Looking for a transit trade mechanism
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