Latency of Afghanistan-SAARC Merchandise Trade Relation: An Economic Evaluation

Focusing on the analysis of South Asia Association for Regional Co-operation (SAARC) trade, the study attempts to analyze the merchandise trade performance of Afghanistan with SAARC region by employing the RCA, RID and TII over a time period of nine years from 2008-2016. A brief analysis of trade baskets of SAARC countries shows that trade of Afghanistan relies heavily on the SAARC countries especially on the imports from India and Pakistan. The growing intensity of trade between Afghanistan and Bangladesh, India, Pakistan and Srilanka reflects an alteration in the trade scenario of SAARC region. With every passing year from 2008- 2016, the trend intensity has amplified, thus confirming the growing trade relations among the economies. On the evaluation of RCA and RID of Afghanistan against Bangladesh, India, Pakistan and Srilanka, the export and import baskets are less relatively diversified for Afghanistan. Afghan economy is still an agricultural driven economy and the analysis of SAARC region’s, through revealed comparative advantage index, finds that Afghanistan has trade comparative advantage in agricultural commodities and the manufacturing base is missing. The study makes a set of implications that given its overriding size, human resources, and aspirations for a global role; Afghanistan will have to take on a disproportionately larger responsibility for endorsing regional cooperation in South Asia. Adjoining governments will have to respond confidently to Afghan initiatives for successful regional incorporation in South Asia.