The recent Taliban takeover in Afghanistan has caused a lot of confusion and disorder within the country, as citizens fled and those that remained were unable to access their business and other economic amenities. Reports in the media suggest that this takeover was not welcomed and came across as a disruption to the country's socio-political system that took years to establish.
In 2016, Afghanistan signed its first Memorandum of Understanding with China and undertook several initiatives, out of which only a few began due to security instability and the country's rugged terrain and climatic conditions. When the Taliban took over the country, the Chinese embassy was one of the few remaining in the region, defining China's Realpolitik approach. Through this article, we explore Afghanistan's involvement within the BRI and the current state of the supply chain systems.
BRI and Afghanistan
China and Afghanistan have always had friendly ties and, through the US invasion, China remained a silent yet critical economic partner, fostering trade and cooperation in the region. When the BRI MOU was signed in 2016, Beijing pledged $100 million to develop hard and soft BRI policies, covering education, infrastructure, health care and the mining sector. In the same year, the first direct train from China to Afghanistan completed its journey in Hairatan. The BRI initiative also included air corridors between Urumqi and Kabul.
In terms of infrastructure, China built fibre optic cables and set up mining units in the Amu Darya Basin in the years 2017-18. As a geographic neighbour of Afghanistan, China's BRI depends on the stability with the Afghan region, as it could be optimized to form the shortest route between China, the Persian Gulf, and the Middle East. The CPEC would have been the most effective way of integrating Afghanistan, which would provide direct access to the sea through Pakistan. Stability in the country has been a critical aspect for China as they invested in combating terrorism in the region for safer trade channels.
With the Taliban take over this year, there have been shifts within the BRI policies for Afghanistan. Taliban has assured that Afghanistan will continue participating in the BRI and welcomes Chinese investment to rebuild the war-torn region. At the same time, Beijing has been closely monitoring the situation and awaiting the formation of a functioning government. Currently, the plans focus on hard policies, such as infrastructure and mining, as Afghanistan is home to some of the rarest earth metals and minerals. The next few months will be critical to the Afghan and Chinese cooperation, as the future of many projects will be determined.
Supply Chain Industry in Afghanistan and Growing Troubles
Essentially, logistics opportunities in Afghanistan have been centred around NATO Logistics and aid logistics since 2001-2021. Military logistics was crucial during the war, but civil contractors were also given the opportunities to perform these delicate transports into the region. Apart from that, United Nations has also regularly offered contracts to civilian logistics companies for transport aid and essential amenities. There are several critical routes to enter Afghanistan, connecting from Pakistan and China and Turkmenistan. However, the cross-border movement with Afghanistan is known to be precarious and prone to security breaches.
In terms of rail freight, there have been quite a few developments in the country. In 2020, a new rail link was created between Khaf, Iran, to Herat, Afghanistan. Though the line was not fully functional, it had made tremendous progress. Furthermore, in January this year, Turkey had stepped in to improve Afghanistan's logistics infrastructure. The cooperation between the countries focused on developing rail lines, road and air transport. In February, Uzbekistan, Afghanistan and Pakistan entered into a joint proposal to develop rail routes between these three countries. The rail line would pass through Mazar-e-Sharif, Afghanistan, to Peshawar, Pakistan. This regional development would have offered the opportunity to open the landlocked countries to the Arabian.
The situation has drastically changed since the Taliban took over in August, with the future of these projects unknown. There have been reports coming from forwarders of facing growing troubles with their business. At the moment, cross-border trading between Afghanistan and Pakistan via the port of Karachi has come to a standstill due to delays caused by Taliban and Pakistan border authorities, along with high freight rates globally and growing conflict in the country.
If this wasn't enough, Afghan forwarders are now dealing with the collection of soaring detention and demurrage (D&D) charges. Some forwarders have reported up to $50,000 of detention charges on a single consignment. Shipping lines have only offered minuscule discounts, but essentially most forwarders are unable to pay due to the closure of banks and other financial institutions. Many Afghan freight forwarders are now appealing for the reduction of D&D charges on humanitarian grounds. It is only a matter of time that the logistics industry and supply chain crumbles in the region; therefore, it is now the responsibility of geopolitical forces to stimulate the Afghan economy and sustain trade and transport in the area.