PAKISTAN and Afghanistan have agreed to facilitate two-way transit trade after having reached a consensus at the 7th session of the Pakistan-Afghan Joint Economic Commission last week. Now, both the sides are busy finalising the draft agreement, said an official.

Pakistan is Afghanistan’s traditional trading partner and it provides the shortest and cost-effective transit route to its landlocked neighbour. That is why despite a long history of mutual suspicions, not only the volume of transit trade via Pakistan’s land route has considerably increased, but Pakistan remains a major trading partner of the war-ravaged country.

The first transit trade agreement was signed in 1965 under which both agreed to grant each other the freedom of transit to and from their territories. Under the ATTA, five routes were identified including those of Peshawar-Torkhum and vice versa, Chaman-Spin Boldak and vice versa, Ghulam Khan Kelli, Port Qasim and Karachi Port.

The fall of Taliban regime in 2001 brought in a US-backed government into power in Kabul which is not so friendly to Pakistan; yet its imports from Pakistan grew to $1.63 billion in 2006-07 before slowing down the following year. The current cold war between the two countries has badly impacted the bilateral trade although Pakistan has done a lot to facilitate the Afghan transit trade.

But the Karzai-led Afghan government has adopted discriminatory policies towards Pakistan. It resulted in reducing the Pakistani exports to $600 million last year, said Manzoor Elahi, a leading exporter in Peshawar.

Afghan government, he explained, is charging high rate of tariff on Pakistani goods such as steel products, plastic goods, PVC goods, cement and citrus fruits etc.

At the same time, goods imported from China and India via Pakistan are being charged with concessional rates of tariff, resulting in their illegal sales in Pakistan.

“Let me tell you that 80 per cent of these goods are smuggled back to Pakistan which hurt us and also our economy,” lamented Mr Elahi. In his opinion, in the next round of bilateral talks, Afghanistan should be persuaded to charge high duty rates on the transit goods not consumed in Afghanistan and these goods should be cleared from Kabul customs instead at Jalalabad to avoid its smuggling to Pakistan.

Under the ATTA, Kabul is bound to facilitate Pakistan transit trade with Central Asian Republics (CARs), but it has instead imposed a number of restrictions on Pakistanis trading with CARs via Afghanistan. The Afghan government has made it mandatory for Pakistani traders to get their trade contracts with their central Asian counterparts, registered with various Afghan ministries.

A Pakistani trader has to pay $2000-3000 per contract and it takes more than 15 days to complete cumbersome formalities. Similarly, the Afghan government charges $300 from Pakistani traders per truck on transit consignments through Afghanistan from or to CARs.

Moreover, an amount equivalent to 110 per cent Afghan custom duties has to be deposited with the Afghan customs at the time of entry of Pakistani transit goods into Afghanistan, to be refunded after deducting 20 per cent of the deposited amount and presentation of crossed border certificate. This practice takes too much time, as a Pakistani trader has to wait for 2-3 months to get his deposited amount refunded from the Afghan government.

Pakistan is facilitating Afghan transit trade without any hindrances and duties, but the attitude of the Afghan authorities indicates that it is not favourable to boosting trade relations between Pakistan and CARs,” opined Mr Elahi.

The landlocked CARs are potential markets for Pakistani goods including citrus fruits, surgical items, sports goods, leather jackets, garments, pharmaceutical items, matches, juices, edible oil, sugar and cement etc.

“The ATTA is to facilitate the transit trade for both sides, but so far it has been, for all practical purpose, a ‘unilateral’ arrangement, with Afghanistan being the major beneficiary because it pays nothing for using Pakistani territory for its imports/exports without any barriers/hindrance,” said Mr Elahi.

The ATTA should be enforced as a bilateral arrangement as soon as possible for providing transit facility to Pakistani traders’ to and from CARs on reciprocal basis, Mr Elahi said.

Apart from that, the Preferential Trade Agreement should also be signed with Afghanistan with the commitment that it will give access to Pakistani products on concessional tariff lines because Pakistan government is already providing concessional rates on Afghan products such as fresh fruits, dry fruits imported in Pakistani via Torkhum charging nominal rate of duties.

Pakistani traders import iron, steel and copper scrap and aluminium scrap, plastic raisins, LPG, oil and gas, minerals, wheat and other agricultural products that can be routed through Afghanistan from CARs for local consumption at economical cost.

Land route linking Peshawar with Termiz in Uzbekistan via Afghanistan--a distance of 880 kilometres-- provides easy and the shortest access to Pakistani goods to reach CARs and vice versa.

Currently, CARs’ major transit trade is routed through Iranian seaport Bandar Abbas, which is 3800 kilometres away from Uzbek capital, whereas Peshawar-Termiz land route reduces this distance substantially. Karachi or Gawadar seaport is 2700 kilometres away.

Worsening law and order situation in Afghanistan is also another impediment in expanding Pakistan’s transit trade with CARs. Efforts should also made be to improve security situation inside Afghanistan, said Zahidullah Khan Shinwari, Chairman All-Pakistan PVC Manufacturers Association.

The insurance companies, he said, are not ready to provide insurance cover for Pakistani imports and exports passing through Afghanistan, adding, “Until and unless situation in Afghanistan is improved, Pakistan cannot fully utilise its potential of being located at the gateway to CARs.”