AFGHAN TRANSIT TRADE

The ATT resulted in a quasi-legal smuggling in more ways than one

By SYED M. ASLAM
Aug 26 - Sep 01, 2002

Pakistan signed an agreement 37 years ago with Afghanistan to facilitate foreign trade of its land-locked neighbour. Better known as ATT Afghan Transit Trade the agreement has been massively abused by the unscrupulous elements to import products way above their actual demand in Afghanistan meant only to push back the products into Pakistan.

By now most of us are aware how the agreement has resulted in massive smuggling of black tea, tyres, electronic goods, kitchen items, home appliances and other such goods into Pakistan. This happened despite the fact that Afghans prefer to drink green tea and not its black variety preferred by tea-guzzling Pakistanis and the fact that the Afghan market was just not able to absorb the quantity of electronics and other goods booked in great volumes by the unscrupulous elements.

In short, the ATT resulted in a quasi-legal smuggling in more ways than one: The majority of the imported products booked for Afghanistan just went through the motions never to reach Afghanistan after being rerouted in the border areas of the North West Frontier Province (NWFP) bordering with the country. A big quantity also find its way back into the country flooding the markets in the major urban centers of the country with the goods imported under the ATT.

With each passing year the abused increased pushing products into the local markets which not only undermined the local manufacturing but also the legal imports. The first hurt the manufacturing sector tremendously forcing many foreign investors to close their operations in the country while the second discouraged the legal imports of many items, particularly tyres and spices, due to in-competitive prices. This, in turn, deprived the government of substantial loss in terms of investment, corporate taxes and duties.

The agreement was abused to such an extent that an otherwise necessary service extended to the land-locked country turned it into the major cause for smuggling into Pakistan. It was all the more troubling as it was hard to keep track of the movement of imported goods bound for Afghanistan due to rampant corruption and political influence during all stages of transit from Karachi, the nation's only port-city.

The strong concerns of the manufacturing sector and the importers worst hit by the nefarious trade under the umbrella of agreement and their growing vocal discord made the government put 17 items on the negative list of the ATT six years ago. The present government added another 7 items in the prohibitive list in 2000-01. Thus, presently, 24 items make the prohibitive list of the ATT. The list includes such high smuggling prone items as black tea, tyre, television set, refrigerator, air conditioner, VCR/VCP, etc.

These high smuggling prone items intended for consumption in Afghanistan was really meant for the Pakistani market as the Afghan market was obviously was not able to absorb such a massive quantity. Figures show that prior to the slapping the prohibitive list in 1996, the value of these 17 items made up 43 per cent of the total goods imported under the ATT in 1994-95. Similarly, the value of 7 additional items added to the negative list in July 2001 made up 10 per cent of the total imports under the ATT in 2000-01.

However, despite the ban, the smuggling of the prohibitive items has continued over the years as the unscrupulous elements found an alternative route the port of Bander Abbas in Iran. Only about 75 per cent of the total demand of 1.2 million bus & truck tyres in the country is still fed by smuggling while locally manufactured and imported counterparts meet the remaining 25 per cent of the demand combined. The local manufacturers are suffering and the imports are on a decline and the national exchequer is deprived of Rs 1.5 million in revenue.

Now, reports have it that the Government of Afghanistan has requested Pakistan to remove the 24 items from the negative list of ATT Agreement. For reasons which are much too apparent the news has caused a stir within the circles of Pakistani industry and trade which see ATT as the major cause of smuggling a phenomenon which has refused to die down despite the ban imposed on the import of 24 items under the ATT.

This is particularly true of tyre manufacturers and importers, tea importers and blenders, and the electric and electronics industry which has able to gain certain grounds after a range of products were nor more allowed to be imported under the ATT. For instance, the issuance of the negative list in 1996 did miracles to the television manufacturing in the country: The production of television sets quadrupled from 72,000 in 1996-97 to around 288,000 in 1999-2000 to push the industry's revenue from Rs 290 million to almost Rs 500 million during the same period. The production increased to 450,000 level during the last fiscal.

Even the sealing of Pak-Afghan border and the ongoing operations by the US led forces in the areas has failed to make any visible dent in the nefarious activity which is still costing a loss of billions of revenue to the Pakistani government on the one hand and discouraging the local manufacturing and legal imports on the other. The request by Afghan government to remove the 24 items from the negative list of the ATT is, thus, poses serious concerns about the survival of a number of industries, legal imports as well as serious revenue implications.