Trade and Regional Cooperation between Afghanistan and its Neighbors

Abstract

The report envisages significant, medium-term benefits for Afghanistan and its neighbors from trade policy liberalization, from country-by-country reforms in trade logistics, and, especially within Afghanistan, from road rehabilitation and building a commercially-oriented enabling environment for trade, private investment and entrepreneurial development. The growth of regional and transit trade will boost private investment and growth in the short-to-medium term and help to realize the long-term vision for Afghanistan as a country moving toward middle-income status, based on sustainable development of its resources. Recommendations focused on Afghanistan include calls for priority action, with broad support from the international community, aimed at: improving security throughout the country both for persons and property; completing the main road rehabilitation, extending telephone and other telecommunication systems and ensuring that after reconstruction maintenance is undertaken to sustain roads in good condition; streamlining of border crossing procedures; reestablishing formal financial and insurance systems including development of a effective clearance and settlement system; implementing a national customs and transit system; eliminating restrictions on direct transit; removing internal checking-posts and en-route inspections; and increasing domestic trucking competition. To foster a strong, enabling environment for domestic and foreign trade, the study also advocates a set of immediate and short-term measures, including implementing a functioning payments system for international and domestic transfers though the formal banking system; making transit bonds and transport insurance available to shippers; redefining the role of the Afghan Ministry of Commerce to emphasize its mandate in trade and investment promotion relative to it role in trade regulation; supporting a larger role, distinct from that of government, for a private chamber of commerce to assist in export promotion; designing and implementing major capacity-building programs to develop skills and professionalism in banking, insurance and customs; and encouraging truckers and freight forwarders to establish national private industry organizations and to affiliate with international organizations.