Changing business dynamics in NWFP
By Intikhab Amir
THE North West Frontier Province (NWFP) is in the initial process of re-gaining its centuries-old position of a gateway to Afghan and Central Asian markets amidst a limping peace in the war-torn Afghanistan. Left in the ruins as a result of a three-decade long war, Afghanistan still has a long way to go before it can achieve normalcy. However, the economic activities there are picking up very fast and its imports are touching an all-time high.
Pakistan exported goods worth more than $1 billion in fiscal 2005 but these are reported to be lower than the much larger exports made by India and Iran. Goods worth $280 million were imported by Afghanistan through Pakistan under the Afghan Transit Trade (ATT), higher than the level of fiscal 2004.
Another area experiencing a boom with the help of external funds is the construction sector busy in re-building the war-shattered infrastructure. The same buoyancy can be witnessed in the consumer markets. And all this has benefited Pakistan, in general and the NWFP, in particular.
According to a conservative estimate of the Afghan government, nearly 65,000 Pakistani labourers, mostly from NWFP are working on daily wages in different sectors but the majority works in the construction sector.
Ever since the rehabilitation activities and a large number of infrastructure projects were launched in the war-shattered country, it has attracted a large number of skilled and non-skilled workforce. The people of the Frontier province have benefited the most because of the language factor. In fact, a large number of people from the Pashto-speaking areas have discovered green pastures in Afghanistan.
Though the working environment including security situation is not so conducive, the poverty-ridden youth and middle aged men from the NWFP have found solace in moving out to Afghan markets to earn a livelihood which their own government could not ensure to them.
Masons, carpenters, painters and daily wage earners and other urban and rural workers from the NWFP have moved in large numbers to Afghanistan because of higher wages there.
“ A daily wager is being paid Rs500 per day in Afghanistan as compared to Rs120 or even less in Peshawar and other cities,” said Roohullah, a private sector contractor of Peshawar.
Apart from daily wagers, Afghanistan requires substantial number of accountants, computer operators, computer hardware experts, office managers and attendants, drivers and skilled workforce for a growing number of non-governmental organizations, financial institutions and businesses.
According to one account, the demand for engineers and architects is also on the rise in the war torn country as more and more infrastructure projects are being undertaken.
NWFP’s transport sector has equally benefited from the growing business and trade activities inside Afghanistan.
According to Peshawar-based official sources, between 150 and 200 trucks loaded with a variety of items, mainly food products and construction material, enter Afghanistan every day from the Torkham border.
“Previously only 20 to 30 trucks used to cross over to Afghanistan from the Torkham border but now the customs post, with the existing facility at the border crossing, is finding difficult to tackle the growing volume of business,” says a Peshawar-based official of the Customs extension of Central Board of Revenue.
The CBR has already unveiled a plan to improve its facility in Torkham to cater for the growing volume of business with Afghanistan.
Official circles are of the view that Pakistan’s exports to Afghanistan would grow substantially in the years to come in case peace prevails in the area.
However, traders maintain that unless Pakistan aggressively facilitates trade and business with Afghanistan, it would become difficult to counter the growing penetration of Indian and Iranian products into the Afghan market.
“Pakistan’s exports to Afghanistan touched $1 billion mark in the last financial year and the country has tremendous potential to boost its exports but this would also largely depend on the lasting peace,” says an official holding important position in the customs department.
Nonetheless, businessmen believe that the federal government should act more aggressively to cash in on the comparative advantage Pakistan has over India and Iran.
“Because of their prolonged stay in Pakistan, Afghans have developed a taste for our products and by pursuing aggressive policies we should take advantage of the situation, otherwise, we would not be able to sustain growing competition posed by Indian and Chinese products,” said Ghulam Sarwar Momand, former president of the Sarhad Chamber of Commerce and Industry (SCCI).
More than 80 per cent of the total market value of items exported to Afghanistan in the 2004-05 fiscal year, were routed through the Frontier province. The share of exports made via NWFP substantiates the fact that the business in NWFP has benefited one way or the other.
Goods valuing Rs51 billion were exported to Afghanistan via NWFP during the 2004-05. The volume of informal trade is not known but business circles reckon that it could be close to 30-40 per cent of the official exports.
In all probability, business and trade community of the NWFP have benefited from the informal trade, said Sharafat Ali Mubarak, vice-president of the SCCI.
“Even though the local manufacturing sector-– other than cement producers - has not benefited much from the business opportunities in Afghanistan, the NWFP’s traders and unskilled labourers have benefited the most,” said Mr Momand.
In the last fiscal, the main export items were food, fresh fruits and vegetables and manufactured items like cement, plastic material and also some other manufactured items. Some of these products, particularly, wheat flour, also find its way to Central Asian countries.
Exports of fresh fruits and vegetables stood at Rs900 million, milk/cereals Rs660 million, wheat flour Rs4.5 billion, rice Rs1.4 billion, ghee/cooking oil Rs4.4 billion and sugar Rs1.7 billion.
Similarly, cement exports stood at Rs2.9 billion, paints and varnishes Rs2.8 billion, mild steel products Rs3.4 billion, plastic materials Rs5.9 billion and relief goods Rs1 billion.
However, jet fuel topped the list of export items as Pakistan sold Jet A-I oil worth Rs10 billion, via NWFP, during the last financial year – higher than any other item, food products or construction material.
Afghanistan’s booming construction sector, said businessmen, has also helped revive a couple of closed sanitary units and boosted the NWFP’s industrial output involved in manufacturing plastic products.
The fast improving situation in Afghanistan has encouraged the traders and investors of Kabul and Peshawar to enter into joint ventures. Cement sector stands out as a result of agreements signed between Afghan businessmen and a cement factory owner of NWFP last year.
Pakistan should support such development initiatives inside the the war-torn country which are beneficial to its own business community to realize the potentials of the Afghan market, ” said Mr Momand.
The government’s inability to construct the Torkham-Jalalabad highway even after more than one year of its initiative, may diminish the comparative advantage Pakistani businessmen have over their counterparts from Iran and India.
The early completion of the highway is necessary to bring down the transportation cost which, traders complain, is much higher when compared with Iran and India.
Zia-ul-Haq Sarhadi, a leading customs agent of Peshawar, said that while India and Iran have given subsidy to transporters doing business with Afghanistan, Islamabad has not done so making it difficult for the exporters to effectively compete against neighbouring countries.
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http://www.dawn.com/2005/09/19/ebr15.htm
Its obvious that NWFP is poised to take of if given the chance… Hopefuly the Govt will encourage trade…