DUSSELDORF: Given the prevailing geopolitical situation, the recent transit trade agreement with Afghanistan goes in Pakistan’s favour because the latter must improve bilateral relations with its neighbour towards the west.
After the departure of US forces in 2014, or even later, Pakistan will need firm and solid support inside Afghanistan to safeguard its interests inside and outside the country.
The agreement, despite a few tricky clauses, may even prove to be beneficial for the country.
Previously, Pakistan had realised that the Afghan Transit Trade Agreement (ATTA) has become outdated and unfavourable due to a host of reasons. The old arrangement, for instance, did not contain a provision enabling transit trade to the Central Asian republics through Afghanistan – a serious impediment to Pakistan’s aspirations.
Furthermore, customs and other procedures stipulated in the 1965 agreement had become archaic and provided an opportunity for pilferage and smuggling of goods.
A new arrangement, therefore, was required simply because of the sheer volume of trade between the two neighbours.
Currently, the trade volume between Pakistan and Afghanistan is about S1.5 billion and Pakistan is looking to increase it up to $5 billion by the end of 2015 on back of the recent agreement.
The ATTA was signed on March 2, 1965 under the supervision of the UN to protect the interests of landlocked Afghanistan. Through this agreement, Afghanistan could import goods through ports in Pakistan without paying customs duties.
Last year, the president of Pakistan, during his visit to the US, signed a memorandum of understanding with Afghanistan to conclude the agreement on transit trade by the end of 2009.
This year, finally, the Afghanistan-Pakistan Transit Trade Agreement or APTTA will replace the 45-year-old accord signed by the two nations. However, in addition to the very apparent problem of smuggling, there are a few red flags that should be pointed out.
Although Afghanistan is already using our roads to export a limited number of goods to India, the start of a truck service, a core provision of the new arrangement, will destroy Pakistan’s transport infrastructure.
Another pressing issue is the law and order situation in Khyber-Pakhtunkhwa and Punjab, where the trucks will travel while carrying goods.
On the other hand, the inclusion of the bank guarantee requirement for transit trade needs to be appreciated. The business community has always suggested to the government to include such a provision as a prerequisite to transit trade and now both governments have reached a consensus on the issue.
The bank guarantee would only be released after the contentment of Pakistani authorities that the goods have in fact reached Afghanistan.
The agreement notwithstanding, Pakistan has some serious issues at the Afghanistan border, which need to be addressed by the authorities at the soonest. According to experts, Pakistan is losing more than two billion dollars in tax revenue every year due to smuggling.
Although Afghanistan has a small market, the volume of goods imported far outweighs local demand. As a result, items ranging from electronic goods to air conditioners, clothes, cosmetics and automobile spares (including tyres) are smuggled to Pakistan.
In the Pakistani market, prices are high and smuggled goods are much cheaper. This obviously impacts industry and the economy negatively.
Published in The Express Tribune, August 30th, 2010.
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