The most fundamental issue was uniformity in the tariff structure



Sep 09 - 15, 2002



The visit of trade delegation from Pakistan to Kabul and visit to Pakistan by two high ranking Afghan Ministers, during the last week was a reassuring sign that the relations between the two neighbouring countries were improving.

During the talks Pakistan offered Afghanistan Free Trade Agreement (FTA) with an understanding to follow common tariff policies, to facilitate the transit trade.

Afghan team led by Foreign Minister Abdullah Abdullah held detailed talks with Ministers for Finance and Commerce to work out proper mechanism to enhance bilateral economic cooperation.

Trade between the two sides during last fiscal year was just Rs.14.8 billion, with Pakistani exports of Rs.11.6 billion, and imports of Rs.3.2 billion. In addition to this, the goods in transit to Afghanistan amounted to Rs.10.7 billion. Pakistan also facilitated Afghan goods transit to India. During Taliban rule the trade under transit facilities (ATT) was over Rs.100 billion and comprised of items which were not in demand in Afghanistan and were actually meant for smuggling into Pakistan. Why, for instance, should there be so many air-conditioners imported into Afghanistan. Trucks carrying transit items to Afghanistan get stopped on the deserted roads of Balochistan to disgorge stuff that was never meant for Afghanistan. The goods that get to Afghanistan are not subject to any tariff; therefore they get smuggled back into Pakistan to bag the 25 to 35 per cent differential on tariff that Pakistan imposes on its imports. According to an estimate Pakistan was loosing over Rs.30 billion in revenues throughout, ATT.

There are no real estimates for the present quantum of smuggling, which could be higher than the official trade figures. However since September 11, the scope of smuggling had actually reduced due to strict monitoring of the mountainous border terrene.

A senior official of the Ministry of Finance said that the most fundamental issue was uniformity in the tariff structure Afghan side had shown understanding with Pakistani proposal to have 5-25 per cent tariff slabs that now exist in Pakistan. This would facilitate the two sides to have joint appraisal of transit goods at Karachi before their transportation to Afghanistan, eliminating scope for intending smugglers to push such goods back into Pakistani market.

Two sides have decided to pursue this proposal more seriously, as it would help alleviate Pakistani concerns about certain goods that were more smuggling prone due to cushion available on different tax rates. A high level team, comprising officials from the Central Board of Revenue (CBR) and Ministry of Commerce would soon visit Kabul to work out details. There was consensus that the Afghan Transit Trade Agreement (ATTA), a 1965 treaty between the two countries, was largely misused in the past due to higher incidence of smuggling in the garb of ATTA. The government wants to avoid similar happenings again that ruined Pakistani industry in the recent past.

The two sides also discussed possibilities of escorting convoys from Karachi to Peshawar, and Chaman, to discourage pilferage of smuggling-prone items imported by Kabul through ATTA to make sure that transit trade does not subvert financial interests of Pakistan.

Pakistan and Afghanistan also discussed in detail the feasibility of Turkmenistan Afghanistan Pakistan gas pipeline project. The Asian Development Bank (ADB) is due to hold a steering committee meeting on the subject some time next month.

In the context of enhancing trade through land route, the two sides also discussed construction of Torkham-Jalalabad-Kabul road. Pakistan had decided to send a technical team of NESPAK and NHA officials to conduct the pre-feasibility study. Pakistan had shown interest to construct this highway project in cooperation with the European consortiums to facilitate the Afghan transit trade.

It is a matter of satisfaction to hear Foreign Minister Abdullah Abdullah saying that relation between Afghanistan and Pakistan are gaining strength, especially as he, being a key figure in the Northern Alliance, had not been kindly disposed towards us during the Taliban era, not had he reportedly markedly softened his stance. The imperative of contiguous land, large ethnic groups straddling the border, and the two peoples' religious identity demand they put past rancour to rest to pave the way for a relationship of common economic as well as strategic advantage to meet new challenges. Pakistan could benefit greatly if it plays a major role in any future reconstruction and rehabilitation efforts in that country.

Pakistani machinery, manpower and expertise could play an important part in any future rebuilding effort, and its ports and transport sector could receive a major boost. Islamabad also has an interest in seeing the current government in Kabul headed by Hamid Karzai extend its writ over larger parts of the country. If Karzai can tame the warlords who wield vast power in the Northern parts of the country, Pakistan would benefit greatly because it would then open up the land route to oil and gas rich Central Asia.