Under the Afghanistan-Pakistan Transit Trade Agreement that superceded the transit treaty of 1965, importers of Afghanistan would submit financial guarantees equivalent to 100 per cent duties applicable to imported goods. The move is meant to curb smuggling that is not only causing revenue losses of billions of rupees but is also hurting the local industry.
“From Friday, transit trade will be regulated under the insurance guarantee regime,” said Salman Siddique, Chairman of Federal Board of Revenue (FBR) while talking to The Express Tribune. He said only graded insurance companies would be allowed to issue these guarantees. The insurance companies would charge 0.8 per cent fee.
Another official said that once the volume of trade increases, the fee would be reduced. Afghan importers were reluctant to pay these charges. The financial guarantee condition was originally scheduled to come into force on July 6 but due to the reluctance of insurance companies to take risks and the high premium costs, the condition remained suspended for over three months.
However, other important safety wall – the tracking system – would remain unimplemented, as the authorities are under the process of finalising arrangements with system providers.
An FBR official at Customs said the authorities have asked the bidders to provide more details. After receiving the required data, the government would issue a licence, he added.
According to an FBR presentation, since the new transit treaty came into effect, the shipment of commercial cargo has declined 54 per cent, which is considered an evidence of a decrease in smuggling. It further states that non-commercial cargo traffic also plunged 32 per cent.
However, during recent meetings with Pakistani authorities, Afghanistan’s finance minister complained that due to the stringent measures Afghanistan’s trade has started shifting to Iran’s Bandar Abbas port.
Former finance minister Senator Ishaq Dar said the other day the only viable solution to the smuggling problem was that Afghanistan should sign an agreement for revenue collection with the FBR. According to his proposal, the FBR would collect taxes on behalf of Afghanistan and hand them over after deducting nominal service charges.
Meanwhile, the meeting of the Joint Economic Commission (JEC) of Afghanistan and Pakistan has been postponed as the Afghan finance minister has been unable to spare time due to pressing domestic engagements, said an official of the finance ministry. JEC was scheduled to discuss a range of issues including transit trade, import of electricity and road link to Central Asia via Afghanistan.
Published in The Express Tribune, October 14th, 2011.
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do they have money?
@It Is Economy Stupid: Afghanistan can't sign an FTA with Iran, it will incur a massive trade deficit and its balance of payments will worsen (which I'm assuming is already heavily negative, considering Afghanistan doesn't have an economy). Iran has its own equities with Pakistan so it may give Afghanistan access to its sea-port but its relationship with Pakistan is much more important so it won't turn this into some sort of "beat Pakistan" plot, even when Iran's not-all-that-solidified relations with India are taken into account.
@It is Economy Stupid: If Afghanistan is getting some of its trade done via an Iranian port, it is no cause for alarm to Pakistan. This is only one part of a larger pattern that is emerging across the entire region, which is mutual interdependence. This is marked by gas pipelines that are soon to crisscross just about every country in this region, the increased mutual trade and infrastructure linkages, electricity exports, etc and everyone in the region, including Afghanistan, Iran and Pakistan, all stand to benefit from this. Not everything going on in this part of the world has something to do with people getting victimized by Pakistan's supposed bullying.
@It Is Economy Stupid: Don't you guys ridicule everything Iran does. Are the iranians fool to take american blessings all the while they are under stringent american sanctions since 1979. You except iran to listen to the US while the US threaten it with bombing & block its future trade relations with PAK, cental asia & M.east. Recently the US accused iran of plotting to kill saudi ambasador to the US. You are right that the world is changing too fast and that explains your inability to see the changes properly. I don't think the iranians will welcome a US colony like Afganistan for transit trade since it can heart their security interest keeping in mind that lots of their nuclear scientist have been assassinated by CIA & mossad. Do you really expect iran to open a pandora's box just to please the indians ?
@It Is Economy Stupid: Last time I checked, Iran is an international pariah which is effectively shut off from the world due to sanctions. This is only going worsen for Iran because of their alleged involvement in a plot to kill the Saudi Ambassador in Washington. What makes you think that the same Western nations who give money to the poor Afghanis would allow Afghanistan to trade with Iran? Not only should we make sure that Afghanistan signs trade treaties with Pakistan but we need to fence the border with Afghanistan so that all movement into our nation is strictly regulated. Now is the time to seal the border with Afghanistan before the West leaves- otherwise we will be burdened with millions of Afghani refugees again.
The Afghanistanis are coming to their senses. Means less smuggling and loss of revenue for Pakistan.
“Afghanistan’s trade has started shifting to Iran’s Bandar Abbas port.” What? You mean Afghanistan can think independently and live without Pakistan? What will happen to our geopolitical location? What will happen to Karachi Port? We were told Afghanistan can not live without Karachi Port. I think I will crawl back under my rock. World is changing too fast for my liking. I will wake up when Afghanistan sign a free trade agreement with Iran with the blessing of Americans.