ISLAMABAD: In a major development which may address many obstacles in bilateral as well as transit trade, Pakistan and Afghanistan have agreed on Preferential Trade Agreement (PTA), besides clearing the containers stuck at the port and border.
The agreement was reached in a meeting between the relevant authorities of the two countries on Monday (January 9) held in a virtual format in which Pakistan’s side was led by Ahsan Ali Mangi, additional secretary commerce, while Afghan side was led by Dr Farooq Azizi, advisor ministry of industry and trade.
Well-placed sources told Business Recorder that PTA from the Pakistan side focused on 25 items mostly fruits and vegetables while Afghanistan agreed to reduce 60 percent export tax on coal.
Currently, Afghanistan is charging $85 tax per ton on export of coal to energy-starved Pakistan. When this tax is added to the unit price of coal, $35 in royalty, transportation and warehousing costs for Pakistan, it becomes very expensive.
“Taxes have led to increase in cost of production of energy, and increase in the input cost for large-scale manufacturing sectors such as textile, cement, and chemicals that are vital for the economy of Pakistan,” says an official document available with Business Recorder which contains the agenda of discussions.
A heavy duty of $1,360 per truck on trucks coming from Central Asia to Pakistan has already been imposed and when this duty is added to the unit price of coal, transportation and warehousing charges, it increases the overall cost of buying and procuring coal from Central Asia, making it an expensive option for Pakistan, according to the document.
Under Transit Trade, trucks coming from Afghanistan carrying Afghan goods for trade are allowed free movement into Pakistan under temporary admission document (TAD) but Pakistani trucks cannot cross Jalalabad.
Official sources said that Pakistani side sought an urgent TAD for free movement of the transit trucks to Central Asia through Afghanistan as it is difficult due to the condition on Pakistani trucks to off-load at Chaman border, hire Afghan trucks and pay them additional fee to transit to Central Asia which has made transit trade cumbersome and expensive for Pakistani traders.
“No progress was made on movement of Pakistani trucks through Afghanistan to Central Asia,” the source said, adding that Pakistani trucks will have to off load goods in Hairatan, in northern Afghanistan bordering Uzbekistan and then Afghan trucks will take the cargo on to Central Asia.
Furthermore, the sources said that Pakistan has also taken up the issue of US$250 per truck as transit fee by Afghanistan on trucks carrying relief goods for flood victims citing two instances when trucks coming from Tajikistan were charged with high duty, royalty and damages.
“This goes against the agreed rules decided in the Transit Trade Agreement and TIR convention – the Convention on International Transport of Goods Under Cover of TIR Carnets. Pakistan is not charging any fee for transit from Afghans,” the source further stated.
The sources also maintained that the two sides also agreed to undertake measures to prevent smuggling of US dollars from Pakistan to Afghanistan, as on average, US$600-700 million per month is smuggled to Afghanistan and then to UAE and Turkey. Besides, the two sides also agreed on taking steps to prevent smuggling of precious commodities from Pakistan such as silk, sugar, tyres, mobile phones, oil and other commodities which is hurting Pakistan economy while these items are then re-exported to Pakistan.
On the containers stuck at Karachi port and the border, the sources said that Afghanistan side will share the list of stuck containers with the Customs holding some containers because they submitted fake invoices.
The Pakistani side has also taken up the rise in the tax rate on Pakistani Kinnow export to Afghanistan - increased from Afg.198,281 (US$ 2235) per truck to Afg.526,508 [US$5,935] per truck; additionally, Afghanistan has imposed duties on citrus imports from Pakistan ,and increased taxes and duties on import of high demand seasonal fruits of Pakistan such as mango, Kinnow, etc.
In response to some statements coming from Afghanistan that they could divert the route to other countries, the sources maintained that Afghanistan’s 83 percent trade (import export & transit) is through Pakistan, making it the only feasible transit route, adding that rest of the routes including Iran, Uzbekistan and Tajikistan are not feasible at all.
“It’s an inaccurate claim that they can divert the transit route to any other country,” the source further maintained.
Talking to Business Recorder, Dr Ghulam Nayab, former commercial consular of Afghanistan to Pakistan, said that nearly 10,000 transit containers are currently stuck at Karachi Port as a result of a 100 percent increase in tariffs on both sides.
He said that the Chaman crossing point is only operating at 10 percent of its capacity, and trade through Jalalabad and Ghulam Khan crossing points are used to avoid tariff increases from Afghanistan.
“The decline in aggregate demand brought on by NATO’s withdrawal from Afghanistan, the financial crisis and closure of a banking system following the Taliban takeover, the law and order situation, the frequent closing of the Pakistan-Afghanistan border, rising customs duties, and the diversion of Afghan trade to other neighbouring nations are some of the causes of the declining trend of transit trade through Pakistan. Finally, Afghan traders have abandoned Pakistan in favour of Bandar Abbas, Iran as a substitute route,” Dr Nayab said.
He further maintained that the Taliban custom authorities are charging old tariff invoices that are $1.80 per kg on cloth at the Jalalabad and Ghulam Khan crossing points, indicating that three different types of custom rules are being followed at all three crossing points. “The Afghan transit fell by up to 8.5 percent as a result of the increased tariff - up to 6$ per KG for Chaman crossing point from both sides - and Afghan transit and Afghan traders are losing millions of dollars,” he further said.
For the smooth economic and geographic interdependence and mutual gains, he added that both Pakistan and Afghanistan should immediately restore trade and transit by making it free from political tensions between the two countries.
For Pakistan, diplomatic sources said that the major concern is the increased cross border attacks and the presence of anti-Pakistan elements in Afghanistan particularly Tehreek-e-Taliban Pakistan (TTP) and Islamic State Khorasan (IS-K).
According to a recent annual report released by Pakistan Institute for Peace Studies (PIPS), Pakistan witnessed 27 percent increase in 2022 in terrorist attacks as compared to 2021, as a total of 262 terrorist attacks were carried out in 2022 including 14 suicide bombings, in which 419 lost their lives and 734 injured.
Copyright Business Recorder, 2023
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