The Interim Afghan Government’s (IAG) financial constraints and the confiscation of Afghan Central Bank reserves have had a direct impact on the nation’s economy. Economic instability has made it possible for adversarial forces to use the populace as a tool to further their nefarious goals.
According to media reports, Russia is enlisting former US-trained Afghan Commandos who fled to Iran to fight in Ukraine. In addition, a lack of economic resources could strengthen warlords and drug cartels, defeating the goal of world powers to create a stable and peaceful Afghanistan.
IAG can use its geoeconomic location and resources to improve the lifestyle of the Afghan masses instead of relying on outside aid, which will limit the space for hostile elements. Centuries of trade have passed between Central Asia and South Asia. Trade, investment, and economic cooperation between Central and South Asia are essential for the current and future economic growth and development of those countries. Energy connectivity to connect South Asia’s major energy markets with Central Asia’s abundant energy resources has recently been a top priority on the international agenda.
Two initiatives are already under way in these nations: the Central Asia-South Asia (CASA-1000) energy project and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. The 1,814-km-long TAPI pipeline will cross four nations and carry natural gas. The majority of the $10 billion project’s funding would go to Afghanistan. A yearly transfer of 33 billion cubic metres of gas is anticipated. As a result, it will generate a significant amount of foreign direct investment (FDI) in Afghanistan and hundreds of jobs for the local population.
The Trans-Afghan pipeline and Peace Pipeline are additional names for the project. The project will be finished in three to four years, according to a recent statement from Pakistan’s minister of state. The 1,227 km (562 km) cross-border CASA-1000 project, which will cost USD 1.2 billion, will build renewable energy infrastructure and transport 1,300 MW of excess electricity from Central Asia to South Asia. Summertime energy output in Kyrgyzstan and Tajikistan is moved to Pakistan and Afghanistan to assist industrial production and small enterprises.
Da Afghan Breshna Sherkat (DABS) claims that in addition to receiving funding for power transmission, Afghanistan will also be able to purchase electricity at a lesser price. Afghanistan is one of the world’s most resource-rich nations on paper thanks to its vast resources of uranium, zinc, bauxite, copper, iron, marble, talc, coal, lithium, chromite, cobalt, gold, lapis lazuli, gem stones, and many others. Pakistan, Turkey, China, Iran, and Jordan are the major partners and areas to which Afghanistan exports minerals in 2019. However, with the right laws and memorandums of understanding, Afghanistan has the ability to increase its mineral exports to other nations as well.
According to reports, Afghanistan reportedly possessed more than 2.2 billion tonnes of iron ore, which is used to make steel and is worth more than USD 350 billion. The projected 2,700 kg of gold resources, which are worth over $170 million, were far more limited. The internal US department of defence paper claims that Afghanistan is the “Saudi Arabia of lithium,” endowed with resources worth about USD $1 trillion. A former minister of mines calculated that Afghanistan’s natural resources may be worth more than USD 3 trillion in 2010, and they might be even more today. It is crucial to note and clarify that the riches would remain underutilised until the IAG makes it quick and simple for investors.
With Pakistan’s help, China wants to extend the China-Pakistan Economic Corridor (CPEC) to Afghanistan. Both nations are now fully aware of how important it would be for CPEC to be extended to Afghanistan in order to support both regional connectivity in South Asia and Afghan economic success.
Beijing is dedicated to integrating Afghanistan with every regional nation because of Afghanistan’s strategic geographic location. China cannot be connected to the rest of the world without Afghanistan, according to Yao Jing, a former Chinese ambassador to that country who served until 2016. The CPEC may offer Kabul and Islamabad the chance to strengthen their relations while also assisting Afghanistan in lessening its reliance on outside aid. Afghanistan will profit from the industrialization and investment that CPEC would bring to Pakistan.
In fact, Pakistan has already started construction on a number of roads to increase connectivity, including the Torkham Jalalabad Road, which is 75 kilometres long. In addition, Pakistan has built two roads connecting D.I. Khan with the Afghan regions of Paktika and Khost, respectively, via Angoor Adda and Ghulam Khan. Afghanistan will have the chance to stabilise its economy by expanding its trading options by joining CPEC.
According to information from the UN Comtrade database, Pakistan and India alone accounted for more than 70% of Afghanistan’s total exports in 2015. Instead of the copper, iron ore, and other valuable minerals Afghanistan is known to have in large quantities, carpets, rugs, dried fruit, and medicinal plants were the principal exports.
While Pakistan offers a practical path to Afghanistan for trade with the rest of the world, Afghanistan serves as a sort of land bridge for Pakistan to the CARs. During the first four months of the current fiscal year, the two countries’ bilateral commerce increased to $741 million. In July through October of 2021, there was $451 million in bilateral trade between the two nations. July through October of 2022 will show an increase of 64% over the same period in 2021. Because it uses the Karachi port for exports and can link to the Gwadar port for simple export of its commodities, Pakistan is crucial for Afghanistan’s export of goods to the rest of the globe.
Note: This article appeared in Eurasia, dated 17 January 2023.
Disclaimer: The views expressed in the article are of the author and do not necessarily represent Institute’s policy.