Pakistan and Afghanistan have long historical ties that go back far beyond the partition of the subcontinent. After independence, Pakistan found itself confronted with a neighbour that was the only country that voted against Pakistan's admission to the United Nations. The Durand Line, Pakistan's border with Afghanistan on the western side, has been a major concern throughout Pakistan's foreign policy towards Afghanistan since 1947.
Pakistan and Afghanistan have long historical ties that go back far beyond the partition of the subcontinent. After independence, Pakistan found itself confronted with a neighbour that was the only country that voted against Pakistan's admission to the United Nations. The Durand Line, Pakistan's border with Afghanistan on the western side, has been a major concern throughout Pakistan's foreign policy towards Afghanistan since 1947.
Pakistan and Afghanistan have long historical ties that go back far beyond the partition of the subcontinent. After independence, Pakistan found itself confronted with a neighbour that was the only country that voted against Pakistan's admission to the United Nations. The Durand Line, Pakistan's border with Afghanistan on the western side, has been a major concern throughout Pakistan's foreign policy towards Afghanistan since 1947.
AFGHANISTAN(1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKITANS ECONOMY
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CONTENTS Pakistan and Afghanistan relationships before 1978.....................................4--5 Afghanistan (1978-2012) An Economic advantage or curse for Pakistans Economy..6 Major Items of Import from Afghanistan to Pakistan..7 Major items of export from Pakistan to Afghanistan..8 Economic growth in 1990s.9 Economic growth in 200010 Impact on Pakistan industry.......................................................................11-12 Impact on economic growth........................................................................12-14 Political and social impact............................................................................14 Suggest economic relationship from Pakistan perspective...........................15 Conclusion.....................................................................................................16 Page | 4
Pakistan and Afghanistan relationships before 1978 Pakistan and Afghanistan have long historical ties that go back far beyond the partition of the subcontinent. Yet, despite their cultural, ethnic, linguistic and religious proximities, the relationship between the two cannot be termed friendly. At times it reached deteriorating levels because of certain contentious issues historical legacies magnified by inner divisions and external influences. After independence, Pakistan found itself confronted with a neighbour that was the only country that voted against Pakistans admission to the United Nations because of its claims over the Durand Line, Pakistans border with Afghanistan on the western side. The Durand Line has been a major concern throughout Pakistans foreign policy towards Afghanistan since 1947. The Pashtunistan issue was raised by the followers of the Indian National Congress Khan Abdul Ghaffar Khan and his brother Dr Khan Saheb in opposition to the creation of Pakistan. . Afghanistan being a landlocked country dependent on Pakistan for its economic development and transit trade to access international markets, decided on territorial expansion as a way out to the sea. It took up the issue of Pashtunistan, always supported by India, to claim more territory stretching as far as the Arabian Sea. The demand for Pashtunistan also serves as an effective tool the Kabul regimes could employ for diverting the attention of their people from domestic chaos and from the backwardness at home. Due to Afghan propaganda against Durand Lines validity the border remains insecure and more threatened today with greater challenges for Pakistan. Indias involvement in the internal affairs of Pakistan since its inception to create instability in the country through Afghanistan also remains a core problematic issue in Pakistan-Afghanistan relations. The Kautiliyan concept of neighbours neighbour being a friend and the neighbour being an enemy, applies here in the case of Pakistans neighbours. Both India and Afghanistan partnered together became a major source of threat for Pakistan at both eastern and western borders.
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The Afghanistan Pakistan Transit Trade Agreement (APTTA) was signed in 1965 with the objective of granting and guarantee to both parties the freedom of transit to and from their territories. The routes that were identified included: a) Karachi Peshawar Torkhum, b) Karachi Chaman Spin Boldak, and c) Port Qasim was included subsequently in 1998. Relations between Afghanistan and Pakistan began in the 1970s. Afghan president sardar daud khan made friendly gestures with Pakistan. During Russian invasion in Afghanistan, government of Pakistan supported Afghanistan or they welcomed afghan refugees to get shelter in the tribal areas of Pakistan. Bhuttos government created the Afghan Cell within Pakistans foreign office and assigned it a policy that included strengthening ties with and empowering Islamists in Pakistan, against the governments in Kabul. Pakistan hosted over 3 million Afghans at various refugee camps mainly around peshawer in Khyber Pakhtunkhwah The United States and others provided billions of dollars in humanitarian assistance to Afghan refugees in Pakistan. There were no regular schools provided for the refugees but only madrass in which students were trained to become members of the Taliban movement. When the Soviet Union began leaving Afghanistan, during the Presidency of Mohammad Najibullah UNHCR and the international community assisted 1.5 million Afghan refugees repatriate from Pakistan to Afghanistan. During the 1980s, the Durand Line border was heavily used by Afghan refugees fleeing the Soviet war in Afghanistan including the large number of mujahideen insurgent groups who crossed back and forth. Pakistan became one of the major training ground for the 250,000 multi-national mujahideen fighters who began crossing into Afghanistan on daily bases to wage war against the Democratic Republic of Afghanistan and the Soviet forces. The mujahideen included not only locals but also Arabs and others from over 40 different Islamic nations. Many of these foreign fighters married local women and decided to stay in Pakistan, among them were radical Muslims such as members of al-Qaeda and Muslim Brotherhood as well as prisoners from Arab countries.
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Afghanistan (1978-2012) An Economic advantage or curse for Pakistans Economy
In 1979 Soviet invasion of Afghanistan was seen by Pakistan as a great threat to its national security. It also presented Pakistan with a major avenue to build on its 1973 policy of empowering dissident Islamists against the governments in Kabul. Furthermore, Pakistan had been a partner of the United States in the Cold War since the 1950s, and this cooperation had provoked numerous Soviet threats over the years. The new leader of Pakistan, General Muhammad Zia-ul-Haq, who seized power in a 1977 military coup, was a fervent anti-communist and Islamist. General Zia approached the United States for help with organizing a religious resistance against the Soviet invasion of Afghanistan. The US Central Intelligence Agency (CIA) also began funding the Afghan resistance in 1979. As the war progressed and as US and the Saudi Arabia led Arab funding for the mujahideen skyrocketed, the Pakistani government and the ISI gained enormous influence in Afghan affairs. The Afghan resistance coalescing in Pakistan was a combination of nationalist and religious parties. At the outset, they were divided into over a hundred groups. Gulbuddins Hizb ultimately received the bulk of the foreign aid (mostly American and Saudi) during the Afghan resistance. Pakistan provided the mujahideen with weapons, supplies, training, and bases from which to operate; and Pakistani units, disguised as mujahideen, also participated directly in the fighting.
Economic growth in 1980s Pakistan was one of the few developing countries that had achieved an average growth rate of over 5% over a fourth decade period ending 1988 to 1989. Poverty had declined from 40% to 18% by the end of the 1980s. In this decade there was a boom period in because Pakistan earned maximum profit by exporting weapon and food to Afghanistan at that time Pakistan economy Growing day by day.
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Pakistan was self sufficient in production of food. Per capita income increases Pakistan has developed highly diversified base of manufactured product for domestic and foreign market Pakistan has emerged as one of the leading and successful producers of cotton and textile. Physical infrastructure network has expanded with a vast network of gas, power, roads and highways, ports and telecommunication facilities. During afghan war Pakistan received huge amount of foreign aid, mostly they spend this amount on import of consumer product rather than on education, rural and health development. Following are the major import and export which Pakistan had done during Afghan and Russian war. Major Items of Import from Afghanistan to Pakistan
Iron and steel fruits nuts Edible Vegetables Wood & its Articles Charcoal Leather and its manufactures Petroleum textiles
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Major items of export from Pakistan to Afghanistan Cement Live Stock (animals) Wheat (floor) pharmaceutical products household equipments chemical products Paper and paper products
Import and export between Pakistan and Afghanistan Pakistan and Afghanistan have long history of being trade partner. During Afghan and Russian war the import and export between Pakistan and Afghanistan was at its peak. Pakistan earned huge revenue by exporting major products to Afghanistan thats why during 1980s our economy was growing rapidly there was increase in foreign investment of Pakistan and also living standard of people were improved, there was increase in annual GDP and also in income of the people as a result demand for both consumer and industrial product increased. In present days in view of peculiar status of Afghanistan, it has been a good market of Pakistani products ranging from foods to machinery. The mutual trade has demonstrated an encouraging and rising trend in the recent past. chief import from Afghanistan to Pakistan iron ore, fruit, nuts, wood and its articles ,leather, petroleum, textile. These are the major imports from Afghanistan to Pakistan and it has also effect on our economy. Pakistan get 34% import from Afghanistan. Affect on Pakistan economy of importing goods is that it increases like.. In 2001 Pakistans imports from Afghanistan were $30 million which rose to $101million in 2010. Import to Pakistan comes through wagha, Karachi port, qasim port. about US$ 71 million imported to Pakistan every year equal to 21.8 percent of all Afghan imports. Page | 9
Chief export from Pakistan to Afghanistan Cement, chemical products, household equipments, food for animals, wheat, paper and paper products, oil seeds, fish and fish preparation, pharmaceutical products, petroleum. This export has also impact on our economy.GDP of Pakistan economy is increasing FROM 2001 to 2004 which is 28.7 to 41.3 but from 2005 to 2006 it is decreasing which is 2705 to 23.3. We have seen that trade is increased from 2010 to 2011 which is US$ 2509 to US$ 2164.7. Economic growth in 1990s
In the 1990s, economic growth plummeted to between 3% and 4%, poverty rose to 33%, inflation was in double digits and the foreign debt mounted to nearly the entire GDP of Pakistan as the governments of Benazir Bhutto (PPP) and Nawaz Sharif (PML) played musical chairs. Before Sharif was ousted in 1999, the two parties had presided over a decade of corruption and mismanagement. In 1999 Pakistans total public debt as percentage of GDP was the highest in South Asia 99.3 percent of its GDP and 629 percent of its revenue receipts, compared to Sri Lanka (91.1% & 528.3% respectively in 1998) and India (47.2% & 384.9% respectively in 1998). Internal Debt of Pakistan in 1999 was 45.6 per cent of GDP and 289.1 per cent of its revenue receipts, as compared to Sri Lanka (45.7% & 264.8% respectively in 1998) and India (44.0% & 358.4% respectively in 1998). On the other hand Afghan and Russian war had also great impact on Pakistans economy in 1978 when war erupted between Afghanistan and Russian invasion at that time about 2.8 million Afghan refugees came to Pakistan and they become burden on our economy. Most of them had no identity card or any kind of registration as a result they started illegal cross border trade activities in Pakistan like smuggling of goods
which includes consumer to industrial level products. Economic mismanagement in general, and fiscally poor economic policies in particular, caused a large increase in the country's public debt and led to slower economic growth in 1990s. An average GDP was Page | 10
17.1% in a year between 1984 and 1994 than it fell to 7.9 percent between 1994 and 2000. Economic growth in 2000s After a relatively peaceful but economically stagnant decade of the 1990s, the year 1999 brought a bloodless coup led by General Pervez Musharraf ushering in an era of accelerated economic growth that led to more than doubling of the national GDP, and dramatic expansion in Pakistan's urban middle class. Pakistan became one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program. Beyond these benefits there are also some disadvantages After the incidence of 9/11 Pakistan play again a front line state role as a result it has worst affect on our economy. Pakistan army joined the American forces and began operations in tribal areas in order to fight against the terrorist or to destroy their camps from Pakistan as a result our economy ruins day by day. Increase in terrorism Political instability Decline in foreign investment Rise in inflation Balochistan crisis
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Impact on Pakistan industry
Where Afghanistan has suffered from war its neighbouring country Pakistan also suffered alot. 1979, more than 2.8 million Afghan refugees sought shelter in Pakistan and about 1.5 million have fled to Iran. In 1988 the United States, Pakistan, Afghanistan, and the Soviet Union signed an agreement by which the Russia would withdraw its troops, which completed in 1989. After Russian invasion a group of tribal and urban groups arose and all of these known collectively as the mujahidin and afterward they form into now known Taliban. Even after the end of Russian invasion, the Afghan refugees have stayed in Pakistan and caused extra burden on the economy of our country. They also proof harmful for our industry because Pakistan industry suffer huge loss due to illegal cross border trade activities by these Afghan refugees. They prove as cheap labor causing unemployment to local workers. Most of the Afghan immigrants have no documentation of any kind. Hardly any of them have ID or any record to their permanent location. This has given some of culprits an edge because they are not afraid to be identified or recognized. Most of the drug dealers, illegal arms dealer, car lifters, or smugglers are Afghan refugees that have made their permanent shops in the borders areas. The easy access to Illegal weaponry has promoted the Kalakov Culture and has made weaponry very easily available even to common person at a very reasonable price. For example, the 9mm pistol can be easily available at the low price of only Rs 3600, US$. Many goods smuggled from Pakistan to Afghanistan which includes wheat, live stock or weapons etc . As a result there was shortage of these commodities in Pakistan. From home appliance to vehicles are being smuggled thats why our industry lost huge revenue because small to large product are smuggled and sell at reasonable price. These smuggled goods are available in all major cities of Pakistan specially in Peshawar.
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The real problem of smuggling started due to afghan tax free import via Pakistan.
Drugs and smuggling effects on trade
The Talibans main source of income has been drug dealing and production. They gathered their resources from Opium cultivation according to data from CSIS (Central for Strategic and International Studies) Opium cultivation has continued to grow but has shifted into Taliban controlled areas. An opium survey was conducted by UN in 2007 which showed production of 185 Metric Ton opium in 2001 and 8200 Metric Tons in 2007. There are more than 20 unofficial border crossing points on Pak Afghan border from where opium is transferred to Pakistan in NWFP and Baluchistan Province. The trade route between Afghanistan and Pakistan has also been affected. Trade Route Torkham Jalalabad highway now considered as a danger zone. Dry fruits that were imported to Pakistan, have now reached sky high prices such as nuts, Walnuts, Almonds etc.
Impact on economic growth
Afghanistan the neighbouring country of Pakistan has been in war since one can remember. From Mongol Emperors to Russian invasion and now the country is facing war on terror. Where Afghanistan suffered from these war its neighbouring country Pakistan also suffered huge loss. After 9/11 America invaded Afghanistan to end the Al-Qaeda and Taliban Regime but things seem to have gotten worse for both countries. Pakistan is now under pressure by US leadership to wipe out the Terrorist camps in the Northern borders of Pakistan. Pakistan has played a front line role in the war against terror since 2001. According to a report released by an US Department in 2004, Pakistan had faced a loss of 10 billion by becoming an ally on war on terror. Assuming that in 2004 we were not in as much problems as now then after three years as a front line ally we have lost 40 billion minimum. Page | 13
Taliban had only one rival group Northern Alliance in Afghanistan. NA was supported by India and Russia to fight against Taliban. When US attacked Afghanistan, Taliban was in great number and their only rival group Northern Alliance leaded by Ahmad Shah Massoud was US main hope. Eventually US supported NA in fight against Taliban. With time Taliban regime began to lose hold but did not end completely. The US army for the time became confident of their victory but their dreams shattered when Taliban rose again with more strength. By the end of 2006 there were more than 123 suicide attacks in Afghanistan and 69 in Pakistan. In assessment report of Pakistan by Institute for Conflict Management Database at least 3,599 persons, including 1,523 civilians, 597 security force (SF) personnel and 1,479 militants, were killed in 2007. These suicide attacks began after the US attack on Afghanistan. Beside all these factors afghan war has also impact on our annual GDP, inflation, employment, poverty and foreign investment.
ANNUAL GDP RATE:
Pakistan annual GDP rate was 22.5% in 2006 to 2007 and then it decline upto 13.4% in 2010 to 2011. Reason behind continuously decline in annual GDP is due to impact of Afghan war on our economy. Pakistan needs enormous resources to enhance the productive capacity of economy. Security issues in Pakistan are other cause of decline in annual GDP. It needs early end to this war on terrorism.
Rise in inflation
Pakistan is in inflation because of afghan war. The terrorism activities in Pakistan destroy our land as well as industry as a result there is increase in prices of consumer products. because many goods ill egal l y smuggled from Pakistan to Afghanistan which i nclude wheat, li ve stock and weapons ets as a result there is shotage of these consumable products in Pakistan which cause rise in prices. That i s main reason inflati on is rapidl y increasing in Pakistan . Over the past few years, low growth and high inflation, led by a spurt in food prices, have increased the amount of poverty - the UN Human Development Page | 14
Report estimated poverty in 2011 at al most 50% of the population. Inflation has worsened the si tuation, cl imbing from 7.7% in 2007 to more than 13% for 2011. Foreign investment After 9 11 there is rapid increase in terrorism activities in Pakistan. Which destroy the security environment in Pakistan as a result western countries continued to impose travel ban for their citizen, investor and importer to visit Pakistan. this has affect on Pakistan export, prevent the inflows of foreign investment, affect the pace of privatization program, reduced the import demand and also tax collection. The FDI was estimated at $472 million, in 1999-2000 and $322 million in 2000-2001. the main factors that influence investment in Pakistan law and order, political instability, ,government economic policies. Unemployment
At the time of Russian invasion about 2.8 million Afghan refugees have stayed in Pakistan and caused extra burden on the economy and they prove as cheap labour causing unemployment to local workers. Most of the Afghan immigrants have no documentation of any kind. Hardly any of them have ID or any record to their permanent location. Beside this there are many other reasons in rise of unemployment rate in Pakistan which includes slower economic growth, less production in factories And industries, no foreign investment etc all these problems arises after the Afghan war on terrorism.
Political and social impact
Pakistan had supported Taliban in war against Russia. Russia and India supported Northern Alliance Ahmad Shah but after US invasion against Taliban and using NA to their advantage Pakistan got cornered and had to leave his old allies Taliban. The Taliban consists of people belonging to a cast known as Pachtons. Most Pachtons live in the Pak Afghan Border area. US army used our Air Fields against Taliban such as Dera Ismail and Shahbaz Airbase which angered the Pachtons. Pak Army was also utilized in operations against the bases of Taliban in Northern, southern reigons and Page | 15
FATA. These things with time brought hatred in people of Northern and Southern regions that has a majority of Pachtons. The war on terror in Afghanistan has left us alone in many ways. In an survey of Afghan public opinion it shows that the Afghanis remains supportive of the US and major NATO/ISAF countries but the results showed high level hostility to Pakistan. We have to change our border policies. Iran and China were also annoyed when we allowed US to use our land their home security was also threatened by US. We became the welcoming guest of US in Asia. This has caused us isolation from all sides we are in a state of being bankrupt and US has used us and left us as always.
Suggest economic relationship from Pakistan perspective
Policy makers should make development and protection of the Federally Administered Tribal Areas (FATA) of Pakistan. Pakistan has been operating against its home-grown militants which is not only destructive in nature but has caused unlimited displacement of people. The best course of action for Pakistan is to secure FATA as quickly as possible before the full momentum of war transfers from Afghanistan into Pakistan. Pakistan needs to pay more attention to the reconstruction and development effort in Afghanistan. Pakistan should support Afghanistan in changing the infrastructure of Afghan economy. There is a need to bring education in Afghanistan in order to reduce illiteracy and poverty from the country. There is a need to bring improvement in APTA Trade agreement if Pakistan impose duty tax on import and export with Afghanistan it is beneficial for both countries. Pakistan should take immediate measures to reduce the illegal cross border trade activities. Pakistan should convince the US and the Afghan government into limiting Indias role in Afghanistan. Because Indias involvement in Pakistan internal affairs through Afghanistan is the major cause of Baluchistan instability.
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Conclusion
As Pakistan play a front line role in both Russian invasion and war on terror as a result it has great impact on our economy, our economy goes down due to low levels of foreign investment, failure to expand a viable export base , rise in inflation led a spurt in food prices which increase the amount of poverty ,unemployment, rise in political instability has depreciated Pakistani rupee more than 40% since 2007 ,rise in smuggling or On the other hand we have been harmed due to the security situation in Afghanistan which has spilled over into Pakistan causing Terrorism activities which have influence on our economic growth. Thus Afghanistan from (1978-2012) an economic curse for Pakistan economy so Pakistan should change its economic policies or must take immediate measures to save its border area with Afghanistan in order to reduce the terrorism and smuggling activities, Proper law and order situation is advised to maintain political stability in the country.