Jan 05 - 18, 2009

The Pak-Afghan trade growth prospective has been brightened ever since the strategic importance of two countries in world seeking energy corridors and access to expand entry in to landlocked territories became higher. Two nations inter-trade mainly governed by Afghan Trade Transit Agreement has continued to register phenomenal growth since 2001 with misbalanced pace in favour of Pakistan. United Nations brokered ATTA allowed two nations to use transit routes for transporting goods to and from different territories of Pakistan and Afghanistan freely.

Afghanistan that shares longest border known as Durand line with Pakistan is a landlocked country and greatly depends on later for foreign trade transits and access to sea ports. For Pakistan, land routes in Afghanistan have potential to link it to central Asian republics (CARs). Besides, Afghanistan has full potential to become regional hub for trade and transit between South and Central Asia, Mid East, and China. This signifies the interdependence of both countries on each other. As Afghanistan is a key to market expansion and corridor so is the Pakistan.

Over a period of time, Pak-Afghan trade has increased substantially with Pakistan's trade surplus. From Pakistan textile and garments are major exports to Afghanistan. The exports have posted 50 percent CAGR since 2001 except FY07 when exports depicted negative growth as compared to preceding fiscal year. Alone in last fiscal year Pakistan's exports to Afghanistan were of $1.14 billion, 51 percent increase over $753 million in FY07. The total imports were, however, oppositely low. During FY08, Pakistan imported $90 million products from Afghanistan.

While ATTA has been instrumental in enhancing trade volume between two countries it is equally facilitator to transit of cargoes across border. In spite of that, experts believe that lot needs to be done to revise and update agreement in conformity with the changing socio-economic realities. The agreement was initially signed in 1965. Since then numerous economic as well as social changes have taken place and transit accord must assimilate them. Along with Pakistan and Afghanistan now many other countries have direct relation to improvement or deterioration of Pak-Afghan transit system.

Inclusion of prevalent transportation and international trade conventions will bring improvement in the effectiveness of transit agreement. By considering fresh economic requirements the anew accord can produce multifarious advantages. Several times both nations have realized the need of revision and initiated dialogue about modus operandi to get optimal out of interchangeable geographical expertises, but nothing in concrete was resulted. The recently proposed Transit Coordination Committee and the agreement's draft revision may lead to desirable outcomes as other stake-holding countries may have intervened.

According to a media report, the draft has been approved by Afghan government and is now waiting rectification by FBR and ministry of commerce, GoP. In past, independent attempts were introduced by institutions in two countries to strengthen trade and transit ties. Trade bodies of both countries have also signed agreements. Similarly, in principal it was decided to install latest equipment handling and cargo monitoring technology at Karachi port. Surveillance system was to be inducted for screening container without unfastening it at the port. Except few containers all other has to be unsealed before being loaded into trucks for transportation.

Under ATTA, transit of goods between Pakistan and Afghanistan is exempted from custom duty, toll tax, transit fee and any other federal or provincial levies. However, transportation and other service charges are levied. Pakistan offers concessionary railway and logistics tariffs to goods coming across Afghan border. In addition, the tariffs are too small that they slide down original price of products making them price competitive in comparison to same goods for local consumption. That is one of the reasons why smuggling and informal trade between two countries are rampant.

Smuggling of goods enlisted under trade agreement is very common. And goods meant for Afghanistan are returned back in Pakistan through illegal channel. According to an estimate, 80 percent of goods targeted for the country are transported back in Pakistan by smugglers. Rendering sever loss to formal trade and economies of both the countries, this activity is reinforced by unavailability of basic infrastructure in border areas and prevalent customs in the vicinity. The lack of infrastructure has cherished unorganized trading and folklore finds no harm in smuggling or informal trade.

Although logistics are in rundown alike in Pakistan and Afghanistan, the conditions are worst in Afghanistan than in Pakistan. World Bank logistics performance index 2007 based on data about freight and logistics friendliness of countries ranked Afghanistan last and Pakistan on 68th position amongst 150 countries. The road networks in Pakistan are far expansionary and better-off. Importantly, Pakistan's two sea ports: Karachi and Gwadar are windows to world trade vastness. Thus transit agreement has benefits for Afghanistan than Pakistan in immediate time period.

The common shared weaknesses between these nations are absence of trade facilitation mechanism and precarious security environment. Unorganized trucking system, no official warehousing facilities of cargo, no dry ports or port stations all demand investments from countries whose supply line passes through Pak-Afghan transit routes. Well-timed transit agreement has gone beyond bilateral gains and entailed multilateralism.

NATO Secretary General expressed his desire to deliberate upon discussion with Islamabad about viability of transit accord to move its cargo to Afghanistan. Attention towards improvement and facilitation of economic activities around the areas will fructify the transit. Better composed milieu and geographical prosperity will precipitate fructification from energy bonanza and corridors explored within or through taking strategic transit routes of Pakistan and Afghanistan.