Afghan transit trade especially via Gwadar Port: Govt to swap bank guarantee for insurance bond

ISLAMABAD: The government is set to replace the bank guarantee system with an insurance guarantee to facilitate transit trade under the bilateral agreement between Pakistan and Afghanistan, specifically for goods passing through Gwadar Port.

The Afghanistan-Pakistan Transit Trade Agreement (APTTA) was signed in 2010 to facilitate the movement of goods between the two countries. The Ministry of Commerce allowed the import of Afghan bulk cargo—wheat, sugar, and fertilizers—at Gwadar Port, with onward transit to Afghanistan using bonded, insured, and sealable trucks equipped with tracking devices. The cargo handling was part of special initiatives, including the introduction of an Insurance Guarantee. This Insurance Guarantee for Afghan transit goods was introduced under Customs Rules 2021 (Rule 471, clause-xi), and was later replaced by SRO No.1402(1)/2023 on October 7, 2023.

The Ministry of Maritime Affairs (MoMA), in a summary to the Economic Coordination Committee (ECC), noted that the requirement for bank guarantees in Afghanistan’s transit trade had a negative impact, particularly on bulk cargoes such as wheat, sugar, and fertilizer, which in turn affected investors and ease of doing business. As a result, investors in Gwadar, along with the Port Operator and Gwadar Port Authority, have repeatedly requested the withdrawal of the bank guarantee requirement, proposing instead the use of an Insurance Guarantee to streamline trade operations.

SIFC directs Pak-Afghan Chamber to meet, ease trade curbs

To address this issue, several meetings were held with key stakeholders, including the Minister for Maritime Affairs, Minister for Commerce, Minister for Planning, Development & Special Initiatives, and the Secretary of Maritime Affairs. During these meetings, it was revealed that the Ministry of Commerce introduced a new policy in October 2023, which requires special permission for bulk cargo imports under APTTA at Gwadar Port, particularly for Di-ammonium Phosphate (DAP). In another meeting on September 19, 2024, the Ministry of Maritime Affairs was informed that the SRO was issued by the Federal Board of Revenue (FBR) in consultation with the Ministry of Commerce to prevent pilferage and curb smuggling.

At a recent meeting at the Special Investment Facilitation Council (SIFC), the Ministry of Commerce clarified that the Afghanistan-Pakistan Transit Trade (ATT) had not been halted, but rather was being regulated through these SROs. Furthermore, transactions have been documented through banks to prevent smuggling at the Pakistan-Afghanistan border.

The Secretary of the Apex Committee emphasized that the Ministry of Commerce needs to address these issues and encouraged stakeholders to collaborate in overcoming challenges to revive transit trade. A delegation raised concerns about the imposition of a 10% ad-valorem processing fee on Afghan transit commercial goods and also highlighted the unimplemented SRO 642(1) 2023, which allows barter trade between Afghanistan and Central Asian Republics (CARs).

The forum was informed that the government is working on an automated mechanism to regulate Afghan Transit Trade. The State Bank of Pakistan (SBP) and Pakistan Single Window (PSW) are currently collaborating on the development of this system to streamline the tax process.

The Ministry of Commerce briefed participants that Afghanistan’s side has shown little interest in barter trade and continues to insist on the use of banking channels. As a result, the meeting decided that the Pakistan-Afghanistan Joint Chamber of Commerce & Industry (PAJCCI) would convene a board meeting after consulting with Afghan counterparts within four weeks and submit joint recommendations to the Ministry of Commerce and SIFC. The outcome of the meeting is expected to be shared with the SIFC by January 20, 2025.

Copyright Business Recorder, 2025