Afghanistan must not rush to WTO membership -Oxfam

KABUL, June 28 (Reuters) Afghanistan, seeking membership in the World Trade Organisation by 2010, risks undermining efforts to rebuild its shattered economy unless it treads more cautiously, the international aid group Oxfam said today.

In a major report, the group said that instead of opening new markets for Afghanistan's exports, WTO membership could herald a flood of cheap imports that will stifle attempts to resurrect the manufacturing sector.

''Liberalising the Afghan economy too soon could undermine vital efforts to reduce poverty and suffering,'' said Matt Waldman, Oxfam's policy and advocacy adviser in the country.

''The accession process should reflect the development needs of Afghanistan, not the demands of existing members.'' Afghanistan's economy is in ruins following decades of conflict, and despite massive amounts of aid since the overthrow of the Taliban in 2001, the country remains one of the world's poorest.

It trawls the bottom of virtually every economic indicator list, with a GDP per capita of just 315 dollar, life expectancy at 46.4 years, 70 per cent of the population living below the poverty line and official unemployment at a conservative 30 per cent, according to UN and World Bank figures.

Afghanistan has been an observer at the WTO since 2004, but aims to become a full member by the end of the decade -- encouraged by some international donors such as the United States and European Union which have much at stake in the country.

Trade experts say full membership could bring some benefits such as speeding up much needed economic and institutional reforms as well as attracting more direct foreign investment and opening new markets for Afghan exports.

But Oxfam warns of the downside in the report, entitled ''Getting the fundamentals right - the early stages of Afghanistan's accession process''.

Having to open its domestic market to low or tariff-free imports -- particularly from neighbours Pakistan, China and Iran -- could strangle efforts to rebuild the job-creating manufacturing sector, while the privatisation of basic services such as water and electricity could hit the rural areas, the report says.

It warns also that direct foreign investment could have little benefit unless maximum use of Afghan resources is ensured, and questions even the cost of joining the world's trade body -- at least 0 million, according to the WTO.

Latest World Bank figures estimate Afghan exports at around 1.6 billion dollar and imports at 3.9 billion dollar -- leaving a trade deficit that makes up over 30 percent of the GDP.

The country's biggest official export earner is handwoven carpets and rugs -- although many are shipped to Pakistan and re-exported as products of that country. It also exports significant quantities of fresh and dried fruit and nuts, finished leather and some minerals.

It imports virtually all manufactured goods, although even basic items are priced out of the range of most Afghans.

By far the biggest industry in Afghanistan is the illicit drugs trade. The country produces over 90 percent of the world's heroin, which valued at ''street prices'' in the West would be worth billions.

REUTERS SLD DS1110