AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY

HISTORY:
Pakistan and Afghanistan share an immense border stretching 1510 miles (2430 km) along the southern and eastern edges of Afghanistan.1 The Afghan provinces of Badakhshan, Nurestan, Konar, Nangarhar, Paktiya, Khost, Paktika, Zabul, Kandahar, Helmand, and Nimruz are all adjacent to the Pakistani border. Ethnic Pashtuns populate the area along the border. The frontier passes through varying terrain, with sandy deserts in the south and rugged mountains in the east. Major border crossings between the two countries are in Torkham, between Peshawar and Jalalabad and in Spinboldak between Kandahar and Quetta. The border between the two countries was determined in 1893 in an agreement between the Afghan Emir Abdur Rahman Khan and the British Government of India. Since the creation of Pakistan in 1947, however, subsequent Afghan governments have not accepted the so-called Durand Line as the boundary between the two countries. While Kabul considers the dispute unresolved, the Durand Line has functioned as a de-facto border. After Pakistans creation in 1947, Afghanistan objected to its admission to the United Nations. The Afghan government of the time decided not to recognize Pakistan as the legitimate inheritor of the territorial agreements reached with the British India. There were several ambiguous and often changing demands from Kabul centered around the aspirations as Kabul saw it of the Pashtun and Baluch ethnicities inside Pakistan. For intermittent periods between 1947 and 1973, Kabul extended support to Baluch and Pashtun nationalists inside Pakistan and even called for the creation of a new state called Pashtunistan. In 1973, Pakistan, grappling with territorial insecurities, resorted to extending support to Islamists dissidents that opposed Afghanistans Republican government of Sardar Daud. Zulfiqar Ali Bhuttos government created the Afghan Cell within Pakistans foreign office and assigned it a policy that included strengthening ties with and empowering Islamists in exile in Pakistan, and improving Pakistans influence over governments in Kabul. 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. In 1980, the ISI reorganized them into bigger units and it officially recognized seven of these Peshawar-based parties. Anyone wishing to receive aid from Pakistan, the US, the Arabs, and others, had to join one of these groups. The largest of these factions were the ethnic Tajik-dominated Jamiat-e Islami, led by Burhanuddin Rabbani and Ahmad Shah Massoud, and Gulbuddin Hekmatyars Hezb-e Islami. Hezb-e Islami was favored by ISI and had close ties to Zias backers in Jamaat-eECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY Islami. It was also one the most radical of the 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. After the Soviets withdrew from Afghanistan in 1989, international interest in Afghanistan and the mujahideen began to wane. Zia died in a plane crash in 1988, and was succeeded by Prime Minister Benazir Bhutto, the daughter of the man he had overthrown and hanged a decade earlier. However, even though Hezb-e Islami was closely affiliated with Bhuttos political enemy, Jamaat-e-Islami, the ISI continued to support Hekmatyars faction and the other mujahedeen parties against the communist regime of Dr. Najibullah in Kabul. After Kabul fell in 1992, attempts were made to bring Hekmatyar into a unity government with Rabbani and Massoud, but the Hezb-e Islami commander continued to attack his rivals. Afghanistan spiraled into a brutal civil conflict between competing mujahideen warlords, none of whom were capable of unifying or stabilizing the entire country. Kabul remained in Massouds control. Benazir Bhutto briefly lost the office of Prime Minister in 1990, but returned to power three years later. Hekmatyars failure to advance against Jamiat and other forces around Kabul led to the decline of Islamabads support for his group. Bhuttos interior minister, General Nasirullah Babur discovered and empowered a group of former Mujahideen from the Kandahar area as Pakistans new strategic card in the Afghan conflict. Working through Jamaat-e-Islamis rival Pakistani Islamist party Jamiat Ulema-e-Islam, Islamabad began supporting the students the party trained in its madrassas in the Afghan refugee camps, who came to be known as the Taliban. Bhutto was determined to deal a blow to Jamaat-eIslami, which she believed had aided and abetted her fathers executioner and was partly responsible for her losing power. She also wanted to weaken the ISI. But in 1996, as Bhuttos second government was dissolved by Pakistans president, and as the Taliban grew into a formidable force, the ISI regained control of Pakistans Afghan policy. During the 1990s, at the center of Pakistans Afghan policy was the militarys pursuit of strategic depth in Afghanistan that could be useful in the event of any military conflict with India. Bhuttos second government also sought a stability that will allow it access to the newly independent Central Asian republics. Pakistan was also seeking a government in Kabul that did not indulge ethno-nationalists issues inside Pakistan, and question the Duran Line as the boundary between the two countries. The Taliban, with Pakistani and Saudi backing, proved ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY very capable, conquering Kandahar in 1994, Kabul in 1996, and most of the rest of the country by 1998. Pakistan, along with Saudi Arabia and the United Arab Emirates, extended diplomatic recognition to the Taliban regimethe only countries to do so. Rabbani,

Massoud, and other factional leaders retreated to corners in the north of the country and later formed the United Islamic Front for the Salvation of Afghanistan (also known as the Northern Alliance). Hekmatyar sought refuge in Iran in 1997. In the late 1990s, Pakistan continued to support the Taliban regime in its war against the Northern Alliance, while Russia, all the Central Asian Republics minus Turkmenistan, Iran, and India backed the opposition. However, after the attacks of 11 September 2001, General Pervez Musharrafwho had seized power in a military coup in 1999was forced to reverse Pakistani policy and reluctantly joined the US in its War on Terror. Musharraf feared US action against Pakistan and the prospect of a US-Indian alliance. In return for supporting the US war effort, providing bases, and facilitating the transport of supplies, Pakistan would receive billions of dollars in US aid over the coming years. Less than two months into the military operations in Afghanistan the US-led coalition, working with the Northern Alliance, toppled the Taliban regime, which fled across the Pakistani border with its al-Qaeda allies. In Pakistan, the Taliban and al-Qaeda regrouped along the border in the NorthWest Frontier Province (NWFP), Baluchistan province, and the Federally Administered Tribal Areas (FATA). In 2002, the Pakistani military moved into parts of the FATA in search of Al Qaeda operatives. (The FATA is a largely neglected part of Pakistan that is still ruled by colonial era laws. Pakistans constitutional order and liberties does not extend to the region, and political parties are barred from operating there.) In retrospect, Pakistans efforts in the region have been dubbed as half-hearted since Islamabad has pursued a double policy towards Afghanistan. The Musharraf regime declared support for the government of Hamid Karzai in Kabul but retained involvement with the Taliban who were mounting an insurgency against Karzais government and its international backers. Inside Pakistan, newly organized groups known as the Pakistani Taliban have gradually emerged on the scene. In 2007, different Pakistani Taliban groups coalesced as the Tehrik-i-Taliban Pakistan (Taliban Movement of Pakistan or TTP), led by Baitullah Mehsud. The TTP and its affiliate

organizations are blamed for dozens of terrorist attacks throughout Pakistan. Islamabad has shown a willingness to negotiate with the Taliban and has effectively ceded large areas of ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY FATA to their control. However, by the end of 2007, fighting had spread to the so-called settled areas of Pakistan. Thousands of fighters from Maulana Fazlullahs Tehreek-eNafaz-e-Shariat-e-Mohammadi (TNSM) effectively took control of the Swat Valley in the NWFP, less than a hundred miles from Islamabad. Fazlullah and TNSM worked with Mehsuds TTP, and although they were briefly beaten back by the Pakistani military, they seized Swat again by the end of 2008. In February 2009, the Pakistani military agreed to a ceasefire and allowed TNSM, under the direction of Sufi Mohammed, to implement Sharia law but militant continued their expansion, reaching areas such as Buner which is only a few dozen kilometers from the capital. In the meantime, local media broadcasted enraging statements from militants such as Sufi Mohammad and videos surfaced showing the gruesome treatment of the population in areas under the control of the Pakistani Taliban. Public outrage, international pressure, and the proximity of the threat to Pakistans strategic centers such as Rawalpindi and Islamabad appears to have compelled the military to push back TNSM and other militant advances in areas such as Swat. The PDPA was a Marxist regime and from 1989 was supported by the Soviet Union. The occupation by the Soviets was viewed in the west as an escalation of the Cold War. The West began to fund millions of dollars--which became billions of dollars--to the resistance forces known as the Mujahideen (Jazayery, 2002). The resistance forces operated primarily from Pakistan. In 1986 when Mikhail Gorbachev came to power in the Soviet Union, the Soviets began the process of extricating themselves from Afghanistan, and by 1989 the Soviets had left Afghanistan. In 1992 the Mujahideen forces overthrew the government of Najibullah. A failure of consensus of the new government led to a civil war from 1992-1996 (Jazayery, 2002). Afghanistan became divided into tribal fiefdoms controlled by armed commanders and warlords (Poppelwell, 2007). The country was in a state of anarchy, and Afghans lived in a state of constant fear of physical and sexual assault (Poppelwell, 2007). During this time the Taliban emerged, claiming that Afghanistan should be ruled by Sharia law (Islamic law) (Jazayer y, 2002). The Taliban received support and funding from Saudi Arabia and Arab individuals in the quest to establish a pure Islamic model state (Poppelwell, 2007). The Taliban swept through Afghanistan, encountering no resistance by the Mujahideen, and were welcomed in many areas as they established relative security in the areas they controlled (Jazayery, 2002). By 1998 the Taliban had captured the ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY majority of the country and established the Islamic Emirate of Afghanistan (Jazayery, 2002). A Northern Alliance that arose in opposition to the Taliban maintained a government of the Islamic State of Afghanistan with Burhanuddin Rabbini as president (Jazayery, 2002). The Taliban Government was only recognized by Pakistan, Saudi Arabia, and the United Arab Emirates, while the Government of Rabbini maintained an officially-represented seat at the UN (Jazayery, 2002). After the bombings of the US Embassy in Kenya and Tanzania in 1998, the Taliban were asked to stop harboring Osama bin Laden, the alleged leader behind the bombings (Poppelwell, 2007). At their refusal the UN imposed sanctions against the Taliban and Afghanistan in 1999 (Poppelwell, 2007). By this time the Taliban were known for disregarding international law and human rights (Poppelwell, 2007). During this time, killing, pillaging, raping, and ethnic cleansing of individuals occurred across Afghanistan by the Taliban regime (Jazayery, 2002).

MAJOR EXPORTS TO AFGHANISTAN:

Following are Exports: Wheat & Rice Petroleum Products Cement Pharmaceutical Products Fruits and Vegetables Plastic Articles Electrical & other Machinery Textile made-ups House hold equipment Edible oil

MAJOR IMPORTS FROM AFGHANISTAN:

Following are Imports: Fresh and dried fruits Hand woven carpets and rugs Wool and cotton ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY Hides and pelts Precious and semi- precious gems Iron and steel and its articles Wood charcoal, wood and articles

IMPACT ON ECONOMY:
Economic progress in Afghanistan is occurring through the reconstruction effort, but the country continues to be one of the least developed and poorest countries in the world. Table 1 provides an overview of key economic and poverty indicators for Afghanistan in 2007. Real GDP growth for 2008-09 decelerated to 2.3 percent from 16.2 percent in 200708 (World Bank, 2009). This has been the lowest GDP growth recorded in the post-Taliban period and was due to poor agricultural production (World Bank, 2009). In 2009, however, growth is expected to increase due to a good agricultural harvest (World Bank, 2009). The latest poverty assessment in Afghanistan was conducted in 2005 through the National Risk and Vulnerability Assessment (NRVA). The findings indicate that the poverty rate was 42 percent, which corresponds to 12 million people living below the poverty line (Islamic Republic of Afghanistan, 2009, p. 14). In addition, 20 percent of the population was slightly above the poverty line, suggesting that a small economic shock could place them below the poverty line (Islamic Republic of Afghanistan, 2009,). It is evident that widespread poverty continues to be a challenge in Afghanistan.

IMPACT ON TRADE:
Despite continued conflict and blockades of supply routes in some parts of the country, domestic trade continues throughout the country. The closure of the Salang Tunnel has created many difficulties for domestic merchants, as they are no longer able to bring the agricultural products of the north to Kabul and to other parts of the country via Kabul. Even in blockaded areas, merchandise continues to move, albeit in smaller quantities and with more difficulties. Cross-border trade in domestic goods and foreign commodities has increased between Afghanistan, Pakistan and Turkmenistan over the past several years. According to a recent newspaper report, there has been an 11 percent increase in the volume of trade between Afghanistan and Turkmenistan during the last year. In September 1998, the Taliban ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY authorities signed an agreement with the Government of Turkmenistan on the import of petrol, diesel and jet fuel. The first consignment of the fuel reportedly arrived in midDecember via Torghundi. This has, to some extent, reduced Afghanistans dependency on fuel imports from Iran. In December, the Taliban Government signed another agreement with Turkmenistan for the import of 600 tonnes of liquefied natural gas. With souring relations between the Taliban and Iran, Uzbekistan and Tajikistan, the border points with these countries have been closed and trade activities have come to a halt, which has limited Afghanistans access to these markets for its exports and imports. However, the Torghundi border in Herat has remained open as the Taliban managed to establish a cordial relation with Turkmenistan. In the past, Afghan traders used to import goods through Bander-Abbas and Islam Qala, while now they have switched to Bander-Abbas-Turkmenistan and Torghundi, which has increased their transportation costs. Both Pakistan and Afghanistan benefit from cross-border trade, despite their claim to have been affected by the existing trading mechanism--i.e. the Afghan Transit Trade. Under the agreement of the Afghan Transit Trade, Pakistan allows Afghanistan to have access to the sea and to undertake trade and commerce with the international community to the extent required by Afghanistan's economy and commerce requirements. Most of the goods imported under the ATT are reportedly electronics and other consumer items, which cross Pakistan's territory duty free. Some of these are then re-exported illegally through smuggling back into Pakistan. On several occasions, the Government of Pakistan has tried to limit the amount of goods imported under the ATT by dropping some thirty items from the ATT list. In 1995, for instance, the Government of Pakistan made a unilateral decision and took seventeen items including artificial silk fiber and clothing off the list of the ATT. During an interview on 2 January 1999, Pakistans Federal Finance Minister Ishaq Dar said that the government had requested the Afghan authorities to review their transit trade and agree either to pay duties equal to those in Pakistan or reduce the quantity of commodities to be imported (The Frontier Post, 3 January, 1999). The Taliban authorities have not replied to this request. Despite these efforts by the Government of Pakistan, there are indications that the volume of re-exports from Afghanistan to Pakistan has increased during the last fiscal year. After the ban on the ATT, most of these items are imported via Gulf countries to the Afghan cities of Kandahar and Jalalabad and then re-exported into Peshawar and Quetta in Pakistan. ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY

SOCIAL AND POLITICAL IMPACT:

In August 2009, Afghanistan held it second democratic elections (World Bank, 2009). The incumbent President Hamid Karzai was re-elected with 50 percent of the necessary votes; since the election, however, there have been over 2,000 fraud allegations lodged with the Electoral Complaints Commission (ECC). The Independent Election Commission announced in October 2009 that its final results indicated less than 50 percent of the votes for Karzai. Thus, a run-off election was scheduled for November between Karzai and the lead opponent. Before the election, however, the opponent withdrew from the race, leaving Karzai as President (World Bank, 2009). The United Nations Mission to Afghanistan has continued to coordinate international assistance and support the Afghan government in developing good governance. The key aspects of the UN Missions political mandate include: preventing and resolving conflicts; building confidence, and promoting national reconciliation; monitoring and advising on the political and human rights situation; investigating and making recommendations relating to human rights violations; maintaining a dialogue with Afghan leaders, political parties, and civil society groups, institutions, and representatives of central, regional and provincial authorities; recommending corrective actions; and undertaking good offices when necessary to further the peace process (UNAMA, 2009). The political situation in Afghanistan continues to be complex. In 2009 Transparency International rated Afghanistan 1.3 on the Global Corruption Perceptions Index (Transparency International, 2009). This was the second lowest ranking, with only Somalia receiving a lower score. This suggests a high lack of trust in the government of Afghanistan. Afghanistans economic structure has been gravely weakened, distorted, and made more vulnerable through two decades of conflict. Agriculture (including livestock), the most important licit economic activity, is highly vulnerable to natural conditions as is demonstrated by the current drought. Trade activities are vulnerable to the policies of neighboring countries, most notably Pakistan in fact, there appears to have been a substantial decline in Afghanistans unofficial re-exports to Pakistan in the recent past, probably reflecting changing policies and stronger enforcement behavior in Pakistan. The post September 11 closing of the Afghan transit trade through the Karachi port is a major example of this vulnerability. Remittances, another major source of income, tend to be more stable, ECONOMIC PROJECT
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AFGHANISTAN (1978-2012) AN ECONOMIC ADVANTAGE OR CURSE FOR PAKISTAN ECONOMY but nevertheless they are vulnerable to changes in economic conditions in the source countries. The Talibans recent complete ban on opium poppy cultivation, which was a positive move and has been largely effective, has sharply reduced the incomes of those small farmers and rural wage laborers who were dependent on poppy cultivation and related work. Foreign aid, another important albeit smaller source of income, has increased sharply in the wake of the drought but also is subject to fluctuations and severe logistical constraints.

CONCLUSION:
Afghanistan continues to face many challenges in the reconstruction effort, including the management of returned refugees, managing migration relationships with Pakistan and Iran, the return of IDPs, and rapid urbanization. The country has experienced difficulty in absorbing the large rates of return, and poverty is high. Retaining the highly skilled poses a great challenge to the country at a time when skilled workers are in demand. Until significant change occurs in the form of political stability, peace, development, infrastructure, and poverty alleviation, however, it can be assumed that high levels of migration will continue to occur out of Afghanistan. Migration has been a way of life for Afghans for decades, and it will continue to be a key survival strategy.

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