The increase in customs duty, from 5% to 35%, and the levy of maximum regulatory duty on the import of 397 items, in the budget, for the financial year, 2009-10, would increase imports under the Afghan Transit-Trade Agreement (ATT), depriving Pakistan of handsome revenue, with an adverse impact on industrial development.
Talking to Business Recorder, Mohammad Ishaq, Vice President, Sarhad Chamber of Commerce and Industry (SCCI) said that the maximum cut in customs duty, during the last five years, by the Federal Board of Revenue (FBR), had helped bring down the volume of goods under the Afghanistan Transit Trade (ATT), from US $18 billion to US $2 billion.
He said that the policy of the FBR helped generate a handsome amount in revenue. However, with the fall of the current month of July 2009, the volume of the ATT would once again increase, depriving the country of revenue. The policy would have the worst impact on the manufacturing sector, as, despite local production, items like air-conditioners, television sets and refrigerators could be imported under the ATT.
Similarly, he said, crockery, crossing into Pakistan through Afghanistan, decreased, after the maximum cut in customs duty, when traders of the sector joined the legal import system. Furthermore, other items including stationery, tiles, bathroom accessories and cosmetics were imported to Pakistan, due to lower customs duties.
However, he said, the reverse of the policy would once again encourage the smuggling of these goods. He said that the government of Afghanistan had allowed zero-rated duty on the import of Indian manufactured goods, 5% duty on Chinese products, as compared to the highest 18% duty on Pakistani-manufactured products.
Mohammad Ishaq was also critical of the proposed World Bank (WB)-sponsored amendments in the Afghan Transit Trade Agreement (ATTA), which would pave the way for Indian hegemony in the Afghan market. The remaining deficiency would be filled with the opening of the Chabahar Port in Iran.
The Islamic Republic of Iran had leased a vast area of 52 hectares, for 99 years, to India. He said that Pakistan is the fourth largest consumer of black tea, but 60% of the commodity is being smuggled, resulting in a loss of Rs 6 billion to the national exchequer per annum.
The smugglers benefit from saving on the duty, which is 20% in Pakistan, but is very low in Afghanistan. The importers of tea are creating a hue and cry over the unlimited import of black tea into Afghanistan, under the Afghan transit trade. A majority of the people involved in the transit business are either Afghans or tribesmen of the Pakistani semi-autonomous tribal belt.
The World Bank had held a seminar on the matter, in which 90 delegates from NWFP were invited to participate. "We had pin-pointed the problems in the Seminar, but now, instead of bilateral, the treaty would be trilateral, opening the doors of Pakistan to international transport operators, which would create a security risk for Pakistan," contended the SCCI official.
To a question, he acknowledged that no detail about the amount used in the Afghan transit trade was available, as it had no concern with the bank. Furthermore, he said that the Afghan authorities were also claiming 20% commission over the amount deposited, under the head of territorial guarantee for Central Asia-bound goods from Pakistan. "The draft agreement was against the very interest of Pakistan as it would allow the shippers to hire a transport company on their own," concluded Mohammad Ishaq.