First time in 46 years: Afghanistan to deposit financial guarantees for transit trade
Installation of cargo tracking system will take some time.
ISLAMABAD:
Afghanistan will submit financial guarantees for the first time in 46 years on goods that will travel through Pakistan, as the most significant safeguard measure of the new transit treaty comes into force today (Friday) after remaining suspended for over three months.
Under the Afghanistan-Pakistan Transit Trade Agreement that superceded the transit treaty of 1965, importers of Afghanistan would submit financial guarantees equivalent to 100 per cent duties applicable to imported goods.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.
Afghanistan will submit financial guarantees for the first time in 46 years on goods that will travel through Pakistan, as the most significant safeguard measure of the new transit treaty comes into force today (Friday) after remaining suspended for over three months.
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.