Aiding Afghanistan

Now that the US has fully withdrawn from Kabul, latest developments indicate that Pakistan will have the lead role in West’s future engagement with Afghanistan’s new regime. As the US, the UK and EU countries are loath to publicly engage with the Taliban (leave alone recognize their nascent rule), it is increasing their dependency on Islamabad to keep backdoor channels open with Kabul.

In the near future, the focus of Western powers is to get their remaining nationals out of Afghanistan, and Pakistan’s help is key in that regard. Pakistan is about the only neighboring country that is in a position to ensure some sort of a safe passage for those stranded expats overland into Pakistan. Once at the frontier, it has to keep the borders open, functional and secure, to effectuate an orderly transfer later on via its airports.

In the longer term, more strategic concerns are expected to force a deeper embrace. The Americans, the British and the Europeans may now have no way around seeking Pakistan’s assistance in managing trans-national terrorism threats emanating from Afghanistan. This strategic reliance will increase if the Taliban, who are yet to declare a government, are unable to govern as a cohesive entity, potentially leading to warlord-ism, or worse, another civil war.

At this stage, folks are right to wonder, what is in it for Pakistan, economically speaking? Indirectly, but significantly, efforts made in the interest of bringing security and stability in Afghanistan will have a positive effect on security here, sparing Pakistan’s economy from negative fallout. The GDP must grow in excess of 7 percent for a long number of years in order to reap the demographic dividend and raise living standards. Bombs going off north and south of the country, à la 2007-2015, are the last thing this recovering economy needs in the future. It is of utmost importance to avoid that scenario.

Then there is the potential benefit of remaining positively engaged with key Western countries. While international forums such as the IMF and the FATF are technical in nature, there is an impression that they tend to be swayed by geopolitics. Pakistan’s economy needs a breathing room, and renewed diplomatic engagement with the West, even if transactional in nature, which can buy the government valuable time. The government’s real success will be to build on this emerging spirit of security cooperation and score something big on trade and investment fronts.

As for doing more business in Afghanistan, the prospects for large-scale post-war reconstruction will turn bright once regional powers witness a certain level of security on the ground. It is important to be realistic, however. It must be understood and appreciated that Afghanistan’s is a small economy, with GDP less than tenth the size of Pakistan. That economy has multiplied five times during US presence, but it is left entirely dependent on foreign aid flows, along with a huge incidence of poverty and unemployment.

If the Taliban is able to hold Afghanistan together in the coming years, prospects may brighten for influx of foreign investments in infrastructure, and development projects in areas of transportation and connectivity, energy grids and pipelines, irrigation and agriculture, and urban development. This will create opportunities for Pakistani manufacturers in sectors such as cement, medium & heavy duty vehicles, refined POL products, chemicals and fertilizers, and other low-value-added raw materials.

However, it will be countries such as China and Russia who are in a better position to reap the higher-end of economic dividends in Afghanistan, as they specialize in producing advanced industrial machineries and equipment; they also possess global expertise in executing large-scale, complex construction projects. This likely missed opportunity is a lesson for Pakistan to grow its industrial muscle so that it can economically leverage its strategic position better in the future.

There are opportunities for Pakistani professionals, especially in the development sector. With foreign staff of most foreign humanitarian organizations as well as experienced Afghan professionals having left that country, there is a skill shortage to organize and deliver humanitarian assistance to millions of vulnerable Afghans. The situation in that country is reported as dire amid the brain drain, with a drought going on, new rulers in town trying to get on their feet, amid most of the country’s foreign exchange now frozen in Western banks.

The Western governments have also indicated that they will use the United Nations channel to supply resources (such as food aid, medical assistance, grants for refugee management, etc.) to international development organizations/NGOs. While it is not clear how many Pakistani social sector professionals will be willing to trek to Kabul, it is likely that Islamabad will become the development hub again.