Crossroads Asia

How Trade Shapes Afghanistan-Uzbekistan Relations

With new initiatives and new infrastructure, trade plays a dominant role in bilateral relations between Tashkent and Kabul.

How Trade Shapes Afghanistan-Uzbekistan Relations

Afghan President Ashraf Ghani and Uzbek President Shavkat Mirziyoyev’s first meeting in May 2017.

Credit: Press Service of the President of the Republic of Uzbekistan

In May 2019, Tashkent launched an Afghanistan-Uzbekistan trade zone that will function within the Termez Cargo Center terminal at the Afghan-Uzbekistan border. The trade zone promises expedited handling of paperwork for products from and into Afghanistan. This unprecedented movement toward closer trade relations between Tashkent and Kabul is taking place as Uzbekistan desires to play a larger role in the stabilization of Afghanistan. The launch of the trade zone is just one aspect of this movement. The trade zone and center are also a signal toward other countries with interests in Afghanistan, mainly the United States, demonstrating Uzbekistan’s resolve to support U.S. stabilization efforts through trade activities.

The Termez Cargo Center terminal, which houses the Afghanistan-Uzbekistan trade zone, was launched three years ago and is a 40-hectare terminal capable of storing from 2,000 to 3,000 containers. The terminal is able to receive 300 regular and refrigerated trucks. Uzbek President Shavkat Mirziyoyev praised the terminal on his first visit in 2016 and expressed the desire to commission similar terminals in other parts of Uzbekistan. Uzbekistan has no other facility with similar capacity to process large amounts of products and conduct import and export activities.

The trade zone and cargo terminal are a conduit to larger trade cooperation. Trade relations have largely shaped Uzbekistan-Afghanistan relations since the change of power in Uzbekistan in 2016. The new era of bilateral relations started in earnest in 2017 when Afghan President Ashraf Ghani paid an official visit to Tashkent. During that visit, 40 export contracts for a total amount of $500 million were signed.

According to Tashkent, transportation via Afghanistan will become the shortest route to the sea and therefore has huge significance for Uzbekistan. In 2018, Kabul and Tashkent held their first rounds of ministerial trade dialogue and Tashkent proposed a free trade regime with Afghanistan. Afghanistan is also bringing capital into Uzbekistan – in 2018, the Afghan side invested around $7 million and for 2019-2020, the sides are planning to cooperate on 14 projects for the amount of $30 million.

In 2018, the total value of the exports from Uzbekistan reached half a billion dollars and by far the largest export commodity was electricity, followed by wheat flour, wheat, red beans, and iron rod. Exports from other Central Asian countries to Afghanistan are dominated by similar products. Tashkent, however, wants to challenge the status quo and enter the Afghanistan market with higher-value products, such as low-cost appliances, automotive and chemical products, and other products to compete with more traditional suppliers like China and India. The new trade zone could serve to further this goal.

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The launch of the trade zone within the unique cargo center at the Afghanistan border is an important milestone in the relations of both countries. This indicates that Uzbekistan is confident that Uzbekistan-Afghanistan trade will rise and diversify. The remaining question then becomes how and when the exploitation of the zone and terminal will reach its potential and how attractive it will become given Uzbekistan’s notoriously high transportation tariffs and weak regulatory and legal frameworks.