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AFGHANISTAN'S ECONOMIC STRATEGIES PRIOR AND POST ACCESSION TO THE WORLD TRADE ORGANIZATION
Mojeeb Rahman Rahmani ibn Abdul Rahman Second year economy master student of Termez state university Email: [email protected]
Abstract: This article present a case study of Afghanistan's accession to the WTO focusing on its opportunities and challenges. The study also addresses several lessons learned from the case of Afghanistan and Cambodia - a country whose WTO accession experience resembled that of Afghanistan- that provide a ground for recommendations to other LDCs who pursue WTO accession. My findings suggest that WTO accession is a good opportunity for the LDCs and fragile states to jumpstart their economic growth despite some short-term negative implications on government revenues. The study also finds that WTO accession helped Afghanistan experience significant legal and institutional reform based on WTO rules and principles. The accession, furthermore, provides Afghanistan equal opportunity of access to WTO members' markets without trade barriers, and Country's human capacity to effectively implement the WTO rules and standards for doing business in a multilateral trading system. Afghanistan had been able to address some of the post-accession technical and professional challenges in the areas of quality standards in agriculture, health and service sectors, and adopting the best practices of international law and trade. Country he country still has a long way to reap the full benefits provided by WTO accession.
Keywords: Afghanistan, Economy, World Trade, Agriculture, Investment, Membership.
Аннотация: В этой статье представлен пример вступления Афганистана в ВТО с уделением особого внимания его возможностям и вызовам. В исследовании также рассматриваются несколько уроков, извлеченных из примера Афганистана и Камбоджи - страны, чей опыт вступления в ВТО напоминал опыт Афганистана, - которые служат основанием для рекомендаций другим НРС, стремящимся к вступлению в ВТО. Мои выводы показывают, что вступление в ВТО - это хорошая возможность для НРС и нестабильных государств ускорить свой экономический рост, несмотря на некоторые краткосрочные негативные последствия для государственных доходов. Исследование также показывает, что вступление в ВТО помогло Афганистану пережить значительную правовую и
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институциональную реформу, основанную на правилах и принципах ВТО. Присоединение, кроме того, предоставляет Афганистану равные возможности доступа к рынкам членов ВТО без торговых барьеров, а также человеческий потенциал страны для эффективного выполнения правил и стандартов ВТО для ведения бизнеса в многосторонней торговой системе. Афганистан смог решить некоторые технические и профессиональные проблемы после присоединения в области стандартов качества в сельском хозяйстве, здравоохранении и сфере услуг, а также перенять передовой опыт международного права и торговли. Страна страна еще предстоит пройти долгий путь, чтобы в полной мере воспользоваться преимуществами вступления в ВТО.
Ключевые слова: Афганистан, экономика, мировая торговля, сельское хозяйство, инвестиции, членство.
Annotatsiya: Ushbu maqolada Afg'onistonning JSTga kirish imkoniyatlari va muammolariga bag'ishlangan amaliy tadqiqoti keltirilgan. Tadqiqot, shuningdek, JSTga a'zo bo'lish tajribasi Afg'onistonga o'xshash bo'lgan Afg'oniston va Kambodja misolida o'rganilgan bir necha saboqlarga bag'ishlangan bo'lib, ular JSTga kirishni istagan boshqa LDKlarga tavsiyalar berish uchun zamin yaratmoqda. Mening topilmalarim shundan dalolat beradiki, JSTga a'zo bo'lish mahalliy aholi punktlari va mo'rt davlatlar uchun davlat daromadlariga ba'zi qisqa muddatli salbiy ta'sirlarga qaramasdan iqtisodiy o'sishni boshlash uchun yaxshi imkoniyatdir. Tadqiqotda JSTga a'zo bo'lish Afg'onistonga JSTqoidalari va tamoyillari asosida muhim huquqiy va institutsional islohotlarni o'tkazishda yordam berganligi aniqlandi. Qo'shilish, shuningdek, Afg'onistonga Jahon savdo tashkilotiga a'zo davlatlarning bozorlariga savdo to'siqlarisiz kirish uchun teng imkoniyatlar yaratadi va mamlakatning ko'p tomonlama savdo tizimida JSTni boshqarish va biznes qoidalarini standartlarini samarali tatbiq etish bo'yicha inson salohiyatini ta'minlaydi. Afg'oniston qo'shilishdan keyin qishloq xo'jaligi, sog'liqni saqlash va xizmat ko'rsatish sohalarida sifat standartlari va xalqaro huquq va savdo-sotiqning ilg'or tajribalarini o'zlashtirish bo'yicha ba'zi texnik va kasbiy muammolarni hal qilishga muvaffaq bo'ldi. U mamlakatda Jahon savdo tashkilotiga a'zo bo'lish uchun barcha imtiyozlarni olish uchun hali uzoq yo'l bor.
Kalit so'zlar: Afg'oniston, iqtisodiyot, jahon savdosi, qishloq xo'jaligi, sarmoyalar, a'zolik.
Having completed the bulk of the accession formalities,1 Afghanistan is scheduled to become the 35th least developed country (LDC)2 members of the World Trade
INTRODUCTION
Organization (WTO). Afghanistan is a landlocked country but strategically located at the heart of the Silk Road, three of which even today can serve as the 'trade and transit hub' of Central Asia and South Asia.4 It is believed th at sustainable economic growth through attracting significant trade and investment cannot be achieved without broader integration into the world economy. Afghanistan National Development Strategy (ANDS) explicitly recognizes the role of trade for economic development and highlights Afghanistan's integration into the world economy as one of the key development goals for which membership to WTO is an essential step (GoIRA, 2008). Economic growth and poverty reduction are the core objectives of ANDS, five of which place greater emphasis on a free market and private sector-led economy (Mobariz, 2016)
Despite ongoing security problems, Afghanistan has been able to sustain relatively high rates of economic growth. Real GDP growth has averaged 7% in the last six years, within an inflation rate of 8%. According to different sources in 2014, the real GDP was estimated around US$ 22,000 million, and GDP per capita during the last five years increased from US$500 to US$ 840.1
However, that was partly based on aid flows, diaspora investment, "catch-up" growth in areas like cellular phones, and economic activity associated with ISAF, which is no more unstained. The agricultural sector was the main economic activity involving 8Country's Country's population. This sector contributes approximately 25% to GDP. The main traditional crops are grain, rice, fruits, nuts, and vegetables. Small scale industries were contributing approximately 15% to GDP, including handicrafts, textiles, carpets, mining, and some food processing. Services were significant and increasing, contributing 60% to GDP.2
REFERENCES AND METHODS The objective method of scientific knowledge was used in the research process. The study provides an objective picture of the Afghan economy. The dynamics of economic growth has been studied in terms of logical consistency.
DISCUSSION AND RESULTS The Government's strategy to foster private sector-led economic development and increase domestic and foreign investment consisted of efforts to (i) build a strong and stable enabling environment that would encourage a competitive private sector; (ii) expand the scope for private investment in developing national resources and infrastructure; and (iii) promote investment from domestic sources, the Afghan diaspora, and foreign investors. And in accordance with the Government's policy on
1 Afghanistan Trade Review Report 2014-2016 - Afghanistan Economic Profile page 5- para 2
2 Afghanistan Trade Review Report 2014-2016 - Agriculture - page 6- para 2
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price stabilization, the new currency of Afghanistan was introduced in October 2002.3 In terms of Tariffs and Tariffs quotas, Afghanistan Customs laws were enacted in 2005, but they required certain amendments to be in line with WTO rules and principles.4 The applied tariff rate structure was made up of relatively low tariff rates and reflected Afghanistan's intention to establish an open, market-based economy. As the process of economic development following decades of conflict and economic isolation was still in the early stages, Afghanistan was required to undertake some tariff adjustment.
In such cases, the Government would take into consideration the economy-wide impacts, including in particular the impact on consumers. These factors have been reflected in Afghanistan's specific market access commitments. Furthermore, Afghanistan did not apply tariff quotas. Imported goods could have been exempted from customs duty by a legal act by the Afghan Government, i.e., Presidential Decree, laws and regulations, and Government agreements; and ratified international agreements or conventions.
OPPORTUNITIES.
Afghanistan is a country with limited access to the sea, and the privilege of its WTO membership will enable it to utilize WTO pressure tools to fix its transit rights as per Article V of GATT 1994 and access most economical routes and transit mechanisms for its goods. In addition, Afghanistan's WTO accession acts as an accelerator for domestic reforms and transition to an effective and efficient economic market which may attract investments, create jobs and improve Afghan people's prosperity.
Afghanistan, as a least developed member state, has specific privileges under the WTO.5 The privileges include expansion of trade opportunities in accessing markets, support of the least developed countries by other WTO member states, the flexibility the least developed countries enjoy under the rules and principles governing the trade, and financial and technical support. WTO membership contributes to the objective of a country as a regional "trade and transit hub" and achieve sustainable economic growth through attracting significant investment, which cannot be achieved without broader integration into the world economy.
3 Afghanistan accession to WTO- Factual summary- Monetary and Fiscal Policy, page 6, para 7 - JOB/ACC/28
4 Non- Discriminations principle embodied in Article I and III of GATT 1994
5 The WTO Agreements contain provisions which give developing countries special rights. These are called "special and differential treatment" provisions. The Ministers in Doha, at the 4th WTO Ministerial Conference mandated the Committee on Trade and Development to examine these special and differential treatment provisions. The Bali Ministerial Conference in December 2013 established a mechanism to review and analyses the implementation of special and differential treatment provisions.
The studies show that Afghanistan - like other developing countries - is faced with challenges, including providing public services, lack of quality infrastructure, as well as the low capacity of state organizations that provide infrastructure and services. Thus, Foreign Direct Investment is an essential country to address the need for financial and technology resources. Meanwhile, WTO Membership in Afghanistan sends a positive signal to the international investment community and is a stamp of confidence that we have established a stable, predictable, transparent, and cost-efficient business environment where the rule of law prevails with strong legal guarantees for investors.
Moreover, access to the neutral and effective WTO Dispute Settlement Body6 allows Afghanistan to defend its economic interests in case of violations by other WTO members, which negatively affect Afghan producers—becoming a WTO Member allowed Afghanistan to reap the WTO benefits sooner and position itself to participate in shaping future WTO rules to serve the interests of the producers and suppliers. It will help add the country from any measures, which may be imposed by trading partners that could potentially limit our ability to increase exports and achieve greater economic growth.7. Membership to WTO doesn't prevent Afghanistan to protect its domestic industries against any unfair trade practices by imposing the trade remedies measures to abolish and limit the adverse effects of unfair practices on production, growth and sustained development of domestic industries. Afghanistan has achieved his objective of export growth in post WTO accession, on average basis 18% increase in export is recorded in two years after WTO accession in compare to last two years prior to WTO accession. But one of the main tools of increase in exports has been the initiative of launching air corridors between Afghanistan and India. Afghanistan main exports are fresh fruit, dry fruit, vegetables, species, carpets, handicrafts and semi-precious stones. The air cargos aimed to carry the export of Afghanistan to India, avoiding the unduly delays and imposition of restrictive measures by Pakistan while transiting goods through its territory and on the other hand the air cargo served to carry the perishable goods such as fresh fruit and vegetables to potential destinations before it gets spoil in the route. 8 Imports to Afghanistan has decrease by 18% in last two years, but decrees in imports is mainly due decrease in aggregate demand. The aggregate demand decline after
6 The DSB has authority to establish dispute settlement panels, refer matters to arbitration, adopt panel, Appellate Body and arbitration reports, maintain surveillance over the implementation of recommendations and rulings contained in such reports, and authorize suspension of concessions in the event of non-compliance with those recommendations and rulings. https://www.wto.org/english/tratop e/dispu e/dispu body e.htm
7 Formal Note on Afghanistan accession to WTO (2015) by International Trade Dept to Afghanistan HEC
8 www.commerce.gov.af
2014, followed by withdrawal of NATO troops and conclusion of some major projects run by International community in Afghanistan.
CHALLENGES
The domestic environment of trade in Afghanistan in which the notable achievements have been realized has been challenging and complex. Severe conflict has done enormous damage to production facilities, physical infrastructure and the readiness to invest. The legacy of institutional difficulties has been no less detrimental to progress. Above all, the critical intangible assets of trust and confidence have been shattered, and their reconstruction takes longer than that of material assets. Hence, Afghanistan faces some challenges and demerits of its membership to WTO:
REVENUE LOSS:
Theories and Practices show that for developing countries tariff revenue constitutes a major section of revenue collection. For Afghanistan, about 47% of total public revenue comes from tariffs and taxes.9 As per Afghanistan commitments in country has to reduce the current applied tariffs of 657 tariff lines between 2.5% to 20%, in order to comply with WTO- bound tariff rates. This will cause to loss tariff revenue amount of $5.4 million annually.10
INFANT INDUSTRIES:
An important aspect of development in all schools of thoughts is economic growth. GDP growth is a necessary condition for development. Therefore, for an economy to grow it has to produce more goods and services, export more and gain more market share in the global markets. Neoliberals take this point as ransom and argue that increased market share can be obtained by uninterrupted market forces and liberalization of the economy. This is exactly what WTO also promotes: in order to have growth we need to produce more, production requires larger market (demand) and this can be attained through international trade; and trade can grow in a free trade regime which brings efficiency in international allocation of resources. This regime is facilitated by WTO agreements. The acceding member has to harmonize its national laws with the WTO trade laws and abide by MFN treatment of all WTO members. This implies Country at country loses policy space for its national development strategies with WTO accession. 11
9 www.customs. gov.af
10 Analytical paper on cost and benefits of WTO by Afghan Customs Department
11 The Impact of Accession to WTO on Afghanistan's Economy (Improvements, Reforms and Challenges) - Vol 003 - Bochum/Kabul 2017 - www.afghaneconomicsociety.org
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LACK OF COMPLIANCE WITH INTERNATIONAL STANDARDS:
Although Afghanistan has secured non- discriminative market access to global markets by joining WTO, the Afghan products are not competitive enough in the international markets due to low level of quality standards, lack of compliance with import standard of the importing countries, lack of accredit laboratories and certification bodies.
Afghanistan exports remains focused on few products, mostly agriculture and unprocessed goods, hence the limited export competitiveness of Afghan goods and services - apart from some selected, mostly agricultural, products - results in high export concentration which in turn leads to high vulnerability of the Afghan economy to external shocks.
As a least developed and war-torn country, Afghanistan experiences low institutional capacity in both public and private agencies. This constraint the efficiency of utilizing the maximum of accession to WTO and integration in MTAs, as well as low institutional capacity also rest of country in active participation in shaping global trade rules, determination of its economic interest and priorities in multilateral trade negotiations.
This article present a case study of Afghanistan's accession to the WTO focusing on its opportunities and challenges. The study also addresses several lessons learned from the case of Afghanistan and Cambodia - a country whose WTO accession experience resembled that of Afghanistan- that provide a ground for recommendations to other LDCs who pursue WTO accession. My findings suggest that WTO accession is a good opportunity for the LDCs and fragile states to jumpstart their economic growth despite some short-term negative implications on government revenues. The study also finds that WTO accession helped Afghanistan experience significant legal and institutional reform based on WTO rules and principles. The accession, furthermore, provides Afghanistan equal opportunity of access to WTO members' markets without trade barriers, and Country's human capacity to effectively implement the WTO rules and standards for doing business in a multilateral trading system. Afghanistan had been able to address some of the postaccession technical and professional challenges in the areas of quality standards in agriculture, health and service sectors, and adopting the best practices of international
LACK OF EXPORT DIVERSIFICATION:
LACK OF INSTITUTIONAL CAPACITY:
CONCLUSION
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law and trade. Country he country still has a long way to reap the full benefits provided by WTO accession.
1. Basu Sudip Ranjan, "Does WTO accession affects domestic economic policies and institutions?" (2008), available at: http://bit.ly/2ePp6Be
2. M. and R. Duncan, "Current status of the WTO accession process and the experience of ESCAP acceding countries" (2002), in: ESCAP, "Facilitating the Accession of ESCAP Developing Countries to WTO through Regional Cooperation", United Nations.
3. Bayramov Vugar, "A comparative analysis of CIS countries' WTO accession; ways to European integration" (2008), available at: http://bit.ly/2ejfI5o
4. Bossche Peter Van Den, Zdouc Werner, "The Law and policy of the World Trade Organization. Text, Cases and Materials" (2013), 3rded., Cambridge University Press.
5. Conti Joseph A., "Learning to Dispute: Repeat Participation, Expertise, and Reputation at the World Trade Organization" (2008), Law & Social Enquiry, vol. 35(3).
6. Collier Paul, "The Bottom Billion. Why the Poorest Countries are Failing and What Can be Done About It" (2008), Oxford University Press.
7. Cattaneo Olivier and Primo Braga Carlos A., "Everything you always wanted to know about WTO but were afraid to ask" (2009), World Bank Policy Research Papers 5116, available at: http://bit.ly/2eXQ2fQ
8. Douglas Irwin A., "A Brief History of International Trade Policy", Library of Economics, (2001), available at: http : //bit .ly/2dyHwq 9
9. Drabek Zdenek, "Is the World Trade Organization Attractive Enough for Emerging Economies?" (2010), Palgrave Macmillan.
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