Transit trade: Banks refuse to provide guarantee for Afghan trucks

No Afghan carrier has entered Pakistan for over a month to lift cargo.

ISLAMABAD:

Banks have refused to provide guarantees for Afghan trucks which come to lift imported cargo in Pakistan under the new transit trade agreement, citing high risk and effectively blocking the entry of vehicles to pick import consignments, sources say.

According to sources, no Afghan transporter has submitted bank guarantee for lifting imported goods because of the reluctance shown by banks.

Earlier, Pakistan had relaxed this condition for three months, but since the waiver ended over a month ago, no Afghan truck has entered the country and goods are being shipped to the border by Pakistani cargo carriers where they are lifted by Afghan trucks.

The new Afghanistan-Pakistan transit trade agreement came into effect in June this year, aimed at curbing massive smuggling, which had caused losses to the trade and industry as well as to the government in the shape of lost revenues.

Under the previous transit trade arrangement, many goods, particularly tea and tyres, did not reach Afghanistan and instead ended up in Pakistani markets to be sold at lower prices.

Commerce ministry spokesperson Najeeb Khawar, while talking to The Express Tribune, said the absence of bank guarantee had blocked the entry of the two countries’ trucks into each other’s territory. “Talks are being held in this connection between the Federal Board of Revenue and Afghan authorities to sort out the issue,” he said.

According to sources, the two countries have already reduced the rate of bank guarantee from 25 per cent to 10 per cent of the value of cargo trucks.

Islamabad had earlier assured Kabul that Pakistani banks in Afghanistan would be persuaded on an emergency basis to offer guarantees for cargo carriers, but banks turned down the request, fearing financial losses. Afghan banks were  likewise reluctant to provide guarantees.

According to sources, Pakistani vehicles have also not been able to ship the country’s goods to central Asian states via Afghanistan because of the absence of bank guarantee.

However, the clause of insurance guarantee for goods, routed through Pakistan to Afghanistan, is successfully being implemented.

Insurance companies have already reduced the risk premium and insurance charges from 1.8 per cent to 1 per cent on sensitive items being transported to Afghanistan under the transit trade accord. For food items, they have cut insurance charges by a further 15 to 20 per cent.

The insurance companies have also agreed that the amount deposited by traders for insurance guarantee will also be brought down from 15 per cent to 10 per cent of insurance guarantee. For further reducing the amount pledged as insurance guarantee for insensitive and less-risky goods, talks will be held with insurance companies.

Published in The Express Tribune, November 13^th, 2011.