On 15 August the Taliban took over Kabul and declared their rule over Afghanistan. Taliban spokesperson Zabihullah Mujahid said at his first press conference that the Taliban would continue trading with neighbouring countries and steps would be taken to promote trade. Business people and traders in Pakistan widely welcomed the announcement and the Pakistan stock exchange (PSX) and the country’s bilateral trade with Afghanistan saw a short term sudden rise.
According to Spectrum Research, the local bourse settled the last week on a positive note by adding 430 points as Afghan uncertainties ease and the new government is likely to recognised by big economies. Moreover, the anticipated increase in Pakistan-Afghan trade kept investors alive in the market throughout the week. The cement stocks also supported the positive sentiments in anticipation of the rise in cement export to Afghanistan.
Pakistan’s cement industry, mainly northern players, are also enthusiastically watching the Afghanistan political situation as cement mills here export a large quantity of cement to Kabul.
A cursory look of export data suggests that shipments to Afghanistan have been on a continuous decline in the past 10 years – from nearly US$2bn in FY11 to less than US$1bn in FY20. If exports to Afghanistan increase, the cement sector may be a crucial beneficiary (Pakistan exported 4.7Mt of cement to Afghanistan in FY11 versus just 2.5Mt in FY21). Moreover, in the medium to longer-term, provided Afghanistan remains stable, Pakistan may finally link up with the central Asian republics in a trade and energy corridor. This vision has been in place since at least the 1990s, observed by an analyst at IMS Research.
Moreover, media reports rebuke that the previous Afghan government was more dependent on India, Iran and its central Asian neighbours for its trade needs. Therefore, it bought fewer Pakistani products, especially cement and iron, to meet its requirements.
AHL Research Analysts said that in the longer term, stability in Afghanistan bodes well for the entire region in general and Pakistan-Afghanistan relations in particular. This could be a game-changer for Pakistan in terms of economic development as Afghanistan can function as a link between Pakistan and central Asia. Moreover, Afghanistan’s geographical location relies on neighbouring countries for transit to its other trading partners. Therefore, the opening of trade routes will benefit Afghanistan and aid Pakistan’s CPEC expansion, a step that will help establish Pakistan as a regional trade corridor.
