Afghan-Pak Transit Trade

Discussion in 'Strategic & Foreign Affairs' started by gubbi, Nov 14, 2009.

  1. BATMAN

    BATMAN ELITE MEMBER

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    Smugglers Profit From Landlocked Afghanistan

    Ashfaq Yusufzai

    PESHAWAR, Aug 4 (IPS) - Taking advantage of the United Nations-facilitated Afghan Transit Trade Agreement (ATTA), a massive contraband trade has grown around goods imported into Afghanistan and smuggled back into the markets of this frontier town in Pakistan.

    Mohammad Fida, owner of a huge shopping complex in Peshawar’s famous Kharkhano Market is candid. "Smuggling is not considered an unlawful activity here. Thousands of shops in Pakistan sells goods brought clandestinely from Afghanistan," he says disarmingly.

    Officially, Pakistan has a bilateral trade of two billion US dollars with Afghanistan. But the volume of clandestine business between the two countries is estimated to be more than ten billion dollars every year.

    The Kharkhano market established in 1985 has 4,500 shops, owned by both Pakistani and Afghan traders. Afghanistan has been riven with conflict for close to three decades. Millions of Afghan refugees have made Peshawar their home.

    The shops do booming business. Everything from electronic goods to air conditioners, clothes, cosmetics, automobile spares, even tyres, are from outside Pakistan. Here prices are cheaper than anywhere else, attracting shoppers from all over the country.

    The ATTA enables landlocked Afghanistan to import goods through ports in Pakistan without paying customs duty. It was signed in 1965 under a U.N. agreement to protect the interests of landlocked nations.

    Ever since, smugglers have prospered on the booming trade in clandestine goods, transported back into Pakistan on the back of donkeys, even camels, through hard mountainous routes.

    "Pakistan is losing more than two billion dollars in revenue every year due to the smuggling. Afghanistan has a small market, but the volume of goods imported far outweighs local demand there," explains Mohammad Ali Khan, a business reporter with Pakistan’s oldest newspaper, Dawn.

    During the Taliban regime, Pakistan cracked down on the illegal trade by issuing a list of 24 items that could not be imported from Afghanistan under the ATTA. The items included television sets and cosmetics, both banned by the Taliban militia.

    "Yet imported items were arriving here in such huge quantities that Pakistani authorities found it hard to cope with the situation," said Ibrahim Shinwari, an official in the traders’ association in Karkhano Market. Items like wheat, flour, ghee, oil, timber and cement were smuggled in from Afghanistan, he told IPS.

    Both Pakistani and Afghanistan’s authorities profited from the huge bribes paid out to ensure the illegal trade continued without interruption.

    The goods flooding Pakistan are not only imports into Afghanistan under the ATTA, but smuggled items from China, Iran and the Central Asian states.

    "As there are no manufacturing units in Afghanistan, it is dependent on its neighbours," explains Shinwari.

    The Ministry of Commerce in Islamabad has calculated the official volume of trade between Pakistan and Afghanistan at 71 percent. Traders here, including Shinwari, rubbish the claim as highly inflated.

    He points out that Pakistan’s official trade policy for 2007-08 has little to offer to help increase exports to Afghanistan. He predicts that it will be difficult to achieve the ambitious trade target of 19.2 billion dollars, including 2 billion dollars with Afghanistan.

    Pakistan has emerged as a major trading partner of Afghanistan during the post-war reconstruction phase because of its geographical, ethnic and cultural advantages.

    Until the Taliban were ousted from Kabul by U.S.-led troops in end-2001, more than 3.5 million Afghans lived in rural and urban Pakistan for three decades making them familiar with Pakistani consumer goods.

    The bilateral trade climbed up from 492 million dollars in 2003-04 to 1.63 billion dollars in the previous financial year, mainly because of exports.

    But due to many problems, exports have witnessed a decline of almost 400 million dollars in 2006-07 from the previous year. Pakistani manufacturers have been losing out to mainly Iranian and Indian competitors.

    Liaqat Ahmad Khan, president of the Sarhad Chamber of Commerce and Industry (SCCI), in Peshawar, says the government claims that Pakistan is located at the doorstep of Central Asia, but in reality it has never focused on the benefits of geographical proximity to these emerging markets.

    The Federal Board of Revenue on Dec. 30, 2004, notified the opening of customs stations at nine different routes to facilitate trade. But that has not been formalised because of lack of facilities, poor road infrastructure and above all security concerns in the tribal belt. However, the informal trade conducted by smugglers is brisk.

    In his trade policy speech, Commerce Minister Humayun Akhtar attributed the decrease of almost 400 million dollars in exports to Afghanistan to reduced demands of petroleum, leather and rice, as flow of other consumer goods is normal.

    Numan Wazir, president of the Industrialists Association Peshawar, says trade and industry in the NWFP is mostly focused on the consumer markets in Afghanistan, but the government’s inability to give incentives is cramping business. (END/2007)
     
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  2. Abu Zolfiqar

    Abu Zolfiqar First Line of Offence

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    in a way this benefits Afghanistan more than it benefits us....

    for every district a truck goes through in Afghanistan it must pay huge bribes; this system needs to change
     
  3. EjazR

    EjazR SENIOR MEMBER

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    Pakistan allows one-way transit trade with India to Afghanistan

    DAWN.COM | Business | Kabul allowed to export goods through Wagha

    ISLAMABAD: Pakistan and Afghanistan on Monday agreed to allow Afghan products’ export to India through land route, but stopped short of taking up the issue of reciprocal trade by New Delhi to Afghanistan.

    Although a formal agreement would be signed later, understanding on the issue was reached as result of three days’ of negotiations between technical experts of the two sides from Commerce and Immigrations departments in Islamabad.

    As a result of this understanding, for the first time Afghan trucks with goods meant for a third country would be allowed to enter Pakistan, and would travel up to Wagha border for off-loading goods meant for India.

    However, the understanding does not allow Indian exports to Afghanistan through Pakistan.

    ‘The Afghan delegation has been informed that the issue of allowing two-way trade between Afghanistan and India cannot be discussed at this forum,’ said a member of Pakistan delegation, adding that this can be decided in composite dialogue between India and Pakistan.

    Izharulhaq Ahady, first secretary to Embassy of Afghanistan, told newsmen that Pakistan has allowed Afghan trucks to move up to Wagha border to carry Afghan exports to India to facilitate Afghan exports, mainly perishable items.

    ‘But the same facility for Indian exports to Afghanistan has not been discussed,’ he said, adding rules of engagements are being finalised to check possible movement of narcotics and illegal items through this facility.

    Another issue is to provide legal status to Afghan truckers in Pakistan and vice versa. Similarly, it is yet to be finalised if drivers and conductors would be required to get passports or they would be able to travel on permits, Mr Ahady said.

    A Pakistani official of the commerce ministry said that operational modes for allowing Afghan trucks to move up to Karachi and movement of Pakistani trucks across Afghanistan to central Asia is yet to be finalised.

    He said that the APTTA was signed in 1965 and the trucking industry was immature in Afghanistan at that time, but the situation has changed now and there was a need to upgrade the agreement.

    It was decided that the APTTA group on Customs would meet in Kabul in the second week of January 2010 to streamline the pending issues.

    The fourth round of APTTA meeting also agreed that both the countries would cooperate to check smuggling of five items, including black tea, electronics, tyres, cigarettes and fabrics into Pakistan.

    It was decided that the Customs departments of both the countries would coordinate closely to curb smuggling and the private sectors of both countries have been authorised to identify limitations of imports of items under the APTTA, which are smuggled back into Pakistan.

    The members of business community have decided to establish joint chambers in Kandahar, Kabul, Nangarhar and Herat in Afghanistan, while similar arrangements would be made in Quetta, Peshawar, Karachi and Islamabad.

    Mr Ahady informed that Afghan government would not allow excessive import of these quantities.

    This would help remove Pakistan’s concerns of smuggling, said that Mr Ahady and added that efforts would be made to check smuggling of certain items, like food into Afghanistan from Pakistan.

    The meeting decided that both the countries would help each other curb smuggling and would cooperate to enhance the formal trade as smuggling was causing revenue loss to Afghan government.

    It was informed that the formal trade stands at $1.5 billion and the informal trade between two countries also was to the tune of $1.5 billion per annum which is causing revenue loss and business loss in both the countries.
     
  4. indianrabbit

    indianrabbit ELITE MEMBER

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    Good they allowed it to Afghanistan. That country needs business and support from neighbors as it is land locked.
     
  5. deckingraj

    deckingraj SENIOR MEMBER

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    Clever move by Pakistan...Not sure if AF will like it that much but then they are land locked....It would be stupid to take back empty trucks from India so surely this will create export options for Pakistan...Lets see how India will counter it....
     
  6. Abu Zolfiqar

    Abu Zolfiqar First Line of Offence

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    that's the plan :)

    as for "counters" -- your only real option is Chahbahar Port Iran
     
  7. deckingraj

    deckingraj SENIOR MEMBER

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    You are right...However there were reports of GOI subsidize rates for Air transport...Though AM was suggesting that even that loop-hole will be targeted...However even this one side trade might be a blessing in disguise as i am sure planners on our side must have not even taken this into account(so kind of bonus)...

    My question is once we start using Chahbahar port then will it make sense to continue use of AF() - Pak () -India route??? Though this is making imports cheaper however is hitting export options for India?? In other words once cargo ships take some export stuff from India for AF the same ships will expect import material before returning back....Kind of wondering how it works???
     
  8. Abu Zolfiqar

    Abu Zolfiqar First Line of Offence

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    of course u can subsidize air.....who said we will allow your aircrafts over our territory? You'd have to go through China or south through Iran.

    but trucks going back from india we can use; since as you rightly pointed out, they wont want empty trucks to head back. Regardless, at any given time there are hundreds of Afghan trucks in our country to and from the ports. It can save us money, though we cannot endanger the lives of our local truck drivers. Trucking industry here is very lucrative and it employs many people.
     
  9. AgNoStiC MuSliM

    AgNoStiC MuSliM PDF Veteran

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    Iran could be a risky option for Afghanistan in terms of depending upon it as the major transit route because of its belligerence towards the West and the possibility of sanctions.

    It is still an option for Indian exports to Afghanistan, but the transport cost will obviously increase. Like the FBR, I am not satisfied with the systems being discussed at the moment to prevent smuggling from Afghanistan to Pakistan by evading Pakistani duties and taxes. The steps being considered now are an improvement, but I would have liked to have seen some of the other policies suggested in past articles implemented as well.
     
  10. Abu Zolfiqar

    Abu Zolfiqar First Line of Offence

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    it just means that trucks will have to be more thoroughly searched....there is no room for corruption, as national security must take precedence over anything else -financial incentive or otherwise.

    an adequate search takes time, but is well worth it

    Don't forget:

    Afghanistan-Pakistan-Iran route for human trafficking and drugs has proven to be very troublesome. Proceeds are being used to fund terrorists/bandits and other anti-social elements.
     
  11. AgNoStiC MuSliM

    AgNoStiC MuSliM PDF Veteran

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    Establishing JSG: Afghanistan concedes Pakistan's demand


    MUSHTAQ GHUMMAN
    ISLAMABAD (December 22 2009): Afghanistan has conceded Pakistan's longstanding demand to establish a Joint Study Group (JSG) with the objective of suggesting measures to curb smuggling which is not only hurting Pakistan's domestic industry but is also compromising duty collection on imports like tea and tyres, sources told Business Recorder.

    Pakistan achieved this success after three days of deliberations with Afghanistan under new Afghanistan-Pakistan Transit Trade Agreement (APTTA) supported by US State Department. The Ministry of Foreign Affairs, the Federal Board of Revenue (FBR), and the local business community feel that Commerce Ministry is not negotiating the new agreement in the interest of Pakistan.

    Pakistan's team, headed by Senior Joint Secretary, Commerce, Shahid Bashir, however, turned down a persistent demand of Afghanistan regarding provision of land route by Pakistan to allow Afghanistan to purchase Indian products, sources added. According to sources, private sectors of both countries have signed a Memorandum of Understanding (MoU) to facilitate business community.

    "This is the first time when the private sector of both countries, including chambers, signed the MoU," sources said. The purpose of this pact is stated to be mutual co-operation in different fields and addressing the problems arising from informal trade on both sides, commented an official who was part of the deliberations. Both sides have also set up Pak-Afghanistan Joint Chamber of Commerce and Industry, a forum which would provide opportunities to the business community on both sides of the border to promote their business.

    Sources said all issues being faced by Pakistan customs officials have been tabled and discussed in detail. In this connection, a meeting of customs sub-group will be held in January 2010. "The sub-group and private sector will identify the sensitive list of items which are being transported in huge quantities to Afghanistan under transit trade agreement but flood back and hurt Pakistan's domestic industry," sources said.

    It is pertinent to mention here that black tea and blades whose consumption is very nominal in Afghanistan are among those items which are being smuggled back to Pakistan. Vehicles tyres are also among items re-exported into Pakistan and which hurt Pakistan's importers who pay full duty.

    The FBR observed that its proposals regarding safeguards against smuggling back of transit goods had been consistently disregarded, and excluded from the draft agreement. According to the Board, exclusion of such safeguards was not appropriate at such forums as it provides a proper opportunity to firm up the point of view on longstanding issues.

    US Trade and Development Agency compiled a briefing book for South Asia transport and trade facilitation conference in 2006. Discussing data from late 1980s, it states: "According to 1965's ATTA, Afghan traders do not pay duty to Pakistan for goods imported from a third country but around 80 percent of goods entering Afghanistan are subsequently smuggled back to Pakistan."

    In February this year, Pakistan had agreed to cooperate through mutual assistance in trade policy liberalisation, trade facilitation, and public outreach on trade-related issues with a goal to improve processes and reduce impediments affecting the trade and investment environment in both countries.

    To achieve these shared objectives, the Government of Afghanistan and the Government of Pakistan undertook to conclude and sign a complete Afghanistan Pakistan Transit Trade Agreement as early as possible, and not later than December 31, 2009. The MoU was meant for conclusion of the Afghanistan Pakistan Transit Trade Agreement, and is designed to co-ordinate and resolve all issues relating to cross-border commerce and inland transit trade.

    Copyright Business Recorder, 2009

    Business Recorder [Pakistan's First Financial Daily]
     
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  12. deckingraj

    deckingraj SENIOR MEMBER

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    ^^^^^^^
    Good news for Pakistan...hopefully this will give some respite to already troublesome trade....
     
  13. AgNoStiC MuSliM

    AgNoStiC MuSliM PDF Veteran

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    It is a good development, but when you read comments such as "the Ministry of Foreign Affairs, the Federal Board of Revenue (FBR), and the local business community feel that Commerce Ministry is not negotiating the new agreement in the interest of Pakistan" it points to problems in the future.

    An agreement such APTTA should have all stake holders on board and satisfied, otherwise later on we'll have accusations of so an so sold out and what not that will put a damper on the whole thing. If the FBR and MFA have concerns then the Commerce Ministry should have ensured that they were being addressed, especially when we are this far into the negotiations.
     
  14. AgNoStiC MuSliM

    AgNoStiC MuSliM PDF Veteran

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    Continuing to update this thread:

    ATT issues unresolved
    Sunday, December 27, 2009
    By By Samia Saleem

    KARACHI: The main issues of policy, customs and transportation governing the Afghan Transit Trade remain unresolved even after deliberations by both the countries, Pakistan continues to suffer a loss of $2 billion annually.

    Over the years, the Afghan Transit Trade (ATT), facilitated by Pakistan since 1965 and ECO countries since 1997, has been massively abused by unscrupulous elements resulting in rampant smuggling by the traders who see an easy means of corruption in the unchecked cross-border exchange.

    This clandestine trade has grown rapidly in the past, whereby excessive goods are deliberately imported into Afghanistan, only to push most of them back into Pakistan. This quasi-legal smuggling of goods in Pakistan is not only causing a colossal loss in billions but also discouraging the local manufacturing and legal imports in the country.

    In the recent rounds of talks to review the agreement, many current issues came to the limelight. The Afghan government is now advocating the entry of Indian goods through Pakistan’s borders particularly Wagah border. Pakistani businessmen however, strictly oppose the move. Pakistan currently retains a trade volume amounting to $3 billion with Afghanistan. “Allowing Indian goods to be delivered to Afghani markets will not only endanger our trade with Afghanistan and other central Asian countries but they will also result in the entry of smuggled Indian goods in our country.”

    If India is given access to Afghanistan through Wagah their goods will enter Pakistani markets through smuggling. This way, India will get easy access to Central Asian States through Afghanistan whereas Pakistan is presently denied this facility through ATT with Afghanistan, said Mansha Churra, Acting President of FPPCI.


    Besides, among competition with India, there are also other reasons to contradict the proposal. “In order to reach the Central Asian states the Afghanistan government imposes 18 per cent duty on our goods while there is no duty on Indian goods,” said Engr Daroo Khan, Vice Chairman FPCCI. In the talks, Pakistan made two key demands which have been categorically denied by the Afghan side, sources told The News.

    “We want the Afghan government to put the unwanted items on the negative list and to set quotas for the imported products according to their requirement in Afghanistan to ensure that Pakistani markets are safe from smuggling,” said Daroo khan.

    “What if the limited imported goods are smuggled back in Pakistan, it will result in a shortage of the same in Afghanistan” an afghan official was quoted as saying at the meeting. The Afghanis are of the view that it is not in their constitution to restrict any trader from importing any goods in Afghanistan and in any quantity or number.

    Smuggling of goods is seriously hampering trade in Pakistan and the government seriously needs to take measures to curb it, said Daroo Khan. “Even if we stop the transport through Wagah border, goods will be smuggled in Karachi via Iran,” he added.

    The issues regarding Afghan traders also came into limelight. The Afghan traders also have objection to the additional rates they have to pay for transport through NLC, now that “we have less railway bogies.

    However, stakeholders from Pakistan still believe that despite developing shortage of means of transport, transportation of goods for Afghanistan is given priority over Pakistani goods. “Despite shortage of railway bogies for Pakistani traded goods, they are still given to Afghani traders for transportation on priority” said Majid Aziz, a private dealer and former President of KCCI. Besides, business in areas close to the borders has been the most seriously affected. There is a significant impact in Peshawar and Chaman where owing to the undue availability of smuggled items businessmen do not take any initiative for production or setting up industries. This also deprives the local residents of employment opportunities.

    ATT issues unresolved as Pakistan
     
  15. Abu Zolfiqar

    Abu Zolfiqar First Line of Offence

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    allowing indian goods to Afghanistan via Pakistan is OUT of the question. We shouldn't even contemplate this for an inumerable number of reasons!!

    goods being smuggled in the first place should be stopped! Easier said than done, but perhaps this is one area that would require more attention.

    It's time we focus 100% on our interests....and our interest only. Enough of this preferential treatement at the expense of our own people.