War Risk Surcharge/ Insurance
A genuine concern of Pakistani business community
By AMANULLAH BASHAR
Nov ,12 - 18, 2001
Pakistan's cargo both imports and export comes to 700,000-800,000 containers per year. The levy of $200 per container as an average of War Risk levy, currently being paid by the importers and exporters is certainly going to seriously hit the business in Pakistan.
Although the business community has raised hue and cry over the levy of this uncalled for surcharge, nothing tangible has come into force to save the economic activity on account of US-led war in Afghanistan. It is amazing that on one hand Pakistan being an ally to the UN efforts against terrorism, it is being punished through imposition of this funny surcharge on Pakistan cargo. On the other Indian cargo has been spared from levy of this surcharge despite the fact it is located on the similarly coast of Indian Ocean. Business community feels it a blind discrimination against Pakistan.
Though a delegation of Lloyds Insurance of London had visited Pakistan, but their visit seems to be a joy ride despite of their promise to take up the matter seriously nothing positive has come out so far and the business in Pakistan continues to suffer.
It may be recalled that an unprecedented war risk insurance premiums and War Risk Surcharge have been imposed on all cargo shipments to and from Pakistan. Shipping companies are charging War Risk Insurance @ $150 per 20 ft container of #300 per 40 ft container of refer or dry cargo from October 5. Imposition of War Risk Insurance is totally unjustified as there is no Naval War which could pose any threat to the coming or outgoing ships from Pakistani ports.
The government has however assured the business community that it is preparing a case to present before the War Risk Committee in London against the levy of war risk insurance on Pakistan.
The war risk related levies are implying double edge effects on Pakistan's economy in the shape of making the imports and exports expensive while enhancing the cost of end products rendering them out of economy of the scale.
The levy is costing heavily both on public and private sectors leaving no option but to pay extra charges on their cargoes. It may be noted that following the terrorist attacks in New York and Washington on September 11, the International airline and shipping lines had stopped their operations for Pakistan. Though some of the airlines and shipping companies have resumed their operations but with the charges of war risk insurance.
As a result of these levies and overall prevailing conditions, Pakistan's exports have reduced by 45 per cent after the imposition of war risk insurance. Both the public as well as private sector is of the view that imposition of war risk insurance is unjustified as neither its territorial waters nor the air space were declared as the war zones.
The business community is of the view that the government should take serious notice of the uncalled for levy adversely affecting economic activity in this country. The government should take note of the situation and should give its sovereign guarantee to the international insurance companies and shipping lines in order to reduce the landed cost of imported raw materials for the benefit of export industries. The government should sort out with insurance companies the cases where surcharges on consignments arriving before October 1, 2001 are being collected.
The Karachi Chamber of Commerce and Industry (KCCI) has urged for complete withdrawal of the War Risk Insurance Surcharge through the War Risk Committee in London.
KCCI has argued that neither Pakistan was engaged in any war nor did war-like situation exists in Pakistan, hence there is no justification for imposing the War Risk levy.
According to an estimate, the imposition of war risk surcharges would cost Pakistan about $90 million. This would partially offset the favourable impact of the financial relief being contemplated for Pakistan.
KCCI pleaded that if there was any reservation on the part of shipping lines, the government can resolve the issue by giving sovereign guarantee.
This surcharge has raised the cost of imports as well as exports manifold rendering particularly our exports uncompetitive in the world market.
Imran Saeed, Convenor, Tajir Action Committee (TAC), has urged the Federal Finance Minister to take appropriate measures to get rid of war risk surcharge at the earliest. He said neither Pakistan is at war with any country nor it is in the war zone and added that the imposition of war risk surcharge has no justification. He said that the war risk surcharge makes Pakistan goods not competitive in international markets and places its competitors in advantageous position.
He pointed out that the importers are already cancelling orders and placing no new orders for Pakistani goods.
Meanwhile, the minister of communications Lt. Gen. Javed Asharaf Qazi has said that the government will provide sovereign guarantee to the Lloyds Insurance of London if it does not withdraw what he called the unjust and unfriendly war risk surcharge imposed on shipping in Pakistan. He said that surcharge is adversely affecting the economy which cannot afford to have its exports hurt by the surcharge.