Look­ing for a transit trade mech­a­nism

Enterprise - - Snapshot -

The bi­lat­eral Transit Trade Agree­ment be­tween Pak­istan and Afghanistan has not yet been able to sat­isfy the reser­va­tions of cus­tom clear­ing agents and lo­cal busi­ness com­mu­nity. De­spite the in­tro­duc­tion of a new set of rules in the form of Afghanistan-Pak­istan Transit Trade Agree­ment (APTTA) 2011, the is­sues per­tain­ing to trade lo­gis­tics still re­main un­re­solved. In a re­cently re­leased World Bank Study on trade lo­gis­tics in the global econ­omy, Afghanistan ranked at the bot­tom in a sur­vey of 150 coun­tries. Pak­istan holds the 68th po­si­tion on the Lo­gis­tic Per­for­mance In­dex (LPI) that is based on the abil­ity to trans­port goods re­li­ably and in a cost-ef­fec­tive man­ner.

Be­fore APTTA 2010, the 1965 Afghan Transit Trade Agree­ment (ATTA) broadly spec­i­fied the port, route, trans­port modes and cus­toms transit pro­ce­dures. Due to the chang­ing eco­nomic and trans­port con­di­tions, both Afghanistan and Pak­istan agreed on the need to ne­go­ti­ate a new agree­ment to con­tinue to pro­vide Afghanistan with ac­cess to the sea through Pak­istan and to pro­vide Pak­istan with di­rect routes to the Cen­tral Asian Re­gion (CAR) through Afghanistan. But there are nu­mer­ous prob­lems which hin­der the ac­tual con­duct of trade.

The is­sues re­lated to the im­ple­men­ta­tion of the new transit trade ac­cord in­clude in­stal­la­tion of a track­ing sys­tem, de­posit­ing bank guar­an­tees and in­ter­na­tional re­quire­ments for trans­port through sealed trucks, poorly de­signed and man­aged of­fi­cial bor­der port sta­tions, long wait­ing times at the borders which also gen­er­ate un­of­fi­cial pay­ment trans­ac­tions and lack of for­mal fi­nan­cial and insurance sys­tems.

The lo­cal busi­ness com­mu­nity stresses on the es­tab­lish­ment of an in­built mech­a­nism to check the mis­use of transit trade due to the tra­di­tional link­age of Afghan Transit Trade with smug­gling. An­a­lysts view that be­sides dis­cour­ag­ing lo­cal man­u­fac­tur­ing and le­gal im­ports, the transit trade is caus­ing in­dus­trial stag­na­tion, cost­ing $15 bil­lion loss to re­mit­tances equal to $120 bil­lion loss to the GDP and $3 bil­lion loss to the rev­enue.

How­ever, the gov­ern­ment of Pak­istan has clar­i­fied that it will not al­low en­try of Afghan ori­gin ve­hi­cles for trans­porta­tion of transit goods un­der the new Afghan Transit Trade Rules 2011 in cases where the cus­toms au­thor­i­ties refuse to is­sue Road Transit Tem­po­rary Ad­mis­sion Doc­u­ment (TAD) to Afghan car­ri­ers. TAD has been in­tro­duced by the Fed­eral Board of Rev­enue, through which ve­hi­cles reg­is­tered in Afghanistan are tem­po­rar­ily brought into Pak­istan for trans­porta­tion of transit goods.

In ad­di­tion, the trans­port op­er­a­tors will also be re­quired to de­posit a re­volv­ing insurance guar­an­tee of Rs. 5 mil­lion from a re­puted insurance com­pany cov­er­ing all types of risks and a gen­eral un­der­tak­ing to transit the goods safely and se­curely.

There is con­sid­er­able trade be­tween Afghanistan and Pak­istan, to­tal­ing well over US $1 bil­lion, but it is very asym­met­ric, con­sist­ing of heavy im­ports from Pak­istan, as com­pared to very lit­tle for­mal im­ports from Afghanistan. Through struc­tural im­prove­ments, both the coun­tries can lever­age nu­mer­ous ben­e­fits from this transit trade

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