reported a
28 percent increase in Afghan exports from 2016 to 2017, crediting it largely to the initiation of the air corridor program with India.
Following the success of the first air corridor project, the Afghan government expanded it at an impressive rate to several other countries, framing it as “National Air Corridor Program”.
So far, the program has facilitated export of 3,643 MT of goods worth $63 million through 244 flights to international markets, including India, Turkey, Saudi Arabia, European Union, Kazakhstan, and UAE. These include perishable and non-perishable goods, such as dry fruits, fresh fruits, medical herbs, handicrafts, and carpets. As a result, Afghanistan’s air exports have grown from $230 million in 2015 to $391 million in 2017, marking a 70 percent increase in two years,
according to SIGAR.
On Nov 07, 2018, Afghanistan opened a new air corridor with China dispatching 20 tons of pine nuts (
worth $500,000) to Shanghai. During the inauguration ceremony, Afghan President Ashraf Ghani
said, “Pine nut, pistachio and cumin are the hidden treasures of Afghanistan, and the government is committed to bring out its full potential via trade corridors.” It is estimated that Afghanistan will export approximately 2,000 MT of pine nuts to the Chinese market annually. The Afghan government also signed an MOU with the Turkish Airline to transport other commercial merchandises, such as vegetables, rugs, minerals, handicrafts, and animal products, to Shanghai, Beijing, and Guangzhou.
Export via air corridor carries some financial costs for the Afghan government, on the other hand. In an attempt to make air transportation more affordable for the businesses and make Afghan products competitive in the international markets, the government provides 80 percent subsidy in the shipment costs, aggregating to
$2 million to date. However, the air corridor program is still nascent. As it expands and larger amounts of merchandises are exported, the financial burden on the government could be overwhelmingly high. For instance, Ajmal Ahmady, President Ashraf Ghani’s senior economic advisor, recently
tweeted, “We estimate the value of pine nuts to be ~$10k/MT in Kabul and ~$20k/MT in China. This means the total value for 22MTs is $440k (using end market prices). By comparison, shipping costs are relatively low at ~$3k/MT, or $66k for all 22MTs”. With the current subsidy rate, the government would need to contribute more than $17.5 million annually merely for 2,000 MT export of pine nuts to China.
Though the National Air Corridor Program is a “win-win” option for both the government and private sector at the status quo by offering faster, more secure, and more reliable mode of shipment in the immediate term, it might not be a viable alternative in the long term due to the high cost of air freight. The US government recently exempted the development of the Chabahar port from the new sanctions imposed on Iran
under the Iran Freedom and Counter-Proliferation Act of 2012. Thus, in the long term, Chabahar port will open a new transit route for the Afghan businesses to transport goods to India and other international markets via sea route. The Afghan government should also leverage Pakistan’s recent commitments to ease trade and transit for Afghan traders. Hence, providing Afghan businesses with access to the Karachi port should be a priority for the Afghan government.
India seeks more joint projects with China in Afghanistan
(MENAFN - Pajhwok Afghan News) KABUL (Pajhwok): India on Monday said it would like to pursue more joint projects with China in war-torn Afghanistan as the first batch of 10 Afghan diplomats being jointly trained by both countries started their training programme in New Delhi, according to a media report.
The Afghan diplomats, who underwent training in New Delhi from October 15-26, began a 10-day training stint at the China Foreign Affairs University on Monday, The Economic Times said.
This is the first joint programme being undertaken in Afghanistan by India and China. It was part of an understanding at the informal summit between Prime Minister Narendra Modi and President Xi Jinping held in April in China's Wuhan city.
For China, which shares a border with Afghanistan, this is a rare initiative as it closely coordinates its Afghan policy with Pakistan. Kabul has been accusing Islamabad of backing the Taliban's frequent violent attacks destabilising the country.
..
Addressing the inaugural session of the China training programme, India's Deputy Ambassador in Beijing, Acquino Vimal said "We are hopeful that in the months to come we will be able to identify more specific projects which can be jointly done by the government of India and government of China for the benefit of Afghanistan as desired by the government and people of Afghanistan".
Vimal said India, which is committed to Afghanistan's efforts to emerge as a united, peaceful, secure, stable, inclusive and economically vibrant nation, has committed USD 3 billion for its development in the last 17 years.
"India and Afghanistan are close neighbours as well as strategic and development partners. All efforts of India as a development partner of Afghanistan have been based on the priorities set by the government and people of Afghanistan. This has been our fundamental basis for any development partnership," an Indian Embassy press release quoted him as saying.
India's development programmes in Afghanistan focus particularly in the areas of building infrastructure, development of human resources, enhancing connectivity and promoting trade and investment links, he said.
Most of these major development projects have been completed over the years," he said.
Since 2017, the next generation of new development partnership has been launched in Afghanistan through high impact community development projects in all the provinces of Afghanistan, he said.
"I am happy to inform that through our scholarship and training programme, more than 3,500 Afghan diplomats are being trained in India every year," he said.
