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MANILA, PHILIPPINES - ADB will help improve the environment for international trade and transit in Afghanistan through a grant of US$1.2 million to enhance the Government's handling of customs and trade facilitation.

The Afghanistan Government has emphasized the importance of regional cooperation to its reconstruction efforts, private sector development, and peace building. The opening of Afghanistan's borders and reconstruction efforts provide new opportunities for the region, with the country potentially forming a land bridge connecting South and Central Asia.

However, trade is limited to imports to, and exports from, third countries via ports in Pakistan or Iran, as well as to a lesser degree via the Central Asian republics. There is therefore almost no transit trade through Afghanistan.

Afghanistan faces several constraints to boosting trade, including customs issues, trade policies, permits, visa regulations, and endemic corruption. Physical infrastructure such as link roads, ports, and border crossings are inadequate and their operation inefficient. There are also wider considerations holding the country back, such as Afghanistan's distance from world markets, weak investment laws, lack of private sector investment, and absence of key services such as banking, finance, and telecommunications.

“The ADB grant project will boost customs revenue and cross-border and transit trade, while reducing leakage through corruption,” says Michaela Prokop, an ADB economist based at its office in Kabul. “Major activities will involve harmonizing customs procedures and laws with Afghanistan's neighbors, and developing mechanisms to combat corruption, promote private sector involvement, and improve transit arrangements.”

The technical assistance (TA) project builds on work being carried out by ADB and other development partners and will coordinate with a TA approved in early 2006 to rehabilitate roads.

The total cost of the grant project is $1.35 million, of which $150,000 will be financed by the Government through counterpart staff and office accommodation. The Ministry of Finance is the executing agency for the TA, which is due for completion around March 2009.

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